Delhi High Court
Swastik Industrial Powerline Ltd vs Commissioner Trade & Taxes Delhi on 28 August, 2015
Author: Vibhu Bakhru
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 28.08.2015
+ ST.APPL. 25/2013
SWASTIK INDUSTRIAL POWERLINE LTD ..... Appellant
versus
COMMISSIONER TRADE & TAXES DELHI ..... Respondent
Advocates who appeared in this case:
For the Appellant :Mr. Rajesh Mahna with Mr. Ramanand Roy,
Advocates.
For the Respondent :Mr. Peeyoosh Kalra, Additional Standing
Counsel with Mr. G. Jain, Advocate.
CORAM:
HON'BLE DR. JUSTICE S.MURALIDHAR
HON'BLE MR. JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. This is an appeal preferred by the Assessee under Section 81 of the
Delhi Value Added Tax Act, 2004 (hereafter 'DVAT Act') impugning a
common order dated 19th March, 2013 passed by the Appellate Tribunal,
Value Added Tax, Delhi (hereafter 'the Tribunal') in Appeal Nos. 877-
878/ATVAT/09-10 emanating from proceedings relating to the assessment
year 1983-84. This Court admitted the present appeal on 1 st November,
2013 and framed the following questions of law for consideration:-
"Whether the order of the Appellate Tribunal, Value Added
Tax, Delhi holding that ST-I Forms should be ignored, is
perverse and does not deal with several factual aspects
relevant for consideration."
2. The Appellant/Assessee is aggrieved on account of being denied
deduction in respect of sales made by the Appellant to registered dealers
against ST-1 Forms. The Assessing Authority (hereafter 'AA') had found
that the relevant account (ST-2 account) filed by certain dealers ( hereafter
referred to as 'purchasing dealers') who were stated to have purchased
goods from the Appellant against the ST-1 Forms, had reflected the ST-1
Forms to have been issued to persons other than the Appellant. Both in the
initial round of assessment as well as in the remand proceedings, the AA
was of the view that the Appellant could not substantiate its claim with
regard to the movement of goods sold and thus, concluded that the
appellant had colluded with the purchasing dealers to arrange the ST-1
forms and consequently disallowed the exemption claimed by the Appellant
in respect of the sales made against ST-1 forms. According to the
Assessee, it had discharged its burden of proof for claiming deduction from
its taxable turnover and the AA has wrongly disallowed the same.
3. Briefly stated, the relevant facts for addressing the issue involved in
the present appeal are as under:-
3.1 The Appellant is engaged in the business of manufacture and sale of
copper wire. During the period relevant to the assessment year 1983-84,
the Appellant had claimed that a part of its sales turnover included sales
made to registered dealers against the declaration issued by the said dealers
in ST-1 Form and accordingly, such sales were liable to be deducted from
the taxable turnover. The Assessee filed ST-1 Forms - 90 in number - in
support of its claim. The AA took up 63 ST-1 Forms for cross-verification
with the accounts furnished by the purchasing dealers (i.e. ST-2 Account).
The AA obtained verification reports in respect of ST-1 Forms where a
single transaction exceeded Rs.1 lac. On verification, it was found that 9
ST-1 Forms did not reconcile with the ST-2 Accounts furnished by the
purchasing dealers.
3.2 The Appellant was confronted with the discrepancies and a show-
cause notice was issued as to why deductions claimed against the ST-1
Forms should not be disallowed and penal proceedings initiated. The
Assessee produced the books of accounts as well as the photocopies of the
ledger accounts pertaining to the purchasing dealers. The Assessee claimed
that the sales had been made in good faith to purchasing dealers who were
duly registered with the concerned department and thus, the Assessee could
not be held responsible for any discrepancy or any delinquency on the part
of the purchasing dealers.
3.3 The AA passed an Assessment Order dated 18th March, 1988
rejecting the Assessee's contention. The AA held that the Assessee could
not substantiate its claim with reference to the movement of goods and
concluded that the sales had, in fact, been made to unregistered
dealer(s)/customer(s) and the declarations in ST-1 Forms had been arranged
from the purchasing dealers in collusion.
3.4 The Assessee preferred an appeal before the Deputy Commissioner
(Appeals) vide Appeal No.185/88-89. The Deputy Commissioner (Appeals)
disposed of the appeals by an order dated 31 st March, 1989 and remanded
the matter back to the AA. The Appellate Order dated 31st March, 1989 is
not on record, however, the assessment order framed subsequently indicates
that the matter was remanded back with the direction to re-examine the ST-
1 Forms received by the Assessee.
3.5 Pursuant to the remand, the AA called upon the Assessee to prove
the genuineness of the sales amounting to Rs. 13,40,735/- against 7 ST-1
Forms which remained unverified because the concerned purchasing
dealers had shown the said forms to be issued to persons other than the
Assessee. The Assessee was also asked to produce documentary proof of
the transfer of property in goods and to produce the concerned purchasing
dealers with their Books of Accounts. The AA also issued notices to the
concerned purchasing dealers, however, none of those dealers were found
to be in existence at the material time. The Assessee reiterated it's stand
that it had received payments through bank drafts and cheques but could
not produce the purchasing dealers or their books of accounts. The AA,
further, passed an Assessment Order dated 28th March, 1993 (hereafter
referred to as 'remand assessment order') disallowing deduction of sales of
Rs.13,40,735/- from the taxable turnover of the Assessee. The particulars
of the said disallowances are as under:-
S. ST-1 Form issued Amt. As per As per ST-2 Form issued
No No. to:- ST-1 Form a/c to: -
1. A/5 M/s Simple Rs.2,00,323/- Rs.82,535.71/- M/s Nirmal
541089 Traders Metal Inds.
(Wards-42)
2. A/5 M/s Metal & Rs.1,76,245/- Rs.96,278.00/- Chandra Steel
390986 Metal Inds. Wazirpur
(Wards - 42)
3. A/5 M/s R. K. Rs.2,00,755/- Rs.14,747.60/- National
541119 Traders Metal Inds.
4. A/6 M/s Capital Rs.2,00,846/- Rs.1,79,568.3 Metal Indl.
145285 Agencies 2/- Co.
(Ward-42)
5. A/5 M/s Metal Rs.1,90,905/- Rs.1,00,208.0 UniBros(P)
340952 Crafts 0/- Ltd.
6. A/5 M/s M.M. Rs.1,86,306/- Rs. Raj Metal
281533 Industries 29,289.00/- Inds.
7. A/5 M/s M.M. Rs.1,85,355/- Rs.28,552.00/- Popular Inds.
281532 Industries
Total Sales as Rs.13,40,735/-
per ST-1
Form/(Disallo
wances) :-
3.6 The Assessee appealed against the remand assessment order before
the First Appellate Authority (hereafter 'FAA'), which was rejected by an
order dated 24th September, 2004; the FAA holding that the Assessee had
failed to prove the genuineness of the sales in question and upheld the
remand assessment order.
3.7 Being dissatisfied with the order dated 24th September, 2004 of the
FAA, the Assessee sought a review of the said order by filing a review
petition. The Assessee contended that it had placed the deposit slips, bank
statements, ledger accounts and duly receipted invoices on record to show
the genuineness of the sales transactions in question. It was once again
contended that the Assessee could not be held responsible for the misuse of
the statutory declarations (ST-1 Forms) by the purchasing dealers.
However, the petitioner's contentions were not accepted and the review
petition was also rejected by an order dated 3rd February, 2010.
3.8 The Assessee preferred two appeals before the Tribunal - Appeal
No.877 impugning the order dated 24th September, 2004 passed by the
FAA and Appeal No.878 against the order dated 3rd February, 2010,
whereby, the Review Petition preferred by the Assessee was dismissed.
3.9 The said appeals were disallowed by the Tribunal by a common
order dated 19th March, 2013 which is impugned for the present appeal.
4. Mr. Mahna, learned counsel for the Assessee contended that the
Tribunal and the Authorities below failed to consider the scheme of the
Delhi Sales Tax Act, 1975 (hereafter 'Act') as was in force at the material
time. He submitted that there was no dispute that the ST-1 Forms were
genuine and had been issued by the Sales Tax Department to the purchasing
dealers. He further submitted that it was not in dispute that the purchasing
dealers were registered with the Sales Tax Department in respect of the
goods sold by the petitioner. Mr. Mahna submitted that in view of the
above, the Assessee being the selling dealer was not required to carry out
any further investigation and in any event, was not responsible for any of
the acts of the purchasing dealers including the ST-2 Account submitted by
them. He referred to the recent decisions of this Court in Milk Food Ltd. v.
Commissioner, VAT &Ors.:(2013) 59 VST 1 (Delhi) and Powerlite
Electricals India P Ltd vs. Commissioner Trade and Taxes Delhi: St.
Appl. 78/2012, decided on 23rd March, 2015 in support of his contentions.
5. Mr. Peeyoosh Kalra, Addl. Standing Counsel for the Revenue
submitted that there was no dispute as to the obligations of the dealer
making sales against receipt of ST-1 Forms. He, however, emphasized that
the present case was not one where the Assessee was being faulted for any
defect in the Accounts maintained by the purchasing dealers or mis-
utilisation of goods purchased by them, but the sales made by the Assessee
were itself questioned. He drew the attention of this Court to the findings
of the AA and the Tribunal and contended that the authorities had
concluded that no sales had been made by the Assessee to the purchasing
dealers in question as the Assessee had failed to substantiate the transfer of
property in favour of the purchasing dealers.
6. Before proceeding further to consider the rival contentions, it would
be relevant to refer to the relevant provisions of the Delhi Sales Tax Act,
1975 as were enforced at the material time.
7. Section 4 of Act provides for the levy of Sales Tax on the taxable
turnover of an assessee. The expression "turnover" is defined under Section
2(o) of the Act as under:-
"(o) "turnover" means the aggregate of the amounts of sale
price receivable, or, if a dealer so elects, actually received by
the dealer, in respect of any sale of goods, made during
prescribed period in any year after deducting the amount of
sale price, if any, refunded by the dealer to a purchaser in
respect of any goods purchased and returned by the purchaser
within the prescribed period:
Provided that an election as aforesaid once made shall
not be altered except with the permission of the
Commissioner and on such terms and conditions as he may
think fit to impose."
8. Sub-section (2) of Section 4 of the Act provides for certain
deductions from the dealer's turnover to arrive at the "taxable turnover" for
the purposes of the Act. Section 4(2)(a)(v) of the Act provides for
exclusion of certain sales made by a registered dealer to another registered
dealer from the "taxable turnover" of the selling dealer. Section 4(2)(a)(v)
of the Act reads as under :-
"4. Rate of Tax -
(1) xxxx xxxx xxxx xxxx xxxx
(2) For the purposes of this Act, "taxable turnover" means
that part of a dealer's turnover during the prescribed period in
any year which remains after deducting therefrom,--
(a) his turnover during that period on -
xxxx xxxx xxxx xxxx xxxx
(v) sale to a registered dealer--
(A) of goods of the class or classes specified in the certificate
of registration of such dealer, as being intended for use by him
as raw materials in the manufacture in Delhi of any goods, other
than goods specified in the Third Schedule or newspapers,--
(1) for sale by him inside Delhi; or
(2) for sale by him in the course of inter-State trade or
commerce, being a sale occasioning, or effected by
transfer of documents of tile to such goods during the
movement of such goods from Delhi; or
(3) for sale by him in the course of export outside
India being a sale occasioning the movement of such
goods from Delhi, or a sale effected by transfer of
documents of title to such goods effected during the
movement of such goods from Delhi, to a place outside
India and after the goods have crossed the customs
frontiers of India; or
(B) of goods of the class or classes specified in the certificate
of registration of such dealer as being intended for resale by
him in Delhi, or for sale by him in the course of inter-State trade
or commerce or in the course of export outside India in the
manner specified in sub-item (2) or sub-item (3) of item (A), as
the case may be; and
(C) of containers or other materials, used for the packing of
goods, of the class of classes specified in the certificate of
registration of such dealer, other than goods specified in the
Third Schedule, intended for sale or resale;"
9. Rule 7 of the Delhi Sales Tax Rules, 1975 (hereinafter referred to as
'the Rules') specifies the conditions subject to which a dealer may claim
deduction from his turnover on account of sales made to a registered dealer.
The relevant extract of Rule 7(1) of the Rules is quoted below:-
"7. Conditions subject to which a dealer may claim
deduction from his turnover on account of sales to
registered dealers.-(1) A dealer who wishes to deduct from his
turnover the amount in respect of sales on the ground that he is
entitled to make such deduction under the provisions of sub-
clause (v) of clause (a) of sub-section (2) of section 4, shall
produce-
(a) copies of the relevant cash memos or bills according at the
sales are cash sales or sales on credit; and
(b) a declaration in Form ST-1 duly filled in and signed by the
purchasing dealer or a person authorized by him in writing:
Provided that no single declaration in Form ST-1 shall cover
more than one transaction of sale except in cases where the total
amount of sales made in a year covered by one declaration is
equal to or less than Rs.50,00,000/- or such other amount as the
Commissioner may, from time to time, specify in this behalf in
the Official Gazette:
Provided further that where, in the case of any transaction of
sales, the delivery of goods is spread over different years it shall
be necessary to furnish a separate declaration in respect of goods
as delivered in each year."
10. Rule 8 of the Rules mandate that the declaration referred to in the
second proviso to clause 4(2)(a) of the Act should be in 'Form ST-1' which
would be printed under the Authority of the Commissioner and could be
obtained from the appropriate Assessing Authority by a registered dealer
intending to purchase goods on the strength of his certificate of registration.
The relevant extract of Rule 8 of the Rules is quoted below:-
"8. Authority from whom the declaration form may be
obtained, and use, custody and maintenance of records of
such forms and matters incidental thereto.-
(1) The declaration referred to in the second proviso to
clause (a) of sub-section (2) of section 4 shall be in Form ST-1
which shall be printed under the authority of the Commissioner
and shall be obtained from the appropriate assessing authority
by the registered dealer intending to purchase goods on the
strength of his certificate of registration.
(2) No selling dealer shall accept any declaration from a
purchasing registered dealer unless it is furnished in Form ST-1
and not declared invalid or obsolete by the Commissioner:
Provided that the declaration Form ST-1 issued to a
dealer before the 1stFebruary, 1978 and remaining unused shall
become invalid and obsolete except for the purpose of a
transaction of sale effected before the 31st January, 1978:
Provided further that all invalid and obsolete Form ST-1
covered by the foregoing proviso shall be surrendered by the
registered dealer to the appropriate assessing authority upto the
31st March, 1979 with an up to date account of the forms
received, used and surrendered.
(2A) If the space provided in Form ST-1 is not sufficient for
making the entries, the particulars specified in the said form
may be given in a separate annexure attached to that form so
long as it is indicated in the form that the annexure forms part
thereof and such annexure is also signed by the person signing
the declaration in Form ST-1.
(3) For obtaining declaration Form ST-1, a registered dealer-
(i) shall submit a Requisition Account of statutory form
in Form ST-2A together with his last return in each
assessment year; and
(ii) shall apply for issue of forms to appropriate assessing
authority in Form ST-2C, whenever such forms are
required.
(4)(a) If, for reasons to be recorded in writing the appropriate
assessing authority is satisfied that the declaration forms
have not been used bona fide by the applicant or that he
does not require such forms bona fide, the appropriate
assessing authority may reject the application or it may
issue such lesser number of forms as it may consider
necessary.
(b) If the applicant for declaration forms has, at the time of
making the application, failed to comply with an order
demanding security from him under sub-section (1) of
section 18, the appropriate assessing authority shall reject
the application.
(c) If applicant for declaration forms has, at the time of
making application-
(i) defaulted in furnishing any return or returns in
accordance with the provisions of the Act or these
rules, or in payment of tax due according to such
return or returns; or
(ii) defaulted in making the payment of the amount of
tax assessed or penalty imposed by assessing
authority, in respect of which no orders for
instalments/stay have been obtained from the
competent authority under the provisions of law; or
(iia) not filed proper Requisition Account of the
declaration forms required by him; or
(iib) not filed proper utilization account in Form ST-2B
of forms issued to him in advance together with the
returns for the period during which the form were
utilized; or
(iii) been found by an appropriate assessing authority
having some adverse material against him,
suggesting any concealment of sale or purchase or of
furnishing inaccurate particulars in the returns,
the appropriate assessing authority shall, after affording
the applicant an opportunity of being heard, withhold, for
reasons to be recorded in writing, the issue of declaration
forms to him and the appropriate assessing authority shall
make a report to the Commissioner about such
withholding within a period of three days from the date
of its order:"
xxxx xxxx xxxx xxxx xxxx
"(d) Where the appropriate assessing authority does not
proceed under clause (a), clause (b), or clause (c), it shall
issue the requisite number of declaration forms to the
applicant.
(5) The counterfoil of the form shall be retained by the
purchasing dealer and the other two portions marked 'original'
and 'duplicate' shall be made over to the selling dealer."
11. A bare perusal of Form ST-1 indicates that it is in two parts; while
one part is marked as duplicate the other part is marked as original. The
portion marked as 'Original' is issued by the purchasing dealer to the
selling dealer and the counterfoil is retained by the purchasing dealer.
12. In the present case, it is not disputed that the Assessee had produced
the declarations made by the purchasing dealer in the prescribed form (ST-
1 Form). The genuineness of the form is also not disputed by the Sales Tax
Authorities. In addition, it is also not disputed that the purchasing dealers
were registered with the Sales Tax Department in respect of copper wires
i.e. the goods claimed to have been sold by the Assessee to the purchasing
dealers.
13. The obligations of a registered dealer selling goods to another
registered dealer against a declaration in the prescribed form (ST-1 Form)
is no longer res integra. The Supreme Court in the case of State of Madras
v. M/s. Radio and Electricals Ltd. &Anr.:(1996) 18 STC 222 had observed
as under:-
"The Act seeks to impose tax on transactions, amongst others,
of sale and purchase in inter-State trade and commerce. Though
the tax under the Act is levied primarily from the seller, the
burden is ultimately passed on to the consumers of goods
because it enters into the price paid by them. Parliament with a
view to reduce the burden on the consumer arising out of
multiple taxation has, provided in respect of sales of declared
goods which have special importance in inter-State trade or
commerce, and other classes of goods which are purchased at an
intermediate stage in the stream of trade or commerce,
prescribed low rates of taxation, when transactions take place in
the course of inter-State trade or commerce. Indisputably the
seller can have in these transactions no control over the
purchaser. He has to rely upon the representations made to him.
He must satisfy himself that the purchaser is a registered dealer,
and the goods purchased are specified in his certificate: but his
duty extends no further. If he is satisfied on these two matters,
on a representation made to him in the manner prescribed by the
Rules and the representation is recorded in the certificate in
Form 'C' the selling dealer is under no further obligation to see
to the application of the goods for the purpose for which it was
represented that the goods were intended to be used. If the
purchasing dealer misapplies the goods he incurs a penalty
under s. 10. That penalty is incurred by the purchasing dealer
and cannot be visited upon the selling dealer...."
(underlining added)
14. The aforesaid decision was rendered in the context of Central Sales
Tax Act and the sales made by the purchasing dealers against declarations
in Form-C. However, the ratio of the said decision would be equally
applicable to sales made against ST-1 Form. The aforesaid decision has
also been followed by this Court in Powerlite Electricals India P. Ltd.
(supra) and Milk Food Ltd. (supra).
15. In view of the above, it is well established that a selling dealer would
have no duty to examine the correctness of the Form ST-1 submitted; the
selling dealer would also not be responsible for any misapplication of
goods by the purchasing dealer or failure on the part of the purchasing
dealer to maintain the correct records. Clearly, the Assessee could not be
held responsible for any discrepancy in the ST-2 Account furnished by the
purchasing dealer to the Sales Tax Authorities. The Assessee had produced
the original portion of ST-1 Forms which were duly addressed to the
Assessee and, further, also mentioned the invoice numbers, invoice value as
well as the description of the goods. In the circumstances, undisputedly, the
Assessee was not obliged to make any further enquiries or compliance with
regard to the goods sold to the purchasing dealers. The Assessment Order
as well as the remand assessment order indicates that the AA had concluded
that the Assessee had not been able to substantiate its claim regarding
transfer of goods to the purchasing dealer. The remand assessment order
had been upheld by the FAA. The Tribunal had also accepted the
Revenue's contention that the genuineness of the sales claimed to have
been made by the Assessee were not established.
16. In the aforesaid context, it would be important to note the documents
produced by the Assessee in support of its claim. The Assessee had
produced the ST-1 Forms issued by the Department to the purchasing
dealer. There is no dispute as to the genuineness of these forms. The ST-1
Forms also bore the noting of the purchasing dealer with regard to the
receipt of goods. The Assessee produced certain deposit slips indicating the
deposit of the consideration received from the purchasing dealers, the bank
statement evidencing receipt of consideration for sales made by bank drafts
and cheques, ledger accounts of the purchasing dealers, which also indicate
the receipt of consideration from the respective purchasing dealers and duly
receipted invoices. The Order dated 3rd February, 2010 dismissing the
Review Petition filed by the Assessee indicates that the aforesaid
documents were referred to by the Assessee.
17. The AA had passed the remand assessment order concluding that the
sales were not genuine, principally, for the reason that the Assessee had
been unable to produce the purchasing dealers and according to the AA, it
had also not established the transfer of property in goods.
18. In our view, the aforesaid reasons would not be sustainable in light of
the fact that the Assessee had produced documents for the sale of goods and
the duly receipted invoices along with original ST-1 Forms coupled with
receipt of consideration through bank drafts and cheques that would clearly
establish the transactions claimed by the Assessee. The AA was unduly
influenced by the ST-2 Account filed by the purchasing dealer and the fact
that the purchasing dealers were not found in existence at the time of
making the remand assessment order. Insofar as the ST-2 Account
furnished by the purchasing dealer is concerned, it is well established that
the Assessee cannot be held responsible for any discrepancy in that regard.
As indicated above, the originals of ST-1 Forms in the name of the
Assessee had been produced and the Assessee could not be penalised for
any contrary return filed by the purchasing dealers. As regards the
existence of the purchasing dealers is concerned, there is no dispute that the
said dealers were in existence when the transactions had been effected;
admittedly, the ST-1 Forms had been issued by the Commissioner to such
dealers. It is relevant to note that ST-1 Forms are printed under the
Authority of the Commissioner and are issued by the Assessing Authority
to a registered dealer on an application made by the said dealer. The
Assessment Order dated 18th March, 1988 also does not indicate that the
existence of purchasing dealers was doubted at that time. Clearly, if the
purchasing dealers were not found in existence almost a decade after the
transactions in question had been completed, the Assessee cannot be held
responsible on that count. Particularly, when there is no dispute that such
dealers were registered by the Department at the relevant time and,
therefore, their existence at the material time cannot be questioned by the
Department, unless on investigation, it is found that ST-1 Forms itself had
been fraudulently issued/procured from the Sales Tax Department.
19. In the proceedings before the Tribunal, the Assessee had referred to
the invoice, deposit slips as well as the ledger accounts of various
purchasing dealers. The Tribunal rejected the aforesaid evidence by
holding that in certain cases, cheques received from the purchasing dealers
were in advance of the invoice raised and that the amount of cheques did
not tally with the date of the invoice. The fact that the ledger account of the
purchasing dealer indicated that in some cases, advance payments had been
received prior to the dates of invoice, in our view, could not possibly lead
to the conclusion that the transactions were not genuine. Photocopies of
ledger accounts of two purchasing dealers, which were handed across by
Mr. Mahna indicate that bulk of the amounts had been received in advance
and only small amounts - in one case Rs.323.00 - had been received after
the date of invoice. The Tribunal assumed that it was the trade practice to
sell goods on credit and, thus, receiving advances against the sales
indicated that the transactions were not genuine and were contrary to the
trade practice. We are hard pressed to find any material on record, which
would indicate that it was the established trade practice in the copper wire
industry to sell goods on credit. Concededly, there was no material before
the Tribunal, which would support this view. In the circumstances, the
decision of the Tribunal, which is based on such an assumption would be
wholly perverse and bereft of merits.
20. The Tribunal had further concluded that the transfer of property in
goods had not been established. We find the aforesaid conclusion to be
unmerited in view of the fact that the Assessee had produced invoices
which were duly receipted by the purchasing dealers. The ST-1 Forms, in
addition to the other particulars, also specifically recorded the receipt of
goods by the purchasing dealer. In addition, the receipt of consideration for
the sale of goods had been established by showing (a) deposit slips in
certain cases; the bank statement (which was not noted by the Tribunal);
and the ledger account of the purchasing dealers, which also noted the
particulars of the cheques received from the purchasing dealers in
consideration of the sale.
21. It is also relevant to note that the department had no other
evidence/material apart from the ST-2 Account submitted by the
purchasing dealers to doubt the sales made by the Assessee against ST-1
Forms. No investigations had been conducted by the AA at the material
time on the purchasing dealers - the Assessment Order had been passed
without summoning the purchasing dealers or making any further enquiries
as to the correctness of the ST-2 Account submitted by them.
22. In view of the above, we find it difficult to sustain the denial of
deduction claimed by the Assessee for the sales made against ST-1 Forms.
23. Under Rule 7(1) of the Rules, the Assessee is required to produce
only the copies of the relevant cash memos or bills and a declaration in
Form ST-1 duly filled and signed by the purchasing dealers to claim
deduction from its taxable turnover. These conditions had been met by the
Assessee.
24. The facts in Milk Food Ltd. (supra) are somewhat similar to the facts
of the present case. In that case, the Department had denied the exemption
claimed by the Assessee therein against certain ST-1 Forms, inter alia, on
the ground that the payments made by the purchasing dealer were not by
cheque and the Assessee had not produced any proofs of delivery. In that
case the Court framed the following question for consideration:-
"Whether the Tribunal was right in law in placing the
burden upon the dealer to show that the forms issued
by the registered purchasing dealers in ST-1 were
genuine and in consequently upholding the assessment
and the appellate orders refusing to allow deduction of
the sales made by the appellant to them under section
4(2)(a)(v) of the Delhi Sales Tax Act, 1975?"
25. The Court took note of the provisions of Rule 7 of the Rules and
concluded that since conditions prescribed under Rule 7 of the Rules had
been met, the Assessee was entitled to deduction of sales made against ST-
1 Forms from the taxable turnover. The Court held that "in our opinion the
Tribunal appears to have placed the burden wrongly upon the appellant-
dealer." In our view, the decision in Milk Food Ltd. (supra) is squarely
applicable in the facts of the present case.
26. In view of the aforesaid, the question of law framed is answered in
the affirmative; that is, in favour of the Assessee and against the Revenue.
The order dated 24th September, 2004 passed by the FAA and the order
dated 19th March, 2013 passed by the Tribunal are set aside. The remand
assessment order to the extent that it denies the Assessee a deduction in
respect of sales worth Rs.13,40,735/- and raises a consequential demand, is
set aside.
27. The appeal is, accordingly, allowed. No order as to costs.
VIBHU BAKHRU, J
S. MURALIDHAR, J
AUGUST 28, 2015
RK
