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TMI Blog2002 (7) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... y be purchasing goods from another registered dealer without payment of sales tax, and in such cases they would be categorised as the "purchasing dealers". The legal imbroglio in these writ petitions has arisen because the petitioners, as the "selling dealers", have sold goods to one of the respondent "purchasing dealer" on the latter's assurance that they will supply requisite ST-1 forms to the former. Instead, it has transpired that the sales tax department has declined to issue ST-1 forms to the purchasing dealers in this batch of writ petitions either for the reason that they have relinquished their registration, or because they have not complied with the sundry provisions of the Act and the Rules. There may also be other reasons which would empower the department to refuse to issue ST-1 forms but we are not required to cover all the eventualities in this judgment. The consequence of the department's declining to issue ST-1 forms is that the petitioners would become liable to deposit sales tax in respect of the transactions in which they are the selling dealers. The further consequence would be that unless the petitioners deposit the sales tax payable on these transactions they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of sale, and that therefore it could not be imposed with retrospective operation. This contention is, in our judgment, wholly without substance. Now, the point for decision in that case was whether a tax imposed by a Provincial Legislature on the sale of oil by a person who manufactured it was bad on the ground that it was in essence an excise duty. While a sales tax could be imposed by a Provincial Legislature, an excise duty could be imposed only by the Federal Legislature. In holding that the tax in question was a sales tax and not an excise duty, the court observed as follows: 'The duties of excise which the Constitution Act assigns exclusively to the Central Legislature are, according to the Central Provinces case [1938] 1 STC 1 (FC), duties levied upon the manufacturer or producer in respect of the manufacture or production of the commodity taxed. The tax on the sale of goods, which the Act assigns exclusively to the Provincial Legislatures, is a tax levied on the occasion of the sale of the goods. Plainly a tax levied on the first sale must in the nature of things be a tax on the sale by the manufacturer or producer; but it is levied upon him qua seller and not qua m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstance that the 1947 Act, after the amendment, permitted the seller who was a registered dealer to collect the sales tax as a tax from the purchaser does not do away with the primary liability of the seller to pay the sales tax. This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the purchaser and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller. The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise'." 3.. At the most, the intent behind the devising of the "C" forms or ST-1 forms is to "avoid multi-point taxation and enable a dealer passing on the burden of sales tax in such a way that it ultimately reaches the buyer-consumer" [See Shri Krishna Engineering Co case [2003] 131 STC 321 (Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.. We shall now deal with the gravamen of the argument advanced by Mr. Mahna that once registration is granted to a dealer, other similarly registered dealers are prohibited from charging tax from them in regard to any sale transaction between them. We are unable to subscribe to such an extreme proposition as it is neither supported by any provision of the Act nor by any judicial pronouncement. Since a consideration of the provisions in question, viz., section 4(2)(a)(v) and rules 7 and 8(4) will repeatedly recur, they are given below for ease of perusal. Delhi Sales Tax Act, 1975: "4. Rate of tax.-(1).......... (2) For the purpose of this Act, 'taxable turnover' means that part of a dealer's turnover during the prescribed period in any year which remains after deducting therefrom: (a) his turnover during that period on- ................ (v) sale to a registered dealer: (A) of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for use by him as raw materials in the manufacture in Delhi of any goods, other than goods specified in the Third Schedule or newspapers, 1. for sale by him inside Delhi; or 2.. f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... (3) Notwithstanding anything contained in sub-sections (1) and (2), the Commissioner may at any time for reasons to be recorded in writing and after giving the dealer an opportunity of being heard, cancel the certificate of registration held by such dealer from such date as the Commissioner may specify in this behalf- (a) if the dealer has failed to pay any tax (including any penalty) due from him under any provisions of this Act; or (b) if the dealer holds or accepts or furnishes or causes to be furnished a declaration for the purposes of sub-clause (v) of clause (a) of sub-section (2) of section 4 or section 5 which he knows or has reason to believe to be false; or (c) if the dealer who has been required to furnish the security under the provisions of section 18 has failed to furnish such security; or (d) if the dealer contravenes or has contravened any of the provisions of this Act; or (e) if the dealer has been convicted of an offence under this Act or under the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941), as then in force in Delhi; or (f) if there is any other reason which in the opinion of the Commissioner warrants such cancellation. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declarations, subject to the conditions as are hereinbelow mentioned and to such further conditions as may be specified by the Commissioner in the order. Conditions: (1) That the application is made within 30 days of the event, i.e., fire or flood or riots, as the case may be, stating the fact and circumstances in which the loss took place and also shall state the evidence on which he relies in support of such facts. The application shall be duly signed and verified by the dealer in the manner as is provided in respect of returns. (2) That the loss had taken place at the place of business of the dealer. (3) The provisions of sub-rule (3) of rule 7, shall mutatis mutandis apply to the furnishing of exemption certificates from the diplomatic missions, their personnel and specialised agencies as specified under rule 11. 8.. Authority from whom the declaration form may be obtained, and use, custody and maintenance of records of such forms and matters incidental thereto.-(1) ......... 4. (a) If, for reasons to be recorded in writing the appropriate assessing authority is satisfied that the declaration forms have not been used bona fide by the applicant or that he does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and restrictions, as may be imposed by the Commissioner, issue to applicant-dealer, declaration forms for which requisition account cannot practically be filed. Provided further that notwithstanding the provisions of this rule or any other rule, the appropriate assessing authority may withhold the issue of declaration forms- (a) to an applicant who has been granted a certificate of registration under the Act without prescription of security under section 18, or (b) if in his opinion the security already furnished is inadequate taking into consideration the provisions of section 18; until such time as the applicant-dealer furnishes a security or an additional security as may be prescribed by an order in writing after affording the dealer an opportunity of being heard. (d) Where the appropriate assessing authority does not proceed under clause (a), clause (b), or clause (c), it shall issue the requisite number of declaration forms to the applicant." 5.. Reliance has been placed on State of Maharashtra v. Suresh Trading Company [1998] 109 STC 439 (SC), by Mr. Mahna, but in doing so he has quite apparently glossed over the distinguishing features. The honourable Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implied that the exemption should be permitted to it by the concerned selling dealer. This is the farthest extremity to which we understand Modern Automobiles case [1984] 56 STC 85 (Delhi), to have travelled. It is certainly not an authority for the proposition that sales tax cannot be charged by a registered dealer from another registered dealer. The same position prevails in respect of the decision of a division Bench of this Court in Praveen Motors Store v. Union of India STI [1985] Delhi 4, a cursory reading whereof may lead to the erroneous conclusion palpably reached by the learned counsel for the petitioners. The judgment is a short one, proceeding almost entirely on first principles. What may have escaped the attention of the petitioners is the fact that, as in the previous case, along with the request for abstention from charging sales tax, ST-1 forms were simultaneously offered to be furnished by the purchasing dealer. When this factor is kept in focus, the fulcrum of the petitioners argument is fractured, and the premise that the said exemption is available even where ST-1 forms have not been supplied in respect of the relevant transaction, disintegrates completely. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a criminal offence under section 50(g) of the Act. 8.. As the Director-General of Supplies and Disposals seems to be unwittingly committing the offence, we have no hesitation but to issue a writ directing that the sale to the petitioner will be without charging sales tax provided that a valid ST-1 form is supplied by the purchasing dealer. That has already been done, so we would allow the petition. Similar petitions have previously been allowed and we would expect this practice to come to an end as a Government Department cannot be a party to a criminal offence. Having made the position clear, we would refrain from passing any order as to costs at this stage as under the interim order, the purchaser has already been allowed to take the goods without paying the sales tax. Dated: 14.11.1984. Petition allowed." 6.. Mr. Mahna, the learned and defatigable counsel for the petitioners, has relied heavily on the decision of the honourable Supreme Court in State of Madras v. Radio and Electricals Ltd. [1966] 18 STC 222. In our view it is of no avail to the petitioners. The concerned sale of goods related to the Central Sales Tax Act, 1956. The question before the honourable Court was w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e selling dealer. The selling dealer is under the Act authorised to collect from the purchasing dealer the amount payable by him as tax on the transaction, and he can collect that amount only in the light of the declaration mentioned in the certificate in form 'C'. He cannot hold an enquiry whether the notified authority who issued the certificate of registration acted properly, or ascertain whether the purchaser, notwithstanding the declaration, was likely to use the goods for a purpose other than the purpose mentioned in the certificate in form 'C'. There is nothing in the Act or the Rules that for infraction of the law committed by the purchasing dealer by misapplication of the goods after he purchased them, or for any fraudulent misrepresentation by him, penalty may be visited upon the selling dealer." We fail to appreciate any manner in which this decision can be interpreted to indicate that the selling dealer cannot charge sales tax where the purchasing dealer does not simultaneously furnish ST-1 forms. The ratio of the judgment is precisely what the third proviso to section 4(2)(a)(v) of the Act states. On an ST-1 form being furnished by the purchasing dealer to the sellin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of arrears of tax still remains payable. If so, state the year and the amount of arrears and reasons for non-payment. I do hereby solemnly affirm and declare that the above information is true and correct to the best of my knowledge and belief. Signature of the dealer Status................. Please deliver......forms to Shri............an employee of my firm. His signatures are as attested below: Signature of dealer Signature of Shri............. Signature attested Signature FOR OFFICIAL USE 1.. Signature of the applicant tally/do not tally with those on record. 2.. Verified that the dealer has filed all returns up-to-date, if not, mention defaults. 3.Arrears due, if any: Year Amount Local or Central Remarks." 7.. We now need to deal with an important question pertaining to the supply of form by the sales tax department to the dealers. As has been seen, the legal provisions enable their issuance in advance. Mr. Mahna had drawn attention to Departmental Circular No. 18 of 1987-88 which, inter alia, states that "so far as issue of ST-1 forms is concerned, the assessing authorities may restrict issue of ST-1 forms relating to time barring peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhanji AIR 1952 SC 16. 8.. In this batch of writ petitions the challenge is directed to the vires of rule 8(4)(c) of the Rules, on the ground that they traverse beyond the ambit of section 4(2)(a)(v) of the Act. The grievance of the petitioners is not that they have requested the sales tax department for issuance of the forms in advance and this has been turned down, but that their purchasing dealers should be supplied with ST-1 forms regardless of whether such dealers have relinquished their registered status, or have committed other infractions of the Act and Rules. Keeping the scheme of the Act in perspective, and the representations to the public made in terms of the various circulars issued by the sales tax department, the latter would not be justified in declining to supply the forms on the date on which an application has been made by the dealer. Since this is neither the grievance nor the prayers in these writ petitions, we need to say no more. However, even if a purchasing dealer has applied for ST-1 forms but has not received them for any reason, the selling dealer is not automatically exonerated from liability, nay the statutory duty to collect tax, since the ST-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer [1965] 16 STC 607, has been relied on by both adversaries in these proceedings. The assessee had suffered the misfortune of irretrievably misplacing its file containing 147 declaration forms received from its dealers. It made various attempts to get duplicate forms from the dealers, but for circumstances beyond the assessee's control, as also because of the "unhelpful and hostile attitude of the Commercial Tax Officer", it was not able to furnish duplicate forms. The case was governed by the Bengal Finance (Sales Tax) Act, 1941 which at the material time did not contain any provision for the supply of duplicate forms. Incidentally, this Act had been extended to Delhi until the Delhi Sales Tax Act, 1975 came into force. It appears that the Bengal Act has since been amended so as to contain a provision similar to that contained in the Act permitting the supply of duplicate forms. The apex Court observed as follows: "The only question, therefore, that arises is whether under section 5(2)(a)(ii) of the Act the furnishing of the declaration forms issued by the purchasing dealers was a condition for claiming the exemption thereunder. In substance section 5(2)(a)(ii) exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We realise that the section and the rules as they stand may conceivably cause unmerited hardship to an honest dealer. He may have lost the declaration forms by a pure accident, such as fire, theft, etc., and yet he will be penalised for something for which he is not responsible. But it is for the Legislature or for the rule-making authority to intervene to soften the rigour of the provisions and it is not for this Court to do so where the provisions are clear and unambiguous. There is an understandable reason for the stringency of the provisions. The object of section 5(2)(a)(ii) of the Act and the rules made thereunder is self-evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will well nigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the twofold obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If the Revenue satisfies the court that the case falls strictly within provisions of the law, the subject can be taxed". A few years later another honourable Constitution Bench in Commissioner of Sales Tax, U.P. v. Modi Sugar Mills Ltd. [1961] 12 STC 182 (SC); AIR 1961 SC 1047 observed thus: "In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The Court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency". The approach adopted in the decisions of this spirit in Modern Automobiles case [1984] 56 STC 85 (Delhi) and Praveen Motors case STI [1985] Delhi 4, inasmuch as it runs contrary to that advocated by the honourable Supreme Court appears to be per incuriam. 13.. On first reading the decision of the honourable Supreme Court in Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh [1953] 4 STC 114, cited by Mr. Mahna, appears to support the proposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity for being granted the said form or forms in order to avail of the benefit of rule 26. It is equally not denied that the appellant and the corporation is such person. In the first place, it was for the appellant to apply for the grant of those forms to the assessing authority, then to have them duly filled and the counter-foils put to use as part of his return. It seems that the forms were neither solicited by the appellant nor by the corporation in order to shift the liability of payment of sales tax to the purchaser who could, in the event of sales on his behalf pass on the liability onwards to the last sale. Mr. R.S. Sodhi, learned counsel appearing for the State of Punjab, is candid enough to state that should the appellant now apply to the assessing authority for the grant of the requisite form/ forms, there is no doubt that such form or forms will be provided to the appellant for putting them to use for the sales involved since the authenticity of the sales cannot be disputed, it being Government to Government (Government-owned corporation) sale. The question is only of shifting the responsibility. Once that is accomplished the forms duly filled have to be signed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who have approached this Court because of the department's refusal to issue the forms to their purchasing dealers, for the reason that the latter had large outstandings of sales tax. The controversy in the above decision is articulated in paragraph 8 of the erudite judgment. Three points had been formulated-(i) The amended rule is in excess of the rule-making power of the Lt. Governor or in other words, is beyond the delegated legislative authority and hence is ultra vires the power of the rule-making authority; (ii) the rule causes an unreasonable restriction on the petitioner's fundamental right to trade and hence is violative of article 19(1)(g) of the Constitution; (iii) the amended rule having not been laid on the floor of Parliament as provided by section 72 of the Act, has ceased to be enforceable. Before spelling out the reasons why the division Bench had found the provisions to be ultra vires, it recorded the following observations the topicality of which can scarcely be over-emphasised: "(13) This mechanism of passing on the burden of tax is made by the Act conditional upon the purchaser-dealer making available a declaration duly filled in and signed by him and contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g dealer of the blank declaration forms ("C" forms) prescribed under rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957, on the grounds either that the purchasing dealer has defaulted in furnishing the return under the Madhya Pradesh General Sales Tax Act, 1958, or that he is in arrears of tax under the State Act, is ultra vires the rule-making authority of the State Government under section 13(3) and (4) read with section 8(4) of the Central Sales Tax Act, 1956. The division Bench opined that the rulemaking power of the State Government under section 13(3) and (4) of the Central Act cannot be used by the State Government as a device for the realisation of its own dues under the State Act. In arriving at their decision the division Bench drew support from the observations of the honourable Supreme Court in Khemka and Co. (Agencies) Pvt. Ltd. v. State of Maharashtra [1975] 35 STC 571; AIR 1975 SC 1549, where it was held that liabilities and outstanding dues in respect of the Central Act should be differentiated from those arising out of the State Act, and that the powers and penalties contained in the Central Act cannot be extrapolated into the State Acts. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (C.W.P. No. 3304 of 1997) [2003] 131 STC 321 (Delhi) the court, therefore, had to investigate firstly whether there was any provision in the Act which authorised the withholding of forms on the grounds of the applicant being in arrears of tax. The court perused sub-section (2) of section 71 of the Act but could not locate any power contained therein. It was in those circumstances that it arrived at the conclusion that the newly added clause (ii) in clause (c) of sub-rule (4) of rule 8 of the Rules was ultra vires the powers of the Lt. Governor. In these petitions we are not concerned with that provision, since it is no longer on the statute books as a result of that judgment. 18.. In the decision rendered by the honourable Supreme Court in Commissioner of Income-tax, Andhra Pradesh v. Taj Mahal Hotel [1971] 82 ITR 44 and Rallis India Ltd. v. State of Andhra Pradesh [1980] 45 TC 456, it has been reiterated that Rules are meant only for the purpose of carrying out the provisions of the Act and they cannot take away what is conferred by the Act or whittle down its effect. To this proposition we may add the observations of the honourable Supreme Court recorded in State of Kerala v. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olly otiose. Canons of statutory interpretation abhor such a result. 20. The provisions before the apex Court in State of Kerala v. M. Appukutty [1963] 14 STC 242, and those before us are in pari materia. Section 19(1) of the Madras General Sales Tax Act, 1939 empowered the State Government to "make Rules to carry out the purposes of the Act". Rule 17 conferred powers to assess escaped turnover, although the substantive provisions of the Act did not expressly deal with the power and procedure for assessment of escaped turnover. The court held the assailed Rules to be intra vires and opined that the rule-making powers were to be found in subsection (1) and the function of sub-section (2) were merely illustrative. 21.. Similarly, in State of Mysore v. M.L. Nagade Gadag AIR 1983 SC 762, section 172 of the Hyderabad Land Revenue Act conferred rule-making powers "for the purpose of carrying out the provisions of the Act". The apex Court reiterated that a "guideline need not be found in the impugned provision. The same may be collected from the setting in which the provision is placed, the purpose for which the Act is enacted and even the preamble of the statute in which the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant statutory provisions prior to their alteration by the said notification and by Delhi Act No. 1 of 2001. Foremost amongst all, is the second proviso to section 4 of the Act, the effect of which is that the selling dealer's taxable turnover would perforce include all transactions, regardless of whether they are between registered dealers, excepting and excluding only those transactions in respect of which a declaration is available. The language of the Act is explicit and admits no controversy. It is certainly arguable that the incorporation of the words "in the manner and subject to such conditions as may be prescribed" into the second proviso of section 4 and the first proviso of section 5 of the Act by the said Delhi Act No. 1 of 2001 is a needless or superficial surplusage in view of the sweep of section 71(1) of the Act. It is also of considerable significance that the petitioners have not assailed rule 7 which is patently predicated on sections 4 and 5 of the Act. This provision mandates that in order to qualify for or avail of the exclusion, deduction or exemption of a transaction from the dealers turnover, ST-1 forms should have been obtained when the sale took plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an appeal was nonetheless an alternative remedy thereby discouraging the invocation of extraordinary powers of the High Court under articles 226 and 227 of the Constitution. As we have already mentioned, the impugned Rules merely implement this settled principle of law. In Shyam Kishore's case (1993) 1 SCC 22 the plea that the provision for deposit of duty or penalty pending appeal whittles down the appellant's right of appeal and is, therefore, ultra vires did not find favour with the honourable Supreme Court. The court relied on its previous observations in Vijay Prakash D. Mehta v. Collector of Customs (Preventive), Bombay [1989] 72 STC 324 (SC); (1988) 4 SCC 402, viz., "right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant". This position was once again reiterated in Gujarat Agro Industries Co. Ltd. v. Municipal Corporation of the City of Ahmedabad AIR 1999 SC 1818. It was again articulated in State of Haryana v. Maruti Udyog Ltd. [2001] 124 STC 285 (SC); AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not obliterate the selling dealers duties under the Act, namely, to collect tax where the purchasing dealer fails to furnish the requisite form. It should also be noted that the right to file an appeal, bestowed by section 43, stipulates in sub-section (5) that it shall be entertained only if it is accompanied by satisfactory proof of the payment of tax with or without penalty; these provisions appear not to have been highlighted before the Bench which decided Shri Krishna's case (C.W.P. No. 3304 of 1997) [2003] 131 STC 321 (Delhi). All these sections must be conjointly borne in mind while considering the sweep of section 71(1). Since the statute itself deals with these sundry topics it is clearly illusory to challenge the vires of the Rules on the platform that they travel beyond the Act itself. The primary intendment of the Act is to levy and collect tax. Every device, including all stipulations pertaining to the dealer-friendly declaration forms, are incorporated to implement the objectives of the Act. They cannot be conceived as ultra vires the statute. We have reached this conclusion after carefully cogitating on all parts of rule 8(4)(c), and are unable to detect any hiatu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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