# Member, Sales-tax Tribunal, Orissa v. M/s. S. Lal & Co

- **Citation:** [1964] 7 S.C.R. 816
- **Court:** Supreme Court of India
- **Decided:** 1964-04-21
- **Case number:** Civil Appeals Nos. 507-508 of 1963
- **Bench:** K. Subb~ Rao, J. C. Shah, S. M. Sikr•
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/member-sales-tax-tribunal-orissa-v-m-s-s-lal-co-3123
- **Pages:** 4

## Headnote

Sales Tax-Sale to Registered deale.r-Claim for deductionProduction of declaratio71. under r. 27(2) if obligatory-Orissa
Sales Tax Act, 1947 (Orissa 14 of 1947), s. 5(2)(a) (ii), Orissa Sales;
Tax Rules, 1947 r. 27(2)-0rissa Sales Tax (Amendment} Act
(Orissa 10 of 1957).
Assessment orders were passed by the Sales Tax Officer
allowing the deductions of two amounts claimed by the respondent-dealer under s. !>(2)(a)(ii) of the Orissa Sales Tax Act in:
respect of goods sold to a registered dealer. The respondentdealer filed appeals to the Assistant Collector Sales Tax, challenging the assessment on grounds which were not relevant and
against those decisions revisions were filed by the dealer. While
the revisions were pending the Orissa
Sales Tax Act was
amended by Orissa Sales Tax (Amendment) Act (Orissa Act, 10'
of 1957) with the result that revisions were treated as appeals
to the Sales Tax Tribunal, and it enabled the Government to
file cross-objections. In pursuance, the State filed cross-objections challenging the deductions on the ground that the dealer
had not produced any declaration as required under r. 27(2) of
the Orissa Sales Tax Rules, 1947. The Tribunal upheld this
objection and directed that fresh assessments be made.
On
statement of the case, the High Court answered that the assessing officer was not wrong in allowing the deductions.
On
appeal by special leave).
Held: (i) There is nothing in s. 5(2)(a) (ii) itself that disentitles a selling dealer to a deduction, but if the contingency provided in the proviso occurs, then the price of goods is included
in the taxatle turnover of the buying dealer.
(ii) The production of a declaration under r. 7(2) is not
always obligatory on the part of a selling dealer when claiming
the exemption. It is open to him to claim exemption by adducing other evidence so as to tring the transaction w1thin the
scope of s. 5(2)(a)(ii). Rule 27(2) must be reconciled with the
section and the rule can be reconciled by treating it as directory. But the rule must be substantially complied with in every
case. It is for the Sales-tax Officer to be satisfied that, in fact.
the certificate of registration of the buying dealer contains the
requisite statement, and if he has any doubts about it, the selling
dealer must satisfy his doubts. But if he is satisfied from other
facts on the record, it is not necessary that the selling dealer
should produce a declaration in the form required in r: 27(2)~
before being entitled to a deduction.
Member, Sales-tax Tribunal, Orissa v. M/s. S. Lal & Co.
(1961) 12 S.T.C. 25, referred to.

## Text

1964
.April 21
816
SUPREME COURT REPORTS
STATE OF ORISSA
v .
M.A. TULWCH AND CO.
[1964}
[K. SUBB~ RAO, J. C. SHAH AND S. M. SIKR•, JJ.]
Sales Tax-Sale to Registered deale.r-Claim for deductionProduction of declaratio71. under r. 27(2) if obligatory-Orissa
Sales Tax Act, 1947 (Orissa 14 of 1947), s. 5(2)(a) (ii), Orissa Sales;
Tax Rules, 1947 r. 27(2)-0rissa Sales Tax (Amendment} Act
(Orissa 10 of 1957).
Assessment orders were passed by the Sales Tax Officer
allowing the deductions of two amounts claimed by the respondent-dealer under s. !>(2)(a)(ii) of the Orissa Sales Tax Act in:
respect of goods sold to a registered dealer. The respondentdealer filed appeals to the Assistant Collector Sales Tax, challenging the assessment on grounds which were not relevant and
against those decisions revisions were filed by the dealer. While
the revisions were pending the Orissa
Sales Tax Act was
amended by Orissa Sales Tax (Amendment) Act (Orissa Act, 10'
of 1957) with the result that revisions were treated as appeals
to the Sales Tax Tribunal, and it enabled the Government to
file cross-objections. In pursuance, the State filed cross-objections challenging the deductions on the ground that the dealer
had not produced any declaration as required under r. 27(2) of
the Orissa Sales Tax Rules, 1947. The Tribunal upheld this
objection and directed that fresh assessments be made.
On
statement of the case, the High Court answered that the assessing officer was not wrong in allowing the deductions.
On
appeal by special leave).
Held: (i) There is nothing in s. 5(2)(a) (ii) itself that disentitles a selling dealer to a deduction, but if the contingency provided in the proviso occurs, then the price of goods is included
in the taxatle turnover of the buying dealer.
(ii) The production of a declaration under r. 7(2) is not
always obligatory on the part of a selling dealer when claiming
the exemption. It is open to him to claim exemption by adducing other evidence so as to tring the transaction w1thin the
scope of s. 5(2)(a)(ii). Rule 27(2) must be reconciled with the
section and the rule can be reconciled by treating it as directory. But the rule must be substantially complied with in every
case. It is for the Sales-tax Officer to be satisfied that, in fact.
the certificate of registration of the buying dealer contains the
requisite statement, and if he has any doubts about it, the selling
dealer must satisfy his doubts. But if he is satisfied from other
facts on the record, it is not necessary that the selling dealer
should produce a declaration in the form required in r: 27(2)~
before being entitled to a deduction.
Member, Sales-tax Tribunal, Orissa v. M/s. S. Lal & Co.
(1961) 12 S.T.C. 25, referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeals Nos.
507-508 of 1963.
Appeal by special leave from the judgment
and order dated November 4, 1950, of the Orissa High Court
in Special Jurisdiction Cases Nos. 38 and 39 of 1958.
R. Ganapathy Iyer and R. N. Sachthey, for the appellant
(in both the appeals).
·
7 S.C.R.
SUPREME COURT REPORTS
817
B. Sen and S. N. Mukherjee, for the respondents (in both
1961
the appeals).
Staie
of on ...
April 21, 1964. The Judgment of the Court was delivered JI.A.Tu~'oclrnndCo.
by
SJKRI. J.-The respondent, hereinafter referred to as the
the dealer, filed a return for the quarter ending June 30, 1951.
under the OriGsa Sales Tax Act (Orissa Act XIV of 1947)
(hereinafter referred to as the Act). He claimed a deduction
of Rs. 2,40,000/- under s. 5(2)(a)(ii) in respect of the goods
sold to a registered dealer, named Mis. Lal & Co. Ltd., BA
1335. Similarly, for the quarter ending September 30. 1951,
he claimed a deduction of Rs. 15,677 JI/ 3.
By two assessment orders passed under s. 12(2) of the Act, the Sale;> Tax
Officer, Cuttack III circle, Jaipur, Orissa, determined the tax
payable allowing the deduction of Rs. 2,40.000 /-
and
Rs. 15,677/1/3, under s. 5(2)(a)(ii). The dealer filed appeals
to the Assistant Collector, Sales Tax, challenging the asses;;.
ment on grounds which are not relevant. The dealer later
filed revisions against the decision of the Assistant Collector.
While the revisions were pending, the legislature amended the
Orissa Sales Tax Act, in 1957, by Orissa Sales Tax <Amendment) Act (Orissa Act XX of 1957). The effect of this amendment was that revisions were treated as appeals to Sales Tax
Tribunal, and it enabled the Government to file croos-objections. The State of Orissa, in pursuance of this amendment,
filed memorandum of cross-objections challenging the deduction of Rs. 2,40,000/- and Rs. 15,677 JI /3, on the ground
that the dealer had not produced any declaration, as required
under r. 27(2) of the Orissa Sales Tax Rules, 1947, as evid.~nc
ed from the Check Sheet kept on record. The Tribunal upheld
this objection and directed that freiih assessments be made.
Certain other questions were raised before the Tribunal by
the dealer, but as nothing turns on them as far as these appeals
are concerned, they are not being mentioned. The Tribunal
stated a case to the High Court and one of the questions
~eferred. to was "~hether the asseiising officer was not wrong
m allowing deducl!on of Rs. 2,40,000/- for the quarter ending
on•30-6-51 and Rs. 15,6771113 for the quarter ending on
30-9-51. from the respective gross turnover of the applicant."
The High Court, following its earlier decision in Member,
Sales-tax Tribunal, Orissa v. Messrs S. Lal & Co. Limited(')
anrswered the question in the affirmative. The State of Orissa
having obtained special leave from this Court, these appeals
are now before us for disposal.
Mr.Ganapathy Iyer, on behalf of the State of Orissa, has
contended before us that it is clear that r. 27(2) was not complied with, and, therefore, the Sales Tax Officer was wrong
( 1) (1961) 12 S.T.C. 25.
Sil·ri, J.
818,
SUPREME COURT REPORTS
[1964]
~
in·. allowing the said deduction. The answer to the question
.fJIJIU
of °""" referred depends on the correct interpretation of s. 5(2)(a)(ii),
m ... ~~-' _, 0 . and r. 27(2). They read thus:-
Jr.A. ,~naO.
.8ilw1, J.
"s. 5(2)(a)(ii)-sales to a registered dealer of goods
specified in the purchasing dealer's certificate of
registration,. as being intended for resale by him
in Orissa and on sales to a registered dealer of con·
tainers or other materials for the packing of such
goods.
Provided that when such goods are used by the registered dealer for purposes other than those speeified
in his certificate of registration, the price of goods
so utilised shall be included in his taxable turnover."
"Rule 27(2). Claims for deduction of turnover under
sub-clause (ii) of clause (a) of sub-section (2) of
section 5A dealer who wishes to deduct from his gross turnover
on sales which have taken place in Ori8sa the
amount of a sale on the ground that he is entitled
to make such deduction under sub-clause (ii) of
clause (a) of sub-section (2) of section 5 of the Act,
shall produce a copy of the relevant cash receipt
or bill according as the sale is a cash sale or a sale
on credit in respect of such sale and a true
declaration in writing by the purchasing dealer or
by such responsible person as may be authorised
in writing in this behalf by such dealer that the
goods in question are specified in the purchasing
dealer's certificate of registration as being required for resale by him or in the execution of any
contract:
Provided that no dealer whose certificate of registration has not been renewed for the year during
which the purchase is made shall make such a
declaration and that the selling dealer shall not be
entitled to claim any deduction of sales to such a
dealer."
It ill plain from the terms of s. 5(2)(a)(ii) that a selling
dealer is entitled to a deduction in respect of sales to a registered dealer of goods, if the goods are specified in the purchasing dealer's certificate of registration as being intended for
re-sale by him in Orissa. No other condition is imposed by
the above r,ection. The proviso deals with consequences that
follow if the purchasing dealer uses them for purposes other
than those specified in his certificate of registration, and
directs that, in that event, the price of goods so utilised shall
I
-
.. '
7S.C.R.
SUPREME COURT REPORTS
819
be included in his turnQIVer. Therefore, there is nothing in
1964
the section i16eli that disentitles a selling dealer to a deduction, Stale of
Orri•sa
but if the contingency provided in the proviso occurs, then H..A Tu~ ndO
the price of goods is includc;d in the taxable turnover of the
· _
0
0
•
buying dealer. But Mr. Ganapathy Iyer says, be it so, but
Sikri, J.
the rule making authority is entitled to make rules for carrying
out the purposes of the Act, and r. 27(2) is designed to ensure
that a buying dealer's certificate of registration does, in fact,
mention that the goods are intended for resale by him, and for
that purpose it has chosen one exclusive method of proving
the fact before a Sales Tax Officer. He further urges that no
other method of proving that fact is permissible. Rule 27(2)
is mandatory and if there is breach of it the selling dealer is
not entitled to deduction. The learned counsel for the respondent, on the other hand, contends that r. 27(2) is directory.
He points out that the word 'shall' should be read as 'may', in
the context. He further says that supposing the selling dealer
brought the original certificate of registration of a buying
dealer and produced it before the Sales Tax Officer, according
to the appellant, this would not be enough, but this could
never have been intended. In our opinion, r. 27(2) must be
reconciled with the section and the rule can be reconciled by
treating it as directory. But the rule must be substantially
complied with in every case. It is for the Sales Tax Officer
to be satisfied that, in fact, the certificate of registration of
the buying dealer contains the requisite statement, and if he
has any doubts about it, the selling dealer must satisfy his
doubts. But if he is satisfied from other facts on the record,
it is not necessary that the selling dealer should produce a
declaration in the form required in r. 27(2), before being enti·
tied to a deduction.
We are, therefore, of the opinion that the High Court
came to a correct conclusion. The High Court is correct in
holding that the production of a declaration under r. 27(2)
is not always obligatory on the part of a selling dealer when
claiming the exemption. It is open to him to claim exemption
by adducing other evidence so as to bring the transaction
within the scope of s. 5(2)(a)(ii) of the Act In this case, the
Sales Tax Officer was satisfied by a mere statement of the
dealer and it has not been shown that in fact the registration
certificate of the buying dealer, Mis S. Lal & Co., did not
contain the statement that the goods were intended for resale
by him in Orissa.
The appeais accordingly fail and are dismissed with
costs. One set of hearing fee.
Appeat~ dismissed .
•