D.P Madon, J.:— This is a reference under section 34(1) of the Bombay Sales Tax Act, 1953, made at the instance of the assessee in which the following two questions have been referred to us:
“(1) Whether, on the facts and in the circumstances of the case, and upon true construction of the provisions of section 9 the Tribunal was justified in law in upholding the disallowance of the sales of Rs. 4,09,040 to Messrs. Arun Trading Company for the purpose of proviso (1) to section 9 of the Act?
(2) Whether, on the facts and in the circumstances of the case and upon true construction of section 9 the declarations of Messrs. Arun Trading Company signed by the respective Managers, Shri Sathe and Shri Pandya, as the case may be, were valid declarations under the law?”
2. The assessment period in question is 1st April, 1956, to 31st March, 1957. The turnover of sales of Rs. 4,09,040 made to Messrs. Arun Trading Company during that period was disallowed by the taxing authorities on the ground that the certificate in form K to the Bombay Sales Tax (Registration, Licensing and Authorisation) Rules, 1954 (hereinafter for the sake of brevity referred to as “the Registration Rules”), was not signed by a person authorised to do so. Under the first proviso to section 9 of the said Act no general sales is to be levied on the sales of goods to a dealer who holds a licence and furnishes to the selling dealer a certificate in the prescribed form (the prescribed form being form K) declaring inter alia that the goods so sold to him are intended for resale by him. Apparently, Messrs. Arun Trading Company were licence-holders under the said Act. The certificates in form K relied upon by the applicants for claiming exemption in respect of the aforesaid turnover of Rs. 4,09,040 were signed in some cases by one Sathe and in the remaining cases by one Pandya, both of whom had signed the said certificates as managers. When a dealer registered under the said Act applies for a licence and a licence is issued to him, that licence is issued subject to certain conditions which are incorporated in the licence. The form in which the said licence is to be issued is form F to the Registration Rules and the conditions set out clauses 6, 7 and 8 of the said form are three of the conditions subject to which such licence is issued. These clauses provide as follows:
“6. Where the ‘licensee desires to purchase any goods free of general sales tax under the provisions of clause (1) or (2) of the proviso to section 9 of the Act, the licensee or any person nominated by him under paragraph 7 of this licence shall furnish to the selling dealer a certificate in form K or L, as the case may be, in respect of the goods purchased by the licensee. The certificates in the said form K or L furnished by the licensee shall be serially numbered by him in chronological order and the licensee shall keep and produce before the Collector or the assessing authority, if so required, mechanically duplicated (or carbon) copies of such certificates duly signed and dated.
7. The licensee may for the purpose of paragraph 6 of this licence nominate any person to sign certificates on his behalf in respect of goods purchased by the licensee under this licence and the name and signature of the person so nominated shall be entered in the statement appended to this licence.
8. The licensee or any person nominated by him under paragraph 7 of this licence shall produce this licence for the inspection of any dealer from whom he purchases any goods under this licence or for the inspection of the manager or agent of such dealer whenever required to do so.”
3. We have had occasion to consider the effect of the first proviso to section 9 of the said Act and the aforesaid conditions of the licence in Sales Tax Reference No. 15 of 1970—New New Prahlad Mills v. The State Of Maharashtra, [1975] 35 STC 352, decided by us on 19th November, 1974. In that case while referring to the assessee's contention that a certificate in form K would be valid if signed by anyone on behalf of the purchasing dealer we observed as follows:
“In the case before us it is a condition laid down in section 9 itself that the certificate has to be furnished in the prescribed form…………If the contention that a certificate in form F could be signed by anyone on behalf of the purchasing dealer, even though such person was not nominated by the purchasing dealer as provided for in clause 7 of the purchasing dealer's licence, were true, it would open the door to many types of fraud. The department would be burdened with deciding questions such as whether the person who had signed a certificate had the authority of the purchasing dealer to do so in cases where a false certificate has been given or the foods purchased have been utilised for purposes other than those specified in the purchasing dealer's licence and mentioned in his certificate, whether the purchasing dealer had knowledge of the transaction or whether it was a transaction unauthorisedly entered into by someone purporting to do so on his behalf. The requirement that the certificate should be signed by the purchasing dealer himself or by a person nominated by him as provided for by clause 7 of the purchasing dealer's licence is, therefore, neither a mere formality nor an inconsequential matter of routine. The requirement with respect to the signature is vital to the very validity of the certificate, for it is a signature to the declaration that the goods purchased are intended for resale and such a declaration can only be made either by the purchasing dealer himself or someone duly authorised by him. When such an authorisation is by statute or by rules required to be in a particular form, there cannot be said to be a proper authorisation unless the statutory requirement is strictly complied with.”
4. Rule 17 of the Bombay Sales Tax (Exemption, Set-off and Composition) Rules, 1954, expressly provides that the burden of proving to the satisfaction of the Collector that inter alia any sale is eligible for exemption from the tax payable under section 9 is on the dealer claiming such exemption and that such dealer is on demand to produce any bills, cash memoranda, accounts and other documents in support of his claim. The burden of proof, therefore, of showing that the aforesaid turnover of Rs. 4,09,040 was exempted from tax by reason of the first proviso to section 9 of the said Act lay upon the applicants. The provision of the said rule 17 that a dealer claiming exemption was on demand to produce any bills, cash memoranda, accounts and other documents in support of his claim has been expressly inserted in order to enable the department to compel the dealer to produce such documentary evidence which may go either to substantiate his case or repel it and in order to determine whether the exemption claimed should be granted to him and whether the dealer had discharged the burden of proof resting upon him. In the present case we find from the record that the applicants have made no attempt whatsoever to prove that Sathe and Pandya or either of them were persons nominated as required by clause (7) of the licence issued to Messrs. Arun Trading Company; except, when the matter was being argued before the Tribunal, to call upon the additional Government agent who was appearing on behalf of the State to produce the record of Messrs. Arun Trading Company. That record could not be traced. If for whatever reason the department was unable to produce the record of Messrs. Arun Trading Company, there were other methods open to the applicants to prove their case. They could have asked the. Tribunal or any one of the sales tax authorities before whom the matter was at various stages to summon the proprietor of Messrs. Arun Trading Company or one of its partners, in case the said concern was a partnership firm, to produce the licence and in such a case the licence would have shown whether it contained a statement that Sathe and Pandya or either of them were nominated under clause (7) thereof. Assuming for the sake of argument that no one from Messrs. Arun Trading Company was available or that the said concern had ceased to exist, they could have still examined the person from the applicant-company who made the sale or made out the invoice or anyone else to depose (is such was the fact) that he had satisfied himself by looking at the licence of Messrs. Arun Trading Company that Pandya and Sathe were nominated to sign certificate in form K to the Registration Rules on behalf of Messrs. Arun Trading Company.
5. In this connection, Mr. Joshi on behalf of the applicants relied upon rule 13-A of the Registration Rules. The said Rule provides as follows:
“Nomination of person to sign certificates.—Where a dealer, in accordance with the conditions of a licence or authorization held by him, nominates a person to sign on his behalf any certificates in respect of the goods purchased by him under the licence or authorisation, as the case may be, he shall, within seven days from the date of such nomination, send an intimation to the Collector in form NAA specifying the date of such nomination and the full name and address of such person and containing three specimens of each for verified the rule of signature which such person intends to use for signing, on behalf of the dealer, any certificate in respect of the goods purchased under the licence or authorization held by the dealer:
Provided that where a dealer has made such nomination at any time prior to the 15th day of July, 1957, he shall comply with the requirements of this rule within thirty days from the said date.”
6. This rule was inserted in the Registration Rules with effect from 11th May, 1957. We fail to see what relevance this rule has to the present case. All that this rule requires is that when a dealer holding a licence or an authorisation has made a nomination, he is within seven days from the date of such nomination to send an intimation to the Collector in form NAA specifying the date of such nomination and the full name and address of the nominee and containing three specimens of the nominee's signature which he intends to use for signing certificates. Thus, by this rule an additional obligation was cast upon the licensee to give intimation within the specified period to the Collector of the nomination made by him and to furnish to the Collector the other particulars required by the rule. The absence of such a rule during the period of assessment did not mean that a person not nominated as required by condition 7 of the licence could validly sign a certificate in form K.
7. It was next submitted by Mr. Joshi on behalf of the applicants that by virtue of the fact that Sathe and Pandya have both signed the said certificates as managers of Messrs. Arun Trading Company, it must be presumed that both of them were managers as contemplated by section 24 of the said Act. The said section 24 provides as follows:
“Dealer to declare the name of manager of his business.—Every dealer, who is liable to pay the tax and who is an undivided Hindu family, an association or a club, society, firm or company or who carries on business as the guardian or trustee or otherwise on behalf of another person, shall within the prescribed period send to the prescribed authority a declaration in the prescribed manner stating the name of the person who shall be deemed to be the manager of such dealer's business for the purposes of this Act. Such declaration may be revised from time to time.”
8. Thus, it will be seen that all classes of dealer other than a sole trader are required to make such a declaration. The object of this provision is to have on the records of the department a person who would be responsible for seeing that the provisions of the Act are complied with. This is clear from form O to the Registration Rules which prescribes the form in which such declaration was to be made. The said declaration is to be signed both by the dealer making the declaration and by the manager and contains a statement that the person so declared as manager shall be deemed to be the manager of the business of the dealer for the purposes of the said Act and “shall at all times comply with the provisions of the said Act, and the Rules made thereunder”. This position is further fortified by a reference to sub-section (2) of section 36 of the said Act under which where a dealer is accused of certain offences specified in sub-section (1) of the said section, the person deemed to be the manager of the business of such dealer under section 24 is also to be deemed to be guilty of such offences unless he proves that the offences were committed without his knowledge or that he exercised all due diligence to prevent the commission of such offences. There is no finding of fact that the names of Sathe and Pandya or either of them had at any time been declared to the department as required by the said section 24. The fact that they have signed the said certificates as managers does not give rise to any such presumption. It was a fact as easy and capable of proof as the fact that Sathe and Pandya or either of them were nominated under clause (7) of the licence to sign certificates. The applicants, have, however, made no attempt to prove this fact either. Apart from this, even assuming for the sake of argument that the names of Sathe and Pandya or either of them were declared to the department as being the managers under section 24 of the said Act, to our mind this fact would make no difference to the position. The manager under the said section 24 is there to see that the provisions of the Act are complied with. He is not there for the purposes of signing certificates and other documents. There are several provisions of the Act which are mandatory and the object in enacting the said section 24 was to see that there should be a person in the case of a dealer who is not a sole trader who would be responsible for complying with those provisions. The provisions about giving a certificate under the first proviso to section 9 is not a mandatory provision which a dealer is under any obligation to do. If the dealer chooses to purchase goods for a certain purpose and to avoid paying to his vendor the amount of tax, which but for such certificate the vendor would be assessed to, he gives to the vendor a certificate in form K. There is also no mandatory compulsion upon a dealer, who is a licensee, to nominate any person under condition 7 of the licence. The said condition expressly states that “The licensee may………………nominate any person to sign certificate on his behalf”.
9. In the result, we find that the claim for exemption of the said turnover of Rs. 4,09,040 made by the applicants in their assessment for the period 1st April, 1956, to 31st March, 1957, was rightly disallowed on the ground that it was not supported by validly signed certificates in form K. Accordingly, we answer both the questions submitted to us in the affirmative.
10. The applicants will pay to the respondent the costs of this reference.