S.T. Appeal No. 4 of 2010 Page 1 of 24 Reportable * IN THE HIGH COURT OF DELHI AT NEW DELHI + S.T. Appeal No. 4 of 2010 & CM No.11439 of 2010 Judgment Reserved On: 02nd August, 2010. % Judgment Pronounced On: 14th September, 2010. ALPINE AGENCIES PVT. LTD. . . . Appellant through : Mr. Rajesh Jain, Advocate VERSUS COMMISSIONER OF VALUE ADDED TAX & OTHERS . . .Respondent through: Mr. H.L. Taneja, Advocate CORAM :- HON’BLE MR. JUSTICE A.K. SIKRI HON’BLE MS. JUSTICE REVA KHETRAPAL 1. Whether Reporters of Local newspapers may be allowed to see the Judgment? 2. To be referred to the Reporter or not? 3. Whether the Judgment should be reported in the Digest? A.K. SIKRI, J. 1. This second appeal has been filed by the appellant (hereinafter referred to as „the assessee‟) under Section 45 of the Delhi Sales Act, 1975. The appellant feels aggrieved by the order dated 1st April, 2010 passed by the Appellate Tribunal, Value Added Tax, Delhi under Section 43 (6) of the Delhi Sales Act, 1975. Before we pin-point the substantial question of law which arises, it would be proper to traverse the facts under which the question of law has cropped up. S.T. Appeal No. 4 of 2010 Page 2 of 24 2. The assessee is a private limited company. It is trading in electric, electronic and refrigeration items. All these goods in which the appellant is trading were notified to be the first point items under Section 5 of the Delhi Sales Act (hereinafter referred to as „the Local Act‟). The implication thereof is that liability to pay the sales tax is of the first seller from whom the assessee was buying these goods, as the assessee was not the first seller of the goods. It was in the case of the assessee that it had been purchasing these goods from the registered dealers namely M/s Videocon International Ltd., M/s. Whirlpool India Ltd. and M/s. Expo Machinery Ltd., etc. 3. The assessment order in question, relating to the local Act is 1996-97. For this assessment year, the assessment orders which were framed by the Assessing officer were ex-parte and framed on 25th February, 2000. The assessment was made applying the best judgment assessment for want of requisite material given by the assessee who also did not participate in the proceedings and remained ex-parte. The assessment was done both under the local Act as well as Central Sales Tax Act (hereinafter would be referred to as „the Central Act‟) raising a demand of Rs. 3679144 and Rs. 90172 respectively, under the aforesaid Acts. This order reads as under: “The trader runs AC and Refrigeration work. The quarterly return were filed late, hence penalty of `1000 for the same is imposed on the trader. The penalty for the fourth quarterly return has already been imposed. The tax was also deposited late and interest thereon is charged. The trader has shown sale of `2,00,63,689 in the quarterly returns and in the absence of Account Books of the trader, I declare the total sale of the trader this year at `2,25,00,000 out of which tax at the rate of S.T. Appeal No. 4 of 2010 Page 3 of 24 12% in local is levied on `2,00,00,000 and interest is also levied on this due tax. On remaining amount, tax at the rate of 12% under Central Act is to be levied. The benefit of tax deposited by the trader is allowed to the trader.” 4. The assessee preferred an appeal against this order before the First Appellate Authority alongwith the stay application. In the said stay application, the First Appellate Authority passed the orders dated 29th March, 2000 directing the assessee to deposit entire amount of tax as a condition of hearing the appeal. In appeal, this order was modified by the Tribunal on 31st January, 2001 directing the assessee to deposit Rs. 10 lacs under the local Act and Rs. 19,000/- under the Central Act. Still not satisfied, the assessee challenged that order by filing Writ Petition No.7171 in this Court. This writ petition was decided on 17th January, 2002 whereby order of the Tribunal was further modified allowing the assessee to now deposit `1,00,000 under the Local and `50,000 Under the Central Act. 5. The appeal was ultimately heard by the First Appellate Authority (i.e. Additional commissioner) who vide orders dated 27th March, 2003 remanded the case back to the Assessing Authority for passing fresh orders after providing an opportunity to the assessee. 6. At this stage, we may state that the entire controversy relates to the payment of sales tax on the sales made by the assessee. As pointed out above, the items in which the assessee deals incurred sales tax at first point, thus, according to the assessee, the S.T. Appeal No. 4 of 2010 Page 4 of 24 registered dealers from whom it had purchased the goods had paid the sales tax. Therefore, it was not necessary for the assessee to charge the sales tax on those very items of goods when the assessee sold the same to the consumers. However, in order to claim exemption of sales tax liability, it was necessary for the assessee to produce the invoices vide which it had purchased the goods from the registered dealers reflecting sales tax having paid to those registered dealers. Since ex-parte assessment order was made on 25th February, 2000, naturally, the assessee had not produced those bills in the absence whereof tax liability was raised while framing the assessment order. The plea of the assessee in appeal filed by it and also in the proceedings arose out of interim orders passed by the First Appellate Authority and as noted above, was that since sales tax had already been paid at the point of first sale, there was no liability on the part of the assessee to pay this tax and the assessment of sales tax was without jurisdiction. 7. When the matter was remanded back to the Assessing Officer, the assessee again failed to produce these invoices. According to the assessee, it lost its books of accounts in September, 2001 for which FIR was lodged on 9th September, 2001 and, therefore, it was not in possession of the books of accounts or original invoices. Again the assessee, though, attended the proceedings before the Assessing Officer in the beginning when it was given repeated opportunities to produce the books of accounts, the assessee did not turn up on 10th January, 2005 which was the final S.T. Appeal No. 4 of 2010 Page 5 of 24 opportunity given for this purpose. In these circumstances, again an ex-parte assessment order was passed confirming the original assessment order dated 25th February, 2000. The assessee again went in appeal and also filed stay application. It was again directed to pay the entire amount before the appeal could be heard. This controversy again reached this Court when the assessee filed Writ Petition (C) 4568/2007 challenging the order of pre-deposit. The order dated 24th September, 2007 was passed in that writ petition directing the assessee to deposit a sum of ` 1 lac and directing the First Appellate Authority to decide the appeal on merits. 8. The appeal was heard once again on merits by the First Appellate Authority i.e. Additional Commissioner and was disposed of vide orders dated 29th May, 2009. The assessee was given part relief. However, as the assessee again failed to produce the original invoices or books of accounts, which were purportedly lost, it was ready to produce the photocopy of those bills which he allegedly collected from the dealers. The First Appellate Authority observed that it was for the assessee to submit proof to the satisfaction of the Assessing Officer that the sale made by it was not liable to be taxed. The first Appellate Authority also observed that as far as enhancement of sale was made by the Assessing Officer, no reasons in support thereof are given. The First Appellate Authority again remanded the case back to the Assessing Officer with the direction to assess the turnover on the basis of available records and pass speaking order for any enhancement of sale. S.T. Appeal No. 4 of 2010 Page 6 of 24 9. Since the first appellate Authority had observed in the impugned order that the assessee was not entitled to get the relief in the absence of original invoices and on the basis of photocopy of the invoices, the assessee took the same as an order adverse to it as it was not in a position to produce the original books of accounts or the original invoices which were purportedly lost and could clearly foresee the outcome of the fresh assessment orders had it gone to the Assessing Officer back on the basis of direction given by the First Appellate Authority. Therefore, the assessee decided to challenge this order by filing appeal before the Tribunal. Along with this appeal, as usual, stay application was also moved. This application was heard on 16th December, 2009 and the Tribunal dispensed with the condition of pre-deposit of tax. The Tribunal heard the appeal also on merits finally there and then and reserved the orders. The orders were pronounced on 31st March, 2010 dismissing the appeal. This is how the assessee has approached this Court by way of present appeal challenging the said order of the Tribunal. 10. Though, many questions of law are proposed, according to us controversy highlighted above gives rise to the following two questions of law: (i) Whether the inference drawn by the Tribunal that the appellant was in possession of the books of accounts and, therefore, there is no reason for them not to produce them before the Assessing Authority is not contrary to the facts of the case, especially when an FIR regarding the loss of books of accounts had been lodged on 9.9.2001 and the remanded assessment order in this matter was passed on 13.1.2005 (and not 25.2.2000)? S.T. Appeal No. 4 of 2010 Page 7 of 24 (ii) When the goods dealt in by the appellant were first point goods on which liability to tax is on first sale, then could the liability be fastened on the appellant when:- (a) they were not the first seller of the said goods, (b) in discharge of their onus in terms of notification dated 31.02.1988, they had produced photocopies of the purchase invoices before the Additional Commissioner and had also submitted the list of such purchases before the Tribunal, and (c) There is a recording of admission of the respondent in the order dated 18.2.2002 passed by this Court in CWP No.7173/2001 that appellant has paid all the taxes?” 11. It was highlighted by Mr. Jain, learned counsel appearing for the assessee that the goods in question dealt with by the assessee attracted sales tax on first sale and admittedly first sale was by the registered dealers to the assessee and, therefore, that sale could not be without charging the sales tax. Thus, it could clearly be inferred and implied that due sale tax was paid by the assessee. In such circumstances, there was no question of any liability to pay sales tax again when the sales were made by the assessee to the ultimate consumers Though, it was conceded that in order to avail this benefit, it was necessary for the assessee to produce the books of accounts and the purchase invoices showing sales tax charged by the dealers from the assessee at the time of making first sale to it, his grievance was that the authorities below failed to appreciate that when the books of accounts had been lost, the assessee had no alternative but to produce the photocopies of the purchase invoices which the assessee had collected from the dealers He submitted that loss of books of S.T. Appeal No. 4 of 2010 Page 8 of 24 accounts etc. took place in September, 2001 and FIR was lodged in that behalf as these books of accounts were available earlier, he had shown the same to the Additional Commissioner (the First Appellate Authority) when in the first round of appeal before the said authority, the assessee had pressed its application for stay. This contention of the assessee is noted by the said Authority in its order dated 3th August, 2005 in the following terms:- “Out of the total sales made for `1,76,30,139, sales worth `1,33,98,488 had been claimed as Tax paid sales. Since the tax had been paid at first point the same could not be subjected to tax again in the hands of the petitioner. The details of tax paid purchases worth `1,62,97,112 had been filed before the Ld. AA at the time of assessment as well as before the Hon’ble Appellate Tribunal, Sales Tax at the time of appeal and also the purchase vouchers were produced before the Hon’ble Sales Tax Appellate Tribunal at the time of hearing of appeal U/S 43(5). It amply proves that the appellant had the requisite purchase voucher/bills in respect of the tax paid purchases which were subsequently lost along with the books of accounts on 9.9.2001, however, copies of purchase bills are available.” 12. We may again clarify that this was the contention of the assessee before the said authority. 13. His further submission was that in order to get the benefit, there was no requirement of producing the original bills. The Assessing Officer had only to satisfy itself about the fact that tax had been paid which could be gathered from the fact that items in which the assessee was dealing were liable to tax on first sale whereas the sales made by the assessee to the consumers were second sale. Further, the assessee had S.T. Appeal No. 4 of 2010 Page 9 of 24 produced the photocopies of the bills duly verified by the registered dealers evidencing the payment of sales tax. 14. Mr. Jain referred to the following judgments in support of his plea that when the first seller of the goods is identifiable who alone is liable to tax, then subsequent tax is exempted from taxation: (1) B. Narasaiah & Co. Vs. State of Andhra Pradesh [2002 (127) STC 606 (AP)]; (2) Shanmuga Traders Etc. Vs. State of Tamil Nadu [1999 (114) STC 1 (SC); (3) State of Tamil Nadu Vs. V. Balu Chettiar [1996 (100) STC 120 (Mad.); (4) Dy. Commissioner Vs. Saivakumar & Co.[1980 (45) STC 436 (Mad.); (5) Govindan & Co. Vs. Raichael Chacko [1975 (35) STC 50 (SC) ; (6) State of Tamil Nadu Vs. Raman & Co. & Ors. [1994 (93) STC 185 (SC); and (7) State of Andhra Pradesh Vs. Tungbhadra Inds. Ltd. [1986 (62) STC 71 (AP). 15. He also relied upon the Notification dated 30.12.1988, which reads as under: “… the only condition imposed upon a dealer for claiming exemption is to produce bill(s)/cash memo(s) in support of purchase of such goods in Delhi. Photocopies of such bills are available with the appellant which are produced before this Court. Such purchases stand confirmed from the sellers either by stamping the invoices or supported with their letters. These have been recorded in the books of account and payments too have been made by cheques.” S.T. Appeal No. 4 of 2010 Page 10 of 24 16. He further tried to distinguish the judgment of the Supreme Court in the case of Indian Agencies (Regd.), Bangalore Vs. Additional Commissioner of Commercial Taxes, Bangalore [139 STC 329] relied upon by the Tribunal. In support of his submission that when the original copies of the cash memos/books of accounts had been lost, non-production thereof would not attract denial of the benefit when the payment of taxes at first point or purchases from registered dealer had not been disputed and referred to the following judgment in support of this plea: (a) CCE, Ludhiana Vs. Ralson India Ltd.[2006 (202) ELT 759 (P & H); (b) CCE Vs. Stelko Strips Ltd. [2010 (255) ELT 397 (P&H)]; and (c) Kothari General Foods Corpn. Ltd. Vs. CCE, Bangalore [2002 (144) ELT 338 (T)]. 17. Mr. Taneja, learned counsel appearing for the respondent/Revenue relied upon the reasons given by the Tribunal in its detailed judgment and the case law referred by the Tribunal in the impugned order was extensively read by Mr. Taneja in support of his plea that in a case like this, no indulgence could be given to the assessee who had been negligent throughout and had ultimately failed to produce the requisite evidence in support of its plea that sales tax had been paid. He placed strong reliance upon the judgment of the S.T. Appeal No. 4 of 2010 Page 11 of 24 Supreme Court in the Case of Indian Agencies (Regd.), Bangalore (supra). 18. We have considered the rival submissions. We find from the order of the Tribunal that it has drawn its conclusion, based upon the judgment of the Supreme Court in the case of Indian Agencies (Regd.), Bangalore (supra). The attempt made by the learned counsel for the appellant is to distinguish that judgment. Therefore, it would be appropriate to start discussion from that judgment and to find out as to what that case actually decides. 19. That case arose out of Central Sales Tax Act, 1956. Section 8 of the said Act provides for rates of tax on sales in the course of inter-state trade and commerce. Sub-section (4) whereof lays down the circumstances under which the sales tax to any sale in the course of inter-state trade and commerce would not be leviable. Clause (a) thereof provides that the dealer selling the goods shall not be liable to pay this tax if he furnishes to the prescribed authority in the prescribed manner, a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority. These prescribed forms are known as „Form-C‟. The appellant/dealer in the said case had claimed exemption from payment of tax at the prescribed rate, but wanted the same at concessional rate. This was, however, disallowed by the Additional Commissioner of Commerce Taxes, S.T. Appeal No. 4 of 2010 Page 12 of 24 as the appellant had not produced original „Form-C‟ and instead wanted the benefit of concessional rate of tax on the basis of „Form-C‟ marked as duplicate. He had pleaded that since „Form-C‟ marked as original had been lost, he was producing duplicate „Form-C‟, which contention was not accepted by the Assessing Officer. The appeal was preferred before the Joint Commissioner of Commerce Taxes (Appeals), Bangalore, which was allowed holding that the Assessing Authorities should not have rejected the duplicate of the „C-Forms‟ and the indemnity bonds filed by the appellant and should not have denied the benefit of concessional rate of tax on such turnover covered by duplicate „C- Forms‟. The Revenue preferred appeal thereagainst before the Additional Commissioner Commercial Taxes, who allowed the appeal by setting aside the order of the Joint Commissioner of Commerce Taxes (Appeals) to the extent that it allowed concessional rate of tax on the inter-state sales effected by the controller on the basis of the „C-Forms‟ marked as duplicate and the indemnity bonds furnished by the dealer for the loss of the „C- Forms‟ marked as original. The appellant/assessee approached the High Court of Karnataka by filing the Sales Tax Appeal No.75 of 1998, which was dismissed. In these circumstances, the appellant knocked the door of the Supreme Court. It was the contention of the appellant before the Supreme Court that as „original‟ C-Form had been lost, it was permissible for the appellant to produce „duplicate‟ C-Forms, which was also primary evidence of the said document by virtue of the principles enshrined in Section 62 of the Evidence Act, 1872. It was also S.T. Appeal No. 4 of 2010 Page 13 of 24 argued that in any event, filing of the „original‟ C-Form was not mandatory, but directory and filing „duplicate‟ C-Form was sufficient compliance for levy of lower rate of tax under Rule 12(1) of Central Rules read with Rule 6(b)(ii) of the State Rules and Section 8 of the Central Act. It was also argued that when the original document is lost, duplicate, in any case, would be the best secondary evidence admissible under Section 65/66 of the Evidence Act. Many other submissions were made, which are not relevant for our purposes. 20. The Supreme Court referred to the provision of Section 8 of the Central Act as well as Rule 12 of the Central Sales Tax (Registration and Turnover) Rule, 1957 made by the Central Government in exercise of its power conferred under Section 13 of the Central Act. Proviso (2) and (3) to this Rule deal with the situation where original Forms are lost and reads as under: “Provided also… (2) Where a blank or duly completed form of declaration is lost, whether such loss occurs while it is in the custody of the purchasing dealer or in transit to the selling dealer, the purchasing dealer shall furnish in respect of every such form so lost an indemnity bond in Form G to the notified authority from whom the said form was obtained, for such sum as the said authority may having regard to the circumstances of the case, fix. Such indemnity bond shall be furnished by the selling dealer to the notified authority of his State if a duly completed form of declaration received by him is los, whether such loss occurs while it is in his custody or while it is in transit to the notified authority of his State. Provided that where more than one form of declaration is lost, the purchasing dealer or the selling dealer, as the case may be, may furnish one such indemnity bond to cover all the forms of declaration so lost. (3) Where a declaration form furnished by the dealer purchasing the goods or the certificate furnished by the Government has been lost, the dealer selling the goods, may demand from the dealer who purchased the goods or, as the case may be, from the Government, which purchased the goods, a duplicate of such form or certificate, and the same S.T. Appeal No. 4 of 2010 Page 14 of 24 shall be furnished with the following declaration recorded in red ink and signed by the dealer or authorized officer or the Government, as the case may be, on all the there portions of such form or certificate.” 21. The Court also took note of Rule 6 of Central Sales Tax (Karnataka) Rules, 1957. Clause (ii) of sub-Rule (ii) thereof is relevant and reads as under: “(ii) A registered dealer who claims to have made a sale to another registered dealer or to Government shall, in respect of such claim, attach to his return to be filled in Form IV the portion marked „original‟ of the declaration or the certificate in Form D, received by him from the purchasing dealer or Government, as the case may. The assessing authority may, in his discretion, also direct the selling dealer to produce for inspection the portion marked „duplicate‟ or the declaration or certificate in Form D, as the case may be.” 22. On the basis of the aforesaid provisions, the Apex Court came to the conclusion that merely by producing „duplicate‟ C-Form instead of „original‟ forms, the appellant had not complied with the provision of Section 8 (4) to enable it to claim the benefit of concessional rates. It observed: “12… … … In our view, the Rule has to be strictly construed. Admittedly, the appellant has not complied with the said provisions and, therefore, he is not entitled to the concessional rate of tax under Section 8 of the Central Sales Tax. Section 8(4) specifically provides that the provisions of sub-section (1) shall not apply to any sale in the course of inter-state trade or commerce unless the dealer selling the goods furnishes to