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2008 DIGILAW 1132 (PNJ)

Rama Trading Co. v. State Of Haryana

2008-05-30

RAKESH KUMAR GARG, SATISH KUMAR MITTAL

body2008
Judgment Rakesh Kumar Garg, J. 1. The petitioner is a registered dealer and in the course of its business purchased vegetable ghee from Pradeep & Co., Yamuna Nagar (RC No. 19733), Suresh Kumar Sanjay Kumar, Yamuna Nagar (RC No. 19645), Aggarwal Agency, Yamuna Nagar (RC No. 19853) and Ganesh Trading Co. Head Office at Panipat (RC No. 17629). 2. As per the averments made in the writ petition, the sales tax on vegetable ghee was payable at the first stage of sale. It is further the case of the petitioner that the selling dealers of vegetable ghee issued to him declaration in form ST-14 declaring that the tax had already been paid. 3. During the course of assessment, the petitioner had furnished copies of bills along with the declaration forms in form ST-14 to claim that the goods have already suffered tax at the hands of the first purchaser and therefore, the claim of tax paid, as well, is permissible to him under Section 18 of the Haryana General Sales Tax Act (hereinafter referred to as "the Act"), the petitioner being a subsequent seller. However, the claim of the petitioner was disallowed by the Assessing Authority on the ground that no tax had actually been paid by the first seller and, therefore, the petitioner was not entitled to claim deduction under the terms of proviso to Section 18 of the Act and created a demand of Rs. 72,983 vide his order dated August 29, 1986. The appeal filed by the petitioner against the order of the Assessing Authority before the Joint Excise and Taxation Commissioner (A) was also rejected vide order dated March 16, 1988. 4. Aggrieved against the said order of the appellate authority, the petitioner further filed an appeal before the Sales Tax Tribunal, Haryana. The said appeal was also dismissed by the Tribunal vide its order dated February 10, 1992. Petition under Section 42(1) of the Haryana General Sales Tax Act, 1973 , seeking reference on certain questions of law stated to be arising out of the order dated February 10, 1992 passed by the Tribunal was also rejected vide order dated April 28, 1994 by the Tribunal. 5. Petition under Section 42(1) of the Haryana General Sales Tax Act, 1973 , seeking reference on certain questions of law stated to be arising out of the order dated February 10, 1992 passed by the Tribunal was also rejected vide order dated April 28, 1994 by the Tribunal. 5. The petitioner, still aggrieved, has filed the present petition under Section 42(2) of the Act, 1973 for directing the Tribunal to draw a statement of the case and refer to this Court for its decision on the following questions of law arising out of the order of the Tribunal dated February 10, 1992: (i) Whether, on the facts and in the circumstances of the case, the declaration furnished by the selling registered dealer in form of ST-14 is sufficient compliance of the proviso of Section 18 of the Act ? (ii) Whether, on the facts and in the circumstances of the case, the non-deposit of tax by the selling registered dealers during currency of their registration certificate makes the purchasing registered dealer liable to pay the tax, in spite of the fact that the selling registered dealer has furnished declaration to the effect that tax has been paid ? (iii) Whether, on the facts and in the circumstances of the case, the department can only proceed against the selling registered dealer in view of the fact the registered dealer has been furnished a false certificate and tax has been paid ? (iv) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law to maintain order of the Assessing Authority when the requirements of Section 18 have been fully complied with by the petitioner-assessee ? 6. Mr. Rajesh Garg, learned Counsel for the petitioner, has vehemently argued before this Court that the petitioner had produced the declaration in form ST-14 and once the proper declaration is furnished, the assessing authority should have allowed the claim and if the tax was not paid by the first seller, it is the duty of the department to proceed against him and not against the purchasing dealer. Learned Counsel has further argued that the genuineness of the ST-14 declaration form submitted by the petitioner has not been disputed at any stage by the department. Learned Counsel has further argued that the genuineness of the ST-14 declaration form submitted by the petitioner has not been disputed at any stage by the department. Thus, the order of the Tribunal is against the law and questions of law as raised by the petitioner do arise from the order of the Tribunal. 7. On the order hand, Mr. Sanjeev Kaushik, Additional Advocate-General, Haryana, has argued that the enquiries revealed that the tax which was to be paid by the first seller has not been paid and, therefore, as per proviso to Section 18 of the Act no sale of such goods at a subsequent stage shall be exempt from tax under this Act unless the dealer effecting the sale at such subsequent stage furnishes to the assessing authority in the prescribed from and manner a certificate duly filled in and signed by the registered dealer from whom the goods were purchased to the effect that the tax on such goods has been paid at the first stage. He has further argued that the certificate which was actually produced only indicated an undertaking to pay tax which was not paid at the first stage and, therefore, according to him, the impugned orders are legal and correct and the present petition is liable to be dismissed. 8. We have heard learned Counsel for the parties and perused the record. 9. Section 18 of the Haryana General Sales Tax Act, is reproduced hereinafter below: The State Government may, by notification, direct that in respect of such goods, other than the goods specified in Schedules C and D, and with effect from such date as may be specified in the notification, the tax under Section 15 shall be levied at the first stage of sale thereof, subject to the conditions and restrictions as the Government may specify in this behalf, and on the issue of such notification the tax on such goods shall be levied accordingly: Provided that no sale of such goods at a subsequent stage shall be exempt from tax under this Act unless the dealer effecting the sale at such subsequent stage furnishes to the Assessing Authorities in the prescribed form and manner a certificate duly filled in and signed by the registered dealer from whom the goods were purchased to the effect that the tax on such goods has been paid at the first stage. Explanation : For the purpose of this sub-section, the first stage of sale in respect of any goods and in relation to any class of dealers shall be such as may be specified by the State Government in the notification. 10. A perusal of the abovesaid provisions of law would show that for claiming deduction from payment of tax on a subsequent sale of goods on which tax has been paid by the first seller, the dealer (second seller) has to furnish the certificate in the prescribed form and manner and signed by the registered dealer from whom the goods were purchased to the effect that the tax on such goods has been paid at the first stage. As per requirement of Section 18 of the Act, there was no further step required to be taken by the petitioner to verify the payment of tax. 11. Undisputedly, sales tax was payable at the first stage of the sale on vegetable ghee in the State of Haryana and further that the petitioner has submitted such certificate, i.e., the declaration in form ST-14 as provided to him by the first seller, who is a registered dealer of the department. It is also not disputed by the department that till date no action has been taken against the said registered dealer for recovery of tax. The Madras High Court in State of Tamil Nadu v. Raichael Chacko [1985] 59 STC 144 has held that once a proper declaration, i.e., form ST-14 has been furnished by the dealer to the assessing authority the dealer is entitled to claim deduction from the payment of sales tax on a subsequent sale of the goods on which tax has been paid at the stage of first sale and it is not the duty of the subsequent seller to pay tax if the first seller has not paid the tax and it is the duty of the department to proceed against him and not the purchasing dealer. In the case of Govindan & Co. In the case of Govindan & Co. v. State of Tamil Nadu [1975] 35 STC 50, the honourable Madras High Court held that to claim benefit of tax on the ground that the sales effected by the assessees were second sales, they need not show that their sellers had in fact paid the tax at the first point and it was enough for them to show that the earlier sales were taxable sales and that the tax was really payable by their sellers. This decision was affirmed by the honourable Supreme Court in State of Tamil Nadu v. Raman & Co. [1994] 93 STC 185. 12. Undisputedly, the sales tax in the State of Haryana on vegetable ghee was payable at the stage of first sale. It is also not in dispute that the petitioners had purchased the impugned goods within the State of Haryana and were the second sellers. The only argument raised by the Revenue to deny the claim of the petitioner is that the first seller has not paid the tax and, therefore, the claim of the petitioner for exemption from payment of sales tax cannot be accepted. The liability of non-payment of tax is on the selling dealer who may have given a false declaration but in any case such false declaration will not make the buying dealer of the first stage of sale liable to pay the tax as the buying dealer has fulfilled the conditions mentioned in Section 18. It would be preposterous to say that buying dealer has to go in for making enquiries with respect to every sale, as to whether the tax has actually been paid or not. If that were to be the situation, then the very purpose of form ST-14 is defeated. 13. In view of the law laid down by the Madras High Court in Raichael Chackos case [1985] 59 STC 144 and Raman & Co. case [1994] 93 STC 185 (SC), the dealer is entitled to claim deduction from the payment of sales tax on a subsequent sale for goods on which tax has been paid at the stage of first sale and it is not the duty of the subsequent seller to pay tax if the first seller has not paid the tax. No contrary judgment has been cited by the respondents. No contrary judgment has been cited by the respondents. Thus, we are of the view that the aforementioned questions of law do arise in the present case and, therefore, we direct the Sales Tax Tribunal, Haryana to draw a statement of the case and refer to this Court for its decision the questions of law as aforementioned in para 5 of the judgment which arise out of the order of the Tribunal dated February 10, 1992.