MARSHAL DISTRIBUTORS Vs. STATE OF GUJARAT

JUDGEMENT

(1.) THE Gujarat Sales Tax Tribunal, Ahmedabad, has referred the following questions for decision of this Court under section 69 (2) of the Gujarat Sales Tax Act, 1969, hereinafter referred to as "the Act" : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that when the declarations in form 17a issued by the appellant were withdrawn after the breach thereof was committed by the appellant, purchase tax under section 16 (1) of the Act was attracted even though in the assessment of the vendor, deduction from the turnover of sales pertaining to the said declarations was not allowed ? (2) If the answer to the above question is in the negative, whether the Tribunal erred in holding that the quantum of purchase tax to be worked out under section 16 (3) of the Act was not nil ? (3) Whether, on the facts and in the circumstances of the case, the conclusion of the Tribunal that there was no reasonable cause within the meaning of section 45 (6) of the Act was perverse and whether the Tribunal erred in holding that penalty was not required to be remitted either in whole or in part under the proviso to the said section ?"

(2.) THESE questions arise from the following unusual facts : (i) The applicant, Messrs. Marshal Distributors of Baroda, is registered as a dealer under the Act, reselling the products manufactured by M/s. Suhrid Geigy Ltd. The applicant purchases dyes and chemicals from M/s. Suhrid Geigy Ltd. under regular sale bills issued by the vendor. During the period of assessment between July 1, 1978 and September 30, 1978, the applicant purchased such goods of the total value of Rs. 91,51,487 from the said vendor by issuing declarations in form 17a. The applicant had declared that the goods purchased by it will be resold by it in the course of inter-State trade and commerce. On account of issue of such declarations the vendor could not charge any tax from the applicant on the said sales of Rs. 91,51,487. For the assessment of this period the Sales Tax Officer issued a notice to the applicant on December 26, 1978, and on receiving such notice the applicant claims to have realised that out of the said goods purchased against the declarations in form 17a, the goods worth Rs. 60,44,927 had been transferred by the applicant to its branches outside the State of Gujarat and only the remaining goods were sold in the course of inter-State trade and commerce. Having realised this situation and the so-called mistake the applicant called back the declarations in form 17a from the vendor and replaced other forms in form 17a in respect of the goods which were actually sold by it in the course of inter-State trade and commerce. As the applicant did not sell all the goods of the value of Rs. 91,51,487 purchased by it by furnishing form 17a in the course of inter-State trade and commerce, the Sales Tax Officer regarded it as breach of the declarations which would result in payment of purchase tax under section 16 of the Act in respect of the goods of the value of Rs. 60,44,927. At the time of replacement, the vendor while returning the original declaration forms, issued a debit note for the tax payable in respect of the sales of Rs. 60,44,927 and the applicant paid the said amount to the vendor which in turn paid to the Government, and on assessment of the vendor, no deduction of tax under section 7 (iv) of the Act was allowed to him in respect of the said value of Rs. 60,44,927, and interest under section 47 (4a) of the Act was charged in their assessment for making late payment of the tax. This withdrawal and replacement took place much before the assessment of either applicant as buyer or M/s. Suhrid Geigy as vendor. However, as stated earlier, the Sales Tax Officer held that the applicant was liable to pay purchase tax under section 16 of the Act, and imposed such tax at Rs. 2,56,305 and held that the applicant was liable to pay purchase tax to the tune of Rs. 2,56,305 and also penalty under section 45 (6) of the Act to the tune of Rs. 55,015 in respect of such additional tax. A draft assessment order was issued by the Sales Tax Officer inviting objections under section 46-A of the Act. Objections were filed by the applicant and so the proceedings were transferred to the Assistant Commissioner of Sales Tax (Appeals), before whom also, the applicant submitted written objections to the levy of purchase tax and penalty. The Assistant Commissioner passed an order of assessment levying purchase tax of Rs. 2,41,797. 08 under section 16 of the Act upon purchase of Rs. 60,44,927 in respect of which the applicant had committed the breach of the declarations. He added a sum of Rs. 14,507. 82 as surcharge at 6 per cent and imposed penalty of Rs. 55,015. 48 under section 45 (6) of the Act. Credit was given for the amount of Rs. 44,706 paid by the applicant and a demand of Rs. 2,66,614. 38 was raised against the applicant. The Assistant Commissioner observed in his assessment order that when notice of assessment was issued in form No. 36 and when the applicant was called on January 16, 1979, and when the scrutiny of the account books was being made, the applicant realised that it had transferred some of its goods to its branches and it would be liable to pay purchase tax under section 16 of the Act. As the Assistant Commissioner found that the difference between the purchase tax and the tax paid by the applicant along with the returns would exceed 20 per cent the penalty of Rs. 55,015. 48 was leviable under section 45 (6) of the Act. He further observed that even though the vendor had recovered sales tax from the applicant and paid the same to the Government by challan he had not filed any revised return in that connection. (ii) This levy of tax and penalty was confirmed by the Deputy Commissioner of Sales Tax in appeal. (iii) The appellate order came to be challenged in Revision Application No. 61 of 1983. It was submitted on behalf of the applicant that as soon as the applicant realised that it had committed breach of declarations in form No. 17a he withdrew such forms even before the breach came to the notice of the department, and in view of this bona fide action on the part of the applicant, purchase tax and penalty ought not to have been levied. It was further submitted that after withdrawing the said forms from the vendor the applicant paid sales tax to the vendor and the vendors paid the same amount to the Government in July 1979, along with interest for making late payment. The Government actually had not lost any tax whatsoever on the entire amount of turnover. It was submitted on behalf of the Government that if the dealer commits the breach of the declarations, and the goods are not resold or despatched in the manner specified in the declarations he becomes liable to include purchase price in the turnover of purchases in the return to be furnished within the specified period and he also becomes liable to pay tax on the purchase of goods. It was further submitted on behalf of the Government that whether deduction is allowed to the vendor on account of declarations furnished by the purchaser is not at all material. After referring to the provisions of section 16 of the Act, the Tribunal expressed the view that no such course of withdrawal or replacement of certificates in form 17a would be permissible after the breach of such declaration was committed. It also expressed the view that even the vendor was not right in returning the certificate to the applicant and the vendor could have very well relied on the certificate in order to claim deduction in the turnover of sales, and that if the vendor might have filed an appeal against the assessment order passed against him, the vendor's plea for claiming deduction at the stage of appeal might be entertained and might merit consideration. In respect of the submission on behalf of the applicant that recovery of purchase tax from the applicant and also of the sales tax from the vendors, M/s. Suhrid Geigy, in respect of the same turnover would result in double taxation, the Tribunal observed that strict interpretation of section 16 of the Act would not result in double taxation. The Tribunal, therefore, rejected the revision application. (iv) Now at the instance of the applicant-dealer the aforesaid questions have been referred to this Court by the Tribunal.

(3.) AS the course suggested by Mr. Modi regarding adjustment of the amount paid by the vendor Suhrid Geigy Ltd. by way of sales tax against the amount that may be found due by way of purchase tax under section 16 of the Act, from the applicant-dealer would necessarily involve consent of the vendor Suhrid Geigy Ltd. , we called upon Mr. Modi to produce the authentic consent recorded by Suhrid Geigy Ltd. Suhrid Geigy Ltd. has now appeared through Mr. J. S. Joshi, Advocate, who states that M/s. Suhrid Geigy Ltd. would have no objection if adjustment is granted as suggested by Mr. Modi on behalf of the applicant-dealer.