DY COMMISSIONER OF SALES TAX Vs. DEBI PRASAD

JUDGEMENT

(1.) THE Revenue is the revision-petitioner in this Tax revision Case. THE respondent-firm is a registered dealer under the Kerala general Sales Tax Act. We are concerned with the assessment year 1983-84. Amongst others, the assessing authority disallowed the exemption to the turnover of Rs. 14,25,172. 78 relating to the sale of pepper and betel nuts to four other registered dealers in Mattancherry. THE said goods are taxable at the last purchase point. THE assessee claimed exemption on the ground that the said goods were sold to registered dealers within the State and so the assessee is not the last purchaser of the said goods in the State liable to tax. THE assessee also produced declarations in Form No. 25 obtained from the local purchasers of pepper M/s. Oscar Spices, Jyothi Spices, Amrit Spices, Vanitha Spices. THE assessing authority declined to grant the exemption holding that the said local purchasers were only name lenders with bogus registration and that their registrations were cancelled with retrospective effect (in 1989? ). THE exemption claimed towards sale of pepper in the sum of Rs. 10,19,460. 55 and sale of betel nuts amounting to Rs. 4,05,712. 23 were disallowed. THE plea of the assessee, that the Revenue has no authority to cancel tile-registration certificate of the purchasing dealers with retrospective effect, that the cancellation of the certificates of registration cannot in any way deprive the assessee from getting the exemption pleaded, that the assessee acted bona fide on the basis of declarations and other documents issued by the purchasing dealers at the time when the certificates of registration issued were valid and had not been cancelled and so the exempt ion cannot be denied on the ground of the cancellation of the registration of the purchasing dealers with retrospective effect, were negatived. In the opinion of the assessing authority when the certificates of registration issued to the purchasing dealers were found to be bogus or fictitious and the certificates were cancelled, that will ipso facto deny the plea of exemption pleaded by the selling dealers like the assessee. THE said decision was affirmed in appeal by the Deputy Commissioner (Appeals ). In further appeal, the Sales-tax Appellate Tribunal, by a majority, held that the only requirement under the K. G. S. T. Act and the Rules for a seller to obtain exemption from tax for goods for which tax is leviable at the last purchase point is the production of Form No. 25 declarations issued by the purchasing dealers and that in the instant case the assessee has produced such declaration Forms issued by the purchasing dealers. It was also found that the revenue has not established any collusion between the assessee and the purchasing dealers and the denial of exemption for the sole reason that the certificates of registration of the purchasing dealers were cancelled with retrospective effect cannot in any manner act to the prejudice of the assessee, who bona fide obtained Form No. 25 declarations as soon as the various transactions took place. It was found that all the purchasing dealers were having registration under the K. G. S. T. Act, 1963 when the disputed sales were effected. THE registration of the purchasing dealers were subsequently cancelled. THEre is no material that at the time when the assessee sold the goods to the said purchasers, as against Form No. 25 declarations, there was any proceeding against the said purchasers. In the light of the above facts, the Salestax appellate Tribunal held that exemption cannot be disallowed and the assessee is entitled for the exemption claimed by them being not the last purchaser of the goods taxable at the last purchase point. It is thereafter, the Revenue has filed the above Tax Revision Case assailing the order passed by the Salestax appellate Tribunal dated 13-2-1990.

(2.) WE heard counsel for the Revenue - Special Government pleader (Taxes) Shri. N. N. Divakaran Pillai. It was argued that the burden of proof to claim exemption is on the assessee, and if at the time when the assessment is taken up for consideration it is evident that the declarations in form No. 25 were given by bogus dealers, the assessee is not entitled to the exemption pleaded. It is for the assessee to prove that Form No. 25 declarations were genuine and the effect of cancellation of the certificates of registration of the purchasing dealers will ipso facto deprive the assessee of the exemption provided by the Act. Form No. 25 declarations filed should be true declarations and if it turns out subsequently that the said declarations are untrue, the assessee is entitled to exemption. The taxing authority is not estopped from challenging the validity of the certificate of registration. Reliance was placed on the bench decision of the Orissa High Court in nowranglal Agarwal v. State of Orissa [ (1965) 16 S. T. C. 271)].

(3.) IT should be remembered that a certificate is granted by the prescribed authority only after making such enquiries as he may consider necessary and only if he is satisfied that the application is in order and that the particulars furnished therein are correct etc. IT is not as if the certificate is granted mechanically. An enquiry is contemplated, on the basis of which the concerned officer should be satisfied that the person who has applied for registration is a real person, that the particulars furnished in the application are correct, and that in the circumstances, the officer is of opinion that the certificate of registration is to be granted for the applicant. When once such a certificate is granted, it clothes the person with certain privileges. Under S. 22of the K. G. S. T. Act, a registered dealer alone can collect tax payable by him on the sale of any goods from the person to whom he sells the goods. IT is only a registered dealer who can give Form No. 25 declaration, as envisaged by R. 32 (14) of the K. G. S. T. Rules, for the goods purchased by him, which are taxable at the last purchase point. In effect, by the grant of the certificate of registration, the Revenue holds out to the world at large that the person to whom the certificate is granted is a registered dealer under the Act, entitled to take advantage of all rights and privileges provided by the Act and the Rules. IT is true, that it is open to the prescribed authority to cancel the registration certificate for good and sufficient reasons, after providing an opportunity to the concerned dealer of being heard. But, such cancellation of registration can take effect only from the date when the order was so passed. IT cannot have any retrospective effect. IT cannot in any manner affect the past transactions bonafide entered into by persons, who relying on the certificate of registration, entered into business deals and arranged their affairs. This is all the more so, in a case where no collusion between the selling dealer and the purchaser is neither alleged nor established. We are fortified in taking this view in the light of the following decisions: (1) Santumal v. Asst. Commissioner of Sales Tax [ (1963) 14 s. T. C. 287- Bombay] (2) Chhabra Electric Stores v. The Chief Commissioner, Delhi [ (1972) 30 S. T. C. 85 -Delhi]; (3) Devinder Kumar Rewal Kumar v. The State [1972) 30 S. T. C. 352 - P & H]; (4) Commercial Tax Officer v. Jasodalal ghosal P. Ltd. [ (1979) 44 S. T. C. 31-Calcutta] and (5) Suresh Trading Co. v. State of Maharashtra [ (1931) 48 S. T. C. 207 - Bombay].