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2010 DIGILAW 189 (BOM)

The Commissioner of Sales Tax v. M. R. F. Limited

2010-02-05

D.G.KARNIK, F.I.REBELLO

body2010
Judgment : FERDINO I. REBELLO, J. The Tribunal has been pleased to refer the following questions for decision: 1. Whether on facts and in the circumstances of the case, was the Tribunal justified in law in holding that the respondent was entitled to claim concessional rate of tax at 4% on their sales effected to Zilla Parishad which is not a State Government on the strength of certificate in Form “AF” within the meaning of notification entry No.70 issued under Section 41 of the Bombay Act? 2. Whether on facts and in the circumstances of the case, was the Tribunal justified in law in absolving the respondent from his statutory liability on the sales effected to Zilla Parishad which is admittedly not a State Government solely on the ground that the purchaser namely Zilla Parishad is made liable to pay purchase tax on such purchases under Section 41(2) of the Bombay Act? 2. Section 41(2) of the Bombay Sales Tax Act reads as under: “41(2) Where any dealer or person has purchased any goods under a declaration given by him under any of the notifications issued under this section and (a) any of the conditions subject to which such exemption was granted, or (b) any of the recitals or the conditions of the declaration, are not complied with, for any reason whatsoever, [or, in any other case, where such dealer or person was not entitled to issue such declaration]then such dealer or person shall be liable to pay purchase tax on the purchase price of the goods so purchased, and the purchase tax shall be levied at the rate set out against each of such goods in column 4 of Schedule B and C, notwithstanding that such dealer or person was not liable to pay tax under section 3, and accordingly the dealer or the person who has become liable to pay purchase tax under this subsection shall file a return in the prescribed form to the prescribed authority within a prescribed time and shall include the purchase price of such turnover in his return, and pay the tax in the prescribed manner. The tax due from any such dealer or person shall be assessed or reassessed under section 33 or 35, as the case may be: Provided that, the amount of tax (if any) paid by the dealer or such person to a Registered dealer on such purchases, on which has become liable to pay purchase tax under this subsection, shall be set of against the purchase tax so leviable. 3. A few relevant facts: The respondent is a reseller in automobile tires and tubes. The relevant period is 1st October, 1985 to 30th September, 1986. Under the provisions of the Bombay Sales Tax Act, 1959 which hereinafter shall be referred to as the Act, the Assessing Athority disallowed the claim of the Appellant for sales against declarations in Form AF amounting to Rs.3,50,560/effected to Zilla Parishad. The Respondents further aggrieved had preferred an Appeal before the Deputy Commissioner of Sales Tax (Appeals) who was pleased to confirm the order of Assessment and disallow sales against the declarations in Form AF issued by Zilla Parishad. The Respondent aggrieved preferred Second Appeal bearing No.634 of 1993 before the Tribunal. In the Second Appeal the learned Tribunal was pleased to hold considering the provisions of Section 41 that it was a duty of the purchaser to effect purchase as per the condition notified in the declaration. The learned Tribunal held that the action of the lower Authority in subjecting sales tax against AF forms to sales tax is erroneous and illegal and this obligation would be directly lying on the shoulders of the purchaser and as such these sales would, the fore, have to be allowed to the assessee. 4. The Revenue aggrieved by this order preferred a Reference being Reference Application No.13 of 1995. One of the contentions raised on behalf of the Revenue before the Reference Court was, whether the selling dealer i.e. the respondent herein, had to make reasonable enquiry about the authority of purchasing dealer to issue required declarations on the basis of the concessional rate of tax is claimed. The Tribunal noted the argument that admittedly the Zilla Parishad is not Government and as such it has no authority to make the purchases against form AF and as the Zilla Parishad has not made payment of purchase price, the respondent is liable to pay full sales tax on the sales affected against declarations in form AF. The Tribunal noted the argument that admittedly the Zilla Parishad is not Government and as such it has no authority to make the purchases against form AF and as the Zilla Parishad has not made payment of purchase price, the respondent is liable to pay full sales tax on the sales affected against declarations in form AF. The Tribunal went on to hold that the second view is also possible and the mere fact that the purchasing dealer is liable to pay the purchase tax by itself is not sufficient to hold the respondent is not liable for payment of tax and in these circumstances the questions as framed would arise. 5. Having perused the order of the Commissioner in the First Appeal and in the Second Appeal we find that the contentions as sought to be made in the reference application were never argued. Attention of the First Appellate Authority was invited to the fact that the explanation under Entry No.70 is added to the Notification only on 1st April, 1987 therefore, sales against AF form to Zilla Parishad etc., after 1st April, 1987 only can be disallowed. This contention was rejected by holding that the Notification only clarifies the position which existed before 1st April, 1987 and accordingly dismissed the Appeal. 6. In the Second Appeal preferred before the learned Tribunal the contention advanced was that the duty was not cast on the respondent dealer to see whether a particular Department is in fact a Government Department. It was argued that under Section 41 the amendment which came into with effect from 1st April, 1987 requires that sales against such forms to such authority are valid and, therefore, it stood to reason that these forms would be allowed as a valid document. On behalf of the Revenue the Assistant Commissioner justified the orders of the authorities below. The Tribunal noted that the revenue had nothing to say that it was the duty of the purchaser to effect purchase as per the provisions of law. The learned Tribunal noted that the findings by the Authorities below in subjecting sales tax against AF forms to sales tax is erroneous and illegal as the obligation will be directly lying on the shoulders of the purchaser and as such the same will have to be allowed to the assessee i.e. the respondent herein and accordingly allowed the Appeal. 7. 7. Dealing with this controversy it would be clear that in so far as question (1) is concerned in so far as Entry No.70 of the Notification, the exemption is to the extent to which the amount of sales tax exceeds 4 paise in a rupee subject to the condition that the authorised officer of the Government furnishes to the selling dealer a declaration in form AF. In the instant case in fact such a form was issued against which the goods were sold. At the hearing of this Appeal on behalf of the Appellant it is submitted that as the respondent had claimed concessional rate of tax he was under obligation to see whether the purchasing dealer was authorised to receive the declaration in form AF. It is submitted that that this aspect was not at all considered by the Tribunal while allowing the claim of the respondent for sales against declaration in Form AF by Zilla Parishad. It would thus be clear that it is the submission of the appellants themselves that Second Appellate Authority did not consider the question of obligation on it to find out whether the declaration could have been issued. The submissions on behalf of the Department are reflected in para.3 of the order of the learned Second Appellate Authority. Nowhere was this contention raised nor has the Tribunal anywhere referred to such a contention. Similarly, neither before the Assessing Authority nor before the First Appellate Authority was such a contention raised. It is only before the Reference Court that such a contention was raised. In our opinion the question must arise from the order of the Tribunal. Even otherwise the question as raised has not referred to such question. The question No.(1) as formulated is whether confessional rate of tax could be claimed on sales effected to Zilla Parishad which is not a State Government on the strength of certificate in Form AF. Assuming that question (1) indirectly arises in our opinion it was not for the selling dealer to go beyond the declaration produced by the Zilla Parishad. The section as amended itself makes it clear that if it is found that such dealer was not entitled to issue such declaration then such dealer would be liable to pay the tax. Assuming that question (1) indirectly arises in our opinion it was not for the selling dealer to go beyond the declaration produced by the Zilla Parishad. The section as amended itself makes it clear that if it is found that such dealer was not entitled to issue such declaration then such dealer would be liable to pay the tax. In our opinion, therefore, the question will have to be answered in the affirmative namely that the Tribunal was right in holding the respondent was entitled to claim confessional rate of tax. 8. In so far as the second question is concerned, in our opinion, it is merely consequential. Even otherwise considering the express language of Section 41(2) once the Act itself puts a burden on the purchaser then the question of claiming from the seller or the duty being cast on the seller would not arise. The language of Section 41(2) as introduced by Maharashtra Act 9 of 1988 is very clear, that in the case where a dealer is not entitled for a declaration then it is that dealer who is liable to pay purchase tax on the purchase of the goods so purchased. The section also makes provisions as to how such tax would be assessed from such dealer. In our opinion, therefore, the question of the seller being under an obligation to pay tax does not arise. The question as framed would have to be answered in the affirmative and against the revenue. 9. In the light of that the Reference disposed off.