CROMELITE INDIA PVT LTD Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) The applicants were at all times registered as a dealer under the Bombay Sales Tax Act, 1959. During the period 1st April, 1965, to 31st March, 1966, the applicants effected three sales in respect of surgical trays made of stainless steel manufactured by the applicants to one Messrs. H. Amritlal and Company. In respect of these three sales the applicants issued three bills dated 22nd November, 1965, 17th December, 1965, and 18th December, 1965, to Messrs. H. Amritlal and Company, the aggregate price being Rs. 2,70,000. Messrs. H. Amritlal and Company were also a registered dealer and they held a licence as also an authorization under the said Act. In respect of the above three sales Messrs. H. Amritlal and Company gave to the applicants certificates in form 14 certifying that they were a registered dealer and held an authorization and that the said goods would be resold within nine months from the date of purchase by them or by an authorized dealer to whom they would sell the goods in the course of inter-State trade or commerce or in the course of export out of the territory of India. By the said certificates they further certified that their authorization was in force on the date when they purchased the said goods. Under section 10(1)(iii) of the said Act the turnover of sales of goods by a registered dealer to an authorized dealer against a certificate in section 12, which is to be in form 14, is to be deducted from the turnover of sales of goods of the selling dealer for the purpose of arriving at his turnover subject to payment of sales tax, and similarly under section 10(1)(ii) such turnover is to be deducted for the purpose of arriving at the selling dealer's turnover subject to payment of general sales tax, that is to say, in view of the said certificates given by Messrs. H. Amritlal and Company, the applicants were not liable to pay either sales tax or general sales tax in respect of such sales. The deductions claimed by the applicants in respect of these sales were allowed by the Sales Tax Officer while assessing the applicants for the aforementioned period. Subsequently, however, the Sales Tax Officer, after following the prescribed procedure, reopened the said assessment and disallowed the said sales on the ground that the registration certificates and the licence and authorization of Messrs. H. Amritlal and Company had been subsequently cancelled with retrospective effect from a date anterior to the date of the said sales. The record shows that the order cancelling the registration certificates and the licence and authorization of Messrs. H. Amritlal and Company was passed on 30th September, 1966, with retrospective effect from 10th November, 1965. The Sales Tax Officer, however, also disallowed the deductions which had been granted to the applicants in respect of sales made to Messrs. H. Amritlal and Company prior to 10th November, 1965. The said order of reassessment mentions that these registration certificates, etc., were cancelled because it subsequently transpired that Messrs. H. Amritlal and Company were fictitious persons. Against the order of reassessment the applicants went in appeal to the Assistant Commissioner of Sales Tax. Their appeal was dismissed by the Assistant Commissioner, holding that the sales said to be made to Messrs. H. Amritlal and Company were not genuine because (1) the payments were made in cash, even though they were large amounts, contrary to the normal trade practice, (2) no delivery chalans for delivery of the said goods by the applicants to Messrs. H. Amritlal and Company were produced, and (3) the documents (that is, the registration certificates and the licence and authorization) of Messrs. H. Amritlal and Company were cancelled on 30th September, 1966, with effect from 10th November, 1965, that is, prior to the date of the sale.

(2.) Thereafter the applicants went in second appeal to the Maharashtra Sales Tax Tribunal. The second appeal was partly allowed by the Tribunal by permitting deductions in respect of the sales made against certificate in form 14 to Messrs. H. Amritlal and Company prior to 10th November, 1965. With respect to the sales made after the said date, namely, the three sales made in November and December, 1965, and mentioned earlier, the Tribunal held that the certificate of registration having been cancelled with retrospective effect from a date prior to the date of the said sales, Messrs. H. Amritlal and Company could not be said to be a registered dealer. It was also contended before the Tribunal that if these sales were taxable, they were subject to levy of tax at the rate mentioned either in entry 22 of Schedule E to the said Act or entry 43 of Schedule E (sic) to the said Act and not at the rate mentioned in entry 20 of the said Schedule E, as was applied by the Sales Tax Officer. These contentions were negatived by the Tribunal.

(3.) At the instance of the applicants the Tribunal has stated this case and referred the following three questions to this Court :