Selling dealer's entitlement to rely on C Forms submitted by the purchasing dealer for claiming exemption of concessional rate of tax, and the inability to deny the benefit of the C Forms if the purchasing dealer is duly registered and the C Forms are genuine.

JUDGMENT

Vibhu Bakhru, J. (Oral)--The petitioner has filed the present petition impugning the assessment order dated 29.03.2019 passed by respondent No. 3 (Assistant Value Added Tax Officer) for the third quarter of the Financial Year 2014-15.

2. The petitioner is aggrieved by the said assessment order to the extent that respondent No. 3 has framed a default assessment on the basis that the C Forms relied upon by the petitioner, were subsequently cancelled by the Rajasthan Tax Authority.

3. Respondent No. 3 had reasoned that since C Forms had been cancelled by the Tax Authority that issued it, no benefit of such C Forms could be availed by the petitioner.

4. The only question that falls for consideration of this Court is whether respondent No. 3 is justified in denying the benefit of C Forms to the petitioner that were issued by the Rajasthan Tax Authorities at the instance of the selling dealer located in the said State.

5. Undisputedly, the selling dealer who had furnished the C Forms was registered with the Rajasthan Tax Authorities in respect of the goods purchased by the petitioner at the material time.

6. The question whether any irregularity in the issuance of C Forms would preclude the assessee from benefits of the same, is no longer res integra.

7. In the case of State of Madras v. Radio Electrical Ltd. and Anr., 1966(18) STC 222 (SC), the Hon'ble Supreme Court had held that, where C Forms submitted by a purchasing dealer state that the goods were intended to be used for a particular purpose and the purchasing dealer misapplied the goods, the selling dealer was under no obligation to ensure that the goods were applied for the purposes as represented by the purchasing dealer. The Court held that the selling dealer was entitled to rely upon the C Forms submitted by the purchasing dealer for claiming exemption of concessional rate of tax.

8. The following observations of the Hon'ble Supreme Court are relevant:

"He (the seller) must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificate: but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules and the representation is recorded in the certificate in Form 'C' the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. If the purchasing dealer misapplies the goods he incurs a penalty under section 10. That penalty is incurred by the purchasing dealer and cannot be visited upon the selling dealer...."

9. In M/s Pentex Sales Corporation v. Commissioner of Sales Tax, Delhi, ST. REF. 1/1998 decided on 06.05.2013, this Court, following the decision in the case of Radio Electrical Ltd. (supra), had held that once a selling dealer had complied with the requirement of verifying that the purchasing dealer is a registered dealer and holds the registration certificate in respect of goods sold to him, he had no further obligations and the benefit of the C Forms could not be denied. The only exception would be where the C Forms are forged; in which case the same would be require to be treated as non-existent.

10. The aforesaid decisions rest on the rationale that a dealer is entitled to rely on such forms as a part of it bargain if the dealer furnishing the forms is a registered dealer in respect of the goods in question. The dealer accepting the forms is not required to undertake any a detailed investigation regarding whether the issuance dealer has complied with all laws. Any liability regarding non-compliance of the relevant laws would rest with the dealer furnishing such forms and not the dealer that accepts these forms.

11. In the present case, there is no dispute that the purchasing dealer was duly registered with the Rajasthan Tax Authorities in respect of the goods sold by the petitioner. There is also no dispute