Mohan Machines Ltd. vs The Sales Tax Tribunal
1993 Latest Caselaw 685 Del

JUDGMENT

Gokal Chand Mital, C.J.

(1) The Sales Tax Officer created a demand of Rs37,66,820.00 against the petitioner vide order dated 20th March, 1991. Against this order,the petitioner filed an appeal before the Additional Commissioner Sales Tax and filed an application for dispensing with the pre-deposit. The Additional Commissioner of Sales Tax vide order dated 9th September, 1991 directed the petitioner to deposit the entire levied amount and the compliance report was to be submitted before 10th October, 1991. Since the petitioner did not deposit the amount, the appeal was dismissed in liming on 10th October, 1991.

(2) Against the aforesaid order, the petitioner took the matter in appeal before the Appellate Tribunal Sales Tax, Delhi and along with the appeal filed an application for dispensing the pre-deposit. The appeal and the application for dispensing with the pre-deposit have been dismissed by the Appellate Tribunal vide order dated 8th October, 1992.

(3) Still feeling aggrieved, the petitioner approached this Court under Article 226 of the Constitution of India.

(4) It is urged on behalf of the petitioner that the petitioner company was declared a sick unit by the Board for Industrial and Financial Reconstruction by order dated 5th December, 1989 and thus the petitioner company was not obliged to deposit the amount as a condition precedent for hearing of the appeal inasmuch as no recovery of tax could be made from the-petitioner.

(5) On a consideration of the matter, on peculiar facts of this case, we are unable to interfere in the writ jurisdiction.

(6) It is not disputed that it is the duty of the dealer to collect sales tax and if sale is to be made to a registered dealer, in that case, the seller need not collect the tax, provided the purchasing dealer gives declaration in the prescribed St form in which event the liability to pay the tax passes on to the purchasing dealer.

(7) In this case, it is the petitioner' sown case, which will be found from the following paragraphs of the writ petition that he collected the tax at the rate of 7% from the purchasing dealer, since the purchasing dealer did not furnish the declarations in form ST-1 or ST-35. A reading of para(f), reproduced hereinafter, which is part of the writ petition, shows that the collection of tax by the petitioner from the purchasing dealer was termed 'deposit of an amount equivalent to tax' was obtained by the petitioner until the declaration forms were supplied by the purchasing dealer and on supplying the declaration forms, the deposit was to be refunded to the purchasing dealer.

(8) Before us, counsel for the petitioner had to admit that till today, the purchasing dealer did not furnish the declaration forms in ST-1 or ST-35tof he petitioner and there by the petitioner is not under an obligation to refund the amount of tax collected by it. Keeping the aforesaid facts in view, it is clear that the petitioner collected the amount of sales tax and that is in trust with it for onward transmission to the Sales Tax Department. It is also admitted that in law, until declaration forms in ST-1 or ST-35 are produced, the liability to pay sales tax is on the seller. The petitioner being the seller, having recovered the sales tax from the purchasing dealer, the amount of sales tax was under trust with it and had to be passed Jan to the Sales Tax Department. Even if it is assumed for the sake of arguments that the purchasing dealer has furnished ST-1 or ST-35 declarations to it, the petitioner will have to refund the so-called deposit amount of sales tax to the purchasing dealer. In any event, it cannot escape the liability to pay the amount of trust money lying with it whether to the Sales Tax Department or to the purchasing dealer.

(9) As already noticed, since the declaration forms have not been furnished the liability to pay tax would be that of the petitioner.

(10) Before considering the other arguments, we may reproduce some of the paragraphs containing the admission of the liability of the petitioner from the writ petition :-

"3(D)That during the Assessment/Financial year 1986-87 the company, petitioner herein, had made sales mainly to registered dealers. The I registered dealers had assured that they are entitled to make purchases of goods without payment of tax on the strength of their registration certificates and that they would be issuing prescribed declarations in 1 or ST-35.whichever one was applicable. On their assurance no sales tax was charged or collected on the sales made to them. I (e) That at that point of time firstly it was not certain as to whether items were taxable at first point or at last point, and as to whether declaration in ST-1 or ST-35 had to be issued by the purchaser, and secondly, the purchasers did not have any forms and they informed that they had to procure the same from their respective sales tax authorities, therefore, as an abundant caution the company had taken a deposit equivalent to tax from the purchasers on the understanding that immediately the declarations were furnished by the purchasers, the deposit would be returned. (f) That it is a common practice in trade that whenever there is a doubt in respect of the taxability, rate, stage of taxation, then as an abundant caution a deposit of an amount equivalent to tax is taken so that whenever the declarations are given or the uncertainty is settled, then the deposit is refunded to the customer. (g).That the Sales Tax Officer, Ward 50 initiated assessment proceedings under the Delhi Sales Tax Act and the Central Act. The Company produced complete books of accounts and represented the matter before the Sales Tax Officer from time to time. In respect of Sales made to registered dealers it was pointed out that the purchasers have not issued the declaration forms and the company was pursuing the matter with the purchasers. Time was sought for procuring and filing the declarations, but the assessing authority without appreciating the difficulty of the company refused to grant time and framed the assessments by creating additional demand of-

Tax Rs. 21,44,430.00 Interest Rs 16.22.390.00 Total: Rs. 37.66.829.00

The English translation of the assessment order is enclosed and marked as Annexure-A. (h) That the aforesaid additional demand had been created by imposing tax for non-furnishing of declarations and the balance was on account of arbitrary and mechanical levy of interest."

(11) This takes us to the point as to what is the effect of declaration of the petitioner company as a sick unit. Here the petitioner is wanting hearing of his appeal and one of the conditions is that the same is permissible on pre-deposit of the- demand created. The petitioner applied for dispensing with pre-deposit, which prayer has been declined and since it did not comply with the provisions of pre-deposit, the appeal, has been dismissed. On these facts, there is no bar created under the provisions of the Sick Industrial Company ( Special Provision) Act, 1985, whereby a statutory authority cannot dismiss the appeal without going into merits, if order of pre-deposit is not complied with.

(12) For the reasons recorded above, the writ petition is devoid of any merit and is dismissed.