The production of a declaration under R. 27(2) of the Orissa Sales Tax Rules is not always obligatory on the part of a selling dealer when claiming the exemption under S. 5(2)(a)(ii) of the Orissa Sales Tax Act.

Headnote:
ORISSA SALES TAX ACT - S. 5(2)(A)(II), R. 27(2) - DEDUCTION OF TURNOVER - PRODUCTION OF DECLARATION - MANDATORY OR DIRECTORY - INTERPRETATION.
Fact of the Case:

The dealer claimed a deduction under S. 5(2)(a)(ii) of the Orissa Sales Tax Act for sales to a registered dealer. The Sales Tax Officer allowed the deduction, but the Tribunal held that the deduction was not allowable as the dealer had not produced a declaration as required under R. 27(2) of the Orissa Sales Tax Rules. The High Court held that the production of a declaration under R. 27(2) was not always obligatory and that the dealer could claim exemption by adducing other evidence.
Finding of the Court:

The Supreme Court held that R. 27(2) must be reconciled with S. 5(2)(a)(ii) and that the rule can be reconciled by treating it as directory. The rule must be substantially complied with in every case, but it is not necessary that the selling dealer should produce a declaration in the form required in R. 27(2) before being entitled to a deduction.
Issues: Whether the production of a declaration under R. 27(2) of the Orissa Sales Tax Rules is mandatory or directory.
Ratio Decidendi: R. 27(2) is directory and not mandatory. The dealer can claim exemption by adducing other evidence so as to bring the transaction within the scope of S. 5(2)(a)(ii) of the Act.
Final Decision: The appeals were dismissed.

Judgement

SIKRI, J. : The respondent, hereinafter referred to as the dealer, filed a return for the quarter ending June 30, 1951, under the Orissa Sales Tax Act (Orissa Act XIV of 1947) (hereinafter referred to as the Act). He claimed a deduction of Rs. 2,40,000 under S. 5 (2) (a) (ii) in respect of the goods sold to a registered dealer, named M/s. S. Lal and Co. Ltd. BA 1335. Similarly, for the quarter ending September 30, 1951, he claimed a deduction of Rs. 15,677-1-3. By two assessment orders passed under S. 12 (2) of the Act, of the Sales Tax Officer, Cuttack III Circle, Jaipur, Orissa, determined the tax payable allowing the deduction of Rupees 2,40,000 and Rs. 15,677-1-3, under S. 5 (2) (a) (ii). The dealer filed appeals to the Assistant Collector, Sales Tax , challenging the assessment on grounds which are not relevant. The dealer later filed revisions against the decision of the Assistant Collector. While the revisions were pending, the legislature amended the Orissa Sales Tax Act, in 1957, by Orrisa Sales Tax (Amendment) Act (Orissa Act XX of 1957). The effect of this amendment was that revisions were treated as appeals to Sales Tax Tribunal, and it enabled the Government to file cross-objections. The State of Orissa, in pursuance of this amendment, filed memorandum of cross-objections challenging the deduction of Rs, 2,40,000 and Rs. 15,677-1-3, on the ground that the dealer had not produced any declaration, as required under R. 27 (2) of the Orissa Sales Tax Rules, 1947, as evidenced from the Check sheet kept on record. The Tribunal upheld this objection and directed that fresh assessments be made. Certain other questions were raised before the Tribunal by the dealer, but as nothing turns on them as far as these appeals are concerned, they are not being mentioned. The Tribunal stated a case to the High Court and one of the questions referred to was "whether the assessing officer was not wrong in allowing deduction of Rs. 2,40,000/- for the quarter ending on 30-6-51 and Rs. 15,677/1/3 for the quarter ending on 30-9-51 from the respective gross turnover of the applicant." The High Court, following its earlier decision in Members, Sales Tax Tribunal Orissa v. S. Lal and Co., (1961) 12 STC 25 (Orissa), answered the question in the affirmative. The State of Orissa having obtained special leave from this Court, these appeals are now before us for disposal.

2. Mr. Ganapathy Iyer, on behalf of the State of Orissa, has contended before us that it is clear that R. 27(2) was not complied with, and, therefore, the Sales Tax Officer was wrong in allowing the said deduction. The answer to the question referred depends on the correct interpretation of S. 5 (2) (a) (ii), and R. 27 (2). They read thus :-

"S. 5(2) (a) (ii) - sales to a registered dealer of goods specified in the purchasing dealer s certificate of registration as being intended for resale by him in Orissa and on sales to a registered dealer of containers or other materials for the packing of such goods.

Provided that when such goods are used by the registered dealer for purposes other than those specified in his certificate of registration, the price of goods so utilised shall be included in his taxable turnover."

"Rule 27(2). Claims for deduction of turnover under Sub-clause (ii) of clause (a) of Sub-section (2) of Section 5 -

A dealer who wishes to deduct from his gross turnover on sales which have taken place in Orissa the amount of a sale on the ground that he is entitled to make such deduction under Sub-clause (ii) of clause (a) of Sub-section (2) of Section 5 of the Act, shall produce a copy of the relevant cash receipt or bill according as the sale is a cash sale or a sale on credit in respect of such sale and a true declaration in writing by the purchasing dealer or by such responsible person as may be authorised in writing in this behalf by such dealer that the goods in question are specified in the purchasing dealer s certificate of registration as being required

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1964 Supreme(SC) 143

The production of a declaration under R. 27(2) of the Orissa Sales Tax Rules is not always obligatory on the part of a selling dealer when claiming the exemption under S. 5(2)(a)(ii) of the Orissa Sales Tax Act.

Cases Referred (1)