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2003 DIGILAW 220 (CAL)

PRIYA CHEMICALS v. WEST BENGAL COMMERCIAL TAXES

2003-04-30

KALYAN JYOTI SENGUPTA

body2003
KALYAN JYOTI SENGUPTA, J. ( 1 ) IN this matter rule was issued but drawing up of rule was dispensed with as the learned lawyers for the respondents insisted so and obtained direction for filing affidavits but no affidavit nor any power has been filed. On November 21, 2000 the matter came up for hearing before me and on that date I extended time to file affidavit-in-opposition. Despite extension of time no affidavit-in-opposition was filed ultimately, the matter was heard ex parte on February 13, 2002 and again on June 28, 2002. Neither on the aforesaid two dates learned lawyers for the State appear, nor to speak of filing any affidavit-in-opposition. Under such circumstances I had no option but to consider this matter, on the basis of the allegations made in the petition. In this matter three orders of the respective hierarchy of the sales tax authorities have been challenged. The said three orders were passed, firstly, by the Commercial Tax Officer, Lyons Range, 14 Beliaghata Main Road, Calcutta-15 being the respondent No. 1, secondly by the Assistant Commercial Taxes, Chowringhee Circle on September 22, 1988 and lastly by the Appellate and the Revisional Board being respondent No. 1 on June 5, 1997 and, prayed for withdrawal and/or cancellation of the demand made in form 4. Ordinarily, in these types of matter in which three quasi-judicial authorities have screened the petitioner's grievance and claim, the writ court does not interfere, however, when the rule was issued by the Court, I am duty-bound to examine firstly as to legality and validity in the eye of law of the aforesaid three impugned orders and secondly, the demand made by the respondents. Without narration of the short fact in this case it would be inappropriate to decide this matter. ( 2 ) THE same are as stated hereinafter. The petitioner being the dealer, seller and exporter of chemical goods purchased certain chemical items from an Andhra Pradesh dealer on May 9, 1981. At the time of purchase of the said materials, the petitioner duly furnished necessary declaration in form C and also paid 4 per cent central sales tax to A. P. dealer against this transaction. Therefore, according to the petitioner this is an inter-State sale and/or transaction of the aforesaid goods. At the time of purchase of the said materials, the petitioner duly furnished necessary declaration in form C and also paid 4 per cent central sales tax to A. P. dealer against this transaction. Therefore, according to the petitioner this is an inter-State sale and/or transaction of the aforesaid goods. On way to West Bengal from Andhra Pradesh by truck the goods were sold by the petitioner by endorsing the lorry receipts (documents of title to goods) in favour of Indian Oil Corporation, Haldia Refinery, Haldia, Midnapur, who in its turn duly furnished and/or issued this declaration in C form to the petitioner as a conclusive proof of second sale. A. P. dealer issued E-I form in their own stationery authenticated and counter-signed by Assistant Commercial Tax Officer, Goodivadda, Andhra Pradesh, in 1985, covering a transaction of May 9, 1981 of Rs. 64,35,000. Thereafter the petitioner duly furnished returns of the aforesaid transaction and claimed exemption from payment of any further tax on the aforesaid turnover. However, respondent No. 1 disallowed such claim for exemption. On appeal being preferred the appellate authority with reasons upheld the order of the Commercial Tax Officer, petitioner unsuccessfully pursued the statutory remedy by filing a revisional application before the revising authority, who too dismissed the petitioner's application and upheld the order of both the subordinate officials. ( 3 ) COMMERCIAL Tax Officer being respondent No. 2 disallowed the claim for exemption because of non-production of statutory declarations in form E-I while the appellate authority gave reasons for rejection of the petitioner's claim that by Government Order No. 384, Rev. (S) dated April 18, 1985 of the A. P. Government the Rule 12 (3) of the Central Sales Tax (Andhra Pradesh) Rules, 1957 was amended for use of stationery E-I form and E-II form with effect from April 18, 1985. In absence of any specification the retrospective effect of the aforesaid amended rule cannot be given. The transactions involved in the appeal were related to the year 1981. Hence, the petitioner is not entitled to cover its transaction of sales under Section 6 (2) of the Central Sales Tax Act, 1956 in respect of the period which is about 4 years older than the amendment of the appropriate Rule made by A. P. Government. The transactions involved in the appeal were related to the year 1981. Hence, the petitioner is not entitled to cover its transaction of sales under Section 6 (2) of the Central Sales Tax Act, 1956 in respect of the period which is about 4 years older than the amendment of the appropriate Rule made by A. P. Government. ( 4 ) FURTHER reasoning was that the stationery E-I forms which were issued by the dealer of A. P. are not exact replica of the form prescribed by the Government of India under G. S. R. No. 896 dated September 23, 1958 as amended from time to time lastly made by G. S. R. 56 (E) Notification F. No. 28/30/72-ST II dated February 9, 1973 with effect from April 1, 1973. In substance it is held that, the petitioner did not obtain the certificate in form E-I either in prescribed form or manner. ( 5 ) THE appellate authority did not allow logically the benefit under Section 8 (1) (b) of the Central Sales Tax Act, 1956 although the petitioner furnished necessary Central declaration in form C. The revising authority however, did give no detail reasons for rejecting the petitioner's application but observed in cryptic manner that as there was a defect in E-I form and rectification had not been made, so the petitioner's claim was rejected. ( 6 ) MR. Gopal Chakraborty, learned Senior Advocate, contends that the decisions of all the three authorities are not sustainable under the law in as much as under the provision of Section 6 (2) of the Central Sales Tax Act, 1956 the petitioner is entitled to exemption from taxation as his client substantially complied with the requirements under the law by furnishing E-I form issued by the A. P. Government earlier and also produced C form issued by the Indian Oil Corporation, Haldia. ( 7 ) HE contends that the filing and furnishing of E-I form has to be done at the time of the assessment and this assessment took place on May 7, 1985. He further contends that issue of E-I form on stationery became effective and/or lawful by the Government Order No. 384 dated April 18, 1985. Therefore, there was nothing wrong in issuing non-statutory E-I form, authenticated by the Assistant Commercial Tax Officer, A. P. , covering transaction of May 9, 1981. He further contends that issue of E-I form on stationery became effective and/or lawful by the Government Order No. 384 dated April 18, 1985. Therefore, there was nothing wrong in issuing non-statutory E-I form, authenticated by the Assistant Commercial Tax Officer, A. P. , covering transaction of May 9, 1981. In support of his aforesaid submission he has relied on the following decisions reported in State of Madras v. P. Subbiah Pillai [19671 20 STC 263 (Mad.), Commissioner of Sales Tax, M. P. v. Prahalad Das Ramdas [1983] 52 STC 224 (MP), Commissioner of Sales Tax, M. P. v. Shivnarayan Jagatnarayan [1978] 42 STC 315 (MP) and State of Orissa v. Ramnarayan Sitaram [1988] 68 STC 153 (Orissa ). ( 8 ) HIS further contention is that the procedural Rule is not mandatory and he has sought reliance on a division Bench decision of this Court reported in Durga Sree Stores v. Board of Revenue, West Bengal [1964] 15 STC 186. He has tried to impress upon me that it is necessary under the relevant Rules and the Act, to establish that there was a second sale in inter-State sale transaction in order to claim exemption under Section 6 (2) of the aforesaid Act. When the petitioner has been able to establish the factum of second sale exemption should have been given as matter of course. ( 9 ) HAVING carefully examined this matter and considering the submission of Mr. Chakraborty in this case on the aforesaid factual matrix the issue in this is whether the petitioner is entitled to get exemption from payment of further tax under Section 6 (2) of the Central Sales Tax Act, 1956. It would be apposite to quote Section 6 of the said Act. "6. Chakraborty in this case on the aforesaid factual matrix the issue in this is whether the petitioner is entitled to get exemption from payment of further tax under Section 6 (2) of the Central Sales Tax Act, 1956. It would be apposite to quote Section 6 of the said Act. "6. Liability to tax on inter-State sales.-- (1) Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified : provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of Sub-section (3) of Section 5, is a sale in the course of export of those goods out of the territory of India. (1-A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State. (2) Notwithstanding anything contained in Sub-section (1) or Sub-section (1-A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods,-- (A) to the Government, or (B) to a registered dealer other than the Government, if the goods are of the description referred to in Sub-section (3) of Section 8, shall be exempt from tax under this Act : provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,-- (a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority ; and (b) if the subsequent sale is made-- (i) to a registered dealer, a declaration referred to in Clause (a) of Sub-section (4) of Section 8 ; or (ii) to the Government, not being a registered dealer, a certificate referred to in Clause (b) of Sub-section (4) of Section 8 : provided further that it shall not be necessary to furnish the declaration or the certificate referred to in Clause (b) of the preceding proviso in respect of a subsequent sale of goods if,-- (a) the sale or purchase of such goods is, under the sales tax law of the appropriate State, exempt from tax generally or is subject to tax generally at a rate which is lower than four per cent (whether called a tax or fee or by any other name) ; and (b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in Clause (A) or Clause (B) of this sub-section. " ( 10 ) UPON careful reading of Sub-section (2) and the proviso thereunder of Section 6 of the Central Sales Tax Act, it appears to me that in order to get exemption from payment of sales tax in case of inter-State trade or commerce, the subsequent sale must be made to the Government, or to a registered dealer other than the Government, if the goods are of the description referred to in Sub-section (3) of Section 8. But it has to be established as a proof of subsequent sale ordinarily by furnishing to the prescribed authority in the prescribed manner within the prescribed time or within such further time as the authority may permit a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority and in case of subsequent sale is made to a registered dealer, a declaration referred to in Clause (a) of Sub-section (4) of Section 8 or to the Government, not being a registered dealer, a certificate referred to in Clause (b) of Sub-section (4) of Section 8 is necessary. The prescribed authority and prescribed manner means as prescribed in the Rule. Rule 6 of the Central Sales Tax (Registration and Turnover) Rules, 1957 prescribes forms E-I and E-II for furnishing the certificate as above. In other words in order to get exemption the dealer has to satisfy basically (i) purchase from registered dealer in another State of the goods the description of which are referred to in Sub-section (3) of Section 8 of the Act and subsequent sale of the same goods either to the Government or registered dealer. Both the transactions have to be proved by the methods mentioned in Sub-section (2) of Section 6 of the said Act. However, proof of subsequent sale can be established aliunde production, declaration and certificate as referred in Sub-clauses (i) and (ii) of Clause (b) of first proviso to Sub-section (2) of Section 6 of the said Act. ( 11 ) OF course, such proof will be to the satisfaction of the prescribed authority. This satisfaction is obviously subjective one but that docs not mean rejection of proof will be unreasonable. ( 11 ) OF course, such proof will be to the satisfaction of the prescribed authority. This satisfaction is obviously subjective one but that docs not mean rejection of proof will be unreasonable. If upon analysis of the facts and circumstances and the accompanying documents of a particular transaction it clearly appears there was purchaser of goods from a dealer of goods nature of which is mentioned in the said section and subsequent sale in course of inter-State trade and commerce as provided in Sub-section (1) of Section 6 of the Act then exemption shall be granted by the prescribed authority. ( 12 ) IN support of ray observation I find a division Bench judgment of the Madhya Pradesh High Court reported in [1978] 42 STC 315 (Commissioner of Sales Tax, M. P. v. Shivnarayan Jagatnarayan ). In this case it has been observed that ". . . . . the satisfaction of the assessing authority of the subsequent sale being made to a registered dealer during the course of an inter-State sale is the total requirement of Rule 8-D framed by the State Government. Ordinarily, the furnishing of declaration in form C obtained from the purchasing dealer would prove this fact beyond controversy. However, substantial compliance of this directory provisions may be made by satisfying the assessing authority of this fact even by any other mode". ( 13 ) THE division Bench judgment of the Orissa High Court reported in [1988] 68 STC 153 (State of Orissa v. Ramnarayan Sitaram) has made nearly similar observation, which is quoted here-under :"the dealer beyond those proof can claim in any other manner also, moreover, the words so used in Sub-rules (5) and (7) of Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, being in a procedural statute, could not be held to be mandatory, when non-compliance was not to have adverse effect. Besides, the provisions in the Rule could not override the provisions of the Act". ( 14 ) I find from the impugned orders, in order to prove the subsequent sale the petitioner produced non-statutory E-I form duly counter-signed by the appropriate officer of the Commissioner of Sales Tax, State of Andhra Pradesh. As the statutory form was out of print, this non-statutory form, however, was subsequently legalised in the year 1985 by amending relevant Rule by passing appropriate order of the Government. As the statutory form was out of print, this non-statutory form, however, was subsequently legalised in the year 1985 by amending relevant Rule by passing appropriate order of the Government. This form was furnished in order to prove the first sale and in order to prove the second sale to Haldia Refinery, the petitioner furnished declaration in C form and to this there is no dispute. ( 15 ) THE whole dispute in this case has arisen because of non-acceptance of the non-statutory E-I form by three sales tax officials holding the same are not in statutory form and subsequent legalisation by the Government Officials does not remove the defect as the transaction relates to the year beyond 1981 whereas, legalisation has been done in 1985. ( 16 ) I find there is considerable force in the submission of Mr. Chakraborty that the whole object of the statute is to establish the second sale. The aforesaid circumstances and the document being a non-statutory E-I form proves beyond reasonable doubt that the first sales took place from the Andhra Pradesh dealer to the petitioner. In this case there is no question of retrospective application of amended provision of Rule as when assessment was made non-statutory form was made statutory. ( 17 ) I am of the view that the sales tax authorities have misconstrued the aforesaid Sub-section (2) of the Act and they have arbitrarily rejected the proof adduced by the petitioner. Issuance of the non-statutory form with due counter-signature of the appropriate officials and subsequent legalisation by the appropriate order of the Government establishes beyond doubt that the documents are acceptable as a proof of purchase from the Andhra dealer. Therefore, the sales tax authorities below should have applied the second proviso to Sub-section (2) for giving benefit of furnishing form C for second sale to Haldia Refinery but because of mistaken view they have applied the first proviso Clauses (a) and (b) without reading the second proviso. ( 18 ) UNDER those circumstances I find that the three orders passed by the prescribed authority have been passed without lawful exercise of jurisdiction, as they have not applied the correct law. Those three orders are liable to be and are thereby set aside. Secondly, I declare that the petitioner is entitled to exemption under Section 6 (2) of the said Act. Those three orders are liable to be and are thereby set aside. Secondly, I declare that the petitioner is entitled to exemption under Section 6 (2) of the said Act. Thus, I allow this application, however, without any order as to costs.