Judgment:
Y.V. Anjaneyulu, J.
1. These three tax revision cases filed by the same assessee give rise to a common question and it is convenient to dispose them of together.
2. The assessment years involved are 1971-72, 1972-73 and 1973-74. The assessee was a dealer carrying on business in steel fabrications and chemical products at Hyderabad. He was assessed under the Central Sales Tax Act. Along with the returns filed for the three assessment years referred to above, the assessee filed C forms to secure assessment at the concessional rate of tax under the Central Sales Tax Act. By his orders the Commercial Tax Officer completed the assessments accepting the C forms filed by the assessee. We may at this stage mention that the assessee furnished C forms issued by the purchasers of the goods sold to the extent of Rs. 16,67,589, Rs. 19,64,833 and Rs. 14,91,000 respectively for the assessment years 1971-72, 1972-73 and 1973-74.
3. On 23rd February, 1978 the Commercial Tax Officer issued notice proposing to tax turnover to the extent of Rs. 15,42,589, Rs. 18,62,000 and Rs. 12,57,630 respectively for the three assessment years at the full rate of 10 per cent without allowing any concession on the ground that the registration granted to some of the dealers who issued the C forms were cancelled. It was also stated that the C forms issued by some of the dealers were not issued to them by the assessing authorities. The assessee objected to the proposal contending that the transaction of sales to the Bombay dealers were bona fide and in the regular course of business, that the declarations were accepted during the course of the assessment proceedings and after the expiry of three to five years, it is not open to the assessing authority to unsettle the matters. The Commercial Tax Officer rejected the assessee's contention by his order dated 28th March, 1978 and levied tax at 10 per cent.
4. The assessee appealed against the orders of the Commercial Tax Officer before the Assistant Commissioner (Appeals). By his order dated 13th February, 1979 the Assistant Commissioner allowed the assessee's appeals and remanded the proceedings to the Commercial Tax Officer with a direction to furnish all the relevant material gathered by the department and allow to the appellant-assessee an opportunity to rebut the material gathered by the assessing authority. The matters were thus remitted back to the Commercial Tax Officer for fresh appraisal.
5. After receiving the orders of the Assistant Commissioner, the Commercial Tax Officer once again issued notice on 31st March, 1981. In the notice for 1972-73 the Commercial Tax Officer raised the following points :
(i) In regard to sales of the goods to Messrs. Parakh Sales Agency, Bombay, in February/March, 1973, to the extent of Rs. 7,50,000, it was learnt by the assessing authority that the licence issued to Messrs. Kanya Weat Padmashali Sangh, Bombay, and the registration certificate was cancelled with effect from 30th October, 1970. Inasmuch as the sales were effected in 1973, the alleged purchaser, Messrs. Parakh Sales Agency, Bombay, could not be regarded as dealer under the Central Sales Tax Act. The C forms are therefore invalid. It may be pointed out that the Commercial Tax Officer does not state the relationship between Messrs. Kanya Weat Padmashali Sangh, Bombay, and the purchasers of goods. Messrs. Parakh Sales Agency, Bombay. He does not also indicate the relevancy of the cancellation of the registration certificate of Kanya Weat Padmashali Sangh, whereas the assessee sold the goods to Messrs. Parakh Sales Agency, Bombay.
(ii) In regard to sales effected to A.P. Enterprises, Bombay, during the month of September, 1972 to March, 1973, aggregating to Rs. 4,59,200, it was found that the purchaser had no valid registration certificate under the Central Sales Tax Act and that he has been using C forms granted to Messrs. Nited Engineering Syndicate. The C forms issued by the A.P. Enterprises, Bombay, cannot therefore be acted upon.
(iii) Finally in regard to the sales of Rs. 6,52,800 effected to Messrs. Elkin Sales Agencies, Bombay, the assessing authority learnt that the purchaser's registration certificate was cancelled with effect from 30th December, 1972 and the purchaser had no valid licence during the year 1972-73 when the sales were effected by the assessee. Consequently the C forms issued by the purchaser were not valid and they could not be considered for the grant of concessional rate of tax.
6. The above discrepancies relate to the assessment year 1972-73. In the notices issued for the assessment years 1971-72 and 1973-74 also there were discrepancies of a similar nature. Basing on the above facts, the Commercial Tax Officer proposed to revise all the three assessments by subjecting inter-State sales to tax at 10 per cent.
7. After receiving the aforesaid notice the assessee requested the Commercial Tax Officer to furnish the addresses of the authorities concerned at Bombay, who conducted the investigation and also to furnish a copy of the report furnished by the said officers, so that he could verify the correctness or otherwise of the statements made in the notice. The Commercial Tax Officer sent a reply to the assessee to the effect that the notices are self-explanatory and no further information was required to be furnished. In that view the Commercial Tax Officer completed the assessments for all the three years by subjecting the inter-State sales to 10 per cent tax ignoring the C forms filed.
8. Against the orders of the Commercial Tax Officer the assessee filed appeals to the Deputy Commissioner (Commercial Taxes), Appeals. The Deputy Commissioner confirmed the orders of the assessing authority. Against the orders of the Deputy Commissioner, the assessee filed a second appeal before the Sales Tax Appellate Tribunal and raised a variety of grounds before the Tribunal for consideration. The Tribunal by its common order dated 5th November, 1983 rejected the assessee's pleas holding that the burden of establishing that the purchasing dealer has a valid registration certificate is on the assessee. In the absence of valid C forms, the Tribunal was of the view that the assessee's claim for levy at concessional rate of tax in regard to the inter-State sales was not maintainable. The Tribunal referred to the fact that in some cases the registration certificates of the purchasing dealers were cancelled long prior to the sales effected by the assessee. The Tribunal also referred to the further fact that one of the dealers abused the C forms issued to another person. Eventually the Tribunal held that there is no ground to doubt the veracity of the investigations made by the authorities at Bombay. In the above view, the Tribunal affirmed the assessments made by the assessing authority and dismissed the appeals filed by the assessee. Hence these revision petitions by the assessee.
9. We have heard learned counsel, Sri Dasaratharama Reddi, and also the learned Government Pleader. We may first clear the ground that there is no dispute about the fact that the assessee had sold the goods to the Bombay dealers, nor has there been any allegation against the assessee that the C forms were obtained from the purchasing dealers at Bombay by an act of collusion. It is necessary to refer to these two facts to indicate that there is no dispute that the sales were effected by the assessee to the purchasing dealers at Bombay and that whatever C forms were issued by the purchasing dealers were faithfully received by the assessee and filed along with the returns filed for the three assessment years under consideration.
10. The gravamen of the charge against the assessee by the Revenue is that the sales were effected long after the registration certificates were cancelled and that the assessee should have investigated, before the sales were effected, into the question whether the purchasing dealers at Bombay were genuine dealers. According to the learned Government Pleader, in some cases the registration certificates were cancelled five years before the sales of goods. The learned Government Pleader contends that the assessee had been callous in collecting whatever C forms were given to him without taking necessary steps to find out whether the purchasing dealers were eligible to issue the C forms to enable the assessee to be assessed at a concessional rate of tax under the Central Sales Tax Act. The learned Government Pleader points out that it is the elementary duty of the assessee to make the aforesaid investigation. Failure to do so would result in the denial of the assessee's claim for assessment under the Central Sales Tax Act at concessional rate. The learned Government Pleader relied on the decision of the Supreme Court in State of Madras v. Radio and Electricals : AIR1967SC234 .
11. Sri Dasaratharama Reddi, learned counsel for the assessee, on the other hand contends that there is nothing to indicate that there was any complicity between the assessee on the one hand and the purchasing dealers at Bombay on the other. It was claimed by the learned counsel that the transactions of sale effected by the assessee were in the regular course of business and inasmuch as the purchasing dealers had nonchalantly issued the C forms, which were available with them, the assessee had no reason to doubt the genuineness of those forms or to entertain the doubt that their registrations might have been cancelled earlier. According to the learned counsel if the purchasing dealers at Bombay abused the C forms that were issued to them, action if any would lie against them and the assessee could not be made the scapegoat for the acts of omission and commissions on the part of the purchasing dealers at Bombay.
12. The questions boils down to this, viz., what is the burden that lay on the assessee in regard to the preliminary enquiries that he has to make at the time of effecting sales during the course of inter-State trade. Business transactions being complex as they are it is fair to accept the assessee's submission that he has no wherewithal to verify the antecedents of the purchasing dealers. Surely a businessman cannot be expected not only to pursue the trade that is carried on by him but also employ necessary machinery to investigate at the time each sale is effected whether the purchasing dealer at the other end is a genuine dealer or not and whether his credentials are in question. The assessee is entitled to act on certain prima facie material at the time of effecting the sales. Let us consider the Revenue's claim that the registration certificates issued to some of the purchasing dealers were cancelled years before the impugned transactions had taken place and registration was not subsisting at the time when the transactions were put in. Rule 9(3) of the Central Sales Tax (Registration and Turnover) Rules, 1957, provides that if the certificate of registration is cancelled, the dealer shall forthwith surrender to the notified authority the certificate of registration and the copies thereof, if any, granted to him. If the purchasing dealer is in possession of the registration certificate, it is prima facie evidence of the certificate not having been cancelled. There is no indication in the notice issued to the assessee that the persons, whose registration certificate were allegedly cancelled, had surrendered the registration certificate. The assessee could have therefore derived prima facie satisfaction that the registration certificate were effective. It is one thing to say that the registration certificate was cancelled and quite a different thing to say that after cancellation there was a surrender of the registration certificates and the assessee had entered into transactions with the purchasing dealers, who did not physically posses the registration certificates. As already pointed out there is no allegation to the latter effect.
13. We would also now refer to the Central Sales Tax (Bombay) Rules, 1957. Rule 4-A(4) is in the following terms :
'Any unused declaration or certificate forms remaining in stock with a registered dealer on the cancellation of his registration certificate shall, within two working days of the date of cancellation, be surrendered to the Sales Tax Officer from whom the forms were obtained : Provided that, if the dealer fails to surrender any unused declaration and certificate forms as required by this sub-rule, the Commissioner shall, by notification in the Official Gazette, declare that all or any of such forms shall be deemed to be obsolete or invalid with effect from such date as may be specified in the notification, and shall forward a copy of such notification to all other State Governments.'
14. It is clear from the above rule that any unused declaration or certificate forms remaining in stock with a registered dealer on the cancellation of his registration certificate shall have to be returned to the Sales Tax Officer within two working days from the date of cancellation. The proviso-would also show that if there is failure on the part of the dealer to surrender the unused declaration and certificate forms, the Government shall by a notification in the Official Gazette declare that all or any of such forms shall be deemed to be obsolete or invalid with effect from the date specified and the copies of such notification shall be forwarded to all the State Governments.
15. The question that now arises is as to how the purchasing dealers at Bombay were in possession of the C forms even after the cancellation of their registration certificates year before. If the allegation regarding the cancellation of registration certificates is true, obviously the purchasing dealers at Bombay failed to surrender C forms to the authorities concerned. There is no mention in the notice issued to the assessee that on the purchasing dealers failing to so surrender, the authorities concerned had taken action in terms of the proviso to rule 4-A(4) of the aforesaid Rules. There is no reference to any Official Gazette and there is much less any reference to the copy of notification being forwarded to the State Government. It follows from the aforesaid circumstance that if a purchasing dealer at Bombay whose registration or licence under the Central Sales Tax Act is cancelled, continued to be in possession of C forms without compliance with the provisions of proviso to rule 4-A(4) above referred, then, in such an event, the assessee effecting the sales to such purchasing dealer is entitled to proceed on the basis that the registration certificate is effective and valid. The fact that the purchasing dealers at Bombay had issued C forms would clearly support the assessee's contention that he had no reason to doubt the veracity of those forms and enter into any detailed investigation in the matter. A vague allegation that pursuant to the cancellation of registration certificate under the Central Sales Tax Act, the purchasing dealers are not entitled to issue C forms does not carry the matter anywhere unless it can be said that the provisions of rule 4-A(4) above referred were complied with. We have already stated that there is no such allegation and there is no material to indicate that the provisions of rule 4-A(4) were complied with.
16. In the circumstances aforesaid, it is impossible to escape the conclusion that assessee had taken the elementary precaution before effecting the sales to the purchasing dealers or in any event there were no circumstances warranting a suspicion to provoke an investigation into the affairs of the purchasing dealers. In the facts and circumstances, it must be said that the assessee collected the C forms unsuspectingly, filed the same before the authorities at this end and sought relief of taxation under the Central Sales Tax Act. In these circumstances, the assessee must be held to have discharged the initial onus that lay on him to show that the inter-State sales were covered by C forms issued by the purchasing dealers and the assessing authority is bound to admit the assessee's claim for assessment at concessional rate. We have already referred to the fact that the assessing authority had even declined to place in the hands of the assessee the relevant information to enable him to pursue investigation, obviously under the impression that the information indicated in the notice issued was sacrosanct and the assessee could not be allowed to make any investigation into the matter.
17. Having regard to the above, we are firmly of the view that the assessee's claim for assessment at concessional rate of tax was rejected illegally and without any justification. The tax revision cases are allowed and the impugned assessment orders passed by the assessing authority are quashed. Government Pleader's fee Rs. 250 in each.
18. Petitions allowed.