Makes Pharmacy vs Sales Tax Tribunal and Another

K.L. Sharma, J.—This writ petition under Article 226 of the Constitution of India is directed against the judgment and order dated 2.2.94 passed by the Sales Tax Tribunal Saharanpur Bench, Saharanpur in second appeal No. 193 of 1993 (92-93) u/s 13A(4) of U.P. Trade Tax Act whereby the penalty imposed on the Petitioner was confirmed and the appeal was dismissed. The Petitioner has, therefore, prayed for issue of a writ of certiorari to quash the judgment and order of the Tribunal and of the order dated 18.1.93 passed by the Respondent No. 2 Assistant Commissioner (Assessment) Sales Tax, Saharanpur imposing penalty on the Petitioner.

I have heard Sri R.K. Agawam learned Counsel for the Petitioner and Sri R.D. Gupta learned standing counsel for the Respondent, and perused the material brought on record.

The Petitioner is a registered dealer under U.P. Sales Tax Act (hereinafter referred to as the Act which includes U.P. Trade Tax Act) and it is a recognised contractor for supply of medicines to Government Ayurvedic hospitals and does not sell any medicines in the open market. For the assessment year 1991-92, (he Regional Ayurvedic and Omani Medical Officer, Allahabad requested the Petitioner that its fund for the financial year 1991 92 was lapsing on 31.3.92 and in order to utilise the fund, he wanted to place orders for supply of specified medicines and the firm should supply the medicines against the orders against separate bills no exceeding in value of more than Rs. 5000. The Medical Officer concerned placed orders for supply of specified medicines on 27.3.92 and 30.3.92. The Petitioner supplied the medicines and prepared 75 bills in response to the said two orders of supplies by taking care that the value of the medicines against a bill was less than Rs. 5000. All these consignments were made on 30.5.92 vide G.R. No. 401 from Saharanpur to Allahabad and Form No. 3D was sent along with tile 75 Invoices but the Sales Tax Officer, Mobile Squad, Saharanpur intercepted the consignments on 31.5.92 for the reason that the bilgy was of 30.5.92 while the bill accompanying the medicines was of 27.3.92 and 30.3.92 and on some of the bills serial numbers were printed while on other bills serial numbers were put by hand. The said consignment;, of medicines were seized, but, later on consignments were released on furnishing cash security to the extent of Rs. 55,500 and thereafter the goods were delivered to the Medical Officer, Allahabad and payments were received by the Petitioner in respect of these supplies. However, the Assistant Commissioner (Assessment) Sales Tax was not satisfied with the explanation of the Petitioner and imposed penalty amounting to Rs. 55,500 u/s 13Aof the Act. In the. appeals the Petitioner did not succeed and thereafter having no legal remedy under the Act, the Petitioner preferred this writ petition.

The learned Counsel for the Petitioner has strongly contended hat the Petitioner sent the consignments of the medicines on 30.5.92 to the Regional Ayurvedic and Omani Officer, Allahabad in compliance with the order of supply dated 27.3.92 and 30.3.92 pertaining to the financial year 1991-92. As such the order of imposition of penalty u/s 13A(4) of the Act is wholly illegal and liable to be quashed.

The facts that the Petitioner is a registered dealer under the Act to supply Arvada medicines only to the Government department and does not sell the medicines in the open market are indisputable and it has also been proved by the documentary evidence. The Assistant Commissioner (Assessment), Sales Tax and the learned Tribunal have failed to appreciate as to how 75 separate bills were prepared In respect of the two consignments of the medicines. It is within the knowledge of the Government officials and also the public that the funds are largely utilised in the month of March which is the last closing month of the financial year. The funds sanctioned for purchase of furniture, equipments and other materials like medicines are utilised by issuing orders of supplies to the manufacturers and suppliers on the last date of the month of March, pre-receipted bills are prepared and encased and the amount is drawn from the Treasury within the financial year and bank drafts are got prepared which are kept in safe custody until the supplies in compliance with the orders are made to the department and the payment is made on the receipt of the goods. This practice has reached the stage of notoriety. The court can take a judicial notice of such practice which has been followed consistently over a long period. The sales tax authorities including (he Tribunal have followed this practice and, in my opinion, there should not have been any difficulty to understand this practice.

The preparation of 75 bills was necessitated by the facts that the Regional Ayurvedic and Omani Officer did not have the purchasing power of more than Rs. 5,000. It is very surprising as to how it could not be understood by the learned Tribunal which remarked that it was not understandable to prepare 75 bills for the two consignments of medicines.

The consignments were accompanied with Form 3-D and were dully recorded in the account books of the Petitioners. The stock book of the Petitioner entirely Indicated the debit of the medicines against the orders received in the month of March, 1992. The reasoning of the sales tax authorities to the effect that if the supplies of the medicines were made in the month of May, the stock book should have reflected the supplies of the medicines in the month of May instead of March. It is obvious that since the Petitioner received orders of supplies in the month of March, 1992, he debited the goods in the stock register for the month of March, 1992. The same goods could not be debited from the stock register in the month of May, 92 again. It is in the discretion of the Petitioner that he makes the entry either at the time of receiving the order of supplies or at the time of actual dispatch of the consignments against the said orders. The Petitioner cannot be deemed to have committed any illegality if the debit entry relating to the dispatch of medicines made in May, 92 was made in the stock register for the month of March, 1992. The reason for making such a debit entry in the month of March, 1992 is apparent on the face of record. In order to check the veracity of these entries, the sales tax authorities including the Tribunal should have summoned the original records from the office of the Regional Ayurvedic and Omani Officer, Allahabad but they failed to do so. However, in this writ petition, this Court considered necessary in the interest of justice to summon these original records from the office concerned and these records were produced by the Medical Officer before this Court and all the entries were properly verified from the Book of Orders and the Receipt of Goods and the Register of Payments produced by the Medical Officer. Therefore, there does not appear to be even shadow of any doubt regarding the truthfulness of the transaction made by the petitioner as a registered dealer. The findings to the contrary recorded by the Assessing Authority and the Tribunal are, therefore, not sustained on the basis of evidence.

Section 13A(4) of the Act provides for imposition of penalty only when the transaction is not traceable to a bona jade dealer and the goods are not properly recorded In the account books or the documents accompanying the consignment. Admittedly, the Petitioner is a registered dealer under the Act and, is only a government supplier and does not sell the medicines in the open market. The medicines have been supplied to the government department after receiving proper orders of supplies and the payments have been made by the government department. Therefore, it is proved that the goods have been sold to traceable bona fide dealer. There is no omission of entries of the goods in the books of the dealer and also in the documents accompanying the consignments which were intercepted by the Sales Tax Officer. As such, the provisions of Section 13(4) of the Act are not applicable to such consignments. Therefore, the imposition of penalty by the Assistant Commissioner (Assessment), Sales Tax on the Petitioner In respect of the consignments of medicines was not at all justified legally.

The objection that the bilgy indicated the date 30.5.92 whereas the consignments were despatched on 31.5.92 from Saharanpur to Allahabad is not at all substantial so as to create any doubt about the dealer or about the entries In the bilgy accompanying the consignments. The imposition of penalty on such minor and trifling objection cannot be justified, as it is a punishment which cannot be inflicted on the dealer otherwise, than on the grounds mentioned in the section itself. Such objections will have to be verified in the light of the explanation and the material or evidence produced by the dealer. Surprisingly enough, the sales tax authorities have not properly acted in this regard and have imposed penalty to the tune of Rs. 55,500 on the Petitioner without any legal and factual ground. Therefore, 1 find that the contention raised by the learned Counsel for the Petitioner is wholly correct and the order of Imposition of penalty u/s 13A(4) of the Act is illegal and without Jurisdiction. The amount of penalty deposited by the Petitioner is liable to be refunded with Interest at the rate of 18 per cent. The judgment of the learned Tribunal suffers from manifest error of law and is liable to be quashed.

For the aforesaid reasons, this writ petition is hereby allowed with costs of this writ petition assessed at Rs. 2,500 payable by the Respondent No. 2 to the Petitioner. A writ of certiorari is hereby issued quashing the judgment and order dated 2.2.1994 passed by Sales Tax Tribunal, Saharanpur Bench, Saharanpur in second appeal No. 193 of 1993 (92-93) and also the order dated 18.1.1993 passed by the Respondent No. 2 Assistant Commissioner (Assessment), Sales Tax, Saharanpur In case No. 1106, Imposing penalty of Rs. 55,500 on the Petitioner u/s 13A(4) of the Act. It is hereby further directed that the Respondent No. 2 shall refund the sum of Rs. 55,500/ along with interest at the rate of 18 per cent from the date of deposit till the date of actual refund. The amounts of costs, penalty and Interest shall be paid to the Petitioner within a period of two months from the date of the receipt of a certified copy of this judgment.