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Commissioner of Sales Tax Vs. Victor Gaskets India Ltd. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference No. 12 of 1979 in Reference Application No. 43 of 1979
Judge
Reported in[1985]58STC293(Bom)
Acts Bombay Sales Tax Act, 1959 - Sections 11, 14, 14(3) and 61(1)
AppellantCommissioner of Sales Tax
RespondentVictor Gaskets India Ltd.
Excerpt:
.....form no. 15 unable to show that goods exclusively used by it in manufacture of goods sold within state - sales tax officer held that respondent was unable to discharge the burden cast on it by section 14 (3) and determined the extent of contravention of recitals of form no. 15 by applying pro rata method - on appeal tribunal held that extent of contravention of recitals of form 15 should be determined on basis of prudent man's theory and not on pro rata basis - view of tribunal challenged - presumption drawn by tribunal would render provisions of section 14 (3) nugatory - decision of tribunal quashed - held, extent of contravention of form no. 15 must be determined on pro rata basis. - - when the assessee fails to discharge the burden of proof cast upon him under section 14(3) or.....kania, j.1. this is reference on a case stated by the sales tax tribunal under section 61(1) of the bombay sales tax act, 1959 (hereinafter referred to as 'the said act'). the question referred to us for determination is as under :'whether on the facts and in the circumstances of this case, the tribunal was correct in law in holding that the extent of contravention of the recitals of form 15, should be determined on the basis of prudent man's theory and not on pro rata basis ?'2. as there is no controversy regarding the manner in which the question is to be answered, the facts can be very briefly stated :the respondent is a registered dealer under the said act and is a manufacturer of gaskets of automobiles and diesel engines and has branches outside the state of maharashtra. the.....
Judgment:

Kania, J.

1. This is reference on a case stated by the Sales Tax Tribunal under section 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act'). The question referred to us for determination is as under :

'Whether on the facts and in the circumstances of this case, the Tribunal was correct in law in holding that the extent of contravention of the recitals of form 15, should be determined on the basis of prudent man's theory and not on pro rata basis ?'

2. As there is no controversy regarding the manner in which the question is to be answered, the facts can be very briefly stated :

The respondent is a registered dealer under the said Act and is a manufacturer of gaskets of automobiles and diesel engines and has branches outside the State of Maharashtra. The respondent purchased various goods from registered dealer on payment of a reduced rate of tax under section 11 of the said Act by furnishing declarations in form No. 15. During the period from 1st September, 1966 to 31st August, 1967 it was noticed by the Sales Tax Officer concerned that the respondent had purchased goods worth Rs. 5,67,190 by giving declarations in form No. 15 as against its total purchases of Rs. 25,45,869. The total sales effected by the respondent were to the tune of Rs. 47,98,580 while goods to the tune of Rs. 6,08,403 were despatched by the respondent to its branches outside the State without sale in the State of Maharashtra. The respondent was unable to show to the satisfaction of the Sales Tax Officer that the goods purchased on form No. 15 were exclusively used by it in the manufacture of goods which were sold within the State of Maharashtra as required by the recitals in form No. 15. The Sales Tax Officers held that the respondent was unable to discharge the burden case on it by section 14(3) of the said Act and determined the extent of contravention of recitals of form No. 15 by applying pro rata method. According to the Sales Tax Officer, the contravention of the recitals of form No. 15 was to the extent of 22 per cent. The assessment was completed by the Sales Tax Officer on this footing. On appeal to the Assistant Commissioner of Sales Tax, it was held by the Assistant Commissioner that the contravention should have been correctly worked out at 11 per cent. which was the ratio of branch transfers to the total sales. On a second appeal to the Tribunal, it was submitted on behalf of the respondent that the purchases otherwise than on form No. 15 were sufficiently large so as to cover the branch transfers, and hence it could not be said that the respondent had contravened the recitals of form No. 15. A Special Bench of the Tribunal upheld this contention of the respondent. The Tribunal proceeded on the assumption that the respondent as an assessee, being a man of business and knowing the tax law in force would so manage his affairs that he attracted the least tax. On this basis it was held by the Tribunal that it must be presumed that the assessee utilised the goods purchased by it on the declarations in form No. 15 solely in the manufacture of goods resulting in permissible sales, that is, goods which were sold in the State of Maharashtra as such presumption was possible on the facts of the case. It is from this decision of the Tribunal that the aforesaid question has been referred to us.

3. It is common ground that in view of the decision of a Division Bench of this Court in Commissioner of Sales Tax v. Berar oil Industries [1975] 36 STC 473, the view of the Tribunal must be held to be erroneous, because drawing a presumption such as was drawn by the Tribunal would render nugatory the provisions of section 14(3) of the said Act. Sub-section (3) of section 14 of the said Act provides that when a question arises whether the turnover of purchases made by an assessee against certificates given by him under section 11 or 12 of said Act is liable to be included in his taxable turnover of purchases, it is for the assessee to prove that it is not liable to be so included. When the assessee fails to discharge the burden of proof cast upon him under section 14(3) or is unable to do so for no fault of his, to raise a presumption such as was raised by the Tribunal would nugatory the provisions of section 14(3), because it puts an assessee who has failed to discharge the statutory burden in the same position as if he had succeeded in discharging it.

4. In view of this decision, it is clear that the question referred to us must be necessarily answered in the negative, and it is answered accordingly.

5. Our notice has been drawn by Mr. Patil to a circular dated 1st December, 1979 providing for grant of relief in such cases. Mr. Dhotre states that the circular has not been withdrawn and is still in force. If the respondent is entitled to get any benefit under this circular, it is agreed that such benefit will be given to the respondent.

6. Looking to all the facts and circumstances of the case, there will be no order as to the costs of the reference.


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