Inder Dev Dua, J.
1. Firm Messrs Ram Pal Madan Gopal, Chaura Bazar, Ludhiana, has approached this Court under Section 22(2) of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as the Act), for a mandamus to the Financial Commissioner to refer to this Court for decision of the question of law, arising out of his order dated 10th January, 1961.
2. The petitioner-firm is a registered dealer within the contemplation of the Act and is alleged to have filed returns for all the four quarters of the assessment year 1954-55 declaring their gross turnover at Rs. 9,12,341-6-6. Out of this turnover they claimed deductions for Rs. 9,03,090-3-0 on account of sales stated to have been made to registered dealers and Rs. 2,207-8-0 on account of exports thus leaving a taxable turnover of Rs. 7,043-11-6 only. In respect of this turnover a sum of Rs. 220-2-6 was deposited as tax under Section 10 of the Act.
3. In response to a notice in Form S.T. XIV the accounts were produced by the petitioner-firm which were examined by the Assessing Authority and by virtue of the order dated 12th March, 1957, the deductions of sale to five registered dealers were disallowed. The order of assessment is annexed with the petition. According to this order, the transactions mentioned above were held not to be genuine because purchases worth lakhs were shown against the purchasers but no corresponding sales made by them (the purchasers) had been proved and that it was also not possible to contact them at their registered places of business for verifying the purchases and further disposal thereof. The registered certificates obtained by the said purchasers were also, according to the averments in the petition, held by the Assessing Authority to have been fraudulently obtained and steps were being taken for the cancellation of their registered certificates. The petitioner according to the averments in the petition had produced the declaration of the said registered dealers required under Section 5(2)(a)(ii) of the Act read with Rule 26 of the Sales Tax Rules. The only duty cast on the petitioners was to obtain a declaration required under Section 5(2)(a)(ii) and it was the duty of the department to see that the registered dealers were genuine dealers and not bogus ones. If a registered dealer purchases goods from the petitioner-firm and gives the necessary declaration, it is enough and the petitioner-firm need not concern itself with the subsequent dealings on the part of the purchaser. There is no evidence or material on the record to show that any one of the dealers concerned was at the time not a registered dealer or that he made bogus purchases. In the circumstances the disallowance of the deductions claimed on account of the sales to registered dealers by the Assessing Authority had been described in the petition to be wholly illegal and unjustified.
4. The petitioner took an appeal to the Deputy Excise and Taxation Commissioner, Jullundur Division, who rejected the same on 29th April, 1958, holding that the registration certificate of one of the purchaser-dealers appeared from his personal file to have been cancelled on 23rd September, 1955, and another one did not produce his account books for assessment year 1953-54 and a third one did not produce his account books before the Assessing Authority on 17th October, 1957.
5. On revision, the Excise and Taxation Commissioner allowed the revision petition in part and reduced the taxable turnover from Rs. 2,37,398-13-0 to Rs. 1,70,463-0-6. The learned Taxation Commissioner agreed with the petitioner that the furnishing of a declaration by a registered dealer is a prima facie proof that the sale in question was made to him but he endorsed the views of the Assessing Authority in refusing to allow deduction if there was any evidence to suggest that the sales had not in fact been made, as claimed. The sales in favour of the five registered dealers were held to be of suspicious nature because one of them had become insolvent after the assessment year and another had appeared before the Assessing Authority and stated that he had never functioned as a dealer. This material, so proceeds the writ petition, was not disclosed by the Assessing Authority during assessment proceedings against the petitioner nor was the petitioner given any opportunity to rebut any such material. Revision preferred to the Financial Commissioner was also disallowed on 10th January, 1960, on the ground that the Commissioner had given proper reasons for not allowing deductions on account of sales to the two firms Messrs A. K. Jain and Co., and Messrs D.N. Hosiery, Ludhiana.
6. An application made to the Financial Commissioner requiring him to refer the following questions of law under Section 22(1) of the Act was also disallowed in April, 1961 :-
(a) Whether there is any material or evidence on the record to justify the presumption that goods never passed to the registered dealers.
(b) Whether it was not the duty of the Assessing Authority to disclose any material or evidence in his possession leading to a suspicion or inference that the sales were not genuine to the knowledge of the petitioner and whether any such material was brought to the notice of the petitioner and the petitioner given opportunity to rebut the same.
(c) Whether in the face of the facts that the deductions claimed were on account of sales made to registered dealers, the registration certificates of these dealers were in force at the time and had not been cancelled, the dealers were carrying on business in the market, the sales to one of two had been allowed and that the declarations required under Section 5(2)(a)(ii) were duly obtained from the dealers, it was open to the department to go behind the declarations and to hold in the absence of any legal evidence that the sales to the said dealers were bogus and no deductions could be claimed in respect of such sales.
7. Having failed to get the matter referred to this Court the present petition has been filed for a mandamus as already observed.
8. To begin with, it has been urged that the production of the declaration from the purchasers is conclusive proof of the genuine nature of the sales and therefore as a matter of law it was not open to the departmental authorities to go into the question of genuineness of the sales. In support of this proposition no authority has been cited by Shri C. L. Aggarwal. On the other hand, a decision of Mehar Singh, J., dated 24th November, 1958, in Messrs Jhangi Mal Nathu Mal v. Punjab State Civil Writ No. 230 of 1958, which was cited in support of the proposition that the production of the declaration is at least prima facie evidence goes against the petitioner's contention that it constitutes conclusive evidence on the point. A similar contention raised by Shri C. L. Aggarwal in that case was negatived as being of no substance. I agree with the view taken in that case with the result that I do not find any good ground for requiring the Financial Commissioner to refer this question of law in the case in hand.
9. Shri Aggarwal then contended that the Deputy Excise and Taxation Commissioner on appeal relied on a statement of one Puran Chand, proprietor of Messrs D. N. Hosiery, made before the Assessing Authority on 17th October, 1957, on his personal file maintained in the District Office of the Sales Tax Department, that he had not maintained account books and indeed had never been in business. According to this statement the registration certificate had been obtained for him by Messrs Prab Dayal Hosiery on the understanding that the latter would pay him a sum of Rs. 3 daily in lieu of his signing certain declarations on the bills whenever required to do so. Regarding Messrs A. K. Jain & Co., the Deputy Excise and Taxation Commissioner observed that the registration certificate had been granted to this firm on 8th May, 1953, and that it filed the return regularly. It had been assessed to an additional tax of Rs. 2,994-2-0 on account of sales of about one lac of rupees but as the tax could not be recovered the sentence of imprisonment has been imposed upon the proprietor. The file of this firm was stated to be with the Senior Sub-Judge with the result ,that this assertion could be verified. The order of the Assessing Authority was affirmed on the ground that the purchases were either bogus or the goods concerned had been misappropriated or that the real purchasers were some other persons. On revision the Excise and Taxation Commissioner also observed that Messrs A.K. Jain & Co. had been adjudicated insolvent by the Senior Sub-Judge, Ludhiana. Relying on this circumstance as also on the statement of Puran Chand relied upon by the Deputy Excise and Taxation Commissioner, the learned Commissioner upheld the refusal to allow deductions in regard to the purchases said to have been made in favour of Messrs A.K. Jain & Co. and Messrs D.N. Hosiery. In regard to the other dealers the revision was allowed with the result that the taxable turnover was reduced as already mentioned. Shri Aggarwal has laid stress on the point that the fact of Messrs A.K. Jain & Co., having become insolvent as well as the statement of Shri Puran Chand of Messrs D.N. Hosiery were not in existence at the time of assessment and that the insolvency was not found disclosed to the Deputy Excise and Taxation Commissioner with the result that the petitioner has not been given any opportunity of rebutting this material on which alone the finding against his client has been given. This according to the counsel raised an important question of law which should be got referred to this Court for decision.
10. Shri Nehra has, on the other hand, contended that at no stage did the petitioner ever ask for an opportunity of rebutting these two pieces of evidence and that his main case throughout has been based on the conclusive nature of the declaration. According to him, the petitioner is not entitled to a mandamus also because there is no equity in his favour.
11. After considering the contentions of the parties, in my opinion, the order of the Financial Commissioner does give rise to the question of law mentioned in para. 17(a) of the petition. I would, accordingly, direct the learned Financial Commissioner to state and to refer to this Court for decision the question as to whether there is any evidence on the record to justify the presumption that the goods sold never passed to the registered dealers, Messrs A. K. Jain & Co. and Messrs D. N. Hosiery. There will be no order as to costs in these proceedings.
Mehar Singh, J.
12. I agree.
13. In pursuance of the abovesaid order, the Financial Commissioner made an order and the case came on for final hearing before the Division Bench consisting of MEHAR SINGH, C.J., and SHAMSHER BAHADUR, J.