9911796707
TMI Blog1962 (8) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... sed is Rs. 3,500 in the year involved in S.C.A. No. 390 of 1961, namely, 27th October, 1954, to 14th November, 1955, and in S.C.A. No. 389 of 1961 which is for the period 15th November, 1955, to 2nd November, 1956, the penalty imposed is Rs. 650. On behalf of the petitioner the imposition of these penalties has been challenged before us as also the best judgment assessments on the ground that the assessment is so utterly capricious and arbitrary that it cannot, even having regard to the provisions of section 11(4), be deemed to be a judgment under that section. Apart from this point the principal point argued in these petitions by Mr. Phadke on behalf of the petitions is directed against the disallowance of exemption in regard to certain sales made to registered dealers. These were sales in respect of which the petitioner claimed exemption under section 2(j)(a)(ii) of the Act, that is to say, because they were made to registered dealers. These sales were all made to three persons, namely, (1) Mohanlal Asumal, (2) Deepchand Khatumal, and (3) Tarachand Gagandas. According to the petitioner, these three persons were registered dealers and they purchased goods from him and granted him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot with registered dealers. Mr. Phadke has challenged the right of the department to pass cancellation orders of this kind and he has further submitted that even assuming that they could pass such orders, the petitioner who bona fide dealt with these registered dealers could not be penalized so long as he obtained the requisite declarations under law from these dealers. In our opinion, this argument is entitled to succeed. The stand which the departmental authorities have taken may best be set forth in the words of the Assistant Commissioner in paragraph 4 of his order dated 28th November, 1961, in Revision Case No. R/54/60-61: "It is, therefore, evident that the registration certificate granted to this dealer was required to be cancelled forthwith as it was found by the Assessing Officer that this dealer has no regular place of business and was not accounting for the purchases and sales effected and was trying to evade sales tax. In the circumstances the declarations furnished by this dealer to the applicant cannot be considered as genuine. Under the provisions of rule 26(3) of the C.P. and Berar Sales Tax Rules, 1947, a dealer who claims deductions under section 2(j)(a)(ii) is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the present assessee whom he has deprived of the benefit of the declarations by those registered dealers was a party to any fraudulent designs of those registered dealers or that he shared their ulterior or fraudulent motive. On the contrary, it appears that the Assistant Commissioner assumed that the assessee had acted bona fide but that he was also the subject of a deception. This is clear from the words used in the passage quoted above "notwithstanding the fact that the assessee may have acted in a bona fide manner or he may have allowed himself to be misled or duped by the purchasing dealer". We have set forth these findings of the revisional authority at some length to emphasize the peculiar nature of the findings because, in our opinion, these had a crucial bearing upon the decision which has been reached, the effect of which is to deprive the petitioner of the benefit of the clear declarations which he had obtained from the three registered dealers simply because those dealers or their dealings had been found to be subsequently shady in character. The Central Provinces and Berar Sales Tax Act and the Rules framed thereunder have made detailed provision for the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te has to specify the location of the business, the nature of the business and the raw materials which may be sold to the dealer free of tax. Rule 14 deals with the cancellation of the registration certificate issued under section 8, and rule 15 with the publication of the cancellation of the certificate. Rule 16 provides for the submission of a cancelled certificate by the dealer for cancellation, and rule 17, sub-rule (1), lays down that the State Government shall publish the list of names and addresses of registered dealers together with the particulars required by section 9 in the Official Gazette in an alphabetical order in the prescribed form. The form is given in rule 17 showing the name and address of the registered dealer, the location of the place of business, the number and date of his registration certificate, and the goods specified in the registration certificate of dealers who manufacture any goods for sale. Sub-rule (2) prescribes that the State Government shall publish in the first Gazette in the month of April of each subsequent year or as soon thereafter the consolidated list prescribed under clause (b) of section 9. It will be seen from these provisions that me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under section 6; (ii) sales to a registered dealer of goods declared by him in the prescribed form as being intended for resale by him or of goods specified in such dealer's certificate of registration as being intended for use by him as raw materials in the manufacture of any goods for sale and of containers and other materials used in the packing of such goods; * * * * * It will be clear from clause (ii) of section 2(j)(a) that sales to a registered dealer of goods declared by him in the prescribed form as being intended for resale by him or of goods specified in such dealer's certificate of registration as being intended for use by him as raw materials in the manufacture of any goods for sale, would be exempt. Now, the declaration is prescribed by rule 26 which has to be read along with section 2(j). Rule 26 runs thus: "26. Production of documents.-(1) A dealer who desires to claim deduction from his turnover under the provision of paragraph (i) of subclause (a) of clause (j) of section 2 shall, on demand, produce the cash memoranda or bills or other relevant documents in support of such claim. (2) A dealer who desires to deduct from his turnover any amount on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Price of goods sold Taxable..... Non-taxable..... Total .... 3. I, ....., a dealer holding Registration Certificate No....., hereby declare that I have purchased the abovementioned goods from Shri..... a dealer holding Registration Certificate No..... for sale and that such resale shall not take place outside the State of Bombay. Signature (of the dealer or an agent duly authorised in writing by him). " Date..... It is in respect of the above statements that the words "declaration in writing" are used in rule 26(2)(ii). Thus, if a dealer declares that he has purchased certain goods when he has never purchased them or declares that he is holding a registration certificate for sale and does not hold a certificate or does not intend to buy the goods for resale, then such statements would be false. We do not think that because a registered dealer had fraudulently taken out a certificate upon false declarations (we are assuming all this), the declaration which is signed in the form appended to rule 26 can possibly become an untrue declaration so long as he holds a registration certificate. Yet, that is precisely what the learned Assistant Commissioner seems to think. We are unab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms, therefore, the rule says that the liability of the dealer whose certificate is cancelled, to pay tax ceases with effect from the date of communication to him of the order of cancellation. There is no other provision in the Act or in the Rules indicating from what date the effectiveness of the order of cancellation shall operate. Rule 14 in terms says that it shall take effect from the date of communication to the dealer. In the face of this rule and in the absence of any other provision we think that the view which the Assistant Commissioner has taken that the subsequent cancellation could affect the position of the registered dealer prior to the cancellation cannot be upheld. In our opinion, the cancellation can only take effect from the date of the order of cancellation in each case and not before. Upon that view also, the transactions which the petitioner had entered into would all be covered by valid declarations issued by one or more of the three registered dealers. We think that the two orders regarding the dealers Mohanlal and Deepchand purporting to cancel their certificates from a date prior to the order were bad and cannot be justified under any provision of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat sales did take place to any person other than the three registered dealers. Therefore, if he were to hold that no sales took place to the three registered dealers in fact, then he would have no jurisdiction to assess at all. There is no finding given by him that sales took place to any other person. The learned Additional Government Pleader urged that such as it is this finding was not considered by the Assistant Commissioner and that he has completely missed the point when he proceeded to consider the effectiveness of the dealers' certificates granted to the three registered dealers. In this submission the learned Additional Government Pleader may be correct, but it is difficult to see how one can blame the Assistant Commissioner because the finding of the Sales Tax Officer is extremely vague and it is difficult to understand clearly what it was that he was finding. In the result, therefore, we think that the best order that we can pass in the interests of both the petitioner and the department is to set aside both the orders of the authorities below and send back these cases for fresh assessments. Two other points which have been raised in these petitions, it is not necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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