JUDGMENT
1. The petitioner is a private limited company and is a dealer in iron and steel goods and hardware. The petitioner as a dealer is assessed under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as the Act). For the four quarters ending Chaitra, 1375 B.S, the petitioner sold iron and steel goods to different parties, some of which were registered dealers. The sales to the registered dealers of those goods were made either in cash or by cheques. The registered dealers who purchased the goods from the petitioner issued declaration forms against the purchases and on the basis of the said declaration forms obtained from the purchasing dealers the petitioner claims exemption in respect of those sales under section 5(2)(a)(ii) of the Act. The Commercial Tax Officer while making the assessment for the said period by his order dated 23rd March, 1973, disallowed the claim of Rs. 2,20,739.61 made by the petitioner under section 5(2)(a)(ii) of the Act. The reason for the disallowance of sales to the following registered dealers, viz., Messrs. Bansal Iron and Steel Engineering Works, Messrs. Hindusthan Commercial and Engineering Co. and Messrs. Shree Mahabir Industrial Corporation, was that the registration certificates of the said three dealers were subsequently cancelled on 9th November, 1970, 25th November, 1970, and 29th October, 1971, respectively. The other grounds disclosed in the order were that the payment was made in cash and the challan number was not written on the declaration forms. Sales made to Messrs. Parkash Impex were disallowed on the ground that the said purchases were not covered by the registration certificate issued in the name of purchasing dealer. For the four quarters ending 31st Chaitra, 1376 B.S, respondent No. 1 issued a notice dated 7th March, 1973, calling upon the petitioner to appear and produce the books of accounts in support of returns. Aggrieved by the said order of assessment for the period ending 31st Chaitra, 1375 B.S, and the notice issued under sections 11 and 14(1) of the Act for the period ending 31st Chaitra, 1376 B.S, the petitioner moved this court and obtained a rule nisi.
2. The learned counsel on behalf of the petitioner contended that at the time when the sales to the three purchasing dealers were effected and the declaration forms were obtained, the registration certificate was not cancelled by the taxing authorities.
3. The subsequent cancellation of the registration certificate of these purchasing dealers did not invalidate the declaration forms issued by them earlier. It was further contended that the failure to mention the challan number in the declaration form or the fact that the payment was made in cash cannot be a valid ground for disallowing such sales. The learned counsel for the respondents submitted that the declaration form filled in by the purchasing dealers was defective inasmuch as the challan number was not given. He further submitted that in the context of the subsequent cancellation of the registration certificates of the purchasing dealers, respondent No. 1 was justified in disallowing the sales made to those purchasing dealers as such sales were not accepted by him to be genuine.
4. In order to examine the rival contentions of the parties, it is necessary to refer to some of the relevant provisions of the Act and the Rules framed thereunder. Under section 5(2)(a)(ii) of the Act sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer as are intended for resale by him in West Bengal, or for use by him directly in the manufacture in West Bengal of goods for sale, are to be deducted in computing the taxable turnover of the selling dealer. Section 7 of the Act imposes upon a dealer liable to pay tax under the Act the obligation of being registered under the Act and to possess a registration certificate. Under rule 27A of the Bengal Sales Tax Rules (hereinafter referred to as the Rules), a dealer who wishes to deduct from his gross turnover the amount in respect of a sale to a registered dealer under section 5(2)(a)(ii) shall produce in respect of such sale, the copy of the relevant cash memo or bill, according as the sale is a cash sale or a sale on credit and a declaration in form XXIV obtainable by a purchasing dealer on application from the appropriate Commercial Tax Officer and duly filled in and signed by the purchasing dealer. Rule 27A(4) requires a registered dealer whose certificate of registration has been cancelled to forthwith surrender to the appropriate Commercial Tax Officer all unused declaration forms remaining in stock with him and the appropriate Commercial Tax Officer shall thereupon cancel the declaration forms so surrendered and report the fact of such cancellation to the Commissioner. Sub-rule (6) of rule 27A requires the Commissioner to publish in the Calcutta Gazette, the particulars of declaration forms which have been so cancelled. A registered dealer for obtaining declaration forms has to apply in writing to the appropriate Commercial Tax Officer stating his requirement of such forms and has to furnish such other particulars, statements and information and produce such other documents as the Commercial Tax Officer may require for the purpose of satisfying himself about the bona fide use of such forms issued to the applicant on previous occasions and the bona fide nature of the applicant's requirement of such forms on the present occasion. Section 7(4a)(ii) of the Act empowers the Commercial Tax Officer to demand reasonable security for the proper custody and use of the declaration forms. Sub-rule (2) of rule 27AA vests the Commercial Tax Officer with the powers even to reject the application for declaration forms where he is not satisfied that such declaration forms have been used bona fide or that are required bona fide. The above analysis of the relevant provisions of the Act and the Rules shows that a selling dealer who claims the benefit of deduction under section 5(2)(a)(ii) of the Act has to satisfy two conditions:— (a) he must produce the relevant cash memo or the bill, according as the sale is a cash sale or a sale on credit, (b) he must produce the declaration in form XXIV duly filled in and signed by the purchasing dealer. The statute imposes upon the purchasing dealer the obligation to fill up the declaration forms duly. If the purchasing dealer fails or neglects to fill up the declaration forms duly and to include the prescribed particulars therein, the seller cannot be made responsible for such failure or omission to fill up the declaration forms properly. In the present case, although the form of declaration has been properly filled in, the only allegation in respect of the three purchasing dealers is that the challan number was not written on the declaration form. The sales of goods to the registered dealers are supported by bills and also by vouchers. Copies of the statement of the bills and challan regarding those sales have been annexed to the petition. It is not the respondents' case that such vouchers and challans were not made available for inspection at the time of the assessment. In the context of these facts one has to consider whether the omission to mention the dealer's challan number renders the declaration form invalid in law. It is true that in the form of declaration the challan number has to be mentioned. The question therefore arises whether the obligation to mention the challan number as required in form XXIV is mandatory or not. A statutory rule requiring certain acts to be done may be either imperative in character or directory in nature. In the absence of an express provision, the intention of the legislature is to be ascertained by weighing the consequences of holding such a rule to be directory or imperative. It is the duty of the court to consider the importance of the provision that has been disregarded and the relevance of that provision to the general object intended to be secured by the Act, and upon a review of the case in that aspect decide whether the matter is what is called imperative or only directory (Per Lord Penzance: Howard v. Bodington 1877 2 P.D 203.). No universal rule can be laid down for the construction of statute as to whether any enactment is to be considered directory only or obligatory. In each case a balance has to be struck between the inconvenience of its rigid adherence and the inconvenience of its departure from its terms. There are some rules which are vital and go to the root of the matter. Compliance with such rules is mandatory. There are other rules, the breach of which may be an irregularity which can be dispensed with provided there is substantial compliance with the rules. If the disobedience of such a rule frustrates the very aim and object of the statute, the direction to do an act enjoined by the rule is to be regarded as a mandatory one. The purpose for which the declaration forms are insisted upon under the law seems to check large scale evasion of sales tax. It may be possible for a selling dealer to inflate his claim of sales to registered dealers when such sales are not in fact made. There may be also misuse of such declaration forms for the purposes not authorised under the law. The taxing authorities are, therefore, competent to find out whether the certificate is genuine. They may also ascertain whether the goods purchased are covered by the registration certificate of the purchasing dealers and may make enquiries about the contents of the certificate of registration of the purchasing dealers. The declaration form filled in and signed by a purchasing dealer may enable the authority to identify such registered dealer to whom the sales are claimed to have been made. It is, therefore, necessary that the registration certificate number of the purchasing dealer is to be included in the declaration form. The particulars in the prescribed form which are necessary to identify the purchasing dealer can be considered to be substantial and non-compliance of such particulars may render the declaration form invalid. Omission to fill up the other particulars in the prescribed form does not necessarily make the declaration form liable to be rejected. In the case of Durga Sree Stores v. Board of Revenue, West Bengal [1964] 15 S.T.C 186., the Division Bench held that where the certificate of registration issued to a registered dealer contemplates that the purpose of purchase might well be either the purpose of manufacture or resale or any of the several alternatives mentioned in the foot-note of that form, the mere non-striking of any of the alternatives in the declaration forms would not be a fatal defect and by itself would not render the declaration form defective. In the case of Anil Kumar Dutta v. Additional Member, Board of Revenue, West Bengal, omission to give the date of registration certificate was not considered to be a vital and substantial omission as from the number of the registration certificate being given in the declaration form, it was not difficult to make the purchasing dealer identified. In the present case, the omission to mention the challan number, in my view, is not a vital and substantial omission, as in spite of the said number not being given in the declaration form, the purchasing dealer was identifiable as the certificate of his registration number has been given in the declaration form. Moreover, the bills and the vouchers (challans) have all been annexed to the petition and were also available before respondent No. 1. In these circumstances, the disallowance of sales to the three purchasing dealers on the ground that challan number has not been given on the declaration form cannot be supported.
5. The next ground urged by the learned counsel for the respondents was that the registration certificate of the purchasing dealers having been cancelled and the sales being mostly cash sales, respondent No. 1 was justified in disallowing such sales. It is the admitted position that when the sales in question were made to the different parties and when the declaration forms were issued by the purchasing dealers, their respective registration certificates were not cancelled by the taxing authorities. Their registration certificates were cancelled subsequently. On the date when the transactions with the purchasing dealers were effected and the declaration forms were given by them, their declaration forms were valid. The subsequent cancellation of the certificate of registration of the purchasing dealers cannot have any retrospective effect so as to invalidate the declaration forms duly given in respect of purchases effected prior to such cancellation. In order to claim a deduction under section 5(2)(a)(ii) of the Act, the sales of goods must be to a registered dealer. The seller must satisfy himself that the purchaser is a registered dealer and the goods purchased are specified in his certificate. Once he is satisfied on these two matters, his duty extends no further. So long as the purchasing dealers are in possession of valid registration certificate, and have given declaration forms duly on the basis of such certificates, the selling dealer is entitled to claim deduction under section 5(2)(a)(ii) of the Act. Sub-rule (4) of rule 27A obliges the registered dealer whose certificate of registration has been cancelled to forthwith surrender all unused declaration forms remaining with him to the appropriate Commercial Tax Officer who is required thereupon to cancel the declaration forms so surrendered. Under Sub-rule (6) of rule 27A, the particulars of the declaration forms which have been cancelled are to be published in the Gazette. In my view, the assessing authorities are not justified in depriving a dealer of the benefit of deduction under section 5(2)(a)(ii) of the Act by subsequently cancelling the registration certificate of a purchasing dealer after the period to which the deduction relates. It is, however, open to the assessing authorities to come to a conclusion on proper evidence that the transactions were not genuine and no sales in fact took place, but no such finding can be arrived at simply from the fact that the registration certificate of a purchasing dealer has been subsequently cancelled by the taxing authorities. If the assessing authorities in an appropriate case are satisfied on proper evidence that the concerns were not in existence when the alleged sales were made to them, it is open to such authorities to come to such a view. But subsequent cancellation of the registration certificate does not ipso facto lead to the conclusion that the dealer was not in existence at the time when the transactions in question took place. Support for this view may be had from the decision of Anil Kumar Dutta v. Additional Member, Board of Revenue, West Bengal, and also Durga Sree Stores v. Board of Revenue Reliance has been placed by the learned counsel for the respondents upon the decision in the case of Hindusthan Stationery Works (P.) Ltd. v. Board of Revenue, West Bengal [1971] 27 S.T.C 394., in support of the contention that if the certificate of registration of the purchasing dealer is cancelled subsequently, the sales made to such dealers may not be deducted in computing the taxable turnover. In that case, the assessee made all the payments in cash. He was given a chance to produce the orders and the challans, but he failed to do so. The certificate of registration of the purchasing dealer was cancelled on 7th January, 1957, but the purchasing dealer issued supporting declaration forms up to 23rd February, 1957. The declaration forms which were produced in respect of sales did not indicate the purpose for which the purchases were being made. In these circumstances, the Division Bench held that there was no reliable document to establish that the sales were in fact effected to a registered dealer. On the facts of that case it was held that the taxing authorities were justified in rejecting the claim for deduction in respect of sales during the period prior to the cancellation of the registration certificate. In my view, the said decision cannot be said to have laid down the proposition that the subsequent cancellation of the registration certificate ipso facto and necessarily render the declaration forms issued prior to such cancellation invalid. It appears that the attention of the Division Bench in the said case was not drawn to the earlier decision of the Division Bench of this Court in the case of Anil Kumar Dutta v. Board of Revenue, in which it is held that such subsequent cancellation does not invalidate the declaration forms given in respect of purchases made prior to such cancellation. In my view, the later Division Bench decided the case on the peculiar facts and circumstances of that particular case and the said decision cannot be considered to have taken a different view from the earlier decision in the case of Anil Kumar Dutta v. Board of Revenue. The decision in the case of State of Madras v. Radio & Electricals Ltd. [1966] 18 S.T.C 222 S.C. relied upon by the learned counsel for the respondents does not, in my view, lay down a different proposition. In that case, concessional rate of tax under the provisions of the Central Sales Tax Act, 1956, was claimed on the basis of the certificate of registration in form B prescribed under the Central Sales Tax (Registration and Turnover) Rules, 1957, issued in favour of the purchasing dealer. It has been held that if the 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 has been further held that when a representation is recorded in the certificate in form C prescribed under the said Rules, 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. In that case, the point as to whether the obligation to fill up the particulars in the declaration form is compulsory or directory or that whether the subsequent cancellation of the registration certificate renders the declaration forms issued prior to such cancellation invalid, did not fall for consideration. The said decision, in my view, therefore, cannot be considered to have decided any of the points which have been urged in the present case.
6. The other contention that the sales were effected in cash and, therefore, such sales cannot be claimed by way of deduction under section 5(2)(a)(ii) of the Act does not also stand closer scrutiny. The law does not require that in order to claim deduction under section 5(2)(a)(ii) of the Act the sales cannot be made on cash payment. The mere fact that the transactions were made in cash may give rise to suspicion in the mind of the assessing authorities, but suspicion cannot be treated as evidence on which it can be concluded that the purchasing dealer was not in existence during the relevant time or that no sales in fact were effected. The production of the valid declaration forms duly filled in by the purchasing dealer is a prima facie proof that the sales have been made to the registered dealer. It is, however, open to the taxing authorities on proper and cogent materials to hold that the transaction was a collusive one or that no sale in fact took place. In the present case, however, no such attempt has been made by respondent No. 1 to impeach the transaction as not genuine on any such legal evidence. In my view, the reason for which the sales in question to the three registered dealers, viz., Messrs. Bansal Iron and Steel Engineering Works, Messrs. Hindusthan Commercial and Engineering Co. and Messrs. Shree Mahabir Industrial Corporation, were disallowed under section 5(2)(a)(ii) of the Act is erroneous in law and cannot be sustained.
7. In respect of sales to Parkash Impex, the reason for such disallowance is that the goods in question are not covered by the certificate of registration of the said dealer. In the certificate of registration of the said dealer the following class of goods have been mentioned: “G.I wires………… G.I sheets, pipes and iron fittings…………….” The learned counsel for the respondents contended that what was sold by the purchasing dealer was “G.C sheets”, that is, galvanised corrugated sheets, which are covered by the certificate of registration. The certificate of registration includes “G.I sheet”, i.e, galvanised iron sheet. The learned counsel for the respondents further submitted that G.I sheet means only galvanised plain sheet and not galvanised corrugated iron sheet. The question, therefore, to be considered is whether galvanised iron sheet means plain galvanised iron sheet or includes corrugated galvanised iron sheet. It is not disputed that plain or flat galvanised iron sheet would be covered by the entry “G.I sheet”. Corrugated galvanised iron sheets are nothing but iron sheets —sheets of iron—corrugated, i.e, wrinkled for the purpose of making them more rigid and giving them increased stiffness so that they become more suitable for certain purposes than they would otherwise be as flat iron sheets. Support for this may be had from the decision in the case of State of Gujarat v. Shah Veljibhai Motichand, Lunawada. If flat iron sheets are covered by entry “G.I sheet”, they do not cease to be so by mere alteration of shape by corrugation. The process of corrugation is one of alteration of shape and it does not make galvanised iron sheets a different article or product of iron. While interpreting items in statutes like the Sales Tax Act, resort should be had not to the scientific or technical meanings of such terms, but to their popular meanings or the meanings attached to them by those dealing in them, that is to say, to their commercial sense: Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh In commercial parlance galvanised sheet includes both corrugated and plain sheets. The certification marks scheme formulated by the Indian Standard Institute for steel products shows that galvanised sheet includes corrugated and plain sheets. Such sheets after corrugation do not lose their character as iron sheets. In my view, the entry “G.I sheet” includes also galvanised corrugated sheet and as such the certificate of registration of the purchasing dealer, viz., Parkash Impex, covers the goods sold by the petitioner to them. The disallowance of the sale in question on that ground is not sustainable in law.
8. For the reasons stated above, the order of assessment dated 23rd March, 1973, made by respondent No. 1 for the period ending 30th Chaitra, 1375 B.S, being annexure B to the petition, as also the notice dated 27th March, 1973, issued under section 11 of the Act are quashed by a writ of certiorari. There will also be a writ in the nature of mandamus commanding the respondents to forbear from giving effect to the said orders. Respondent No. 1 will, however, be at liberty to make an assessment for the said period in accordance with law and in the light of the principle laid down in this case.
9. For the year ending 30th Chaitra, 1376 B.S, no assessment has been made and a mere notice dated 7th March, 1973, under section 11(4)(i) of the Act has been issued. The petitioner is not entitled to any relief in respect of the said notice at this stage inasmuch as no assessment has been made by respondent No. 1 for the said period. I however make it clear that respondent No. 1 while making the assessment for the said period in pursuance of the said notice will do so in accordance with law and in the light of the principle decided in this case. The rule is made absolute to the extent indicated above. There will be no order as to costs.
10. Petition allowed.