2016 (9) TMI 1621 - HC - VAT and Sales Tax

Misuse of declaration form ST-17A - bogus / non genuine firms - requirement under declaration ST-17 are mandatory in nature or not - relaxation in concessional rate beyond the provision of law or not - HELD THAT - It may be that M/s Arvind Traders and M/s Nakoda Traders, Kota, have been found to be non genuine or bogus by the Revenue Authorities, but at a later point of time, which is admitted in the instant case. The fact remains that the transaction of purchase/sale is prior to 31.3.2002, at that point of time both the firms were having valid registration certificate. Therefore, the AO was not justified in holding or observing about misuse of declaration form. Admittedly, both the Appellate Authorities have come to a finding of fact that the registration was in force upto the period ended on 31.3.2002. Not only that, all the transactions have been found to be recorded in the books of account and both the Appellate Authorities have come to a concurrent finding that not only the transactions were recorded but all the payments were by account payee cheques, though it may not be relevant and may not be sacrosanct, but this finding is sufficient to hold in favour of the assessee that atleast in the instant case the registration was valid and in force and cancelled much later than the transactions having taken place in the instant case. The claim of assessee was just and proper and even in the instant case there is no finding that the cancellation of registration is from a retrospective date, prior to the transactions having been effected - the question of law is answered in favour of the assessee and against the Revenue, and the petitions being devoid of merits, are dismissed.

Summary

Issues:
Misuse of declaration form ST-17A in the assessment year 2001-02.

Analysis:
The controversy in this case revolves around the alleged misuse of declaration form ST-17A by the assessee in the assessment year 2001-02. The assessee, a registered dealer, sold Mustard Oil to two firms, M/s Arvind Traders and M/s Nakoda Traders, Kota, by obtaining declaration forms. Subsequently, it was discovered that both firms were deemed non-genuine or bogus. The Assessing Officer charged the assessee with differential sales tax, interest, and penalty, citing misuse of the declaration form.

The matter was taken to the Dy. Commissioner (Appeals), who considered the timing of rejection/cancellation of the firms' registration and the judgment in the case of State of Maharashtra v. Suresh Trading Company. The appeal was allowed, and the tax levied by the AO was deleted. A further appeal by the Revenue to the Tax Board also failed, with the Board noting that the registration of the assessee was valid, and any action should have been directed towards the two firms.

The court examined Rule 23 of the RST Rules, 1995, emphasizing the need for foolproof declaration forms. The Revenue argued that the assessee was aware of the non-genuine nature of the firms and benefited from the misuse of the form. However, the assessee contended that all transactions were through account payee cheques, duly recorded, and took place before the cancellation of registration. The court considered the arguments presented by both parties and the admitted substantial questions of law.

The court referenced the apex court's judgment in Suresh Trading Company, highlighting the entitlement of a purchasing dealer to rely on the selling dealer's registration certificate. It also cited the case of M/s Vardhman Mills, Suratgarh v. ACTO, Suratgarh, and the Madras High Court's judgment in Infiniti Wholesale Limited v. The Assistant Commissioner (CT). These cases supported the assessee's contention that the cancellation of registration did not affect the selling dealer's rights.

In conclusion, the court found in favor of the assessee, dismissing the petitions as devoid of merit. The court emphasized that the cancellation of registration did not occur before the transactions and upheld the validity of the assessee's actions based on the registration in force at the time of the transactions. The judgment in the case of Shri Krishna Engg. Co. & Others was distinguished, and the court ruled in favor of the assessee against the Revenue.