DLF Industries Limited vs State of Haryana and Another

N.K. Agrawal, J.—These are two petitions (Civil Writ Petition Nos. 3542 and 7379 of 1997) Under Articles 226 and 227 of the Constitution, both by DLF Industries Limited, challenging the vires of certain provisions of the Haryana General Sales Tax Act, 1973 (for short, "the Act") and for quashing the assessment orders relating to 1990-91 and 1992-93 and also consequential demand notices. The vires and constitutionality of the proviso to Section 6(1), proviso to Section 18 of the Act and validity of Rule 24(i) and Rule 39A(11) of the Haryana General Sales Tax Rules, 1975 (for short, "the Rules") are under challenge.

Assessment was made by the Assessing Authority for the year 1990-91 on January 11, 1994 and for the year 1992-93 on January 28, 1997. The petitioner is a public limited company incorporated under the Companies Act, 1956. DLF Universal Limited is the holding company of the petitioner-company. The said holding company was engaged in the work of colonization in the State of Haryana and carried out works contracts. Major part of the work was done by the holding company by entering into contracts with the petitioner-company. The holding company thus became the contractee and the petitioner-company became the contractor. The petitioner-company, in turn, executed some work itself and some work was got done through the sub-contractor. Material used in the work was arranged by the sub-contractor. The petitioner-company did some work for the parties other than its holding company also. The petitioner-company had three divisions, namely, Energy Systems Division, Electrical Division and the Construction Division. The petitioner-company maintained its headquarters at Gurgaon (Haryana) and was a registered dealer under the Act as also under the Central Sales Tax Act, 1956. The company filed quarterly returns for both the years and deposited tax due as per the returns. The Assessing Authority made certain additions at the time of assessment.

The petitioner has challenged certain provisions of the Act and the Rules on the ground that, though the Supreme Court in Builders Association of India v. Union of India [1989] 73 STC 370, upheld the Constitution (Forty-Sixth Amendment) Act, 1982, but did not examine the validity of the provisions of various State Acts and Rules.

The case of the petitioner is that it executed works contract in connection with the construction activity and part of the construction work was done by the sub-contractor. Material used in the work was arranged by the sub-contractor himself who executed part of the works contract as an independent dealer under the Act and was liable to pay sales tax. u/s 25-B of the Act, a contractee was under obligation to deduct sales tax at the rate of 2 per cent of the amount paid, credited or adjusted for execution of a works contract involving transfer of property in the goods if the total payment exceeded Rs. 1,00,000 in an assessment year. The amount so deducted was to be deposited in the Government treasury. The petitioner deducted a sum of Rs. 5,70,131 in the year 1992-93 towards tax from its sub-contractors and deposited the money in the Government treasury. The assessing authority, while framing assessment for 1992-93, included, in the gross turnover of the petitioner-company, the value of the goods used by the sub-contractors. Liability to pay tax on the materials used by the subcontractors was on them and not on the petitioner. Tax was, therefore, leviable on sale or deemed sale made by the sub-contractors. Property in the goods used by the sub-contractors passed on directly from the sub-contractor to the contractee and not to the contractor, namely, petitioner-company, who had given the sub-contract.

Shri M.L. Sarin, learned Senior Counsel for the petitioner, has argued that the value of goods used by the sub-contractor was wrongly added to the taxable turnover of the petitioner and it amounted to double taxation inasmuch as the same goods would suffer sales tax twice, once in the hands of the sub-contractor and again in the hands of the contractor, i.e., the petitioner. Property in goods used by the sub-contractor passed on directly from the sub-contractor to the principal, i.e., contractee, and there was no sale by contractor (petitioner) to contractee (holding company) in a works contract. There was only one sale, whether the work was done by a contractor himself or through a sub-contractor. Liability to pay tax on the sale would arise at one stage when the sale took place. Sale of property in goods consumed in a works contract would take place at the time when the goods are consumed in the works contract. Tax would, therefore, be payable by the person consuming goods in the works contract. As per Mr. Sarin, if a sub-contractor consumed material, he should be held liable to pay tax.

The petitioner''s second challenge is against the levy of tax on the purchase of bricks. The petitioner had purchased bricks and used the same in the execution of works contract. Sales tax on bricks was leviable under the Act at the stage of first sale in the hands of the manufacturer or in the hands of the importer making first sale in the State of Haryana. The manufacturer has to issue a certificate in form S.T. 14 to the buyer declaring that tax had been paid on the goods. The brick-kiln owners were given option to pay tax in lumpsum u/s 26 of the Act. Such owners are to sell their bricks as tax-paid goods. The petitioner-company purchased bricks from such brick-kiln owners who had opted to pay sales tax in lumpsum. Rule 39A(11) of the Rules, inserted with effect from October 1, 1992, laid down that the brick-kiln owners, who opted to pay lumpsum tax, were disentitled to issue certificates in form S.T. 14. The petitioner was assessed on the value of bricks also though those were tax-paid goods. It amounted to double taxation. The petitioner was declared by the Assessing Authority as not entitled to any rebate because declaration in form S.T. 14 was not filed as proof of payment of the tax. The petitioner filed form S.T. 14 for the period April 1, 1992 to September 30, 1992 but the claim was not allowed. Charging of tax on the tax-paid goods was contrary to the provisions of the Act, besides being in the nature of double taxation.

Shri M.L. Sarin, learned Senior Counsel for the petitioner, has, while challenging the validity of the relevant Rules, contended that Rule 24 of the Sales Tax Rules related to the rebate on tax-paid goods in case declaration in form S.T. 14 was filed as proof of payment of tax. No form S.T. 14 could be filed by the petitioner because of the prohibition contained in Rule 39A(11) of the Rules. The Assessing Authority wrongly insisted on furnishing of form S.T. 14 in respect of the bricks purchased after October 1, 1992 on which tax was leviable at the first stage. The petitioner furnished complete details of the purchases of the bricks. Liability to pay tax on the bricks was on the manufacturers and do not on the petitioner. The Assessing Authority made additions to the taxable turnover of the petitioner. Shri Sarin has argued that a buyer of bricks cannot be denied form S.T. 14 if the brick-kiln owner opted to pay tax in lumpsum. Rule 24-A permitted adjustment of tax in respect of tax-paid raw material.

The petitioner had also purchased bricks from unregistered dealers. The petitioner was not the first seller inside the State of Haryana but a second seller and was, therefore, not liable to pay tax. If purchases were made from an unregistered dealer, declarations or certificates in the prescribed forms could not be furnished. There was no liability to pay tax on the purchase of bricks, amounting to Rs. 20,75,985 in the year 1990-91 but the Assessing Authority added this amount to the taxable turnover of the petitioner on the ground that such purchases were made from unregistered suppliers and declaration forms in S.T. 14 were not furnished by the petitioner in respect of such purchases. Clause (i) of Rule 24 of the Rules required that a dealer may deduct from his gross turnover the purchase value or the sale value of the goods if those goods had already been subjected to tax at the first stage of sale u/s 17 or Section 18 of the Act. The condition which is required to be fulfilled by a dealer claiming such deduction was that he would append to his return a copy of the certificate in form S.T. 14, duly filled in and signed by the selling registered dealer or a carbon copy of the cash memo or sale bill with a declaration as prescribed. The challenge by the petitioner against the addition made by the assessing authority is that tax was payable not by the petitioner on such goods but by the suppliers, whether a registered or an unregistered dealer under the Act. Bricks are one of the items notified u/s 18 of the Act and tax was payable at the stage of first sale. Bricks have been shown at Serial No. 3 in the list given in the notification dated December 30, 1987 issued u/s 18 of the Act. No declaration is prescribed if the purchase was made from an unregistered dealer.

The petitioner has also challenged the validity of the proviso to Section 18 of the Act on the ground that its provisions converted a successive seller into first dealer if the prescribed declaration was not furnished. This provision is said to be contrary to the spirit of the charging and the main Section. Shri Sarin has argued on behalf of the petitioner that the provisions contained in Section 18 specifically declared that tax would be levied at the first stage of sale on such goods in respect of which Government issued a notification. But, at the same time, under the proviso to Section 18, tax at the subsequent stage of sale was also levied if the dealer, effecting the sale at such subsequent sale, did not furnish to the Assessing Authority, in the prescribed form and manner, a certificate duly filled in and signed by the registered dealer from whom the goods were purchased. Shri Sarin has argued that, once the main provisions of Section 18 conferred a benefit on the successive seller, that could not be withdrawn under the proviso. Moreover, Sub-Rule (11) of Rule 39A of the Sales Tax Rules contained a prohibition that a brick-kiln owner shall not be entitled to issue certificates in form S.T. 14. This prohibition was contrary to the requirement of law, whereby a successive seller was made entitled to claim the benefit of exemption from the payment of tax on the subsequent sale.

The first challenge by the petitioner is against the validity of constitutionality of the proviso to Section 6(1) of the Act. The relevant proviso, which is under challenge, and Sub-section (1) of Section 6 of the Act read as under :

"6. Incidence of taxation.-- (1) Subject to other provisions of this Act, every dealer whose gross turnover during the year immediately preceding the 27th day of May, 1971, exceeded the taxable quantum, shall from the 27th day of May, 1971 and every other dealer shall, on the expiry of thirty days after the date on which his gross turnover first exceeds the taxable quantum, be liable to pay tax under this Act on all sale or purchase of goods by him in the State at the stage hereinafter provided,--

(a) on declared goods at the stage specified u/s 17 ;

(b) on goods notified u/s 18 at the stage of first sale as specified under that section ;

(c) on all other goods at the stage of,--

(i) last sale when the goods are sold to any person other than a registered dealer who furnishes declaration as specified u/s 27 or as notified u/s 13 or as prescribed u/s 13B of this Act ;

(ii) last purchase in all other cases except when the purchase is made on payment of tax :

Provided that this sub-section shall not apply to a dealer who deals exclusively in goods specified in Schedule B or who executes a sub-contract with a contractor who is liable to pay tax in respect of works contract of which the sub-contract is a part : ",

It may be noticed that Section 6(1) is a charging section and makes every dealer liable to pay tax if his gross turnover during a year exceeded the taxable limit. Under the proviso to Sub-section (1), a dealer who executed a sub-contract with a contractor has been exempted from the liability of tax if the contractor was liable to pay tax in respect of works contract of which the sub-contract was a part. The case of the petitioner is that a sub-contractor cannot be exempted from the liability of tax under the proviso inasmuch as it runs counter to the main provisions of Sub-section (1) of Section 6 of the Act.

Clause (ba) and Clause (bb) of Section 2 of the Act define the words "contractor" and "contractee" as under :

"(ba) ''Contractor'' means any person who executes either himself or through a sub-contractor a works contract ;

(bb) ''Contractee'', means any person for whom or for whose benefit a works contract is executed ;".

Clause (pa) of Section 2, defines "works contract" as under :

"(pa) ''works contract'' means any agreement for executing for cash, deferred payment or other valuable consideration,--

(i) the construction, fitting, improvement or repair of any building, road, wall, bridge, embankment, dam or other immovable property ; or

(ii) the assembling, fabrication, installation, repair, fitting out, altering, ornamenting, blending, finishing, improving, processing, treating or adapting any movable property, whether attached to any immovable property or not ; and includes a sub-contract for executing the whole or any part of such work".

The definition of the word "contractor" makes it amply clear that a person who executes a works contract through a sub-contractor is also included in the definition. A contractee is a person for whose benefit a works contract is executed. In the case of the petitioner before us, the holding company, namely, DLF Universal Limited, is the contractee and the petitioner-company is the contractor. Any sub-contract undertaken by a subcontractor would be a part of the works contract and the work done by a contractor, either himself or through a sub-contractor, would be the works contract done by the contractor.

The proviso to Sub-section (1) of Section 6 of the Act excludes such a dealer who executes a sub-contract with a contractor if the contractor was liable to pay tax in respect of the works contract of which the sub-contract was a part. The challenge to the validity and the constitutionality of the proviso appears to have no merit or substance inasmuch as a sub-contractor has been rightly excluded from the liability of tax. The definition of the word "contractor" in Section 2(ba) leaves no room for any doubt that, if a person executes a works contract through a sub-contractor, he would even then be treated to be a contractor. Thus, from the definition of "contractor", the intention of the Legislature becomes clear. In that light, exclusion of a sub-contractor from the liability of tax under proviso to Section 6(1) of the Act cannot be faulted.

Where a sub-contract is given by a contractor executing a works contract, there is no privity of contract between the contractee and the subcontractor. Part of the contract may be given for the purpose of execution to a sub-contractor but that would not absolve the contractor of his liability to pay tax. A sub-contract is a part of the works contract and is not an independent contract by itself. Therefore, a sub-contractor cannot be said to be liable to the contractee inasmuch as he has undertaken the execution of part of the works contract not from the contractee but from the contractor. In such a situation, the sub-contractor cannot be assessed on the value of goods used in the works done by him. Clause (ba) of Section 2 of the Act included within its ambit a sub-contractor engaged for executing the whole or part thereof. A sub-contractor is, therefore not required to pay tax as an independent dealer. The Assessing Authority included the turnover of the work done by the sub-contractor in the turnover of the petitioner-company. The first proviso to Section 6(1) of the Act excludes a dealer who executes a sub-contract inasmuch as sub-contract is a part of the works contract.

Shri Parmod Goyal, learned Deputy Advocate-General, Haryana, has argued that the petitioner-company was not required to deduct tax from sub-contractor u/s 25-B of the Act as the contractee (DLF Universal Limited) had deducted tax at the rate of 2 per cent of the total value of the contract. Value of the sub-contract was rightly added to the turnover of the petitioner in the light of the definition of the "works contract" as given in Clause (pa) of Section 2 of the Act. Proviso to Section 6(1) specifically and unequivocally excluded a sub-contract from the tax liability. Shri Goyal has contended that the said proviso was introduced with a view to avoiding double taxation only. It is not correct to say that property in goods passed on directly from the sub-contractor to the principal contractee. The sub-contractor was only executing the works contract on behalf of the contractor who was liable for all the activities of the subcontractor.

From the scheme of things as contained in the definitions of the words "contractor", "contractee" and "works contract", as given in Section 2 of the Act, a sub-contractor cannot be said to be working independently. He only worked on behalf of the contractor. There is only one sale where work is done by the contractor himself or through a sub-contractor and, therefore, contractor is to pay tax on the whole works contract. Section 25-B of the Act required a contractee to deduct tax from the amount paid by him to the contractor. The petitioner was not a contractee but a contractor and, therefore, Section 25-B was not attracted in his case and did not require him to deduct tax from the sub-contractor. The petitioner cannot seek adjustment of the amount of tax deducted by him from the sub-contractor in so far as petitioner''s liability of tax was concerned. A sub-contractor may be an independent dealer but he was not liable to pay tax in the light of the proviso to Section 6(1) of the Act.

The provisions contained in the proviso to Section 6(1) of the Act are, therefore, not invalid or unconstitutional. The intention of the proviso is to avoid double taxation. Sales tax is leviable only once on the works contract whether the work is done or executed by the contractor himself or through a sub-contractor. A sub-contractor does the work for and on behalf of the main contractor. Therefore, tax is payable at one stage only and at the hands of the contractor. No tax was actually deductible in law from the payments made to a sub-contractor. The petitioner may seek refund of the amount paid to the Government by way of tax deducted at source from the sub-contractor. Provisions of the Constitution (Forty-Sixth Amendment) Act, 1982, have already been upheld by the Supreme Court in Builders Association of India''s case [1989] 73 STC 370. The proviso to Section 6(1) of the Act is not found to be contrary to the law laid down by the Supreme Court in the aforesaid case or to any other provision of the Constitution.

The second challenge in the present petition is against the levy of tax on the bricks purchased by the petitioner.

Section 18 of the Act relates to the levy of tax at the first stage of sale and it reads as under :

"18. Tax at first stage of sale.--The State Government may, by notification, direct that in respect of such goods, other than the goods specified in Schedules C and D, and with effect from such date, as may be specified in the notification, the tax u/s 15 shall be levied at the first stage of sale thereof, and on the issue of such notification the tax on such goods shall be levied accordingly :

Provided that no sale of such goods at a subsequent stage shall be exempt from tax under this Act unless the dealer effecting the sale at such subsequent stage furnishes to the Assessing Authority in the prescribed form and manner a certificate duly filled in and signed by the registered dealer from whom the goods were purchased to the effect that the tax on such goods has been paid at the first stage.

Explanation.--For the purposes of this sub-section, the first stage of sale in respect of any goods and in relation to any class of dealers shall be such as may be specified by the State Government in the notification."

The main part of the Section exempts such goods from the levy of tax at the subsequent stage of sale, which are notified by the Government. Under the proviso, a condition has been laid down that the benefit of exemption at the subsequent stage of sale would only be available if the dealer, effecting the sale at such subsequent stage, furnished to the Assessing Authority a certificate duly filled in and signed by the registered dealer from whom the goods were purchased. Such a certificate should be in the prescribed form to the effect that the tax on such goods had been paid at the first stage.

Shri M.L. Sarin, learned Senior Counsel for the petitioner, has challenged the validity of the proviso to Section 18 with the plea that, once tax was levied only at the first stage of sale under the main provision of Section 18, that benefit could not be withdrawn under the proviso. He has, therefore, challenged the validity of the proviso. The argument put forward by Shri Sarin has no substance at all and is devoid of merit inasmuch as the proviso simply laid down a condition which is required to be fulfilled while the benefit of exemption was claimed by a subsequent dealer. Sale of goods at a subsequent stage has been declared to be exempt from tax if a certificate is furnished, showing the payment of tax on such goods at the first stage. The logic and rationale behind such a scheme are manifest and cannot be said to be bad in law. The scheme behind the levy of tax on the declared goods at the first stage of sale cannot be said to be bad if a condition is laid down in the proviso requiring a subsequent dealer to furnish requisite proof showing the payment of tax by the first seller. The intention behind such a condition is amply clear that the goods declared by the Government u/s 18 of the Act did suffer tax at the first stage of sale and do not escape the levy of tax. If the goods have once suffered tax at the first stage of sale, levy of tax is not permissible at the subsequent stage u/s 18. Therefore, the plea raised by Shri Sarin that the proviso to Section 18 invalidated the scheme laid down in the main provision of Section 18 cannot be accepted. It is correct that the charging of tax on the tax-paid goods is not permissible u/s 18, but, at the same time, goods declared and notified u/s 18 cannot be exempted unless such goods had suffered tax at the first stage of sale. If no proof is furnished showing the payment of tax on such goods at the first stage, there can be no case of double taxation if tax is levied at a subsequent stage.

In the case of the petitioner, rebate of tax was not given inasmuch as declaration in form S.T. 14 was not filed as proof of payment of tax. The petitioner was assessed on the value of bricks on the ground that declaration in form S.T. 14 was not obtained from the selling dealer.

Clause (i) of Rule 24 and Sub-Rule (11) of Rule 39-A are the relevant provisions and it would be necessary to read them :

"24. Deductions of gross turnover.--In calculating the taxable turnover, a dealer may deduct from his gross turnover,--

(a) to (h)................

(i) the purchase and sale value of goods, forming part of the taxable turnover determined u/s 27, which have already been subjected to tax at the first stage of sale u/s 17 or Section 18 ; provided that the dealer appends to his return for the period ending 31st March in Form S.T. 9 or Form S.T. 10, as the case may be, in respect of such goods one copy of the certificate in Form S.T. 14, duly filled in and signed by the selling registered dealer or a carbon copy of the cash memo or sale bill with the following declaration printed thereon duly filled in and signed by him :

Declaration................"

"39A. Lumpsum in lieu of sales tax by way of composition.--(1) to (10)

(11) The brick-kiln owner shall not be entitled to issue certificates in form S.T. 14."

A perusal of Clause (i) of Rule 24 made it clear that a dealer may exclude the purchase or the sale value of the goods if he filed a certificate in form S.T. 14, duly filled in and signed by the selling registered dealer. However, Sub-Rule (11) of Rule 39A of the Rules did not permit a selling dealer to issue a certificate in form S.T. 14 if such a dealer happened to pay a lumpsum in lieu of sales tax.

Section 24 of the Act permitted payment of lumpsum in lieu of sales tax. Rule 39A laid down a scheme in detail as to how a dealer, paying a lumpsum in lieu of sales tax by way of composition, shall deposit tax. This rule specifically related to the brick-kiln owners paying lumpsum in lieu of sales tax on the sale of bricks within the State of Haryana. Sub-Rule (2) empowered the Assessing Authority to recover, as arrears of land revenue, the amount payable by such a dealer if the latter was in default. Under Sub-Rule (3), a brick-kiln owner, who defaulted in making payment of lumpsum, has been made liable to pay simple interest at the rate of 2 per cent per month for the period of default. The brick-kiln shall be inspected for verification of its capacity and category and for checking the stock of bricks at the kiln. Under Sub-Rule (5), a brick-kiln owner, liable to pay lumpsum, is required to inform the appropriate Assessing Authority about the capacity of his kiln in the prescribed form. The rates at which a brick-kiln owner shall pay lumpsum in lieu of sales tax have also been given in the Rules, The amount depended on the capacity of the brick-kiln and its category. The scheme contained in the Rules thus made it clear that the lumpsum payable in lieu of sales tax depended on the assessment of the capacity of the brickkiln and its category. For that purpose, the Excise and Taxation Officer may inspect the brick-kiln. The amount not paid in time is required to be recovered as arrears of land revenue. In such a situation, Sub-Rule (11), denying the benefit of form S.T. 14, appears to be totally contrary to the scheme of things and the intention of the law.

Shri M.L. Sarin, learned Senior Counsel for the petitioner, has challenged the validity of Sub-Rule (11) of Rule 39A on the ground that the petitioner was not at fault for not furnishing certificate/declaration in form S.T. 14 inasmuch as the supplier of the bricks failed to give form S.T. 14 to the petitioner. The Assessing Authority insisted on the furnishing of form S.T. 14 for bricks on which tax was leviable at the first stage. The petitioner had furnished complete details in respect of the purchase of bricks. Liability to pay tax on the bricks was on the manufacturer u/s 18 of the Act. The petitioner was, therefore, not required to pay tax and the addition made to the taxable turnover of the petitioner is said to be bad and contrary to the provisions of Section 18 of the Act.

A buyer of bricks cannot be denied form S.T. 14 if the brick-kiln owner opted to pay tax in lumpsum. The scheme of Rule 39A made it amply clear that a brick-kiln owner has been given the facility of payment of tax in lumpsum on account of certain difficulties being faced by such dealers. If the brick-kiln owner opted to pay tax in lumpsum, it would not imply that he ceased to be a dealer liable to pay tax. It was only by way of facility that tax was recovered from a brick-kiln owner in lumpsum. In this light, denying the benefit of form S.T. 14 Under Sub-Rule (11) of Rule 39A of the Rules appears to be unjust and unreasonable. The petitioner purchased bricks from the registered dealers who manufactured bricks and paid tax in lumpsum. Tax was levied at the first stage of sale and the petitioner was not required to pay tax as the manufacturer of bricks had paid tax, though in lumpsum. Since bricks had already suffered tax at the first stage of sale at the hands of the manufacturer, tax cannot be levied at the subsequent stage of sale at the hands of the petitioner.

The petitioner had also purchased bricks from unregistered dealers. Shri M.L. Sarin, learned Senior Counsel for the assessee, has argued that, in that situation, the petitioner was not the first seller inside the State of Haryana and was not liable to pay tax u/s 18 of the Act inasmuch as the petitioner was a second seller. This argument is found to be devoid of any merit because an unregistered dealer cannot be said to have paid tax to the Government at the first stage of sale. The furnishing of prescribed declaration in form S.T. 14 was essential under proviso to Section 18 of the Act. If the purchases were made from an unregistered dealer, such forms could not be furnished by the selling dealer. That would mean that the unregistered dealer had not paid tax at the first stage of sale. In such a case, the petitioner has to pay tax on such subsequent sale inasmuch as the goods had not suffered tax at the first stage.

The petitioner has claimed that it had no liability to pay tax on the purchase of bricks amounting to Rs. 20,75,985 in the year 1990-91. The Assessing Authority, however, added this amount to the taxable turnover of the petitioner on the ground that such purchases were made by the petitioner from unregistered suppliers and declaration forms in S.T. 14 were not furnished by the petitioner in respect of such purchases. In our view, since the goods had not suffered tax at the first stage of sale inasmuch as the dealer was an unregistered supplier under the Act, the petitioner is not entitled to get the benefit of exemption u/s 18 of the Act. As has been seen, proviso to Section 18 laid down a specific condition, for seeking exemption from the levy of tax at the subsequent stage of sale in respect of the declared goods, that such a dealer shall furnish a declaration in the prescribed form obtained from the selling dealer. Bricks are one of the items notified u/s 18 of the Act and tax was indeed payable at the first stage of sale only. A subsequent dealer, on furnishing of proof regarding payment of tax at the stage of first sale, can seek exemption from the liability of tax.

Shri M.L. Sarin, learned Senior Counsel for the petitioner, has argued that the petitioner may be permitted to furnish proof, regarding the payment of tax at the first stage of sale, other than the declaration in form S.T. 14. This argument has also no substance and is found to be devoid of merit in the light of the requirement of furnishing declaration in the prescribed form and in the prescribed manner. The validity of the rule, requiring the furnishing of declaration in the prescribed form, cannot be challenged simply because the dealer was unable to obtain the declaration in form S.T. 14 from unregistered dealers. However, the petitioner cannot be denied the benefit if the manufacturer, who had paid lumpsum in lieu of sales tax, did not give declaration in form S.T. 14 to the assessee. As has been seen, a manufacturer of bricks, who pays tax in lumpsum, cannot be said to be a seller in the category of unregistered dealers. The goods manufactured and sold by such a dealer cannot be said to have not suffered tax only because the dealer paid tax in lumpsum in lieu of sales tax. It has also been noticed that Rule 39A provided for the determination of the lumpsum in lieu of sales tax on the basis of the capacity and category of the brickkiln. A dealer in default has to pay interest also. Thus, a dealer paying lumpsum in lieu of sales tax is a dealer under the Act for all intents and purposes. Sub-Rule (11) of Rule 39A not entitling a brick-kiln owner to issue certificates in form S.T. 14 is thus arbitrary, unjust and contrary to the scheme of Rule 39A of the Rules. A brick-kiln owner paying tax, though in lumpsum, should be given the benefit available under the other provisions of the Act unless he is found to be disqualified for the same. In the case of a brick-kiln owner not found to be ineligible under any other provision of the Act or the Rules cannot be denied the benefit of issuing declarations to the purchasing dealers. Since bricks fall in the category of declared goods u/s 18 of the Act, tax at the subsequent stage of sale is not leviable and, since the petitioner is a buyer of bricks from the manufacturer, no tax is leviable at the hands of the petitioner if the petitioner furnished declaration in form S.T. 14.

In this light, Sub-Rule (11) of Rule 39A is declared to be arbitrary, unjust and unreasonable and also contrary to the other provisions of the Act and also the scheme of Rule 39A of the Rules.

The next challenge by the petitioner relates to the denial of exemption from the levy of tax in respect of the goods manufactured by an exempted industrial unit.

Section 13-B of the Act empowers the State Government to exempt such class of industries from the payment of tax for such period and subject to such conditions as may be prescribed. Rule 28A of the Rules contained the scheme in respect of the. exemption given u/s 13-B of the Act. Clause (c) of Sub-Rule (4) of Rule 28A is the relevant rule which is under challenge. It reads as under :

"(c) The goods manufactured by an eligible industrial unit availing exemption under this rule shall be exempt from the levy of tax at all the successive stage(s) of sale or purchase subject to the condition that the dealer affecting the successive purchase or sale furnishes to the Assessing Authority a certificate in form S.T. 14-A to be obtained from the Assessing Authority against payment of such sum as may be fixed by the State Government from time to time, duly filled in and signed by the registered dealer by whom such goods were purchased."

An industrial unit which is entitled to claim exemption from payment of tax is required to issue a certificate in form S.T. 14-A to a purchasing dealer. The grievance of the petitioner is that certain purchases were made from the exempted industrial units but the benefit of exemption was not extended to the petitioner in the absence of certificate in form S.T. 14-A. The petitioner has, however, not given further details as to why declaration in form S.T. 14-A was not made available by the exempted industrial units to the petitioner. Clause (c) of Sub-Rule (4) of Rule 28A lays down a clear and unambiguous provision that the goods manufactured by an exempted industrial unit shall be exempt from the levy of tax at all the successive stages of sale or purchase subject to the condition that the dealer, making successive sales, furnished a certificate in form S.T. 14-A obtained from the registered dealer from whom the goods were purchased.

Shri Parmod Goyal, learned Deputy Advocate-General, Haryana, has argued that, if the petitioner was not able to obtain certificate in form S.T. 14-A from the selling industrial unit, it was a dispute between the petitioner and the said selling dealer. No cause has been shown for not getting the declaration from the selling industrial unit. If there was any difficulty or a dispute between the petitioner and the exempted industrial unit, that can be sorted out between them and no fault can be found with the relevant rule.

Challenge to Clause (c) of Sub-Rule (4) of Rule 28A of the Rules is found to have no force inasmuch as nothing has been shown as to why the benefit of declaration in form S.T. 14-A was not made available by the exempted industrial unit to the petitioner. Clause (c) of Sub-Rule (4) of Rule 28A of the Rules cannot be invalidated only because it contained a provision in regard to the benefit of exemption on furnishing a declaration in the prescribed form.

In the result, challenge to the proviso to Sub-section (1) of Section 6 and to the proviso to Section 18 of the Act is found to be not acceptable as neither of the two provisions is found to be ultra vires or violative of any provision of the Constitution. Clause (i) of Rule 24 and Clause (c) of Sub-Rule (4) of Rule 28A are also held to be valid. However, Sub-Rule (11) of Rule 39A of the Rules is found to be arbitrary, unjust and unreasonable and also contrary to the provisions of the Act and the Rules framed thereunder. The said sub-Rule is, therefore, declared to be bad and is struck down. Consequently, the respondents are directed to provide form S.T. 14 to the brick-kiln owners paying lumpsum in lieu of sales tax so that such brickkiln owners could make declaration in form S.T. 14 available to the buyers of bricks making sales at the subsequent stage.

The writ petitions stand partly allowed in the above terms. The parties are left to bear their own costs.