Kool Crown Corks Pvt. Ltd. vs Commissioner Of Sales Tax
2006 Latest Caselaw 970 Del

JUDGMENT

B.N. Chaturvedi, J.

Page 2100

1. Grievance of the petitioner in the instant case emanates from rejection of its claim for deduction from its turnover on account of certain sales made to a registered dealer, namely, M/s. Pure Drinks (New Delhi) Limited.

2. The petitioner company is engaged in manufacture and sale of corks used to seal the bottles containing aerated drinks. During the year 1988-89, the petitioner sold goods to M/s. Pure Drinks (New Delhi) Limited for Rs. 77,87,536.76 who agreed to furnish ST-1 Forms to the petitioner against the said transaction. They, however, failed to do so up to the time of assessment. A demand of Rs. 11,87,575/- was raised against the petitioner by the assessing officer, partly due to non-furnishing of ST-1 Forms for Rs. 77,87,536.75 and partly due to rejection of one ST-1 Form for Rs. 15,72,658.25 received from Mohan Machines Limited. Resentful of the assessment order, the petitioner went in appeal. During the pendency of the appeal 17 ST-1 Forms covering the amount of Rs. 77,87,536.75 were received by the petitioner from M/s. Pure Drinks(New Delhi) Limited, which were, according to the petitioner, produced before the appellate authority.

3. On 26th of February, 1999, the petitioner lodged an FIR with PS Okhla, New Delhi complaining of loss of original portion of the said 17 ST-1 Forms. Advertisements in newspapers were also got issued on 11th of March, 1999 in this regard, which was followed by filing of requisite indemnity bond by the petitioner with the Sales Tax Department.

4. In appeal, the petitioner pressed its claim for deduction from the turnover on account of aforesaid sales to M/s. Pure Drinks(New Delhi) Limited to the tune of Rs. 77,87,536.75 on the basis of duplicate parts of ST-1 Forms from M/s. Pure Drinks(New Delhi) Limited. The appellate authority, however, disallowed the benefit. The petitioner sought a review of this order but the same was declined. A revision before the Commissioner also evoked no favorable response and the same was disposed of with the observation that if the petitioner obtained the duplicate forms from M/s. Pure Drinks(New Delhi) Limited in terms of Rule 8.(6) of the Delhi Sales Tax Rules, 1975(for short, `the Local Rules) within a period of one month, the assessing officer would accept the same. An application for review was filed but the same was rejected by the Commissioner. The petitioner has, in the circumstances, come up with the present writ petition for setting aside the orders passed by the Commissioner, Sales Tax in revision/review and the assessment order dated 24.6.2004 passed by the assessing officer.

5. We have heard arguments on either side.

6. Critical of impugned orders, learned Counsel for the petitioner raised an argument that filing of duplicate parts of ST-1 Forms constitutes substantial compliance with the second proviso to clause (a) of sub-Section (2) of Section 4 of the Delhi Sales Tax Act, 1975 (for short 'the Local Act'). He sought to Page 2101 draw sustenance to his argument from a Supreme Court decision in 'Tata Iron and Steel Company Limited v. State of Punjab 1992-93 (32) DSTC J-257, and a Madhya Pradesh High Court decision in Manganese Ore (India) Limited v. Commissioner of Sales Tax, Madhya Pradesh 1991 (83) STC 116. He contended that Rule 7.(1)(b) of the Local Rules simply requires production of a declaration in Form ST-1 duly filled in and signed by the purchasing dealer or a person authorised by him in writing, which is essentially not referable to the original part of Form ST-1. In support of his contention, the learned Counsel referred to Rule 10.(2) of the Central Sales Tax(Tamilnadu) Rules, 1957, providing that in order to claim deduction from turnover, a dealer is required to attach to his return declaration in Form-1 the portion marked original or duplicate, where the original has been lost.

7. Contesting the arguments advanced on behalf of the petitioner, the learned Counsel for the respondent argued that reliance on Tata Iron and Steel Company Limited (supra) and Manganese Ore (India) Limited (supra) is misplaced as the decisions therein were rendered on a different set of facts. It was argued that in a case where the original part of a ST-1 Form is lost, Rule 8.(6) of the Local Rules prescribes a procedure to obtain a duplicate of the declaration in Form ST-1. Since the petitioner, contended the learned Counsel for the respondent, did not choose to act in accordance with the prescribed procedure for obtaining duplicates of the ST-1 Forms, it cannot press the claim for deduction from its turnover on account of sales in question to M/s. Pure Drinks (New Delhi) Limited on the strength of duplicate parts of ST-1 Forms. Referring to a Division Bench decision of this Court in Commissioner of Sales Tax, Delhi v. Delhi Automobiles (P) Limited 1981 (48) STC 333, upheld by the Supreme Court (vide Delhi Automobiles P. Limited v. Commissioner of Sales Tax, Delhi 1997 (104) STC 75), the learned Counsel argued that while examining analogous provisions of the Central Sales Tax(Registration and Turnover) Rules, 1957(for short, 'the Central Rules'), it was held that for claiming deduction, a dealer must produce the original parts of the declaration. Another decision of the Supreme Court in India Agencies(Regd.) Bangalore v. Additional Commissioner of Commercial Taxes was also cited to reinforce the argument that mere production of duplicate parts of ST-1Forms falls far short of substantial compliance with legal requirement to claim deduction.

8. Reverting to decision in the Tata Iron and Steel Company Limited(supra) referred to by the learned Counsel appearing for the petitioner, it would be noticed that in that case the requisite forms had actually been placed on record but were, subsequently, found missing. The assessed had failed to produce even duplicate parts. Hence, the authorities declined the exemption. It was in peculiar facts and circumstances of the case that the the duplicate parts were allowed to be filed with a direction to the assessing authority to examine the same and decide the matter afresh in the light of duplicate parts. Whether or not, in the event of loss of original parts, production of Page 2102 duplicate parts constitutes sufficient compliance with the legal requirement to claim deduction was neither raised nor examined in that case. Thus, the decision in the Tata Iron and Steel Company Limited(supra) renders no assistance to the petitioner in advancing the argument that production of duplicate parts of Forms ST-1 was in sufficient compliance with the second proviso to Section 4(2)(a) of the Local Act.

9. In Manganese Ore (India) Limited(supra), the assessed claimed concessional rate of tax under Section 8(1) of the Central Sales Tax Act, 1956(for short, 'the Central Act') on the basis of Photostat copies of duplicate parts of prescribed declaration in Form-C and the statement that the originals were submitted before the assessing authority in the State of Maharashtra. The claim was, however, rejected by the assessing authority which was upheld by the appellate authority as well as by the Sales Tax Tribunal. This was a case where declaration in C-Forms marked original had been filed before the assessing authority in the State of Maharashtra and, thus, the assessed could file only duplicate parts of the declaration forms before the assessing authority in the State of Madhya Pradesh. Noticing that the three parts of Form-C marked as `original', `duplicate' and `counter foil', were identical in terms, and that Section 8(1) or Rule 12.(1) did not say which part of the Form was required to be filed before the assessing authority, the filing of duplicate parts was held to be in sufficient compliance with the provisions of Section 8(4) of the Central Act and Rule 12.(1) of the Central Rules. It was, accordingly, held that the filing of original parts of declarations in C-Form is not mandatory but directory. This decision came to be noticed by the Supreme Court in India Agencies(supra), which related to a case where assessed's claim for concessional rate of tax on the inter-state sales on the basis of portions of Form-C, marked as duplicate and the indemnity bonds furnished by it for the loss of portions of Form-C, marked as original, had been disallowed by the assessing authority on the ground that the original of the C-Forms had not been produced. The assessed successfully challenged the order of assessing authority disallowing its claim for concessional rate of tax before the Joint Commissioner of Commercial Taxes, Bangalore, who set aside the order passed by the assessing authority and directed it to accept the duplicate parts to allow the benefit of concessional rate of tax. On an appeal, the order passed by the Joint Commissioner was set aside. Thereupon, it was the turn of the assessed to challenge such order before the High Court of Karnataka, but without any success as the High Court refused to interfere with the order passed by the Additional Commissioner of Commercial Taxes and dismissed the appeal. On the strength of the decision in Manganese Ore (India) Limited, the learned Counsel for the assessed argued that since the three parts of Form-C, marked as `original', `duplicate' and `counter foil', are identical in terms and all form part of Form-C and as Section 8(4) or Rule 12.(1) does not say which part of the form is required to be filed before the assessing authority, filing of duplicate part of Form-C instead of original was sufficient compliance with the provisions of Section 8(4) of the Central Act, and Rule 12.(1) of the Central Rules, entitling the assessed to get the benefit of concessional rate of Page 2103 tax under Section 8(1) of the Central Act. The aforesaid argument was, however, held unacceptable by the Apex Court noticing that the facts in the two cases were different.

10. In Manganese Ore (India) Limited, C-Forms marked as original had been filed by the assessed before the assessing authority in Maharashtra and it was in that situation that the assessed could possess only duplicate parts of C- Forms, which were filed by it before the assessing authority in Madhya Pradesh. It was not a case where the original parts of C-Form had been lost by the assessed. The assessed was rather incapacitated from filing the original parts of C-Forms as the same had already been filed before the concerned assessing authority in Maharashtra. It was, thus, in peculiar facts and circumstances of that case that production of duplicate parts of C-Forms was held to be in sufficient compliance with the requirement to claim concessional rate of tax. On facts, Manganese Ore (India) Limited and, the case on hand being incomparable, the decision in that case is of no avail to the petitioner.

11. Next argument raised on behalf of the petitioner is that Rule 7.(1)(b) of the Local Rules simply requires a declaration in Form ST-1 duly filled in and signed by the purchasing dealer or a person authorised by him in writing to be produced to claim deduction and as the portions marked as 'original' and 'duplicate' are identical in terms, production of even duplicate part would be sufficient compliance with the requirement of proviso to Section 4(2)(v) of the Act. In support of his plea, reference was made to Rule 10.(2) of the Central Sales Tax(Tamilnadu) Rules,1957 requiring production of original or duplicate part, where the original has been lost.

12. No doubt, Rule 7.(1)(b) simply requires a declaration in Form ST-1 to be filed without specifying that it is the original part only which is to be produced, one needs to keep in mind that 'declaration' in Form ST-1 occurring in Rule 7.(1)(b) signifies both the parts of ST-1 Form, original as well as duplicate, and, therefore, furnishing of only duplicate part without original part would not satisfy the requirement of Rule 7.(1)(b). Reference to Rule 10.(2) of the Central Sales Tax(Tamilnadu) Rules, 1957, which permits production of even duplicate part, where original part has been lost, is inconsequential in view of the fact that Rule 7.(1)(b) does not contain an identical provision. Under Rule 10.(2) of the Central Sales Tax(Tamilnadu) Rules, 1957, production of duplicate part, where original part has been lost, may constitute sufficient compliance with the legal requirement to claim deduction as the rule so provides, but in the Local Rules, there being no such provision, production of duplicate parts of Forms ST-I cannot be held to satisfy the legal requirement there under.

13. For taxation at concessional rate under Section 8(1) of the Central Act, a dealer selling is required to furnish a declaration duly filled in and signed by the registered purchasing dealer containing the prescribed particulars in a prescribed form, in terms of Section 8(4)(a). Vide Rule 12(1) of the Central Rules, the declaration in Form-C consisting of, 'counter foil', 'duplicate' and 'original' parts carry a note at the foot that while duplicate part is to be retained by the dealer selling, the original part is to be furnished before the assessing authority. In the Local Act and Rules framed there under, provisions Page 2104 contained in the second proviso to clause (a) of sub- Section (2) of Section 4 and Rule 7.(1)(a) are substantially similar to Section 8(4)(a) of the Central Act and Rule 12(1) of the Central Rules. However, unlike Form-C, Form ST-1 under the Local Act and Rules does not carry a note appended to it that the duplicate part of it is to be retained by the dealer selling and only original part thereof is to be filed before the assessing authority. This would, however, make no material difference in view of Rule 7.(1)(b) requiring a declaration in Form ST-1 to be furnished to claim deduction which essentially sets forth a mandate for production of original part, in any case, as in the absence of the same, mere duplicate part would not make a `declaration' as prescribed in Form ST-1.

14. The legal requirement of production of original part to claim deduction is not without a valid reason. In Kedar Nath Jute Manufacturing Co. Limited v. Commercial Tax Officer, and Ors. , interpreting Section 5(2)(a)(ii) of the Bengal Finance(Sales Tax) Act, 1941(Bengal Act VI of 1941), containing analogous provision and holding that a dealer cannot get exemption on the strength of duplicate parts unless they furnished original parts of the declaration forms, their Lordship's observed thus:

There is an understandable reason for the stringency of the provisions. The object of section 5.(2)(a)(ii) of the Act and the rules made there under is self evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will well nigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the twofold object, namely, prevention of fraud and facilitating administrative efficiency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both of which the provisions of the said clause seek to avoid.

The same very dictum finds its echo in Delhi Automobiles(P) Limited(supra) and has been reiterated by the Apex Court in India Agencies(registered)Bangalore(supra). The decisions in Kedarnath Jute Manufacturing Company Limited, Delhi Automobiles (P) Limited and India Agencies(registered) Bangalore, involving interpretation of analogous provisions clearly lay down that to claim taxation at concessional rate, furnishing of original part of declaration form is a must and production of mere duplicate part would not suffice to satisfy the legal requirement to claim the benefit of taxation at concessional rate.

15. Significantly, the provisions for obtaining duplicates of lost declaration Form contained in Rule 8.(6) of the Local Rules and Rule 12.(3) of the Central Rules are more or less in identical terms inasmuch as both prescribe a Page 2105 procedure for obtaining duplicates of declaration forms which are lost while in the custody of the dealer selling to be able to press in service for tax at a concessional rate. Rule 8.(6) of the Local Rules runs as under:-

Where a duly completed form of declaration ST-1 furnished by the dealer purchasing the goods has been lost while it is in the custody of the dealer selling the goods, the latter shall report the fact to his appropriate assessing authority and shall furnish in respect of every such form so lost, an indemnity bond to the said authority for such sum as it may, having regard to the circumstances of the case, fix. Thereupon the dealer selling the goods may demand from the dealer, who purchased the goods, a duplicate of such declaration in Form ST-1 and on such demand, the same shall be furnished by the dealer purchasing the goods with the following certificate recorded in red ink on all the three portions of such form:--

I hereby declare that this is the duplicate of declaration Form No....

date....

Purchasing dealer Signature

16. Had a duplicate part in Form ST-1 been sufficient to claim deduction, a specific provision in that regard, as noticeable in Central Sales Tax(Tamil Nadu) Rules, would have been in place. In the absence of any such rule, in the event of loss of original part of the declaration forms, the petitioner would be handicapped in claiming deduction solely on the basis of duplicate parts of ST-1 Forms.

17. Though Rule 8.(6) does not specifically provide for a situation where only original part of ST-1 Form is lost, since in the absence of original part the duplicate part of ST-1 Form alone would not suffice to answer the description of a 'declaration' in Form ST-1, as contemplated under Rule 7.(1)(b), it would tantamount to a loss of declaration Form ST-1 and in that event the dealer selling the goods from whose custody the original part of declaration Form ST-1 has been lost would be required to abide by the procedure embodied in Rule 8.(6) to obtain a duplicate of declaration in Form ST-1 for furnishing the same before the assessing authority to claim deduction. The petitioner, in the present case, failed to demand from M/s. Pure Drinks (New Delhi) Limited, the dealer who had purchased the goods, duplicates of declaration in Form ST-1, original parts whereof had been lost.

18. It was pointed out on behalf of the petitioner that since liquidation proceedings were going on in respect of M/s. Pure Drinks (New Delhi) Limited and in view of huge tax amount outstanding against them, no fresh declaration forms in terms of provision of Rule 8.(4)(c) of the Local Rules could have been issued to them there was no point in making a demand from them for a duplicate of declaration in Form ST-1. The plea so raised is, however, without any substance as issue of duplicates of declaration in Form ST-1, in the present case, was to be under Rule 8.(6) and not under Rule 8.(4)(c), in place of ST-1 forms which had already been issued but subsequently lost by the petitioner. Moreover, difficulties, if any, in getting duplicates of declaration in Form ST-1 could not be a valid ground for non-compliance with the legal requirement necessary to claim deduction. Somewhat, in a similar situation, as noticed Page 2106 in Kedar Nath Jute Manufacturing Co. Limited v. Commercial Tax Officer, and Ors. , it was observed:

Sub-rules (3) and (4) of rule 27A are not helpful to the appellant. They provide only safeguards against abuse of the declaration forms by the purchasing dealers; they do not enable the selling dealer to either directly apply or to compel the purchasing dealers to apply for duplicate forms; nor do they enjoin the appropriate authority to give the selling dealer a duplicate form to replace the lost one. We realise that the section and the rules as they stand may conceivably cause unmerited hardship to an honest dealer. he may have lost the declaration forms by a pure accident, such as fire, theft etc., and yet he will be penalised for something for which he is not responsible. But it is for the Legislature or for the rule-making authority to intervene to soften the rigour of the provisions and it is not for this Court to do so where the provisions are clear and unambiguous.

19. In the face of a clear legal position, as noticed hereinabove, filing of duplicate parts of ST-1 Forms cannot be held to constitute substantial compliance with the second proviso to clause(a) of sub-Section (2) of Section 4 of the Local Act. Since the petitioner, after loss of original parts of declaration in Form ST-1, failed to obtain duplicates thereof under Rule 8.(6), they were not entitled to claim deduction on the basis of duplicate parts of ST- 1 Forms. Therefore, no legal infirmity is noticeable in the impugned orders warranting an interference therewith.

20. In the ultimate analysis, finding no merit, the petition is dismissed with no orders as to costs.