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TMI Blog1973 (9) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of sales to the following registered dealers, viz., Messrs. Bansal Iron and Steel Engineering Works, Messrs. Hindusthan Commercial and Engineering Co. and Messrs. Shree Mahabir Industrial Corporation, was that the registration certificates of the said three dealers were subsequently cancelled on 9th November, 1970, 25th November, 1970, and 29th October, 1971, respectively. The other grounds disclosed in the order were that the payment was made in cash and the challan number was not written on the declaration forms. Sales made to Messrs. Parkash Impex were disallowed on the ground that the said purchases were not covered by the registration certificate issued in the name of purchasing dealer. For the four quarters ending 31st Chaitra, 1376 B.S., respondent No. 1 issued a notice dated 7th March, 1973, calling upon the petitioner to appear and produce the books of accounts in support of returns. Aggrieved by the said order of assessment for the period ending 31st Chaitra, 1375 B.S., and the notice issued under sections 11 and 14(1) of the Act for the period ending 31st Chaitra, 1376 B.S., the petitioner moved this court and obtained a rule nisi. The learned counsel on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer all unused declaration forms remaining in stock with him and the appropriate Commercial Tax Officer shall thereupon cancel the declaration forms so surrendered and report the fact of such cancellation to the Commissioner. Sub-rule (6) of rule 27A requires the Commissioner to publish in the Calcutta Gazette, the particulars of declaration forms which have been so cancelled. A registered dealer for obtaining declaration forms has to apply in writing to the appropriate Commercial Tax Officer stating his requirement of such forms and has to furnish such other particulars, statements and information and produce such other documents as the Commercial Tax Officer may require for the purpose of satisfying himself about the bona fide use of such forms issued to the applicant on previous occasions and the bona fide nature of the applicant's requirement of such forms on the present occasion. Section 7(4a)(ii) of the Act empowers the Commercial Tax Officer to demand reasonable security for the proper custody and use of the declaration forms. Sub-rule (2) of rule 27AA vests the Commercial Tax Officer with the powers even to reject the application for declaration forms where he is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bodington[1877] 2 P.D. 203. No universal rule can be laid down for the construction of statute as to whether any enactment is to be considered directory only or obligatory. In each case a balance has to be struck between the inconvenience of its rigid adherence and the inconvenience of its departure from its terms. There are some rules which are vital and go to the root of the matter. Compliance with such rules is mandatory. There are other rules, the breach of which may be an irregularity which can be dispensed with provided there is substantial compliance with the rules. If the disobedience of such a rule frustrates the very aim and object of the statute, the direction to do an act enjoined by the rule is to be regarded as a mandatory one. The purpose for which the declaration forms are insisted upon under the law seems to check large scale evasion of sales tax. It may be possible for a selling dealer to inflate his claim of sales to registered dealers when such sales are not in fact made. There may be also misuse of such declaration forms for the purposes not authorised under the law. The taxing authorities are, therefore, competent to find out whether the certificate is genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported. The next ground urged by the learned counsel for the respondents was that the registration certificate of the purchasing dealers having been cancelled and the sales being mostly cash sales, respondent No. 1 was justified in disallowing such sales. It is the admitted position that when the sales in question were made to the different parties and when the declaration forms were issued by the purchasing dealers, their respective registration certificates were not cancelled by the taxing authorities. Their registration certificates were cancelled subsequently. On the date when the transactions with the purchasing dealers were effected and the declaration forms were given by them, their declaration forms were valid. The subsequent cancellation of the certificate of registration of the purchasing dealers cannot have any retrospective effect so as to invalidate the declaration forms duly given in respect of purchases effected prior to such cancellation. In order to claim a deduction under section 5(2)(a)(ii) of the Act, the sales of goods must be to a registered dealer. The seller must satisfy himself that the purchaser is a registered dealer and the goods purchased are speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxable turnover. In that case, the assessee made all the payments in cash. He was given a chance to produce the orders and the challans, but he failed to do so. The certificate of registration of the purchasing dealer was cancelled on 7th January, 1957, but the purchasing dealer issued supporting declaration forms up to 23rd February, 1957. The declaration forms which were produced in respect of sales did not indicate the purpose for which the purchases were being made. In these circumstances, the Division Bench held that there was no reliable document to establish that the sales were in fact effected to a registered dealer. On the facts of that case it was held that the taxing authorities were justified in rejecting the claim for deduction in respect of sales during the period prior to the cancellation of the registration certificate. In my view, the said decision cannot be said to have laid down the proposition that the subsequent cancellation of the registration certificate ipso facto and necessarily render the declaration forms issued prior to such cancellation invalid. It appears that the attention of the Division Bench in the said case was not drawn to the earlier decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not also stand closer scrutiny. The law does not require that in order to claim deduction under section 5(2)(a)(ii) of the Act the sales cannot be made on cash payment. The mere fact that the transactions were made in cash may give rise to suspicion in the mind of the assessing authorities, but suspicion cannot be treated as evidence on which it can be concluded that the purchasing dealer was not in existence during the relevant time or that no sales in fact were effected. The production of the valid declaration forms duly filled in by the purchasing dealer is a prima facie proof that the sales have been made to the registered dealer. It is, however, open to the taxing authorities on proper and cogent materials to hold that the transaction was a collusive one or that no sale in fact took place. In the present case, however, no such attempt has been made by respondent No. 1 to impeach the transaction as not genuine on any such legal evidence. In my view, the reason for which the sales in question to the three registered dealers, viz., Messrs. Bansal Iron and Steel Engineering Works, Messrs. Hindusthan Commercial and Engineering Co. and Messrs. Shree Mahabir Industrial Corporation, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that galvanised sheet includes corrugated and plain sheets. Such sheets after corrugation do not lose their character as iron sheets. In my view, the entry "G.I. sheet" includes also galvanised corrugated sheet and as such the certificate of registration of the purchasing dealer, viz., Parkash Impex, covers the goods sold by the petitioner to them. The disallowance of the sale in question on that ground is not sustainable in law. For the reasons stated above, the order of assessment dated 23rd March, 1973, made by respondent No. 1 for the period ending 30th Chaitra, 1375 B.S., being annexure B to the petition, as also the notice dated 27th March, 1973, issued under section 11 of the Act are quashed by a writ of certiorari. There will also be a writ in the nature of mandamus commanding the respondents to forbear from giving effect to the said orders. Respondent No. 1 will, however, be at liberty to make an assessment for the said period in accordance with law and in the light of the principle laid down in this case. For the year ending 30th Chaitra, 1376 B.S., no assessment has been made and a mere notice dated 7th March, 1973, under section 11(4)(i) of the Act has been issued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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