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
RGanapathy Iyer and R N Sachthey for the appellant in both the appeals
817 BSen and section N Mukherjee for the respondents in both the appeals
April 21 1964
The Judgment of the Court was delivered by SIKRI J
The respondent hereinafter referred to as the the dealer filed a return for the quarter ending June 30 1951 under the Orirsa Sales Tax Act Orissa Act XIV of 1947 hereinafter referred to as the Act
He claimed a deduction of Rs 240000 under section 52aii in respect of the goods sold to a registered dealer named Ms Lal  Co Ltd BA 1335
Similarly for the quarter ending September 30
1951 he claimed a deduction of Rs 1567713
By two assessment orders passed under section 122 of the Act the Sales Tax Officer Cuttack III circle Jaipur Orissa determined the tax payable allowing the deduction of Rs 240000 and Rs 15677l3 under section 52aii
The dealer filed appeals to the Assistant Collector Sales Tax challenging the assesment 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 cross objec tions
The State of Orissa in pursuance of this amendment filed memorandum of cross objections challenging the deduc tion of Rs 240000 and Rs 15677l3 on the ground that the dealer had not produced any declaration as required under r 272 of the Orissa Sales Tax Rules 1947 as evidenced from the Check Sheet kept on record
The Tribunal upheld this objection and directed that fresh 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 referred to was whether the assessing officer was not wrong in allowing deduction of Rs 240000 for the quarter ending on 30 6 51 and Rs 1567713 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 vs Messrs section Lal  Co Limited 1 answered 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 lyer on behalf of the State of Orissa has contended before us that it is clear that r 272 was not complied with and therefore the Sales Tax Officer was wrong 1 1961 12 STC 25 818 in allowing the said deduction
The answer to the question referred depends on the correct interpretation of section 52aii Co and r 272
They read thus section 52aii 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 containers 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 specified in his certificate of registration the price of goods so utilised shall be included in his taxable turnover Rule 272
Claims for deduction of turnover under sub clause ii of clause a of sub section 2 of section 5 A dealer who wishes to deduct from his gross turnover on sales which have taken place in Orissa 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 is plain from the terms of section 52aii 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 section
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 819 be included in his turnover
Therefore there is nothing in the section itself that disentitles a selling dealer to a deduction but if the contingency provided in the proviso occurs them the price of goods is included in the taxable turnover of the buying dealer
But Mr Ganapathy lyer says be it so but the rule making authority is entitled to make ruler for carrying out the purposes of the Act and r 272 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 272 is mandatory and if there is breach of it the selling dealer is not entitled to deduction
The learned counsel for the res pondent on the other hand contends that r 272 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 272 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 272 before being entitled 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 272 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 section 52aii 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 M  s section Lal  Co did not contain the statement that the goods were intended for resale by him in Orissa
The appeals accordingly fail and are dismissed with costs
One set of hearing fee
Appeals dismissed


Summary:
Assessment orders were passed by the Sales Tax Officer allowing the deductions of two amounts claimed by the respondent dealer under section 52aii of the Orissa Sales Tax Act in respect of goods sold to a registered dealer
The respondent dealer 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 272 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
Heldi There is nothing in section 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 taxable turnover of the buying dealer
iiThe production of a declaration under r 72 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 section 52aii
Rule 272 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 272
before being entitled to a deduction
Member Sales tax Tribunal Orissa vs Mls
section Lai  Co 1961 12 STC 25 referred to