1965 (4) TMI 91 - SC - VAT and Sales Tax

Whether under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941) the furnishing of the declaration forms issued by the purchasing dealers was a condition for claiming the exemption thereunder? Held that - Appeal dismissed. This Court held that the said mandatory provision was inconsistent with section 5(2)(a)(ii) of the Orissa Sales Tax Act; and to avoid that conflict it reconciled both the provisions by holding that the rule was only directory and, therefore, it would be enough if it was substantially complied with. The said provisions may afford a guide for amending the relevant provisions of the Act and the Rules made thereunder, but do not furnish any help for construing them.

Summary

Issues: Interpretation of section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941

The judgment of the Supreme Court of India in this case dealt with the interpretation of section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941. The appellant, a public limited company registered as a dealer under the Act, claimed exemption under this section for certain sales made to registered dealers. The key issue was whether the furnishing of declaration forms issued by purchasing dealers was a mandatory condition for claiming exemption under this provision.

The Court analyzed the provisions of section 5(2)(a)(ii) and the relevant rules, emphasizing that the exemption prescribed by the section should be strictly construed. The substantive clause provided the exemption, while the proviso required the furnishing of a declaration form in the prescribed manner as a condition for claiming the exemption. The Court highlighted that the proviso was not merely directory but imposed a mandatory requirement for claiming the exemption.

The appellant argued that the proviso should not be construed as a strict condition for exemption, and alternative evidence could be produced to prove the nature of sales to registered dealers. However, the Court rejected this argument, stating that the clear terms of the clause, read with the proviso, imposed a condition for claiming exemption under section 5(2)(a)(ii).

The Court also addressed the stringency of the provisions, noting that they aimed to prevent fraud and collusion in tax evasion while facilitating administrative efficiency. The judgment highlighted that the legislative intent behind the provision was to ensure compliance and prevent fraudulent practices in sales tax matters.

Additionally, the Court distinguished a previous case concerning a similar provision under the Orissa Sales Tax Act, emphasizing that the presence of a proviso in the Bengal Finance Act made a significant difference in the interpretation of the condition for claiming exemption.

Ultimately, the Court dismissed the appeal, upholding the requirement of furnishing declaration forms as a condition for claiming exemption under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941. The judgment emphasized the importance of strict compliance with statutory provisions in tax matters and the prevention of fraudulent practices.