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TMI Blog1998 (11) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... een withheld on the ground that the petitioner was a defaulter, having failed to clear arrears of tax. 3.. Both the petitioners have sought for striking down of the amendment in Rules made vide Notification dated February 11, 1997, quashing of the orders withholding the issuance of the forms and a mandamus directing the respondents to issue the forms without insisting on deposit of arrears of sales tax allegedly due and payable by the petitioners. 4.. Before considering the contentions advanced on behalf of the parties, it will be useful to briefly set out the relevant statutory provisions. 5.. The Delhi Sales Tax Act, 1975 (Act No. 43 of 1975) is an Act to consolidate and amend the law relating to the levy of tax on sale of goods in the Union Territory of Delhi. The Act came into force on October 21, 1975. Section 3 is the charging section which renders every dealer whose turnover exceeds the taxable quantum and every dealer who is registered at the commencement of the Act or is liable to pay tax under the Central Sales Tax Act, 1956, liable to pay tax on all sales effected by him on or after such commencement. 5.1. Section 4 prescribes the rate of tax leviable on a deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not require such forms bona fide, the appropriate assessing authority may reject the application or it may issue such lesser number of forms as it may consider necessary. (b) If the applicant for declaration forms has, at the time of making the application, failed to comply with an order demanding security from him under sub-section (1) of section 18, the appropriate assessing authority shall reject the application. (c) If the applicant for declaration forms has, at the time of making the application- (i) defaulted in furnishing any return or returns in accordance with the provisions of the Act or these Rules, or in payment of tax due according to such return or returns; or (ii) defaulted in making the payment of the amount of tax assessed or the penalty imposed by an appropriate assessing authority, which the applicant admits to be due from him and which is not in dispute; or (iii) been found by an appropriate assessing authority having some adverse material against him, suggesting any concealment of sale or purchase or of furnishing inaccurate particulars in the returns; the appropriate assessing authority shall, after affording the applicant an opportunity of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution; (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. 9.. According to the respondents, the restriction laid down by the amended rule is not in any way unreasonable. It has been enacted to safeguard the interest of the Revenue and for proper and timely realisation of the tax assessed. It is neither ultra vires the provisions of the Act nor is repugnant to the scheme of the Act. A similar provision is to be found in rule 4 of the Central Sales Tax (Delhi) Rules, 1957 for obtaining the declaration form C issuance whereof can be denied to a tax defaulter. The rule has successfully withstood the test of time. The amended rule has been forwarded to the Ministry of Home for the purpose of laying the same before each House of the Parliament. However, the provision as to laying before the Houses of Parliament is only directory and not mandatory and hence non-laying of the notification does not result in nullification thereof. 10.. The first question is whether the amendment is in excess of the rule-making authority of the Lt. Governor? Rule-making power is conferred by section 71 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consumers of goods because it enters into the price paid by them. Parliament with a view to reduce the burden on the consumer arising out of multiple taxation has provided in respect of sales of declared goods which have special importance in inter-State trade or commerce, and other classes of goods which are purchased at an intermediate stage in the stream of trade or commerce, prescribed low rates of taxation, when transactions take place in the course of inter-State trade or commerce. Indisputably the seller can have in these transactions no control over the purchaser. He has to rely upon the representations made to him. He must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificate: but his duty extends no further........... That penalty is incurred by the purchasing dealer and cannot be visited upon the 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'." 13.. This mechanism of passing on the burden of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red for regulating the procedure unless that is specifically provided for." 18.. In Commissioner of Income-tax v. Taj Mahal Hotel [1971] 82 ITR 44 (SC), their Lordships have held that the Rules which are meant only "for the purpose of carrying out the provisions of the Act" cannot take away what is conferred by the Act or whittle-down its effect. 19.. A division Bench decision by the Madhya Pradesh High Court in Dawar Brothers v. State of Madhya Pradesh [1979] 44 STC 286 is very near to the cases at hand. It was a case under the Central Sales Tax Act. Declaration forms in form "C" as provided for and prescribed under section 8 of the Central Act on being furnished to the selling dealers entitled the petitioner/assessee to concessional rate of tax. The issuance of "C" forms was withheld by the sales tax authorities on the ground that the petitioner was in arrears of tax. This was done under the purported exercise of the power conferred by Rule 8(1-A)(f) of the M.P. Sales Tax (Central) Rules, 1957 made by the State Government under the rule-making power conferred by the Central Act. The rule was similarly worded. It provided that if the Sales Tax Officer was satisfied that the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r [1998] 109 STC 543 (Ker), there was no specific provision either in the Act or the Rules for withholding issuance of forms on the ground of the assessee being a defaulter. Therefore, the case may not be applicable on all the fours to the cases at hand, but during the course of judgment, the High Court of Kerala observed that the issue of delivery notes and "C" forms was not in any way intended to restrict the trade or business; on the other hand, they were intended to regulate the conduct of the trade and business. Withholding of these document may sometimes result in the complete destruction of trade or business in which event it may amount to total restriction which is impermissible under the law. 20.1. During the course of its judgment, the Kerala High Court has quoted a division Bench judgment of the Madras High Court in Chanda Paints (Madras) Ltd. v. Commercial Tax Officer [1986] 61 STC 335 wherein the division Bench has observed that the Commercial Tax Officer was not constituted as a policeman to regulate and conduct the assessee along with virtuous path. If the assessee had registered himself under the provisions of the Central Act, he was, as a matter of right, entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under are illustrative of the general rule-making power conferred by sub-section (1), is subject to the same condition that the Rules framed on the subjects covered by sub-section (2) must also be for carrying out the purposes of the Act. No rule can be framed which may be inconsistent with the provisions of the Act. 23.. There is yet another angle of looking at the issue. The declaration forms are to be obtained by the purchasing dealer and then delivered to the seller-dealer. The purchasing dealer being in default of payment of tax would be denied the issuance of statutory forms. The consequence would be told on the seller-dealer who shall be held liable to payment of tax on account of failure on the part of the purchasing dealer. Such a situation, not contemplated by the Act, cannot be brought into being by the Rules. As held by their Lordships in the case of Radio and Electricals Ltd. [1966] 18 STC 222 (SC) the seller-dealer which entering into transactions with purchaser-dealer has only to see that the later is a registered dealer and the item of sale is mentioned in his registration certificate. He is not called upon also to ascertain whether the purchaser is a defaulter or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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