2019 (6) TMI 1679 - HC - VAT and Sales Tax

Liability of Respondent/ Assessee/ Selling Dealer for the alleged false declarations in Form-17 given by the Purchasing Dealer - Section 38 of the Tamil Nadu Sales Tax Act - HELD THAT - The learned counsel for the Appellant/Revenue is unable to establish whether any enquiry was held against the Purchasing Dealer to whom such blank declaration forms / books were issued and who in turn gave such declarations to the present Selling Dealer, the Respondent/Assessee to claim the concessional rate of Sales Tax in question. In the absence of any enquiry from the Purchasing Dealer, the Selling Dealer obviously cannot be imposed with the difference tax in question. The law is well settled and it is only the Purchasing Dealer, who had given the wrong declaration in question, can be proceeded against under the provisions of the Act only if the Purchasing Dealers themselves are found to be non existing or bogus, the Selling Dealer can be proceeded against. The Tribunals order does not suffer from any legal infirmity and does not warrant any interference - the present Tax Case Revision filed by State is devoid of merit and is hereby dismissed.

Summary

Issues:
1. Liability of Selling Dealer for alleged false declarations in Form-17 given by Purchasing Dealer under Tamil Nadu Sales Tax Act.

Analysis:
The High Court of Madras addressed the issue of liability of a Selling Dealer for false declarations made by a Purchasing Dealer in Form-17 under the Tamil Nadu Sales Tax Act. The Revenue filed a Tax Case Revision challenging the Tribunal's order holding that the Selling Dealer cannot be held liable for the false declarations made by the Purchasing Dealer. The Tribunal's decision was based on the principle that the Selling Dealer cannot be deprived of the concessional rate due to false declarations by the Purchasing Dealer. The court emphasized that penalties for false declarations are to be borne by the Purchasing Dealer, and the Selling Dealer should not be held responsible unless the Purchasing Dealer is found to be non-existent or bogus.

The court referred to a Division Bench Judgment in Sree Murugan Engineering Products Vs. Commercial Tax Officer, Coimbatore, which supported the view that only the Purchasing Dealer who provided the false declaration can be proceeded against under the law. If the Purchasing Dealer is non-existent or bogus, then the Selling Dealer may be held accountable. In this case, the court noted that there was no evidence of any inquiry conducted against the Purchasing Dealer who provided the false declarations. Therefore, the Selling Dealer could not be held liable for the differential tax amount in question.

Consequently, the court upheld the Tribunal's decision, stating that it was in accordance with the law and did not exhibit any legal infirmity. The Tax Case Revision filed by the State was dismissed on grounds of lacking merit, with no costs awarded. The judgment clarified the distinct responsibilities of Purchasing and Selling Dealers regarding false declarations under the Tamil Nadu Sales Tax Act, ensuring that each party is held accountable as per the provisions of the law.