S.N.E. (India) Pvt. Ltd. vs Commissioner Of Sales Tax And Ors.
2002 Latest Caselaw 1046 Del

JUDGMENT

Vikramajit Sen, J.

1. In this bunch of writ petitions a challenge hasbeen laid to Rule 8(4)(c)(ii) of the Delhi Sales TaxRules, 1975 (hereinafter referred to as the Rules) onthe premise that it is ultra vires the provisions ofSection 4(2)(a)(v) of the Delhi Sales Tax Act, 1975(hereinafter referred to a the Act) and is beyond thelegislative competence of the Rule-making Authoritynamely, the Lt. Governor of the NCT of Delhi. the petitioners' understanding of the Act is that aregistered dealer has been conferred with a vested rightto buy or sell goods without any liability of tax on thegoods specified in his registration Certificate, on theissuance of prescribed declaration Forms. Conversely,it is also contended that a registered dealer selling toanother registered dealer can claim deduction from histaxable turnover on production of such forms. We may atonce observe that the arguments are enable so long asit is understand and accepted that it is essential andpivotal that the Declaration Forms must be available foreach transaction. In conclusion, the contention is thateven if a party is in arrears of tax, forms mustnonetheless be issued to him.

2. We have already pronounced a detailedjudgment concerning the vires of Rule 8(4)(c) in CWP7347/99 (also filed by Prince Plastic and ChemicalIndustries) and a batch of other Petitioners. Thepresent petitioners have approached the Court in thesepetitions in their capacity as selling dealers. Thedistinguishing feature is that by virtue of the decisionof a Division Bench of this Court in CWP 3304/97 titled Shri Krishna Engineering Co. v. Commissioner of SalesTax, Delhi (1998-99) 38 DSTCJ-100 the then existing Rule8(4)(c)(ii), which had been inserted by Notificationdated 11th February, 1997, was declared ultra vies theauthority of the Ltd. Governor of the N.C.T. of Delhi.In order to avoid prolixity we think it appropriate torely nt he reasoning contained in our judgment in CWP7347/1999. Shri Krishna Engineering's case (supra)proceeded o the premise that since statutory support ofthe impugned Rule could not be found in Section 71(2) ofthe Act, the Ltd. Governor had not been delegated with thepowers to promulgate the Rule. In CWP 7347/1999 we hadexpressed the opinion that this is the frontier to whichthe Division Bench had travelled in the aforementionedcase.

3. After the passing of the said judgment on30.11.1998 in the Shri Krishna Engineering case (supra),an amendment was carried out to Section 71(2)(b) by theDelhi Sales Tax (Second Amendment) Act 2000 [Delhi ActNo. 1 of 2000] which received the assent of President ofIndia on 14.2.2001, and it now reads as follows:

"the particulars to be containedin a declaration under Sub-clause (v),of Clause (a) of Sub-section (2) ofSection 4, or under Section 5, as thecase may be, the form of suchdeclaration, the authority from whomand the manner and conditions subjectto which such forms shall beobtainable and the manner in whichand the time within which suchdeclaration is to be furnished."

4. On this amendment of the Act, the Ltd.Governor of the N.C.T. of Delhi felt sufficientlyempowered to re-introduce Rule (8)(4)(c)(ii) by actingon the Powers delegated by the Act. The provisionswhich we had to scrutinise in CWP 7347/1999 did notcontain this Rule and hence the need for filing thesefour writ petitions appears to have arisen. Thereintroduced Rule which has once again been assailedreads as follows:-

"8. Authority from whom the declarationfrom may be obtained, and use, custody andmaintenance of records of such forms andmatters incidental thereto,--

1-3.....

4(a)&(b).....

(c) If the applicant for declaration formshas, at the time of making application-

(i) .....

(ii) defaulted in making the payment ofthe amount of tax assessed or penalty imposedby Assessing Authority, in respect of which noorders for Installment/stay have been obtainedfrom the Competent Authority under theprovisions of law; or....."

5. The Division Bench in Shri KrishnaEngineering's case (supra) had formulated three groundswhich in their opinion fell for consideration, namelythat (a) the amended rule is in excess of rule-makingpowers of the Lt. Governor or in other words way, isbeyond the delegated legislative authority and hence isultra vires the powers of the rule-making authority;(b) the rule causes an unreasonable restriction on the petitioner's fundamental right to trade and hence isviolative of Article 19(1)(g) of the Constitution; and(c) the amended rule having not been laid on the floorof Parliament as provided by Section 72 of the Act, hasceased to be enforceable. The Division Bench consideredit necessary to decide the writ petition only on ground(a). It declined to record any opinion on grounds (b)and (c). The Sales Tax Department has contended thatsince the lacuna detected by the Division Bench in ShriKrishna Engineering's case (supra) has now been pluggedby Delhi Act 1 of 2001, the obstacle to the legallegitimacy of the provisions before the Court have beenovercome.

6. Ground (c) as formulated by the DivisionBench in Shri Krishna Engineering's case (supra), hasnot been pressed before us. We must, therefore, assumethat the statutory requirements expressed in Section 72 have been duly complied with All that remains,therefore, is to address the question whether theimpugned Rule offends the Petitioners' fundamentalrights under Article 19(1)(g) of the Constitution or anyother law including Section 4(2)(a)(v) of the Act.

7. The factual matrix in these four petitionshas been indicated thus - the Petitioners werepurchasing raw material from various dealers on theassurance that the forms would be issued to them in duecourse of tie after obtaining them from the AssessingAuthorities. During the course of purchases made fromvarious dealers who had supplied the raw material to the petitioners, the Petitioners had assured them thatstatutory declaration would be furnished in due courseof time and that the said dealers would be able to claimdeductions under Section 4(2)(a)(v) of the Act, and incase the Petitioners are not in a position to furnishthe statutory forms, they would be liable to pay tax onthese purchases. Some of the Petitioners applied forissue of ST 35 Forms. The Department did not furnishthe Forms since huge additional demands were thenpending against them.

8. For the reasons spelt out in detail in CWP7347/1999, we find no merit whatsoever in the challengemade by the Petitioners to the legality of the saidRule. The purpose of the Act is to collect the tax.Under the Act taxes can be imposed at ore than onestage although the effort is that Sales Tax should becollected from the consumer and on one occasion only.In order to achieve the latter objective, the issuanceof declaration forms had been devised. It is whollyuntenable that a dealer retains the right for theissuance of these forms despite the fact that it is inarrears of payment of tax. That would defeat theobjective of the Act itself. We are unable toappreciate how payment of tax can conceivably be seen asrestrictions on the fundamental right enshrined inArticle 19(1)(g) of the Constitution. A dealer canavail of the benefits of not paying sales tax on eachtransfer of the subject goods only if the requisitedeclaration form is available. The inherentcontradiction in the Petitioner's contention is at onceevident when we find that every dealer has full libertyto transact business with another registered dealer whois not in arrears of payment of tax and hence is in aposition to furnish declaration forms. There may havebeen a possible violation of the rights guaranteed underArticle 19(1)(g), if there is a State mandate to theeffect that goods have to be purchased only from aparticular registered dealer. Persons in the tradewould be well advised to enter into transaction onlywith those persons who have not committed any default inthe performance of any of their duties and obligationsunder the Act. This can be ensured by insistence onsimultaneous and contemporaneous supply of the requisiteForms.

9. The Petitions are dismissed but there shallbe no order as to costs.

CM 12586/2001.

The Court had granted temporary relief to the petitioners by permitting them to deposit 50% of thedemand raised on them. Since we find no merits in the petitioners, these interim orders have to be recalled.

In view of the judgment in CWP 7340/2001 theapplication is without merit and is accordingly,dismissed.