M/S Sayeed Corporation vs Commissioner Of Trade Tax, U.P

Ashok Kumar, J

Heard Sri M.M. Rai, learned counsel for the assessee-revisionist and Sri Ajit Kumar Singh, learned Additional Advocate General assisted by Sri C.B. Tripathi, learned Special Counsel for the State of U.P.

Vide order dated 07.02.2011 passed in Trade Tax Revision No. 1264 of 2003 (M/S Sayeed Corporation Vs. Commissioner Trade Tax, U.P.) this Court has referred the following question for consideration by this Bench (Division Bench):-

"Whether in view of the fact that the purchase of the stone grit has been made from the registered dealer without issuing Form-3A and it was deemed to be sales to the consumer in the hand of seller and such sale is liable to tax whether further sale of such stone grits to the person other than the registered dealer without furnishing the declaration form, presumed to be sale to the consumer is liable to tax."

The fact of the instant case are that the applicant was carrying on the business of stone grit. The stone grit is liable to tax on the point of sale to the consumer under the notification no. ST-II-5785/X-10(1)-80-UP-Act XV/48-Order-81, dated 07.09.1981. The revisionist has purchased the stone grit from a registered dealer without issuing Form 3-A, a declaration certificate, contemplated under Rule 12-A read with Secton 3-AAA of the U.P. Trade Tax Act (herein after referred as the Act). The stone grit purcahsed by the revisionist have been sold by the Revisionist to different parties.

The revisionist claim the exemption on the sales affected by it on the ground that the stone grit was purchased by the revisionist from the registered dealer without issuing any declaration certificate (Form 3-A) and therefore, the sales were sale to the consumer in the hands of the seller (from whom the revisionist had affected the purchases), under Section 3-AAA of the Act.

According to learned counsel for the revisionist, there is no liability in the hands of the revisionist as the sales are treated as sale to the consumer in the hands of the seller from whom the revisionist had affected the purchases, then the subsequent sales affected by the revisionist cannot be liable to tax on the ground that sales are again sales to the consumers.

Learned counsel for the revisionist has submitted that since the tax has been paid by the revisionist on the purchase of stone grit is a single point taxable commodity, as such no further tax can be levied.

Learned counsel for the revisionist has placed the relevant entry being entry no. 40 which is related to the item in question namely stone grit, which provides the liability of tax @ 6% on sale to consumer.

Learned counsel for the revisionist has placed reliance on the judgment of this Court in Sales Tax Revision No. 87 of 1982 Commissioner of Sales Tax, U.P., Lucknow Vs. Dhanna Mal & Sons, Varanasi by referring para -4 which is quoted herein below:-

"4. Under Section 3-AAA of the Uttar Pradesh Sales Tax Act, 1948, certain presumptions enacted by the legislature where goods are liable to tax under the Sales Tax Act are effected and in which tax payable only at the point of sale to the consumer. Under sub-clause (b) thereof it is provided that every sale by a dealer to any person other than a registered dealer shall be deemed to be a sale to the consumer, unless the dealer proves otherwise to the satisfaction of the assessing authority and for the purposes also furnishes to the assessing authority and for the purposes also furnishes to the assessing authority such declaration, obtained from the purchasing dealer. In such from and manner and within such period as may be prescribed. It is admitted in this case that the assessee who himself is a dealer purchased bread and biscuits from registered dealer without furnishing the required Form 3-A. Thus, bread and biscuits were taxable at single point on point of sale to the consumer. Thus, under Section 3-AAA sub-Clause (b), the sale by the assessee to the registered dealer would be the point at which the tax would be levied and when the assessee effected the sale. I find that the Tribunal committed no error in holding that the sales of bread and biscuits were exempted sales."

Learned counsel for the revisionist has also placed reliance of the judgments in the case of Commissioner of Sales Tax Vs. Bechu Lal Ganga Prasad 1981, UPTC, 1213 as well as a decision of this Court in the case of Vishambhar Lal and Company Vs. Commissioner of Sales Tax ( Sales Tax Revision Nos. 320, 321 and 322 of 1979) decided on 8th April, 1980.

Learned counsel has also placed reliance of a Division Bench judgment of this Court in the case of Shahabudin Zakir Hussain & Company Vs. Sales Tax Officer reported in 1970 UPTC 187.

Learned counsel for the revisionist has submitted that since the tax has been charged by the seller from whom the revisionist has affected the purchases, though no Form 3-A was issued, there could be no any liability of tax in the hands of the revisionist.

Per contra learned Additional Advocate General has submitted that stone grit is taxable at the point of sale to the consumer under Section 3-AA of the Act read with Rule 12-A and notification dated 7.9.1981 and he has referred the provisions of Section 3-AA, which provides as follows:-

"Sec. 3-AA. Rate and point of tax in respect of certain goods.-(1) Notwithstanding anything contained in section 3 or 3-A, the turnover in respect of the following goods shall not be liable to tax except at the point of the sale by a dealer to the consumer, and the rate of tax shall be such, [not exceeding the maximum rate for the time being specified in Section 15 of the Central Sales Tax Act, 1956], as may be declared by the State Government by notification in the official Gazette:-

(i) coal including coke in all its forms:

(ii) cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned baled, pressed but not including cotton waste;

(ii-a) cotton yarn, but not including cotton yarn waste;

(iii) hides and skins, whether in a raw or dressed state;

(iv) iron and steel, that is to say-

[a] pig iron and iron scrap;

[b] iron plates sold in the same form in which they are directly produced by the rolling mill;

[c] steel scraps, steel ingots, steel billets, steel bars and rods;

[d] (i) steel plates, ! sold in the same form

(ii) steel sheets, ! in which they are

(iii) sheet bars and tin, bars, ! directly produced by

(iv) rolled and steel sections, ! the rolling mil;

(v) tool alloy steel;

(vi) jute, that is to say, the fibre extracted from plants belonging to the species, corchorus, capsularis and corchorus olitorious and the fibre known as mesta or bimli extracted from plants of the species hibiscus cannapinus and hibiscus, sabdariffavar altissima, whether baled or otherwise;

(vii) oil seeds, that is to say, seeds yielding non-volatile oils used for human consumption or in industry, or in the manufacture of varnishes, soaps and the like, or in lubrication, and volatile oils used chiefly in medicines, perfumes, cosmetics and the like.

(2) Unless the dealer proves otherwise, every sale by a dealer shall, for the purposes of sub-Section (1), be presumed to be to a consumer.

Explanation.- A sale of any of the goods specified in sub-section (1) to a registered dealer who does not purchase them for resale in the same condition in which he has purchased them, or to an unregistered dealer shall, for purposes of this section, be deemed to be a sale to the consumer."

Rule 12-A of the U.P. Trade Tax Rule provides the procedure to be applied for getting exemption of certain sales. Sub Rule 1 of Rule 12-A provides as follows:-

"12-A. Exemption of certain sales.

(1) A registered dealer who wishes to purchase any goods, liable to tax under sub-Section (1) of Section 3-A or Section 3-AA at the point of sale to the consumer, without payment of tax shall furnish to selling dealer a certificate in Form III-A, duly filled in and signed by him."

In the aforesaid background, learned Additional Advocate General has submitted that admittedly in the instant case the assessee/revisionist has not issued /furnished Form 3-A, which is a declaration certificate to be issued to claim the exemption from payment of tax and to show that the purchased goods have already taxed in the hands of the seller.

Learned Additional Advocate General has pointed out that in fact the revisionist/assessee has not discharged the burden to prove that the tax has been paid by him on purchase on such stone grit as no evidence has been adduced by the revisionist at any point of time before any of the authorities.

Learned Additional Advocate General has referred the contents in the referring order of this Court, which are quoted herein below:-

"Once sales are treated as a sale to the consumer, then the subsequent sales cannot be liable to tax on the ground that sales are again sales to the consumers. It is further contended that the tax has been paid on the purchase on such stone grit, though there is no evidence in this regard. It is contended that the stone grit is a single point taxable commodity, therefore, no further tax can be levied."

Learned Additional Advocate General has submitted that in fact while examining the transaction in question there is no provision to consider the earlier transactions of purchases and sales to determine whether the present sales are sales to the consumer or not. He has further submitted that Section 3-AAA of the Act provides that in the cases of sales to the person other than the registered dealer, in case if the declaration certificate, as provided under the law is not furnished, it will be deemed to be sold to the consumer and in the instant case since the revisionist could not furnish the declaration form i.e. Form-3-A, the sale by the revisionist to the various parties are presumed to be the sale to the consumer and therefore, under the notification dated 7.9.1981, the revisionist is liable to tax on sales of such stone grit.

In support of his contention learned Additional Advocate General has placed reliance of cases namely Commissioner of Sales Tax Vs. Shanker Lal Chandra Prakash (1970) 26 STC 386 (full Bench), J.K. Manufacturers Ltd. (Formerly J.K. Cotton Manufacturers Ltd.) Vs. The Sales Tax Officer (1970) 126 STC 310 (Allahabad) (full Bench) and Chunni Lal Parshadi Lal Vs. Commissioner of Sales Tax, U.P., Lucknow (1986) 62 STC 112 SC.

Apart from the aforesaid decisions, learned Additional Advocate General has also referred the Division Bench judgment of this Court in the case of Shahabuddin Zakir Hussan (supra). In the case of Shahabuddin Zakir Hussain (supra) the question referred for the opinion to a 3rd Judge was as follows:-

"Whether Rule 12-A of the U.P. Sales Tax Rules provides that the only proof open to a dealer for establishing that the goods purchased from him are for resale in the same condition is a certificate in Form III-A and unless such dealer furnishes a certificate in Form III-A, the sale by him must be taxed in his hands under sub-Section (1) of Section 3-AA as a sale to the consumer?"

The 3rd Judge Hon'ble M.H. Beg, J. has answered the question in the affirmative by saying 'I hold that unless a dealer proves certification in Form- 3-A, a sale by him must be taxed under Section 3-AA(1) of the Act as a sale to the consumer'. In the case of Commissioner sales tax Vs. Shanker Lal (supra) the Form- 3-A was filed therefore this Court has held that no other material can be looked into to determine that the sale was not made for consumption.

In the case of J.K. Manufacturers Ltd. (supra) this Court has held that furnishing of forms during the assessment proceedings under Rule 12-A is mandatory. This Court has held that furnishing of declaration certificate is a method which provides the proof that the tax is paid by the seller.

Learned Additional Advocate General has referred para-10,11 and 12 of J.K. Manufacturers Ltd. (supra) which are quoted herein below:-

"10. Now, one thing is clear, and that is that the tax is levied only at the point of sale by the dealer to the consumer, In construing the provisions of Section 3-AA and Rule 12-A that must be kept clearly in mind. The Legislature appears to have anticipated that there would be considerable difficulty in determining whether a particular sale was made to the consumer. To obviate that difficulty, the Legislature enacted Sub-section (2) of Section 3-AA. It provides that unless the dealer proves otherwise every sale by him would, for the purposes of Sub-section (1)  of Section 3-AA, be presumed to be to the consumer. The burden is thrown upon the dealer to show that the sale was not made to the consumer. It is manifest that Sub-section (2) merely enacts a rule of evidence for the purpose of giving effect to the substantive provision in Sub-section (1). Sub-section (2), it will be noticed, does not indicate what should be the nature and mode of proof by which the dealer may establish that the sale made by him is not to the consumer. That has been left entirely to the choice of the dealer. In short, therefore, Sub-section (2) lays the burden of proof on the dealer and leaves it to him to determine how he discharges that burden.

And so we come to Rule 12-A. At first blush, the rule gives the impression that unless the selling dealer is armed with a certificate in Form III-A from the purchasing dealer the sale made by him must be considered to be a sale to the consumer. On further consideration, however, I am unable to read the Rule to mean that. To my mind, the Rule suggests a convenient mode to the selling dealer for proving that the goods have not been sold to the consumer. It provides for no more than that. The certificate in Form III-A is one mode in which the selling dealer may establish that he has not sold the goods to the consumer. But that is not the only mode. If the contrary view is accepted, it will limit the selling dealer to that mode alone and will preclude from adopting any other mode of proof. It must not be forgotten that Rule 12-A has been framed for giving effect to the purposes of Section 3-AA. If it seeks to limit the selling dealer to a specific mode of proof it clearly attempts to impose restriction which was not contemplated by Sub-section (2). It may have been a different matter if Sub-section (2) had read, "unless the dealer proves otherwise in the manner prescribed......", when it could have been legitimately contended that the only mode of proof available to the dealer was the mode prescribed in Rule 12-A. But that the Legislature did not enact.

There is another aspect of the matter. If Rule 12-A provides the only mode for a selling dealer to prove that the sale by him is not to the consumer there will be cases where the Rule may operate to nullify the object of Section 3-AA. An illustration will demonstrate this. A registered dealer sells goods to another registered dealer. The goods are purchased by the purchasing dealer for resale in the same condition in which he purchased them. He sells them to a consumer. Inasmuch as the sale by him is a sale to the consumer, it is the purchasing dealer who is liable to tax. Ordinarily, the purchasing dealer would furnish a Form III-A to the selling dealer and on production of that Form the selling dealer could establish that he was not liable to tax. But there may be cases where the purchasing dealer does not furnish the Form III-A to the selling dealer. In four Sales Tax References Commissioner of Sales Tax Vs. Lary Leather Agency, STR No. 255 of 1996, D/- 2-5-1969 (All), Commissioner of Sales Tax Vs. Society Leather Stores, STR No. 256 of 1996, D/-2-5-1969 (All), Commissioner of Sales Tax Vs. Star Leather Agencies, STR No. 257 of 1966, D/- 2-5-1969 (All) and Commissioner of Sales Tax Vs. Abdul Razzaq Leather Stores, STR No. 258 of 1966, D/- 2-5-1969 (All), this Court had recently to consider a situation where the assesses had admittedly made the sale to the consumer and had not furnished Form III-A to the dealer from whom he had purchased the goods. The contention of the assessee in each case was that as the selling dealer could not furnish Form III-A the tax should be levied on the selling dealer, and the tax having been levied on the selling dealer it could not be levied upon him because it was a single-point levy. It is important to note that the statute places no obligation on the purchasing dealer to furnish the Form to the selling dealer. In that event, if Rule 12-A can be said to provide the only mode for proving that the sale is not to the consumer, the selling dealer cannot establish that the sale by him is not to the consumer, and he will be liable to tax. By an act of his own volition, namely refusing to furnish the certificate in Form III-A, the purchasing dealer who sells to the consumer can cause the liability which Sub-section (1) imposes on him to be visited instead on the dealer from whom he had purchased the goods, and escape the liability himself on the argument that the tax cannot be levied at more than one point. A construction such as this would enable a dealer, who sells to the consumer, to subvert the operation of Sub-section (1) and make its application depend on his individual decision as to whether he furnishes Form III-A to the selling dealer or not. It could never have been contemplated by the Legislature that the application and operation of Sub-section (1) should turn on the volition of an individual who could divert the course of the levy by withholding Form III-A. The conduct of such an individual is not controlled by the statute, there being no obligation on him to furnish the Form."

In the case of Chunni Lal Parshadi Lal (supra) the controversy came up for consideration before the Apex Court was as to whether the sales tax is payable if the goods are sold to consumer.

The Apex Court has laid down, while considering the full Bench decision of this Court in the case of Shanker Lal Chandra Prakash (supra), J.K. Manufacturers Ltd. (supra) and has upheld the majority view in J.K. Manufacturers Ltd.'

Learned Additional Advocate General has also referred a Judgment of the Apex Court in the case of Hotel Balaji and Others Vs. State of Andhra Pradesh and Others (1993) 88 STC 98 SC. While dealing with the provision of Section 3-AAAA, which was inserted in U.P. Sales Tax Act in 1992 with a retrospective effect from 1.4.1974, the Apex Court has noticed that the said provision imposes the liability of purchase tax on certain transactions. Paragraph 52 and 54 of the judgment in the case of Balaji (supra) are referred, which are quoted herein below:-

"52. In short, the scheme of the Section is this: (1) if a dealer purchase the goods liable to tax at the point of sale to the consumer from any registered dealer who is not liable to pay tax on such sale, the purchasing dealer shall pay such tax. If, however, the purchasing dealer establishes that the goods purchased by him have already been subjected to or may be subjected to tax under the U.P. Act or Central Sales Tax Act, he will get an exemption to that extent. (2) If the said goods are purchased from a person other than a registered dealer the purchasing dealer shall pay the tax payable on sale of such goods. If, however, he proves that tax payable has been paid, either wholly or partly, by the seller, the tax payable by the purchasing dealer in case he establishes any of the facts mentioned in Clauses (c) and (d) of Sub-Section (2). The central idea is that no transaction of sale (of goods taxable at the point of sale to consumer) should go untaxed. Either the seller pays the tax or the purchaser pays. It is for achieving this central purpose that Section 3-AAAA has been enacted providing for several situations.

(54). It was argued for the petitioner that Sub-section (2) of Section 3-AAAA places a heavy and uncalled for burden upon the purchasing dealer; that it is not practicable for the purchaser to establish that the selling person (other than the the registered dealer) has paid the tax or not. It is submitted that the petitioner purchases his goods from hundreds of persons who are not registered dealers and it cannot reasonably be expected of the petitioner to gather the particulars of or from all such persons. We are unable to appreciate this contention. A person other than a registered dealer is not amenable to the discipline of the Act. He cannot indeed collect any tax [Section 8(A)(2)] and, therefore, will not, ordinarily speaking, make over or pay any tax. This the legislature is justified in presuming. If, however, in any case it is proved that such person has paid the tax, the purchasing dealer will get an exemption to that extent. It a benefit is claimed by the purchasing dealer, it is for him to prove the fact which enables him to claim the benefit. That burden cannot be passed on to any one else. So far as registered dealers are concerned, all that the purchasing dealer need prove is that the said goods have already been or may be subjected to tax under State Act or Central Sales Tax Act. On this score, we see no difficulty for the purchasing dealer. From the bill given by the selling dealer, the purchasing dealer can prove the payment. Or he can simply prove, as a matter of law that the said goods are liable to be taxed under any other provision of the Act or under the Central Sales Tax Act. We are equally unable to see any vagueness in the provision nor is it established that any such vagueness is operating to the prejudice of the petitioner."

In the case of M/s Balaji (supra) the Hon'ble Apex Court has held that if a benefit is claimed by the purchasing dealer, it is for him to prove the fact which enable him to claim the benefit that burden can not be passed on to anyone else. So far as the registered dealers are concerned, all that the purchasing dealer need to prove is that the said goods which are purchased by him have already been subjected to tax under the Act.

In the aforesaid background, learned Additional Advocate General has submitted that admittedly in the instant case revisionist has not placed any evidence which proves that the tax has been paid on the purchase of stone grit by the revisionist or the seller from whom the revisionist has effected the purchases.

In the instant case, we have noticed that the revisionist though has shown in his return the supply of stone grit as exempted from payment of tax and further that the stone grit was purchased from the registered dealers and thereafter was supplied, however, during the course of verification of the book of accounts the assessing authority has noticed that the revisionist has issued the invoices in which he has charged the tax. The tax charged was paid to the revisionist by the purchasers/consumers. The findings so recorded by the assessing authority are confirmed by the First Appellate Authority as well as by the Trade Tax Tribunal. The relevant extract of the order of the Tribunal are necessary to be placed / quoted herein below:-

"कर निर्धारण आदेश से यह भी स्पष्ट है कि व्यापारी द्वारा इस सप्लाई के सम्बन्ध में जो बिक्री के पर्चे काटे गये हैं उसमें स्वयं बिक्री कर चार्ज किया गया है तथा विभाग द्वारा इसका भुगतान भी किया गया है तथा कुछ मामलों में विभाग द्वारा स्त्रोत पर कटौती भी की गई है। इस प्रकार इस सम्बन्ध में अपीलकर्ता का कथन स्वीकार होने योग्य नहीं है।

इसके अतिरिक्त जाँच पर रु0 5,02,987/- की स्टोन ग्रिट/ स्टोन बैलास्ट की ऐसी सप्लाई पायी गयी जिसके सम्बन्ध में व्यापारी द्वारा जो बिल काटा गया है उसमें बिक्री कर चार्ज किया गया है तथा विभाग द्वारा भुगतान भी किया गया है इसी आधार पर कर निर्धारण अधिकारी द्वारा इस बिक्री पर भी कर देयता निर्धारित की गयी थी जिसे अनुचित नहीं कहा जा सकता है।."

In view of the aforesaid categorical findings of fact recorded by the Tribunal, in our opinion the claim of the revisionist cannot be accepted and the question of law, which has been referred for consideration by this Bench is answered as follows:-

(i) The purchases of the stone grit (goods) made from a registered dealer without issuing Form- 3-A can be taxed in the hands of the revisionist/dealer/purchaser.

(ii) In the event of non-issuing or furnishing Form-3-A the sales affected by the subsequent seller (in the instant case the revisionist) will be further sale to the consumer, as such is liable to tax.

Accordingly, we uphold the order of the Tribunal and decide the question of law referred for consideration by holding that the revisionist is liable to pay tax on stone grit treating the same to be sales to the consumer in the hands of the revisionist.

In view of the above answers, the revision petition filed by the dealer/revisionist is dismissed.