Important pointRule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules which provides for furnishing of the original C-Form in order to claim the concessional rate of tax should be construed strictly as the requirements contained in the Rule are mandatory.

Headnote:Central Sales Tax Act, 1956—Section 8(2)(a)—Central Sales Tax (Karnataka) Rules 1958—Rule 6(b)(ii)—Central Sales Tax (Registration and Turnover) Rules, 1957—Rule 12(1)—Inter-state sales—Claim of concessional rate of tax on basis of portions of ‘Form-C’ marked as duplicate—Not maintainable—Assessing Authority disallowed the benefit of concessional rate of tax on ground that appellant did not file original of C-Forms issued by purchasing dealers for the inter-state sales effected by appellant—Whether Assessing Officer was justified in rejecting the duplicate portion of C-Forms and indemnity bonds filed by appellant—(Yes)—Rule 6(b)(ii) of Karnataka Rules is clear and categoric and cannot be liberally construed but it should be construed strictly—Requirements of Rule 6(b)(ii) are mandatory—Dealer has to strictly follow the procedure.
Held : We have already extracted Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 and Rule 12(2) and 12(3) of the Central Sales Tax (Registration and Turnover) Rules, 1957. In our view, the Rule has to be strictly construed. Admittedly, the appellant has not complied with the said provisions and, therefore, he is not entitled to the concessional rate of tax under Section 8 of the Central Sales Tax. Section 8(4) specifically provides that the provisions of sub-section (1) shall not apply to any sale in the course of inter-state trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner. Rule 8(4)(a) also provides that a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority. On the above provision, a registered dealer will not be entitled to the concessional rate of tax in respect of inter-state sales made by him without the production of the declaration referred under clause (a) of sub-section (4). (Para 9)
Under the Central Sales Tax (Karnataka) Rules, 1957, the dealer is required to submit along with his return the original of the prescribed forms. As could be seen from the rule extracted above a registered dealer who claims that he has made a sale to another registered dealer is required to attach the original of the declaration forms on the certificate in the prescribed form received by him from the prescribed dealer along with his return filed by him. We have already extracted Section 13 of the Central Sales Tax Act, which deals with the power of the Central Government to make rules, the form and the manner for furnishing declaration under sub-section (8) of Section 8. Sub-clause (3) of Section 13 provides that the State Government may make rules not inconsistent with the provisions of the Central Sales Tax Act, 1956 and the rules made under sub-section (1) to carry out the purposes of the Act. In exercise of the powers conferred by sub-section 3, 4 and 5 of Section 13 of the Central Sales Tax, 1956, the Government of Karnataka made the Central Sales Tax (Karnataka) Rules, 1957. Under rule 6(b) (ii) of the Karnataka Rules, the State Government has prescribed as to the procedures to be followed and the documents to be produced for claiming concessional rate of tax under Section 8(4) of the Central Sales Tax Act. Thus, the dealer has to strictly follow the procedure and the Rule 6(b)(ii) and produce the relevant materials required under the said rule. Without producing the specified documents as prescribed thereunder a dealer cannot claim the benefits provided under Section 8 of the Act. Therefore, we are of the opinion that the requirements contained in Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 are mandatory. Section 12(1)(2) and (3) of the Central Sales Tax (R&T) Rules, 1957 provides that the registered dealer is required to file the declaration and the certificate referred to in Section 8(4) in Form-C and D respectively. Form-C is a declaration divided into three parts. All the three parts are identical, the first part of the form being the counter foil and the second part being the duplicate and the third part being the original. The counter foil is to be retained by the purchasing dealer. The original is to be filed before the Assessing Officer by the selling dealer to claim the concessional rate. The duplicate is to be retained by the selling dealer. If the C-Form or the original part of it is lost whilst in the custody of the purchasing dealer or in transit, the purchasing dealer shall have to furnish an indemnity bond for the same as fixed by the concerned authority. If the original part of C-Form is lost by the selling dealer whilst it is in his custody or in transit, the selling dealer shall furnish an indemnity bond as fixed by the concerned authority and follow the procedure prescribed under Rule 12(3). We are of the view that the Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 which provides for furnishing of the original C-Form in order to claim the concessional rate of tax is consistent with the provisions of the Central Sales Tax Act and there is no conflict between the provisions of Rule 12(2) and (3) of the Central Sales Tax Rules and Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 as contended by the appellant. Rule 12 of the rule is intended to prevent mis-use of C-Forms by unscrupulous and mischievous dealers and makes it obligatory for the dealer to furnish indemnity bond. In other words, in order to claim concessional rate of tax, the original C-Form has to be attached to the return as provided under Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957. It is not a mere formality or technicality but it is intended to achieve the object of preventing the forms being mis-used for the commission of fraud and collision with a view to evade payment of taxes. In our opinion, Rule 6(b)(ii) which is clear and categoric cannot be liberally construed but it should be construed strictly. We, therefore, hold that without producing the original of the C-Form as prescribed under Rule 6(b)(ii) of the Rules the appellant is not entitled for concessional rate of tax under sub-section (4) of Section 8 of the Act. (Paras 10 & 11)

Judgment

Dr. AR Lakshmanan, J.—In the above appeal, the appellant has impugned the judgment dated 12.11.1998 passed by the High Court of Karnataka whereby the order of the Additional Commissioner of Commercial Taxes dated 22.05.1998 was upheld. By this order, the Additional Commissioner of Commercial Taxes disallowed the claim of the appellant for concessional rate of tax on the inter-state sales effected by the appellant on the basis of portions of “Form-C” marked as duplicate and the indemnity bonds furnished by the appellant for the loss of portions of Form-C marked as original.

2. The Assessing Authority has disallowed the benefit of concessional rate of tax corresponding to duplicate C-Forms filed on the ground that the appellant did not file original of the C-Forms issued by the purchasing dealers for the inter-state sales effected by the appellant. The main contention before the authorities was with regard to non-consideration of duplicate portion of C-Forms filed in support of the claim for benefit of concessional rate of tax under Section 8(2)(a) of the Central Sales Tax, 1956. The appellant challenged the order of the Deputy Commissioner of Commercial Taxes, Bangalore on various grounds before the Joint Commissioner of Commercial Taxes, Bangalore. The Joint Commissioner for the reasons recorded in his order was of the opinion that the assessing authorities should not have rejected the duplicate portion of the C-Forms and the indemnity bonds filed by the appellant and should not have denied the benefit of concessional rate of tax on such turnover covered by duplicate C-Forms. The Assessing Authority was directed to accept the duplicate C-Forms and allow the benefit of concessional rate of tax under Section 8(2)(a) of the Central Sales Tax, 1956. In the light of the above direction, the assessment order was modified and the Assessing Authority was directed to issue revised demand notice accordingly.

3. Aggrieved by the order passed by the Joint Commissioner of Commercial taxes (Appeals), the matter was taken up before the Additional Commissioner of Commercial Taxes who, by his order, dated 22.05.1998 rejected all the objections filed by the appellant/controller and confirmed the proposal made by the authorities in the show-cause notice dated 11.14.1998. The Additional Commissioner allowed the appeal and set aside the order of the Joint Commissioner to the extent it allowed concessional rate of tax on the inter-state sales effected by the controller on the basis of the portions of the C-Forms marked as duplicate and the indemnity bonds furnished by the dealers for the loss of the portions of the C-Forms marked as original. Aggrieved by the above order, the appellant filed sales tax appeal No. 75 of 1998 before the High Court of Karnataka. The High Court refused to interfere with the order passed by the Additional Commissioner of Commercial Taxes and dismissed the appeal accordingly. Aggrieved by the judgment and order passed by the High Court, the above appeal was filed in this Court by the dealer.

4. We heard Mr. A.B. Saharya, learned senior counsel for the appellant and Mr. Sanjay R. Hegde, learned counsel for the respondent. Mr. A.B. Saharya made the following propositions at the time of hearing:—

1) The prescribed Form C is executed in several identical parts marked ‘Original’, ‘Duplicate’ and ‘Counterfoil’ respectively. Where the part marked ‘Original’ is lost but, the dealer selling the goods furnishes to the prescribed authority the other part marked ‘Duplicate’ which is also primary evidence of the said document by virtue of the principles enshrined in Sec. 62 of the Evidence Act, 1872, the same should be accepted as complete compliance of the requirement under Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957 (Central Rules) and Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules 1958 (State Rules) for levy of tax @ 4 under sub-section (1) and (4) of Section 8 of the Central Sal

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2004 Supreme(SC) 1589

Important pointRule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules which provides for furnishing of the original C-Form in order to claim the concessional rate of tax should be construed strictly as the requirements contained in the Rule are mandatory.

Cases Referred (3)