1964 (4) TMI 73 - SC - VAT and Sales Tax

Whether the assessing officer was not wrong in allowing deduction of ₹ 2,40,000 for the quarter ending on 30-6-51 and ₹ 15,677-1-3 for the quarter ending on 30-9-51 from the respective gross turnover of the applicant? Held that - Appeal dismissed. High Court came to a correct conclusion. The High Court is correct in holding that the production of declaration under rule 27(2) is not always obligatory on the part of a selling dealer when claiming the exemption. It is open to him to claim exemption by adducing other evidence so as to bring the transaction within the scope of section 5(2)(a)(ii) of the Act. In this case, the Sales Tax Officer was satisfied by a mere statement of the dealer and it has not been shown that in fact the registration certificate of the buying dealer, M/s. S. Lal and Co., did not contain the statement that the goods were intended for resale by him in Orissa.

Summary

Issues:
1. Interpretation of section 5(2)(a)(ii) and rule 27(2) of the Orissa Sales Tax Act.
2. Compliance with rule 27(2) for claiming deductions under section 5(2)(a)(ii).
3. Whether the production of declaration under rule 27(2) is mandatory for claiming exemption.

Analysis:
The judgment revolves around the interpretation of section 5(2)(a)(ii) and rule 27(2) of the Orissa Sales Tax Act. The dealer filed returns and claimed deductions under section 5(2)(a)(ii) for sales to a registered dealer. The State of Orissa challenged these deductions, citing non-compliance with rule 27(2) as the dealer failed to produce the required declaration. The Tribunal upheld the objection, leading to fresh assessments. The High Court, following precedent, ruled in favor of the State, prompting the appeals to the Supreme Court.

The crux of the matter was whether rule 27(2) is mandatory or directory. The State contended that non-compliance with the rule invalidated the deduction, emphasizing the rule's mandatory nature. Conversely, the dealer argued that the rule should be read as directory, allowing for alternative evidence to prove entitlement to the deduction. The Supreme Court reconciled the rule with the section, concluding that while substantial compliance with rule 27(2) is necessary, the production of the declaration is not always obligatory. The selling dealer can provide other evidence to establish eligibility for the deduction.

Ultimately, the Supreme Court upheld the High Court's decision, affirming that the production of the declaration under rule 27(2) is not always mandatory. In this case, the Sales Tax Officer was satisfied based on the dealer's statement, indicating compliance with the requirements of section 5(2)(a)(ii). As a result, the appeals were dismissed, and costs were awarded to the State. The judgment clarifies the interplay between statutory provisions and rules governing sales tax deductions, emphasizing the importance of substantial compliance in claiming exemptions under the Orissa Sales Tax Act.