Case: The State Of Madras Vs. M/S. Radio And Electricals Ltd. Etc

is open to challenge in an appropriate proceeding before the High Court and even before this Court. Correctness or propriety of satisfaction of the notified authority in issuing the certificate in Form B that the goods are likely to be required for the purpose of the business would not however be again open to challenge before another taxing authority in proceeding for assessment of tax. If therefore goods are specified in the certificate of registration in Form B, it is not open, when a claim is made in respect of the purchase of those goods for the application of concessional rate of tax, to the Sales Tax Officer to deny to the selling dealer of those goods the benefit on the ground that the goods specified cannot be used by the purchasing dealer for the purpose of his business. It is open to the Tax Officer to ascertain whether the goods in respect of which a claim for concessional rate is made are specified in the certificate of registration, but if the class of goods is included in the certificate of registration in Form B he cannot say that the class of goods should not have been specified. 12. The Act seeks to impose tax on transactions, amongst others, of sale and purchase in inter-State trade and commerce. Though the tax under the Act is levied primarily from the seller, the burden is ultimately passed on to the consumers of goods because it enters into the price paid by them. Parliament with a view to reduce the burden on the consumer arising out of multiple taxation has provided in respect of sales of declared goods which have special importance in inter-State trade or commerce, and other classes of goods which are purchased at an intermediate stage in the stream of trade or commerce prescribed low rates of taxation, when transactions take place in the course of inter-State trade or commerce. Indisputably the seller can have in these transactions no control over the purchaser. He has to rely upon the representations made to him. He must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificate but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules and the representation is recorded in the certificate in Form C the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. If the purchasing dealer misapplies the goods he incurs a penalty under S. 10. That penalty is incurred by the purchasing dealer and cannot be visited upon the selling dealer. The selling clearer is under the Act authorised to collect from the purchasing dealer the amount payable by him as tax on the transaction, and he can collect that amount only in the light of the declaration mentioned in the certificate in Form C He cannot hold an enquiry whether the notified authority who issued the certificate of registration acted properly, or ascertain whether the purchaser, notwithstanding the declaration, was likely to use the goods for a purpose other than the purpose mentioned in the certificate in Form C. There is nothing in the Act or the Rules that for infraction of the law committed by the purchasing dealer by misapplication of the good after he purchased them, or for any fraudulent misrepresentation by him penalty may be visited upon the selling dealer. 13. Counsel for the appellant contended that the view expressed by the High Court in the judgments under appeal was any case erroneous, because they held that a C Form certificate produced by the selling dealer is conclusive of the right to the concessional rate of tax, and that no enquiry whatever may be made by the assessing authority. He invited our attention to the following passage from the judgment which is under appeal in Civil Appeal No. 335 of 1165 :"We are of the opinion that whether or not the goods were in feet used for the stated purposes or even usable for such a purpose, so long as the purchasing dealer has furnished the required declaration to the selling dealer, the selling dealer becomes under law entitled to the benefit of Section 8 (1) of the Act. It is no function of the selling dealer to enter into a judicial examination of whether the goods are in fact used or usable for the manufacture or processing of goods for sale by the purchasing dealer. The purchasing dealer declares that they are required for such a purpose and are further so specified in his form of registration granted by the sales tax authorities. It is not the function of the selling dealer to enquire whether the requirement of the purchasing dealer is bona fide or even is or is not within the certificate of registration of that dealer." It is implicit in the context in which these observations occur that if the purchasing dealer holds a valid certificate specifying the goods which are to be purchased, and furnishes the required declaration to the selling dealer, the selling dealer becomes on production of the certificate entitled to the benefit of S. 8 (1). It is of course open to the sales tax authority to satisfy himself that the goods which are purchased by the purchasing dealer under certificate in Form C are specified in the purchasing dealers certificate in Form B. Observation of the High Court that the selling dealer may not enquire whether the requirement is not within the certificate of registration of the purchasing dealer is not accurate. But whether the goods specified in the registration certificate in Form B can be used for the purpose is not for the selling dealer to determine. That is a matter which has already been determined by the notified authority issuing the certificate of registration.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]It is implicit in the context in which these observations occur that if the purchasing dealer holds a valid certificate specifying the goods which are to be purchased, and furnishes the required declaration to the selling dealer, the selling dealer becomes on production of the certificate entitled to the benefit of S. 8 (1). It is of course open to the sales tax authority to satisfy himself that the goods which are purchased by the purchasing dealer under certificate in Form C are specified in the purchasing dealers certificate in Form B. Observation of the High Court that the selling dealer may not enquire whether the requirement is not within the certificate of registration of the purchasing dealer is not accurate. But whether the goods specified in the registration certificate in Form B can be used for the purpose is not for the selling dealer to determine. That is a matter which has already been determined by the notified authority issuing the certificate of registration9. The scheme of the Rules read with the Act is that the purchasing dealer as well as the selling dealer must register themselves under the Central Sales Tax Act. If declared goods are specified in the certificate of registration of the purchasing dealer and if it be certified that the goods are intended for resale by him, the sale is subject to concessional rate of tax under Section 8 (1). In respect of sales of other classes of goods specified in the certificate of registration of the purchasing dealer, if the goods are purchased either for resale by him, or for use in manufacture of goods for sale, or for use in the execution of contracts, the concessional rate of tax is available, provided the selling dealer obtains from the purchasing dealer the declaration in the prescribed form only filled in and signed by the latter containing the particulars that the goods are ordered, purchased or supplied under a certain specific order, bill or cash memo or chalan, for all or any of the purposes mentioned and that the goods are covered by the registration certificate of the purchaser described therein and issued under the Act. If the certificate is defective in that it does not set out all the details, or that it contains false particulars about the order, bill, cash memo or chalan, or about the Number and date of the registration certificate and specifications of goods covered by the certificate of the purchasing dealer, the transaction will not be admitted to concessional ratesBut that contention is not borne out by the Act and the Rules. Goods may be sold to a purchasing dealer under a single order, bill, cash memo or chalan, one part to be used for resale, another to be used in the execution of contracts, and the rest in manufacture of goods for sale, but it is not enacted that separate certificates should be issued each relating to the quantity intended to be used for a specified purpose. A purchasing dealer may again be carrying on business as a manufacturer, as a building, installation or repair contractor, and as a dealer in goods and if he purchasers goods specified in his certificate, but without making up his mind about the precise purpose for which the goods will be used, provided it is one of the purposes, he will still be complying with the statutory requirements if he declared in Form C that the goods are purchased for more than one purpose. The Act and the Rules do not impose an obligation upon the purchasing dealer to declare that goods purchased by him are intended to be used for one purpose only, even though under his certificate of registration he is entitled to purchase goods of the classes mentioned in S. 8 (3) (b) for more purposes than one. When the purchasing dealer furnishes a certificate in Form C without striking out any of the four alternatives, it is a representation that the goods purchased are intended to be used for all or any of the purposes, and the certificate complies with the requirements of the Act and the Rules. The Sales Tax authority is, of course, competent to scrutinise the certificate to find out whether the certificate is genuine. He may also, in appropriate cases, when he has reasonable grounds to believe that the goods purchased are not covered by the registration certificate of the purchasing dealer, make an enquiry about the contents of the certificate of registration of the purchasing dealer. But it is not for the Tax Officer to hold an enquiry, whether the goods specified in the certificate of registration of the purchaser can be used by him for any of the purposes mentioned by him in Form C, or that the goods purchased have in fact not been used for the purpose declared in the certificate11. The authority issuing the certificate under R. 5 (1), as expressly stated in the rule, has, before issuing a registration certificate, to be satisfied after making such enquiry as it thinks necessary that the particulars contained in the application are correct and complete. The enquiry would obviously be made in the light of the nature of the business and goods which are likely to be needed either for resale, or for use in the manufacture of goods for sale, or for use in the execution of contracts. Satisfaction which is contemplated by R. 5 is objective, and may be arrived at upon a quasi judicial enquiry. This Court has in several cases had occasion to consider the legality of orders of the notified authority refusing to grant certificates of registration in Form Bin respect of certain classes of goods which it was claimed by the taxpayer were necessary for the purpose of his business and were, therefore, requested to be specified in the certificate of registration: e.g., Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar,6 STC 259: (AIR 1965 SC 891  ), and J. K. Cotton Spinning and Weaving Co. Ltd. v. Sales Tax Officer, Kanpur, 196516 STC 563  : (AIR 1965 SC 1310  ). On the plain words used in S. 7 and the Rules, It is contemplated that the certificate of registration may only be issued after an objective satisfaction by the notified authority that the specified goods are likely to be needed for the purpose of the business of the registered dealer, and that satisfaction is open to challenge in an appropriate proceeding before the High Court and even before this Court. Correctness or propriety of satisfaction of the notified authority in issuing the certificate in Form B that the goods are likely to be required for the purpose of the business would not however be again open to challenge before another taxing authority in proceeding for assessment of tax. If therefore goods are specified in the certificate of registration in Form B, it is not open, when a claim is made in respect of the purchase of those goods for the application of concessional rate of tax, to the Sales Tax Officer to deny to the selling dealer of those goods the benefit on the ground that the goods specified cannot be used by the purchasing dealer for the purpose of his business. It is open to the Tax Officer to ascertain whether the goods in respect of which a claim for concessional rate is made are specified in the certificate of registration, but if the class of goods is included in the certificate of registration in Form B he cannot say that the class of goods should not have been specified12. The Act seeks to impose tax on transactions, amongst others, of sale and purchase ine trade and commerce. Though the tax under the Act is levied primarily from the seller, the burden is ultimately passed on to the consumers of goods because it enters into the price paid by them. Parliament with a view to reduce the burden on the consumer arising out of multiple taxation has provided in respect of sales of declared goods which have special importance ine trade or commerce, and other classes of goods which are purchased at an intermediate stage in the stream of trade or commerce prescribed low rates of taxation, when transactions take place in the course ofe trade or commerce. Indisputably the seller can have in these transactions no control over the purchaser. He has to rely upon the representations made to him. He must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificate but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules and the representation is recorded in the certificate in Form C the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. If the purchasing dealer misapplies the goods he incurs a penalty under S. 10. That penalty is incurred by the purchasing dealer and cannot be visited upon the selling dealer. The selling clearer is under the Act authorised to collect from the purchasing dealer the amount payable by him as tax on the transaction, and he can collect that amount only in the light of the declaration mentioned in the certificate in Form C He cannot hold an enquiry whether the notified authority who issued the certificate of registration acted properly, or ascertain whether the purchaser, notwithstanding the declaration, was likely to use the goods for a purpose other than the purpose mentioned in the certificate in Form C. There is nothing in the Act or the Rules that for infraction of the law committed by the purchasing dealer by misapplication of the good after he purchased them, or for any fraudulent misrepresentation by him penalty may be visited upon the selling dealer.