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Commissioner of Sales Tax Vs. Girja Prasad Sunderlal of Satna - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case Number Miscellaneous Civil Case No. 163 of 1967
Judge
Reported in1968MPLJ463; [1968]21STC360(MP)
AppellantCommissioner of Sales Tax
RespondentGirja Prasad Sunderlal of Satna
Appellant Advocate K.K. Dube, Adv.
Respondent Advocate R.K. Tankha, Adv.
Cases ReferredIn State of Madras v. R. Nand Lal
Excerpt:
- - the tribunal accordingly held that the declaration in form 'c' submitted by the assessee was perfectly valid. their lordships of the supreme court have recently questioned the validity of the corresponding rule 10(1) of the central sales tax (madras) rules, 1957, in these words :we are constrained to observe that the rule-making authorities have failed to appreciate the scheme of section 13 of the central sales tax act......has referred to us the following questions of law :(1) whether explanation to section 4(2) of the central sales tax act is applicable only to inside sales and not to inter-state sales ?(2) whether, under the facts and circumstances of the case, one 'c' form submitted by the assessee under the central sales tax act was valid ?2. the questions arise in this manner. the assessee, messrs girja prasad sunderlal, satna, is a dealer in tendu leaves at satna. in proceedings for assessment of sales tax for the year 1961-62, the assessee was assessed to pay tax at 7 per cent, on a turnover of rs. 81,954.15 p. from sales of tendu leaves to one messrs a.s. kasim & brothers of tadpali in andhra pradesh. the assessing authority declined to assess the turnover at 1 per cent, under sub-section (1) of.....
Judgment:

A.P. Sen, J.

1. By this reference under Section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958 (2 of 1959), made at the instance of the Commissioner of Sales Tax, Madhya Pradesh, the Tribunal has referred to us the following questions of law :

(1) Whether Explanation to Section 4(2) of the Central Sales Tax Act is applicable only to inside sales and not to inter-State sales ?

(2) Whether, under the facts and circumstances of the case, one 'C' Form submitted by the assessee under the Central Sales Tax Act was valid ?

2. The questions arise in this manner. The assessee, Messrs Girja Prasad Sunderlal, Satna, is a dealer in tendu leaves at Satna. In proceedings for assessment of sales tax for the year 1961-62, the assessee was assessed to pay tax at 7 per cent, on a turnover of Rs. 81,954.15 P. from sales of tendu leaves to one Messrs A.S. Kasim & Brothers of Tadpali in Andhra Pradesh. The assessing authority declined to assess the turnover at 1 per cent, under Sub-section (1) of Section 8 of the Central Sales Tax Act, 1956 (74 of 1956), on the ground that the declaration in Form 'C' of the purchasing dealer submitted by the assessee was invalid being contrary to the proviso to Rule 8 of the Madhya Pradesh Sales Tax (Central) Rules, 1957, because in his view there were two distinct contracts of sale inasmuch as the tendu leaves were despatched from separate places and the aggregate of the sale price exceeded Rs. 5,000. The Deputy Commissioner of Sales Tax, Jabalpur, confirmed the order of the assessing authority. On appeal, the Tribunal accepted the contention of the assessee by holding that, in the absence of any evidence to the contrary, its plea that there was in reality only one transaction of sale should be upheld. The Tribunal accordingly held that the declaration in Form 'C' submitted by the assessee was perfectly valid. Apart from this, the Tribunal also disagreed on the applicability of Explanation to Section 4(2) of the Central Sales Tax Act, to the transaction in question, which admittedly was in the course of inter-State trade and commerce. It was of the view that the Explanation only applied to inside sales.

3. Having heard the counsel, we are of the opinion that the reference on the second question should be answered in favour of the assessee. The Central Sales Tax Act provides, inter alia, by Sub-section (4) of Section 8, that in order to qualify for the lower rate of tax in respect of sales in the course of inter-State trade and commerce, the dealer selling goods has to furnish to the prescribed authority, in the manner prescribed, a declaration duly filled and signed by the registered dealer to whom the goods are sold. The expressions 'prescribed authority' and 'prescribed manner' mean the authority and manner prescribed by rules made under the Act. Section 13(1) of the Central Sales Tax Act authorises the Central Government to make rules providing, inter alia, the form in which, and the particulars to be contained in, any declaration or certificate to be given under the Act.

4. The assessee did furnish the requisite declaration in Form 'C' prescribed under the Rules, framed by the Central Government, in exercise of the powers vested in them by Section 13(1)(d) of the Act. Its liability to pay tax at the higher rate proceeds on the breach of the proviso to Rule 8 of the Madhya Pradesh Sales Tax (Central) Rules, 1957, framed by the Madhya Pradesh Government under Sections 13(3) and 13(4)(e). The relevant rule reads as follows :

8. (1)(a) A registered dealer, who wishes to purchase goods from another such dealer on payment of tax at the rate applicable under the Act to sales of goods by one registered dealer to another, for the purpose specified in the purchasing dealer's certificate of registration, shall obtain from the authority mentioned in Sub-rule (1) or any other officer as may be authorised by the Commissioner in this behalf, blank declaration form in Form 'C' as prescribed under Sub-rule (1) of Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957, for furnishing it to the selling dealer. Before furnishing the declaration to the selling dealer, the purchasing dealer, or any responsible person authorised by him in his behalf, shall fill in all required particulars in the Form, and shall also affix his usual signature in the space provided in the Form for this purpose. Thereafter, 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 by him to the selling dealer :

Provided that no single declaration shall cover more than one transaction of sale, except in cases where the total amount covered by one declaration is equal to or less than Rs. 5,000 or such other amount as the Commissioner may, by general order, notify in the Official Gazette.

The Sales Tax Authorities were of the view that the declaration was in breach of the rule. In State of Madras v. R. Nand Lal & Co. [1967] 20 S.T.C. 374 S.C. their Lordships of the Supreme Court have recently questioned the validity of the corresponding Rule 10(1) of the Central Sales Tax (Madras) Rules, 1957, in these words :

We are constrained to observe that the rule-making authorities have failed to appreciate the scheme of Section 13 of the Central Sales Tax Act. We are of the opinion that it was not within the competence of the State authorities under Section 13 (3) and (4) of the Central Sales Tax Act to provide that a single declaration covering more than one transaction shall not be made. Authority to prescribe such an injunction cannot have its source in Section 13(3) or Section 13(4)(e): it can only be in the authority conferred by Clause (d) of Section 13(1) by the Central Government. The Central Government has, in exercise of the power under Section 13(1)(d), prescribed the form of declaration and the particulars to be contained in the declaration. A direction that there shall be a separate declaration in respect of each individual transaction may appropriately be made in exercise of the power conferred under Section 13(1)(d). The State Government is undoubtedly empowered to make rules under Sub-sections (3) and (4) of Section 13 ; but the rules made by the State Government must not be inconsistent with the provisions of the Act and the rules made under Sub-section (1) of Section 13 to carry out the purposes of the Act. If the authority to make a rule prescribing that the declaration shall not contain more than one transaction can be made only under Section 13(1)(d), the State Government cannot exercise that authority. The situation which has arisen in this case could have been avoided, if instead of each State making its rules requiring that no single declaration shall cover more than one transaction, the Central Government in exercise of the power under Section 13(1)(d) of the Act had made the rules.

Following that decision, we would declare that the proviso to Rule 8(1) of the Madhya Pradesh Sales Tax (Central) Rules, 1957, is unenforceable. It must, accordingly, be held that the declaration in Form 'C' furnished by the assessee was in conformity with the provisions of Sub-section (4) of Section 8 of the Central Sales Tax Act and its turnover was, therefore, taxable at the lower rate of 1 per cent under Section 8(1) of the Act because, without the proviso, all the statutory requirements were admittedly fulfilled. Even otherwise, on the finding reached by the Tribunal, there was only one transaction of sale of tendu leaves and the declaration in Form 'C' submitted by the assessee must be held to be valid.

5. In the view we have taken, the second question must be answered in the affirmative. The first question has, therefore, become academic and we would decline to answer it on that ground. The assessee shall have its costs of this reference. Hearing fee Rs. 50, if certified.


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