1. The petitioners are the successful tenderers for the purchase of surplus stores of the Director General, Supplies and Disposal, Government of India. The Director General as well as the petitioners are registered dealers under the Delhi Sales Tax Act, 1975. In these petitions the petitioners have challenged the validity of Office Order No. 120 dated 28th December, 1981, issued by the Director General, Supplies and Disposal, directing that the purchasers will not be entitled to exemption and that the sales tax declaration forms would not be accepted. The office order also directed the purchasers to pay the sales tax separately. Through the said office order, clause 10 of the special condition of contract No. 117 was amended. The amendment was incorporated in the letter of acceptance of the tender which forms part of the contract between the parties. Incorporation of the said terms in the contract is also challenged in the present writ petitions.
2. We may not the relevant provisions of the Act and Rules in regard to the exemption from sales tax :
'4. (1) The tax payable by a dealer under this Act shall be levied ..................................
(2) For the purposes of this Act, 'taxable turnover' means that part of a dealer's turnover during the prescribed period in any year which remains after deducting there from, -
(a) his turnover during that period on -
(i) to (iv) ...........................
(v) sale to a registered dealer -
(B) of goods of the class or classes specified in the certificate of registration of such dealer as being intended for resale by him in Delhi, or for sale by him in the course of inter-State trade or commerce or in the course of export outside India in the manner specified in sub-item (2) of sub-item (3) of item (A), as the case may be; and
'5. Notwithstanding anything contained in this Act, the Administrator may, by notification in the Official Gazette and subject to such conditions, if any, as may be specified therein, specify the point of sale at which any goods or class of goods may be taxed, and on the issue of such notification, the points of sale in relation to any such goods or class of goods other than the point of sale so notified, shall be exempt from payment of tax under this Act :
Provided that no such exemption shall be allowed unless a true declaration duly filled and signed by the registered dealer by whom the goods are sold and containing the prescribed particulars in the prescribed form obtainable from the prescribed authority is furnished in the prescribed manner and within the prescribed time, by the dealer who purchases the goods :
Provided further that the Administrator may, if he is of opinion that it is necessary in the public interest so to do, by notification in the Official Gazette, exempt, subject to such restrictions and conditions as may be specified therein, any dealer or class of dealers from furnishing a declaration under the first proviso.'
'7. Conditions subject to which a dealer may claim deduction from his turnover on account of sales to registered dealers. - (1) A dealer who wishes to deduct from his turnover, the amount in respect of sales on the ground that he is entitled to make such deduction under the provisions of sub-clause (v) of clause (a) of sub-section (2) of section 4, shall produce -
(a) copies of the relevant cash memos or bills according as the sales are cash sales or sales on credit; and
(b) a declaration is form ST-1 duly filed in and signed by the purchasing dealer or a person authorised by him in writing.'
3. The contention of the respondents is that neither the Act nor the Rules confer any right on the purchasing dealer for an exemption. The selling dealer is not statutorily or legally bound to accept the declaration form (ST-1) from the registered purchasing dealer. It is then submitted that even assuming that such a right is created under the Act and Rules the said right is abandoned/waived by the petitioners by entering into a contract containing the contrary term. It is also submitted that in view of the arbitration clause under the contract this Court should not entertain the writ petition.
4. The bare reading of section 4(2)(a)(v)(B) will show that a purchasing dealer is entitled to a deduction on his furnishing ST-1 form. The two facts are admitted by both the parties : (i) that both the D.G.S. & D. and the petitioners are registered dealers, and (ii) that the goods in question attract sales tax only at the last point and not at the first point of sale. The sales in question are the sales at the first point. The point at which the sales tax is payable, is determined under section 5 of the Act. Clause 10 of the special conditions, as now amended, reads :
'The sales tax wherever payable will be paid separately in any branch of the State Bank of India/Nationalised Banks and a Deposit-at-Call-Receipt (DACR) is obtained and submitted along with the balance sale value. Sales declaration form will not be accepted.'
5. The respondents have relied upon rule 7(1) but I do not think that the said rule helps the respondents. The words used in rule 7(1) : 'A dealer who wishes to deduct from his turnover, the amount in respect of sales on the ground that he is entitled to make such deduction under the provisions of sub-clause (v) of clause (a) of sub-section (2) of section 4' are very clear.
6. Rule 7(1) states the procedure and the formalities to be completed before the exemption is claimed. The procedure is that copies of the cash memos and bills and the declaration form in ST-1 duly filled in should be produced by the purchasing dealer. The object of rule 7 is not to take away the right of the purchasing dealer for deductions/exemptions created by sections 4 and 5. In fact, if the rule purports to do the same it would be ultra virus of the said provisions of the Act. Sections 4 and 5 create a vested right in the registered dealer to the deduction/exemption. When the right is created by the Act itself and its procedure is laid down by the Rules it cannot be said that the selling dealer is not statutorily or legally bound to accept the declaration form ST-1. By necessary implication such legal and statutory duty is fastened on the selling dealer.
7. It is then submitted that the right to exemption is waived by the petitioners through a contract. What a challenged in the petitions is not only the contract but also the amendment in the general conditions of contract introduced by Office Order No. 120 dated 28th December, 1981. Right to claim exemption is created by the Act and Rules. The special or general conditions of contract must act in furtherance of and not contrary to the statutory provisions. Amendment to clause 10 in the special conditions to the effect that sales tax declaration forms will not be accepted is directly in breach of rule 7(1) also. Direction to pay sales tax in the said amendment is contrary to sections 4 and 5 of the Act. The validity of this amendment has been separately challenged by the petitioners and they are entitled to do so. Once it is held that the said amendments to clause 10 is contrary to sections 4 and 5 of the Act and rule 7(1) of the Rules, and thereforee void, it is obvious that no such term can be incorporated in a contract with the purchasing dealers. It is no answer to say that the purchasing dealers has agreed to the incorporation of an illegal term of a contract. It must be remembered that these are standard form contracts and being Government contracts are mostly one-sided. The citizen as a contracting party has no liberty to settle the terms of the contract as in the normal commercial contracts. If he is not to be out of business he has no option but to agree to the terms of contract already settled by the Government. A citizen has a right to expect that the Government will respect the statutory provisions and would not act contrary to it by imposing different terms in the contracts. A term in a contract, contrary to the expressed provisions of a statute is illegal and void and the contract would be read as if no such illegal condition exists in a contract. There is no merit in the respondents' contention on this point.
8. The petitioners have challenged the validity of the amendment to special conditions of contract in these petitions. This relief would not be possible in the arbitration proceedings. So also the question of legality of incorporation of an illegal term in a contract would also be beyond the arbitrator. The writ petition was, thereforee, the proper remedy.
9. I, thereforee, hold that Office Order No. 120 dated 28th December, 1981, is illegal particularly in relation to the sales which are not the sales taxable at the first point. The petitioners would be entitled to the benefit of deduction/exemption as if the conditions imposed by Office Order No. 120 do not exist.
10. The writ petition, thereforee, succeeds with costs. The rule is made absolute.