C. Jairam Pvt. Ltd. vs Commissioner Of Sales Tax, New ...
1981 Latest Caselaw 99 Del

JUDGMENT

Kapur, J.

1. M/s. C. Jairam Private Limited, the assessed-dealer is a private limited company with an office at Delhi and the head office in Bombay. In the assessment year 1968-69, the assessed-firm claimed a concessional rate of tax in the course of inter-State trade or commerce and produced certain D forms in respect of the same. All these D forms were issued in the name of M/s. C. Jairam Pvt. Ltd., Bombay, and not M/s. C. Jairam Pvt. Ltd., Delhi. The sales had been effected in favor of the Director General, Supplies and Disposals, and the forms had been issued by that authority. The case of the dealer was that the head office was at Bombay and the forms had been issued at that address though under the terms of the contract the sales were made from Delhi. The assessing authority did not accept the contention and proceeded to levy full tax.

2. An appeal was taken to the appellate authority which was the Assistant Commissioner, Sales Tax. There, two certificates were produced issued by the Director General, Supplies and Disposals, which are dated 24th October, 1972, and 18th December, 1972. These certificates were to the effect that the D forms in question covered dispatches of cotton waste from Delhi. The appellate authority did not accept the assessed's claim and dismissed the appeal. A revision against the order was also dismissed.

3. A second revision under the Act was heard by the Financial Commissioner, where in it was contended that the D forms had now been duly corrected and were with the dealer. It was also contended that the Central Sales Tax Act covered a dealer carrying on business all over India, and therefore, the mention of "Bombay" instead of "Delhi" did not make any difference in the form. It was also stated that amended D forms had since been obtained which should have been taken on record. The learned Financial Commissioner rejected this contention.

4. The position taken by the Financial Commissioner was a simple one. He held that valid D forms had not been filed before the assessing authority and in the absence of those D forms, the D forms issued by the purchasing Government in the name of the head office of the petitioner-assessed at Bombay could not be treated as valid. The Financial Commissioner was of the view that a dealer in a State was a person carrying on business within the limits of that State. The firm at Bombay was not such a dealer, and hence, the forms had to be rejected and had rightly not been considered valid.

5. This has led the reference of the following questions of law under section 21(1) of the Bengal Finance (Sales Tax) Act, 1941. (As the Bengal Act had been repealed, the actual reference is under section 45 of the Delhi Sales Tax Act, 1975, but that makes little difference) :

"(1) Whether, on the facts and in the circumstances of the case, the notified authority was justified in rejecting the D forms bearing the word 'Bombay' in place of 'Delhi' as defective ?

(2) Whether, on the facts and in the circumstances of the case, the appellate/revisional authorities were justified in refusing to entertain the certificates or corrected D forms produced by the petitioner in the course of the hearing of appeal/revision ?

(3) Whether, on the facts and in the circumstances of the case, the petitioner-company is lawfully entitled to claim concessional rate of tax on inter-State sales in respect of supplies made by the company from Delhi against the contract of D.G.S. & D. ?"

6. The controversy before us in respect of these questions is the subject-matter of Sales Tax Reference No. 25 of 1977. It may, however, be mentioned that the petitioner has also filed Civil Writ No. 327 of 1975, in which case a rule has been issued. The plea taken in that writ petition is that the Sales Tax Officer was at fault in not giving the assessed-company an opportunity to correct or remove the defects in the D forms supplied. It is also contended there that the correct D forms should have been accepted by the Deputy Commissioner, Sales Tax, or the Financial Commissioner, Sales Tax. The plea in the writ petition is that the levy and confirmation of the additional tax amounting to Rs. 1,39,987.80 should be quashed and also the penalty.

7. In connection with the writ petition, the copies of the orders passed by the Sales Tax Officer relating to various adjournments granted at the assessment stage have also been enclosed. Reliance has been placed at the hearing of the reference as well as the writ petition on that order-sheet which is annexure D to the writ petition. It has been urged that a number of adjournments were granted as the D forms were not complete. Those adjournments were from 13th March, 1970, onwards. On 13th March, 1972, the D forms were actually produced. It was then stated that the D forms were defective as not applicable to the Delhi firm and they were therefore rejected. The order states :

"The firm wanted time for the explanation of D forms which was rejected - as enough adjournments - Shri Bhasin requested to sign the order sheet."

8. The case of the assessed in the writ is that since the adjournments had resulted in the filing of the D forms, it was incumbent on the Sales Tax Officer to grant further time to the assessed to rectify the defects, or to give an explanation regarding the defects and the Sales Tax Officer acted wrongly in closing the case and passing the assessment order. For this proposition, reliance was placed on the judgment of the Madhya Pradesh High Court reported as Commissioner of Sales Tax, Madhya Pradesh v. Dayaram Balchand, Hira Mill Road, Ujjain [1973] 31 STC 249.

9. At the hearing of the case, we were of the view that we would normally have granted this writ on the ground that there was a lack of opportunity as far as the petitioners were concerned. The Sales Tax Officer should have granted the adjournment sought. The Sales Tax Act is of a technical nature. In the case of inter-State sales, a lower rate of tax is chargeable under section 8. The rate was 3 per cent at the relevant time. It was raised to 4 per cent with effect from 1st July, 1975. A dealer who makes such a sale is entitled to get the concessional rate of sales tax if he furnishes the declarations mentioned in section 8(4) of the Central Sales Tax Act. These declarations are either in form C or in form D. The Central Sales Tax (Registration and Turnover) Rules, 1957, deal with these forms in rule 12. The form of the declaration is also provided in the Central Sales Tax Rules. We have examined these forms. As far as form D is concerned, there are three copies - a counterfoil, a duplicate and an original. The form requires the name of the State Government or the Central Government to be mentioned and the name of the ministry and the department and the office of issue and is addressed to the seller. As it happened, in this case the forms which were issued are in the proper form, but they are issued to M/s. Jairam Pvt. Ltd., Tokersi Jivrajwadi, K.E. Road, Sewree, Bombay-15, who is described as the seller.

10. It was explained by the learned counsel for the assessed that the contract was entered into between the company from its Bombay office, so the description of the seller is correct. On the other hand, the supplies were made from the branch office at Delhi. Therefore, the actual sale was made from the office at Delhi, but the contract was made with the office at Bombay. It appears to us that the form as originally issued is not defective, but that raises the question as to whether this form can be used in the proceedings at Delhi.

11. The real controversy on the question whether the form can be used at Delhi depends on whether the firm with its head office at Bombay and its branch office at Delhi can be treated as being two separate firms, or they are to be treated as one firm.

12. In a recent decision of the Supreme Court, Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax [1978] 41 STC 409 (SC), certain observations have been made which are quite appropriate to the circumstances of the present case. The assessed in that case was purchasing goods in Delhi and reselling them outside the territory of Delhi. The High Court had in Fitwell Engineers v. Financial Commissioner Delhi [1975] 35 STC 66 held that section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, as applicable to Delhi, operated only when goods were resold inside Delhi. If the assessed sold the goods outside Delhi, then it was a "utilisation" otherwise than in accordance with the purpose for which they had been purchased. In such a case the goods were liable to be included in the taxable turnover of the assessed under the second proviso to section 5(2)(a)(ii). The decision of the Supreme Court, however, was that it did not matter if the purchasing party sold the goods in Delhi or outside Delhi and a resale by the dealer outside Delhi was also a resale by him. Many of the points involved in that case are not appropriate to the present case and need not be examined by us. However, there are some points which have some relevance. Firstly, the court examined the words "resale", "sale" and "by him" to hold that the sale by the purchasing party made outside the State was also a "sale" by him or a "resale" by him. The words "by him" were not confined to the dealer while operating within the Union Territory of Delhi. Furthermore, it was observed as follows and this passage has some importance here;

"Lastly, it was contended that the resales effected by the branches of the assesseds outside Delhi could not be regarded as resales by the assesseds within the meaning of section 5(2)(a)(ii) and the second proviso and hence the assesseds must be held to have utilised the goods for a purpose different from that for which the goods were purchased, namely, resale by them, and the price of the goods purchased must be included in their taxable turnover under the second proviso. But this contention fails to take into account the plain and obvious fact that when the branches of the assesseds resell the goods outside Delhi, it is really the assesseds who resell the goods, for the branches are not distinct and independent from the assesseds but are merely establishments of the assesseds. Resales effected by the branches are nothing else than resales made by the assesseds at the branches and hence it is not possible to say that when the goods were resold by the branches, the resales were not by the assesseds so as to attract the applicability of the second proviso."

13. Clearly, the Supreme Court has held that the branch, or the head office, or the other branch of the same dealer were not different entities but the same entity.

14. If we examine the D forms which have been rejected in this case and apply the test given by the Supreme Court, we would find that the D forms issued in the name of "M/s. C. Jairam Pvt. Ltd., Bombay" or the D forms issued in the name of "M/s. C. Jairam Pvt. Ltd., Delhi", are really the same. The words "Delhi or "Bombay" are not a description or the name of the person. In the present case, as the sales were made at Delhi, in the sense that supplies were made from Delhi, then D forms could not be used by the head office at Bombay, because the sales do not form part of the taxable turnover of the head office at Bombay. On the other hand, the sales in question do form part of the taxable turnover of the branch at Delhi, so the forms can only be used at Delhi and cannot be used at Bombay. Furthermore, as the contract between the parties was entered into between the firm's head office at Bombay and the Director General, Supplies and Disposals, the forms are also not defective. The purchaser has necessarily to issue the forms in the name of the seller. The purchaser is in fact not concerned with the place from where the goods come. He is only concerned with the identity of the seller. The seller happens to be M/s. C. Jairam Pvt. Ltd., and not M/s. Jairam Pvt. Ltd., Bombay, or M/s. C. Jairam Pvt. Ltd., Delhi.

15. It would appear that the word "Bombay" occurring in the D forms only gives the address and nothing more.

16. The analysis just made, which is based on the reasoning contained in the Supreme Court's judgment quoted earlier, brings into focus the real controversy in the present case. The applicant in the present reference has been described as M/s. C. Jairam Private Ltd., 42, D.L.F., Industrial Area, New Delhi. This is a private limited company which has only one identity. It is the same company which does business both at Bombay as well as at Delhi. It may be that for convenience of reference, the sales tax authorities may call the assessed M/s. C. Jairam Pvt. Ltd., with the addition of the word "Bombay" or the addition of the word "Delhi", as the case may be, for application of the relevant sales tax law at Bombay or Delhi. Nevertheless, the assessed in each case would be the same private limited company. For the purpose of claiming deductions under the law, the assessed is required to produce evidence that a particular sale has taken place in a particular manner. This, in the case of the Central Sales Tax Act, is done by producing C forms or D forms, as the case may be. Once the D forms are produced, it is not for the sales tax authorities to reject them on some ground, but it is the duty of the sales tax authorities to determine whether the exemption is to be granted on the basis of the said forms. As explained above, the forms were sent in this case to the company in Bombay because the contract was between the Government and the company which was at Bombay. The purchaser had necessarily to send the forms in question to the seller. However, the working of the sales tax law is not to be influenced by what the seller does, but by the reality of the situation. It would not be too much to say that the operation of the provisions of the Sales Tax Act is dependent on how the purchaser frames the D forms. It is, therefore, the substantive contents of the D forms which have to be examined. As it happens, the seller was M/s. C. Jairam Pvt. Ltd., and the purchaser was the Director General of Supplies and Disposals. The D forms had to be sent by the purchaser to the seller. The purchase order in this case had been placed on the company at Bombay, so there was no error by the purchaser in sending the forms to Bombay and addressing them to the company at Bombay. The next step was the claiming of the concession allowed to inter-State sales. This had to be done by submitting the D forms to the sales tax authorities concerned. As pointed out above, the concession could only be claimed from that Sales Tax Officer where the sale had taken place. If the sales were included in the taxable turnover qua Bombay, the D forms had to be submitted at Bombay. If the sales were included in the taxable turnover at Delhi the forms had to be submitted at Delhi. If the sales had been included in some other taxable turnover, then they would have to be submitted to the Sales Tax Officer dealing with that turnover. As long as the sales were evidenced by the D forms, the assessed was entitled to the concessional rate of tax. We are, therefore, of the view that the D forms were not defective and the word "Bombay" occurring in the forms merely gives the address of the company at Bombay and not the place at which the form is to be used. The applicability of the D forms does not depend on the address given, but depends on the place where the sale is included in the taxable turnover. In the words, we come to the conclusion that the original forms were not defective.

17. We can now answer the three questions referred to us as follows. On the first question, we would hold in the negative to say that the notified authority was not justified in rejecting the D forms because they mention Bombay in place of Delhi. In fact, this is not to be treated as part of the form, but as part of the address.

18. Turning to the second question, we hold that the appellate or the revisional authority were not justified in refusing to entertain the certificates or corrected D forms. As we have already answered the first question in the negative, this question would not have survived, but the corrected D forms would serve to focus attention of the appellate or the revisional authority, as the case may be, on the correct position, and therefore, we would answer this question also in the negative.

19. Turning now to the third question, we would hold that the company is entitled to claim concessional rate of tax on inter-State sales because these sales have been accepted to be inter-State sales. At least there is no material on the record to show that the sales are not inter-State sales. In case the goods were supplied from Delhi at Delhi, then of course, they would not be inter-State sales. For the purpose of clarifying this point, the answer to the second question becomes very material.

20. In our view, the proper course in this case was for the notified authority to accept the forms as originally filed and, at the most call upon the assessed to show that there were in fact inter-State sales involved which could be done by obtaining certificates from the purchaser.

21. The answers to the questions referred to us can, therefore, be summarised as follows. In answer to the first and second questions, we would answer the same in the negative in favor of the assessed and against the department. We would answer the third question also in the affirmative in favor of the assessed and against the department, but with the qualification that the department could call upon the assessed to show that the sales in question were inter-State sales. We would award costs to the petitioner. Counsel's fee Rs. 550.