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Noone R.S. Govindarayulu and Bros. Vs. Sales Tax Appellate Tribunal and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 811 of 1972
Judge
Reported in[1974]33STC580(AP)
AppellantNoone R.S. Govindarayulu and Bros.
RespondentSales Tax Appellate Tribunal and ors.
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateThe Fifth Government Pleader
DispositionPetition dismissed
Excerpt:
- - the rule was, therefore, clearly made to carry out the purposes of the act. it was clearly authorised by section 13(3) of the act......the petitioner is to the production of form c. let us examine what this form c is. form c is not a form prescribed by the rules made by the state government and adopted by the rules made by the state government. it is a form prescribed by rule 12 of the rules made by the central government for the purposes of section 8(4) of the central sales tax act. now section 8(1)(b) provides for the levy of tax at a concessional rate on sales to a registered dealer of goods of the description referred to in sub-section (3) of section 8. i have already mentioned that the exemption under section 6(2) is also available only to goods of the description referred to in section 8(3). that the goods are of the description referred to in section 8(3) is one of the requirements to be established by the dealer.....
Judgment:
ORDER

Chinnappa Reddy, J.

1. The petitioner, a dealer in yarn at Guntur, placed orders for yarn from the Gokak Mills in Mysore State. When the consignments of yarn were in transit, he sold them to various purchasers by endorsing the railway receipts. The turnover in respect of these transactions came to Rs. 12,97,097. The petitioner claimed exemption from Central sales tax under Section 6(2) of the Central Sales Tax Act. The sales tax authorities did not allow the exemption on the ground that the petitioner did not file the declaration in form C as prescribed by Rule 12(3) (ii) of the Central Sales Tax (Andhra Piadesh) Rules, though he filed form E-1. In this application for the issue of a writ, the petitioner claims that under Section 6(2) of the Act, filing of form E-1 was enough to entitle the petitioner to claim the exemption and Rule 12(3) (ii) which stipulates the filing of form C also is ultra vires as it is inconsistent with Section 6(2) of the Act. Sri P. Rama Rao, learned counsel for the petitioner, relies on the decision of the Madras High Court in State of Madras v. Subbiah Pillai [1967] 20 S.T.C. 263, and of the Gujarat High Court in State of Gujarat v. Yakubbhai Hajihakumutdin [1969] 23 S.T.C. 117. in support of the petitioner's contention.

2. Section 6(1) of the Central Sales Tax Act authorises the levy of tax on sales effected in the course of inter-State trade but Section 6(2) exempts from such levy second and subsequent sales in the course of such inter-State trade if the conditions prescribed therein are fulfilled. Section 6(2) is as follows:

(2) Notwithstanding anything contained in Sub-section (1), where a sale in the course of inter-State trade or commerce of goods of the description referred to in Sub-section (3) of Section 8 --

(a) has occasioned the movement of such goods from one State to another; or

(b) has been effected by a transfer of documents of title to such goods during their movement from one State to another;

any subsequent sale to a registered dealer during such movement effected by a transfer of documents of title to such goods shall not be subject to tax under this Act:

Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner a certificate duly filled and signed by the registered dealer from whom the goods were purchased, containing the prescribed particulars.

3. In order to claim the exemption granted by Section 6(2) of the Act, (1) the sale must be a second or subsequent sale in the course of inter-State trade, (2) the sale must be effected by transfer of documents of title during the movement of the goods from one State to another, (3) the sale must be of goods of the description referred to in Section 8(3), (4) the sale must be to a registered dealer, and (5) the seller also must have purchased the goods from a registered dealer. This last requirement is implicit in the proviso. The first and last requirements are met by proving the first or previous sale, and the proviso prescribes the mode of proof of such first or previous sale the dealer claiming the exemption must produce a certificate in the prescribed manner from the registered dealer from whom the goods were purchased. Rule 12(4) of the Central Sales Tax (Registration and Turnover) Rules has prescribed that the certificate shall be in form E-1 or form E-2. Though the statute itself has prescribed the mode of proving the first and last requirements, the statute is silent about the mode of proof in regard to the other requirements. It does not mean that the rale-making authority is barred from making rules prescribing the mode of proof in regard to the other requirements. Section 13(3) of the Central Sales Tax Act enables the State Government to make rules, not inconsistent with the Act and the Rules made by the Central Government, to carry out the purposes of the Act. Prescription of mode of proof of the requirements stipulated by the Act to claim exemption certainly comes within the expression 'to carry out the purposes of the Act'. Section 13(4)(c) provides in particular for the making of rules for 'the furnishing of any information relating to the stocks of goods of, purchases, sales and deliveries of goods by, any dealer or any other information relating to his business as may be necessary for the purposes of the Act'. Now Rule 12(3)(ii) of the Rules made by the State Government [the Central Sales Tax (Andhra Pradesh) Rules] prescribes the mode of proof of the other requirements necessary to be proved to claim exemption under Section 6(2). It prescribes the production of form E-1 and form C. It says:

For the purpose of claiming exemption from tax on his subsequent sale under Sub-section (2) of Section 6, the purchasing dealer who effects a subsequent sale to another registered dealer by transfer of documents of title to the goods during their movement from one State to another, shall furnish to the appropriate assessing authority (i) the portion marked 'original' of the form E-1 received by him from the registered dealer from whom he purchased the goods and (ii) the original of the declaration in form C received from the registered dealer to whom he sold the goods.

4. This rule is not inconsistent with the Act or the Rules made by the Central Government. Far from it, it fits neatly into the scheme of the Act and the Rules made by the Central Government as I shall presently show. The objection of the petitioner is to the production of form C. Let us examine what this form C is. Form C is not a form prescribed by the Rules made by the State Government and adopted by the Rules made by the State Government. It is a form prescribed by Rule 12 of the Rules made by the Central Government for the purposes of Section 8(4) of the Central Sales Tax Act. Now Section 8(1)(b) provides for the levy of tax at a concessional rate on sales to a registered dealer of goods of the description referred to in Sub-section (3) of Section 8. I have already mentioned that the exemption under Section 6(2) is also available only to goods of the description referred to in Section 8(3). That the goods are of the description referred to in Section 8(3) is one of the requirements to be established by the dealer claiming exemption under Section 6(2). Section 8(3) states that the goods referred to in Section 8(1)(b) are goods of the classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him, etc. Section 8(4) provides that the concessional rate of tax provided by Section 8(1)(b) will not be available to any sale in the course of inter-State trade unless the dealer selling the goods produces a declaration from the registered dealer who purchases the goods in the prescribed form. Form C is the form prescribed by the Rules made by the Central Government in that connection. Thus, in order to claim the benefit of the concessional rate of tax under Section 8(1)(b), the dealer has to prove that the goods are of the description referred to in Section 8(3). The statute itself has prescribed the mode of proof in Section 8(4). The mode of proof is the production of the prescribed declaration in form C. In order to claim the benefit of the exemption under Section 6(2) also the dealer has to prove that the goods are of the description referred to in Section 8(3). The statute, though it has prescribed the mode of proof for the purpose of Section 8(1)(b), it has not prescribed the mode of proof for the purpose of Section 6(2). So the Rules made by the State Government have adopted, for this purpose, the mode of proof prescribed by the statute to prove the very thing for the purpose of Section 8(1)(b). Rule 12(3) (ii) has prescribed the production of the same form C. Rule 12(3) (ii), therefore, far from being inconsistent with the Act and the Rules made by the Central Government, fits neatly into the scheme of the Act and those Rules.

5. An analogous rule, though more peremptory, was declared ultra vires by the Madras High Court in State of Madras v. Subbiah Pillai [1967] 20 S.T.C. 263. The prescription, by the Rules, of an exclusive mode of proof was treated by the learned Judges as the imposition of an unwarranted condition on the right to a statutory exemption, not authorised by the rule-making power. The learned Judges did not notice that the very mode of proof was prescribed by the statute to prove the very thing for the purpose of Section 8(1)(b) and that all that the Rules made by the State Government did was to adopt the same mode of proof for the purpose of Section 6(2). Proof of second sale in the course of inter-State trade was necessary. Proof that the goods were of a particular class was necessary. Proof that the purchaser was a registered dealer was necessary. Since Section 6(2) dealt with an exemption from tax, strict proof of these matters was necessary. By prescribing the production of form C as the exclusive mode of proof of all these matters the Rules achieved the twin objects of enabling the dealer to gain the exemption, and at the same time, protecting the revenue. The rule was, therefore, clearly made to carry out the purposes of the Act. It was not inconsistent with the Act or the Rules made under the Central Act. It was clearly authorised by Section 13(3) of the Act. These aspects of the question were not considered by the learned Judges of the High Court. I, therefore, express my respectful dissent from the view expressed by them. In State of Gujarat v. Hajihakumutdin [1969] 23 S.T.C. 117, the Gujarat High Court were not concerned with the vires of any rule but they expressed their agreement with the Madras view. I respectfully disagree.

6. I, therefore, hold that Rule 12(3)(ii) is not ultra vires. The writ petition is accordingly dismissed with costs. Advocate's fee Rs. 100.


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