2015 (6) TMI 303 - HC - VAT and Sales Tax

Whether the Tribunal and the authorities below failed to note and appreciate that the appellant having furnished valid and genuine declaration form ST-35 in terms of rule 11 (XXXIV) of the Delhi Sales Tax Rules, 1975 was legally and rightfully entitled to deduction under Section 4(2)(a)(v) of Delhi Sales Tax Act, 1975, on account of sales made to registered dealer - Held that - Unless there is some material available to show complicity between the purchasing dealer and the selling dealer vis- -vis the alleged doubtful activities of the former, inferences adverse to the interest of the latter are impermissible. The default on the part of the purchasing dealer in submitting a proper utilization certificate respecting the goods purchased under the cover of the ST-35 form may lead to consequences for him but not for the selling dealer. In this context, the third proviso to Section 4(2)(a) of the Sales Tax Act quoted earlier only needs to be applied. It makes it clear that the benefit of deduction continues to inure for the benefit of selling dealer even if the purchasing dealer is found to have indulged in misutilisation. The assessee explained in the proceedings under Section 23(3) of Delhi Sales Tax Act that the sale transactions herein were relatable to purchase order dated 27.06.2000. It is not the case of the Revenue that the ST-35 form is a fabricated document. Concededly, it was issued by the sales tax department of GNCTD to the purchasing dealer who is registered for such purposes with the concerned authorities. There is nothing to show that the selling dealer (the assessee) could have known as to for which assessment year the specific form had been issued by the department. For his purposes, the endorsement on the top showing it to be a form pertaining to AY 2000-01 was sufficient. The mere fact that the form when handed over did not bear a specific date is inconsequential and from this complicity of the assessee cannot be inferred. - deduction of the value of the transaction represented by the ST-35 form has been wrongly disallowed by the Tribunal and the authorities below. - Decided in favour of assessee.

Summary

Issues Involved:

1. Validity and admissibility of form ST-35 for claiming deduction under Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975.
2. Burden of proving the genuineness of the transaction and the ST-35 form.
3. Relevance of the purchasing dealer's activities and submission of utilization certificate.
4. Application of circulars and verification reports in assessing the transaction.

Issue-wise Detailed Analysis:

1. Validity and Admissibility of Form ST-35:
The appellant contested the Tribunal's decision, arguing that the appellant had furnished a valid and genuine declaration form ST-35, which should entitle them to a deduction under Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975. The dispute revolves around sales transactions that occurred between 28.07.2000 and 09.10.2000, amounting to Rs. 1,53,50,908/-. The appellant claimed these sales were made to a registered dealer against a purchase order dated 27.06.2000 and supported by form ST-35. The assessing authority, however, disallowed the exemption claim, noting that the form ST-35 was issued for AY 1999-2000 and was improperly endorsed for AY 2000-01.

2. Burden of Proving Genuineness:
The appellant argued that the Tribunal and lower authorities wrongly placed the burden of proving the genuineness of the transaction and the ST-35 form on the selling dealer. The court referenced the Supreme Court's observations in the case of State of Madras v. M/s. Radio and Electricals Ltd. & Anr., emphasizing that the selling dealer's duty is to ensure the purchaser is a registered dealer and the goods are specified in the registration certificate. The selling dealer is not obligated to verify the purchaser's use of the goods. The court also cited Prince Plastics & Chemical Industries and Ors. v. Commissioner of Sales Tax and Ors., which supports that the selling dealer is not responsible for the purchasing dealer's misuse of the goods.

3. Purchasing Dealer's Activities and Utilization Certificate:
The assessing authority's decision was influenced by a verification report indicating "doubtful" activities of the purchasing dealer and the absence of a proper utilization certificate. The court, however, ruled that the default by the purchasing dealer in submitting a utilization certificate should not affect the selling dealer's entitlement to the deduction. The third proviso to Section 4(2)(a) of the Delhi Sales Tax Act specifies that the selling dealer's deduction remains valid even if the purchasing dealer misuses the goods.

4. Application of Circulars and Verification Reports:
The Tribunal relied on a circular issued by the GNCTD to regulate the issuance of statutory forms, including form ST-35. The court did not find any impropriety in referencing the circular but disapproved of using the verification report to infer complicity of the selling dealer in the purchasing dealer's activities. The court emphasized that unless there is material evidence showing collusion between the dealers, adverse inferences against the selling dealer are impermissible.

Conclusion:
The court concluded that the deduction for the value of the transaction represented by the ST-35 form was wrongly disallowed by the Tribunal and the authorities below. The substantial question of law was answered in favor of the appellant, setting aside the impugned order and allowing the appeal. The court reiterated that the selling dealer's responsibility does not extend to verifying the purchasing dealer's use of the goods or the validity of the form beyond ensuring it is issued by the relevant authorities.