Hon'ble Bharati Sapru, J.
(Delivered by Hon'ble Rajes Kumar, J.) In the aforesaid writ petitions, the petitioners have challenged the validity of Rules 12A(5), 12B(4), 12C(3) and 25B(3) of the U.P. Trade Tax Rules (called the 'Rules' for short) as amended by the U.P. Trade Tax (Amendment) Rules, 2001and further seeking a direction in the nature of mandamus reading down the aforesaid Rules insofar as it provides that the forms issued in particular financial year shall be valid for the transactions of purchase and sale made during two financial years immediately preceding to that year, as not applicable to the transactions of sale or purchase which are not disputed by the Department.
All the aforesaid amended Rules provide that the form issued by the Trade Tax Officer in a financial year shall be valid for the transactions of purchase or sale made during that financial year as also made during two financial years immediately preceding the financial year.
The petitioners are aggrieved by the aforesaid amended Rules as the forms furnished by them could not be entertained/admitted being inadmissible as they are not in accordance to aforesaid rules.
Writ Petition No. 1791 of 2004 is treated as the leading case and the facts of this case are being referred herein below for the adjudication of the issue (hereinafter called the 'petitioner').
The petitioner is a public limited company incorporated under the Indian Companies Act, 1956. The petitioner is engaged in the manufacturing of 'Carbon Blacks'. The petitioner sold Carbon Blacks during the assessment year 2000-2001 to the various parties including M/s. Modi Rubber Limited to the extent of Rs. 19,52,15,148/-. M/s. Modi Rubber Ltd. holds a recognition certificate under Section 4-B of the U.P. Trade Tax Act (hereinafter referred to as the 'Act' for brevity) and as such entitled to purchase the raw material at a concessional rate of tax, i.e. at the rate of 2.5%. The petitioner charged 2.5% tax in the bills for the sale of Carbon Blacks to M/s. Modi Rubber Ltd. and also deposited the same with the Trade Tax Department along with the return.
The assessing authority has accepted the disclosed turnover but has levied the normal rate of tax on the sales to M/s. Modi Rubber Ltd. on account of non-submission of declaration form 3-B during the course of the assessment proceeding.
The petitioner moved an application before the assessing authority for the extension of time. The assessing authority, by order dated 10.3.2003, granted time upto 31.7.2003 for the submission of requisite forms. It appears that during the extended period the petitioner furnished only few forms, the benefit against such forms has been allowed by the assessing authority but some of the forms could not be submitted during the extended period.
Against the assessment order, the petitioner filed appeal before the Joint Commissioner (Appeals), Trade Tax, Ghaziabad, who, by its order dated 22.9.2003, allowed the appeal and remanded back the case for fresh assessment. While remanding back the case, the Joint Commissioner (Appeals) observed that the petitioner is entitled for one more opportunity to furnish form 3-B before the assessing authority.
In pursuance of the appellate order, the assessing authority initiated assessment proceeding and passed the ex parte order on 24.3.2004, which was re-opened under Section 30 of the Act. Before the assessing authority the petitioner submitted few forms 3-B dated 6.5.2004 along with the certificate dated 6.5.2004, issued by the assessing authority of M/s. Modi Rubber Ltd., certifying that the turnover of M/s. Modi Rubber Ltd. was more than Rs. 25 crores. The assessing authority has rejected such forms 3-B and denied the benefit of concessional rate of tax, vide its order dated 11.11.2004. The forms have been rejected on the ground that the said forms were issued by the Department on 1.3.2004, which are not admissible in view of the amended Rule 25-B.
Heard Sri Bharat Ji Agrawal, Senior Advocate, assisted by S/Sri Nishant Mishra, Shubam Agarwal, S.D. Singh, Piyush Agrawal, Rakesh Ranjan Agrawal, Suyash Agrawal, Kunwar Saksena, Gaurav Mahajan, Rishi Raj Kapoor and D.K. Gandhi for the petitioner, and Sri S.P. Kesarwani, learned Additional Chief Standing Counsel, appearing on behalf of the respondents.
Learned counsel for the petitioner submitted as follows :
(i)Under Section 4-B of the Act the manufacturer is entitled to purchase raw material and other items at a concessional rate of tax. M/s. Modi Rubber Ltd. holds a recognition certificate under Section 4-B of the Act and, therefore, entitled for the benefit of concessional rate of tax on the purchases of raw material and other items. M/s. Modi Rubber Ltd. had a vested right to get the benefit of concessional rate of tax provided under the substantive provision of the Act.
(ii) Filing of forms under the Rules is a procedural requirement and for non-fulfilment of the procedural requirement the vested right to avail the benefit of the concessional rate of tax cannot be denied.
(iii) The petitioner, after being satisfied that M/s. Modi Rubber Ltd. holds recognition certificate and on their assurance to provide form 3-B charged tax only at the rate of 2.5% in the bills on the sales made to M/s. Modi Rubber Ltd and deposited the same with the Trade Tax Department along with returns.
(iv) The various correspondence, which are annexed with the writ petition, between the petitioner and M/s. Modi Rubber Ltd. show that form 3-B could not be submitted in time because the same were not issued by the Department to them.
(v) The delay in issuing form 3-B was on the part of the Department and, therefore, for the inaction or arbitrary action on the part of the Trade Tax Department in issuing form 3-B, M/s. Modi Rubber Ltd. as well as the petitioner should not suffer.
(vi) The amended Rule 25-B(3) is arbitrary and unreasonable. It has not taken into account the unavoidable situation, like in the present case, in furnishing the forms.
(vii) Forms 3-B issued by M/s. Modi Rubber Ltd. has been issued by their assessing authority and is a genuine and valid forms. There is no dispute in this regard.
(viii) Even if, the amended Rule 25-B(3) is held to be valid, it is to be read down in the manner that in case if the dealer is able to satisfy that the forms could not be furnished on account of the reasonable cause and the forms are genuine otherwise the same may be admissible and the benefit against the said form may be allowed even if the same has been issued beyond the period specified in the Rules.
(ix) The forms have been submitted in pursuance of the order of the first appellate authority allowing one more opportunity to the petitioner to furnish the forms and the same should be entertained.
(x) It is submitted that in the case of K.B. Hides v. State of U.P. & others reported in 2004 UPTC 292 the Division Bench has taken the note that there was no specific allegation in the writ petition that the petitioner applied to the issuing authority for the forms and the same were not issued to the petitioner and in the absence of any such allegation the petitioner cannot be said to have any grievance at all and the cases can not be decided on hypothetical basis but on concrete evidence. While, in the present case, the petitioner is able to show that despite effort being made by the purchasing dealer the forms could not be issued by the Department.
In support of the above submissions, learned counsel for the petitioner relied upon the following decisions :
1.The Cochin State Power and Light Corporation Ltd. v. The State of Kerala reported in AIR 1965 SC 1688.
2.Supdt. Of Taxes, Dhubri v. M/s. Onkarmal Nathmal Trust reported in 1976 (1) SCC 766.
3.Land Acquisition Officer v. M/s. B.V. Reddy reported in AIR 2002 SC 1045.
4.Eicher Motors Ltd. v. Union of India reported in 1996 (106) ELT 3.
5.Collector of Central Excise v. Vazir Sultan Tobacco Co. Ltd. reported in 1996 (83) ELT 3.
6.Commissioner of Income Tax v. M/s. Onkar Saran and Sons reported in AIR 1992 SC 1139.
7.Commissioner of Income Tax, Bhopal v. Hindustan Elector Graphites Ltd. reported in AIR 2000 SC 1481.
8.State of Kerala v. Unni and another reported in 2007 (2) SCC 365.
9.Global Energy Ltd. v. Central Electricity Regulatory Commission reported in 2009 (15) SCC 570.
10.Hyderabad Karnataka Education Society v. Registrar of Societies reported in 1999 AIR SCW 4420.
11.C.G.E. Society v. Calcutta Municipal Corporation reported in 2003 AIR SCW 4927.
12.Sambhaji v. Gangabhai reported in 2008 (17) ELT 117 (SC).
Sri S.K. Kesharwani, learned Additional Chief Standing Counsel, submitted that -
(i)The validity of Rule 25-B(5) and other similar rules has been upheld by the Division Bench of this Court in the case of M/s. K.B. Hides v. State of U.P. & others reported in 2004 UPTC 292 and the special leave petition against the said judgment has been dismissed by the apex Court. He placed reliance on paragraphs 14, 15, 31, 40, 42, 44, 48, 49, 50, 58, 59, 60, 61, 64, 65, 66 and 70 of the said judgment.
(ii)He submitted that all the arguments raised by learned counsel for the petitioner have been considered by the Division Bench in detail. Therefore, the submission of the petitioner challenging the validity of the Rule has no substance and liable to be rejected.
(iii)Once the rule is held to be valid, there is no question of reading down the said rule in a manner suggested by learned counsel for the petitioner. Reading down of the rule can only be considered to save the provision. Therefore, the argument of learned counsel for the petitioner that the rule should be read down in a manner suggested by him has no substance. He placed reliance on paragraph 20 of the decision of the Supreme Court in the case of Hyderabad Karnataka Education Society v. Registrar of Societies and others reported in AIR 2000 SC 301.
(iv)The issue raised in the present writ petition is squarely covered by the decision of the apex Court in the case of Commissioner of Sales Tax Delhi and others v. M/s. Shri Krishna Engg. Co. & others reported in JT 2005 (1) SC 563 wherein all the submissions of the petitioner have been considered. Reliance is placed on paragraphs 4, 7, 8, 9, 10, 27, 29, 30, 31, 32, 37, 38, 39 and 41.
(v)Rule 25-B(3) has been amended with the object to check the misuse of the forms and the evasion of the tax. Sufficient time has been provided in the rule to obtain the forms from the respective parties. Even six months' time has been allowed, after commencement of the amended rule, to furnish the forms. Therefore, the rule cannot be said to be arbitrary and unreasonable.
DETERMINATION Rules 12-A, 12-B, 12-C and 25-B of the Rules have been amended by the U.P. Trade Tax (Amendment) Rules, 2001. The amended Rules 12-A, 12-B, 12-C and 25-B of the Rules reads as follows :-
"2. Amendment of Rule 12-A. - In Rule 12-A of the Uttar Pradesh Trade Rules, 1948, hereinafter referred as the said rules, for existing sub-rules (5) and (7), the following sub-rules shall be substituted, namely :-
"(5) If the Trade Tax Officer is satisfied that the requisition of the dealer for blank forms referred to in sub-rule (1) is genuine and reasonable, he may issue the same in such number as he deems fit. If the fee paid is more than the fee payable for the number of forms issued, the balance shall be credited to the account of the dealer to be adjusted against any future issue of the forms. A blank form issued by the Trade Tax Officer in a financial year shall be valid for the transactions of purchase or sale made during that financial year as also made during two financial years immediately preceding that financial year :
Provided that the form issued by the Trade Tax Officer before the commencement of the Uttar Pradesh Trade Tax (Amendment) Rules, 2001 shall also be valid for transactions of purchase or sale made during the Financial Year 2001-2002 or any other financial year before such commencement :
Provided further that the form issued by the Trade Tax Officer within six months after such commencement shall also be valid for transaction of purchase or sale made during any financial year before such commencement, if on such form the issuing Trade Tax Officer certifies the validity of transaction of purchase or sale mentioned therein.
(7)No single certificate shall cover the transaction of purchases or sales of more than one assessment year and of value more than Rupees five lakhs.".
3.Amendment of Rule 12-B. - In Rule 12-B of the said rules for existing sub-rules (4) and (9), the following sub-rules shall be substituted, namely :-
(4) If the Trade Tax Officer is satisfied that the requisition of the dealer for blank forms referred to in sub-rule (1) is genuine and reasonable, he may issue the same in such number as he deems fit. If the fee paid is more than the fee payable for the number of forms issued, the balance shall be credited to the account of the dealer to be adjusted against any future issue of the forms. A blank form certificate issued by the Trade Tax Officer in a financial year shall be valid for the transactions of purchase or sale made during that financial year as also made during two financial years immediately preceding that financial year :
Provided that the form issued by the Trade Tax Officer before the commencement of the Uttar Pradesh Trade Tax (Amendment) Rules, 2001 shall also be valid for transactions of purchase or sale made during the Financial Year 2001-2002 or any other financial year before such commencement :
Provided further that the form issued by the Trade Tax Officer within six months after such commencement shall also be valid for transaction of purchase or sale made during any financial year before such commencement, if on such form the issuing Trade Tax Officer certifies the validity of transaction of purchase or sale mentioned therein.
(9)No single certificate shall cover the transactions of purchase or sale of more than one assessment year and of value more than Rupees five lakhs.".
4.Amendment of Rule 12-C. - In Rule 12-C of the said rules for existing sub-rules (3), the following sub-rule shall be substituted, namely. -
"(3) Each certificate or declaration referred to in sub-rule (1) shall have printed serial number. No single certificate or declaration shall cover the transactions of purchase or sale of more than one assessment year and of value exceeding Rupees five lakh. A form issued by the Trade Tax Officer in a financial year shall be valid for the transactions of purchase or sale made during that financial year as also made during two financial years immediately preceding that financial year :
Provided that the form issued by the Trade Tax Officer before the commencement of the Uttar Pradesh Trade Tax (Amendment) Rules, 2001, shall also be valid for transactions of purchase or sale made during the financial year 2001-2002 or any other financial year before such commencement :
Provided further that the form issued by the Trade Tax Officer within six months after such commencement shall also be valid for transactions of purchase or sale made during any financial year before such commencement, if on such form the issuing Trade Tax Officer certifies the validity of transaction of purchase or sale mentioned therein.".
5.Amendment of Rule 25-B. - In Rule 25-B of the said rules, for existing sub-rules (3) and (4), the following sub-rules shall be substituted, namely :-
"(3) If the Trade Tax Officer is satisfied that the demand of the dealer for blank declaration forms referred to in sub-rule (1) is genuine and reasonable, he may issue such number of forms issued, the balance shall be kept in the account of the dealer to be adjusted against future issue of forms to the dealer. A form issued by the Trade Tax Officer in a financial year shall be valid for the transactions of purchase or sale made during that financial year as also made during two financial years immediately preceding that financial year :
Provided that the form issued by the Trade Tax Officer before the commencement of the Uttar Pradesh Trade Tax (Amendment) Rules, 2001 shall also be valid for transactions of purchase or sale made during the Financial Year 2001-2002 or any other financial year before such commencement :
Provided further that the form issued by the Trade Tax Officer within six months after such commencement shall also be valid for transaction of purchase or sale made during any financial year before such commencement, if on such form the issuing Trade Tax Officer certifies the validity of transaction of purchase or sale mentioned therein.
(4) Before furnishing a declaration form to the selling dealer, the purchasing dealer or one of the persons mentioned in sub-rule (1) of Rule 25-A shall fill in all the required particulars and shall sign it. Thereafter the counterfoil of the form shall be retained by the purchasing dealer and the other two portions marked "Original" and "Duplicate" shall be made over by him to the selling dealer :
Provided that no single form shall cover the transactions of purchase or sale, of more than one assessment year and of value more than Rupees five lakhs."."
The validity of the aforesaid amended rules has been upheld by this Court in the case of M/s. K.B. Hides (supra). The special leave petition against the said decision has been rejected by the apex Court. We are of the view that in the said decision almost all the submissions made in the present petitions have been considered. The relevant paragraphs of the judgment are being referred herein below:
"15. It is alleged in paragraph 39 of the writ petition that during the assessment year in question certain buyers had represented to the petitioner on the strength of their recognition certificates that they were entitled to purchase leather from the petitioner at a concessional rate or at a rate exempt from tax. These purchasers had also represented at the relevant time that Form 3-B were not available with them and would be furnished to the petitioner as soon as they were made available to them by the authority concerned. It is alleged in paragraph 40 of the petition that in such cases the petitioner has asked the purchasing dealers to produce before it only the recognition certificate, and the purchasing dealers produced the recognition certificate in original. The petitioner was hence satisfied that the purchasing dealer were entitled to make purchases at concessional rate or rate exempt from tax. The petitioner was informed by the purchasing dealer that Form 3-B was not available with him and his application for issuance of the Form was pending before the concerned authority and would be supplied to the petitioner when it was available in due course. Being satisfied with this assurance the petitioner sold the goods to the purchasing dealers without realizing tax or at the concessional rates. The petitioner acted similarly in the case of registered dealers who assured him that Form III-A was not available but would be supplied to the petitioner when it was made available in due course. The petitioner furnished to the Assessing Authority a list of all these transactions giving details. However, it is alleged in paragraph 44 of the petition that the Assessing Authority did not verify these facts and completed the assessment on 27th December, 2001 vide Annexure-3 to the writ petition. The Assessing Authority granted benefit to the petitioner in respect of the Forms III-A and III-B which were furnished during the Assessment proceedings, but for the remaining transactions he did not grant any benefit and demanded tax at the normal rate. However, the Assessing Authority granted the petitioner six months time to submit such Forms vide Annexure-3 to the writ petition. However, by order dated 14th August, 2000, the Assessing Authority refused to grant the benefit to the petitioner in respect of these Forms submitted by the petitioner in view o the impugned amendment of Rules 12-A and 25-A. True copies of the order dated 14th August, 2002 is Annexure-4 to the writ petition.
31. In our opinion the aforesaid decision is clearly distinguishable. It may be noted that in the decision in Sales Tax Officer v. K.I. Abraham (Supra) the impugned rules provided that the declaration had to be submitted by a certain date. The rule was held ultra vires because the Act d'd not mention that the forms had to be submitted by a certain date. On the other hand, in the instant case the amended Rule 12-A(5) does not state that the form has to be submitted by a certain date. Rule 12-A(5) as substituted by the amendment of 2001 states that the blank forms issued by Trade Tax Officer in a financial year shall be valid for purchases or sales made during that financial year and the two preceding financial years. Thus, there is no limitation fixed for submitting the forms in the impugned Rules 12-A and 25-B. Hence the decision in Sales Tax Officer v. K.I. Abraham, is clearly distinguishable.
40. In our opinion there is nothing unreasonable or arbitrary if the validity of a form is fixed for a certain period because if a form is made valid for an indefinite period it may become liable to be misused since after a lapse of a long time the related transaction cannot be verified. In our opinion the impugned amendment to the rules only imposes reasonable restrictions to avoid misuse of the form and tax evasion.
42. We see no illegality in the impugned rules as in our opinion they have been made with the object of preventing tax evasion. The right to do business in Article 19(1)(g) is subject to reasonable restrictions vide Hathisingh Mfg. Co. Ltd. v. Union of India, A.I.R. 1960 SC 923 and in our opinion the restrictions imposed by the impugned rules are clearly reasonable as they aim at preventing tax evasion. No Government can run without taxes. As held by the Supreme Court in Asst. Collector of Central Excise v. Dunlop India Ltd., the Government cannot run on bank guarantees.
44. We cannot accept the submission of the learned Counsel for the petitioner that the amended rules are in any way violative of Article 14 or 19 (1) (g) of the Constitution. As observed by the celebrated Justice Holmes of the U.S. Supreme Court in Missouri, Kansas, and Tennessee Railroad v. May, 194 U.S. 267 (1904):
"We feel unable to say that the law before us may not have been justified by local conditions. Great constitutional provisions must be administered with caution. Some play must be allowed to the joints of the machine."
48. It may be noted that Section 24 of the U.P. Trade Tax Act confers power on the State Government to make rules to carry out the purposes of the Act. Hence there is certainly legislative sanction for making the impugned amendment to the rules.
49. In our opinion the Court should exercise judicial restraint and should not hamper the State in measures which aim at preventing tax evasion. In the present case it is obvious that the State Government felt that tax evasion on a large scale was going on ny certain unscrupulous dealers by misuse of the statutory forms. If the Government decided to stop this mal-practice it is not for this Court to obstruct the Government in this connection. No doubt if the impugned amendment to the rules was clearly violative of the U.P. Trade Tax Act or the Constitution the Court can interfere, but otherwise it is not for this Court to sit as a Court of appeal over the decisions or the rules made by the Government. In fiscal measures the Court must be wary in invalidating the measures taken by the Government, for such measures are often taken after consulting experts. The judiciary must therefore ordinarily exercise self-restraint in such matters and eschew the temptation to sit as a Court of appeal over the decisions made by the Government.
50. It must be remembered that all legislation or delegated legislation (such as the kind we are examining), particularly in fiscal matters, is essentially ad hoc and experimental. Since fiscal matters now a days are extremely complicated the Court should ordinarily defer to the opinion of the experts and give the state wide latitude in devising ways and means in imposing and collecting taxes.
58. No doubt some dealers may suffer some hardship by the impugned rules, but it is well settled that equity has no place in taxing laws vide Commissioner of Income Tax v. Fir, Muar, A.I.R. 1965 SC 1216; Commissioner of Income Tax v. M.P. Jatia, 1976(4) S.C.C. 92; D.D. Joshi v. Union of India, A.I.R. 1983 SC 420; Commissioner of Income Tax v. Ajay Products Ltd., A.I.R. 1965 SC1358; Banarasi Debi v. Income Tax Officer, A.I.R. 1964 SC 1742; Agra City Real Estate Development Organization v. State of U.P., 2003 (3) U.P.L.B.E.C. 2201, etc. As is said "Dura lex sed led" which means "the law is hard, but it is the law."
59. It is well settled that a statutory rule cannot be said to be unreasonable merely because in a given case it operates harshly vide State of Gujarat v. Shantilal, A.I.R. 1969 SC 634 (vide paragraph 52).
60. In Srinivasa Enterprises v. Union of India, (1980) 4 S.C.C. 507 the Supreme Court observed (vide paragraph 13):
"When a general evil is sought to be suppressed some martyrs may have to suffer for the Legislature cannot easily make meticulous exception and has to proceed on board categorization not singular individualizations."
61. Hence even if some dealers suffer by the impugned rules that would not make the rules invalid. We see no illegality in the impugned amendment to the Rules or in the impugned order dated 14th August, 2002 (Annexure-4 to the writ petition).
64. In R.K. Garg v. Union of India, (1981) 4 S.C.C. 675 (690) a Constitution Bench of the Supreme Court observed:
"Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the Legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with greater play in the joints has to be allowed to the Legislature. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed that in Morey v. Doud where Frankfurter, J., said in his inimitable style:
In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The Legislature after all has the affirmative responsibility. The Courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainly, the liability to error, the bewildering conflict of the experts, and the number of times the Judges have been overruled by events-all these show that self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability."
65. In Prag Ice and Oil Mills v. Union of India, A.I.R. 1978 SC 1296, the Supreme Court observed:
"We do not think that it is the function of the Court to sit in judgment over such matters of economic policy as must necessarily be left to the Government of the day to decide. Many of them are matters of prediction of ultimate results on which even expert can seriously err and doubtlessly differ. Courts can certainly not be expected to decide them without even the aid of experts."
66. In Shri Sitaram Sugar Co. Ltd. v. Union of India, (1990) 3 S.C.C. 223 the Supreme Court observed:
"Judicial review is not concerned with matters of economic policy. The Court does not substitute its judgment for that of the Legislatuare or its agents as to matters within the province of either. The Court does not supplant the feel of experts by its own views."
70. In our opinion there should be judicial restraint in fiscal and economic regulatory measures. The State should not be hampered by the Court in such measures unless they are clearly illegal or unconstitutional. All administrative decisions in the economic and social spheres are essentially ad hoc and experimental. Since economic matters are extremely complicated, this inevitably entails special treatment for distinct social phenomena. The State must therefore be left with wide latitude in devising ways and means of imposing fiscal regulatory measures, and the Court should not, unless compelled by the Statute or by the Constitution, encroach into this field."
So far as the submission of learned counsel for the petitioner that the Division Bench had taken the note that there was no specific allegation in the writ petition that the petitioner applied to the issuing authority for the forms and the same were not issued to the petitioner and in the absence of any such allegation, the petitioner cannot be said to have any grievance at all. While, in the present case the petitioner established that the form could not be issued by the Department despite rigorous effort being made has no substance. In the present case also the petitioner has not applied to the issuing authority for the forms and the same could not be because only the purchasing dealer had a right to apply for the form from its assessing authority. This aspect of the matter has been dealt with by the apex Court in the case of Commissioner of Sales Tax Delhi and others v. M/s. Shri Krishna Engg. Co. & others. The apex Court has considered all the arguments raised by the petitioner in the present petition and has rejected the same. The relevant portion of the judgment is referred herein below.
"4. In the present case the appellants had sold goods to registered dealer who are not being issued the declaration form on account that they being in arrears of some tax and thereby the selling dealers cannot claim the benefit of Section 3(2)(a)(v) and the figure of sales become liable to be included in the figure of his taxable turnover.
7.The grievance of the appellants (selling dealers) pertains to the non-issuance of Sales Tax Forms (ST-1). In the instant case, a legal question has arisen because the appellants as the selling dealers sold goods to the respondents-purchasing dealers on the latter's assurance that they will supply requisite ST-1 forms to the former. Instead it had transpired that the Sales Tax Department has declined to issue ST-1 forms to the purchasing dealers, in this batch of appeals either for the reason that they have relinquished their registration or because they have not complied with the provisions of the Act and the Rules. The consequence of Department's declining to issue ST-1 form is that the appellant (selling dealers) would become liable to deposit the sales tax in respect of transactions in which they are the selling dealers. The further consequence would be that unless the appellants deposit the sales tax payable on these transactions they would render themselves liable for non-issuance of ST-1 forms in other transactions where they may wear mantle of purchasing dealers. They may also encounter the extreme penalty of facing derecognition under the Act.
8. Mr. Rajesh Mahna, learned counsel for the appellant contended that the appellants are being made to suffer the consequence of failure and defaults on the part of purchasing dealers in which they have played no part whatsoever and that under the scheme of the Act they are precluded from charging sales tax from other registered dealers since such a demand would invite prosecution under the Act.
9.Learned counsel also argued that they are in a helpless position and would be compelled to incur sales tax liability for events which are not within their control. Mr. Mahna submitted that as per Rule 8(4)(c) tax assessed must be paid as a condition for issuance of forms. The condition to deposit assessed amount of tax is a substantive provision of law going to the root of the right of the dealer to receive forms. The Rule laying down to deposit the assessed amount and therefore it affects the statutory right of the dealer to receive the forms. It was further contended that the impugned rule has been passed beyond the powers conferred under Section 71(2)(b) of the Act and therefore the rule is in excess of the jurisdiction and authority of law and as such is liable to be quashed. It was also urged that the Administrator cannot take upon himself the power of the Parliament in making any substantive amendments in the Act or the Rules.
10.This Rule directly affects the vested rights conferred upon the dealers to receive forms under Section 4. He further submitted that the legislature lays down the guidelines for issuance of forms in exercise of powers delegated to the Executive. Any Rule made depriving the dealers for obtaining the forms which is in excess of powers is violative of the constitutional rights, free trade and commerce. The power has to be exercised with the strict limits of authority conferred by the Statute.
27.Considering the full effect of the provisions, we are fortified in our conclusion that exemption from including the total turnover of the selling dealer is possible only where the requisite ST-1 form is produced. The embargo on charging tax under the Act is only in those instances where the purchasing dealer contemporaneously offers ST-1 Form to the selling dealer. The Sales Tax Department neither privy to nor is it concerned with any assurances that might have been exchanged inter se these parties. As observed by the High Court quite frequently ST-1 Forms are obtained from Sales Tax Department by the purchasing dealer, but for sundry reasons are not forwarded to the selling dealer. The only legal recourse is for the selling dealer to file a suit for the recovery of the sales tax from the purchasing dealer. There is no reason to deviate from this position. It should be recalled that, for the benefit of the assessee, the Rules permit the filing of exemption Forms till the time of assessment, this is probably the reason why dealers postpone their obtainment. There is no reason for the consequences of the dealers acts of omission or commission to visit the Department. The Act and the Rules do not prohibit the simultaneous furnishing of ST-1 Forms. They, in fact, envisage it.
29.As already noticed in this batch of writ petitions filed by the selling dealers, the challenge is directed to the vires of Rule 8(4)(c) of the Rules, on the ground that they traverse beyond the ambit of Section 4(2)(a)(v) of the Act. The grievance of the appellant is not that they have requested the Sales Tax Department for issuance of the Forms in advance and this has been turned down, but that their purchasing dealers should be supplied with ST-1 Forms regardless of whether such dealers have relinquished their registered status, or have committed other infractions of the Act and the Rules. Even if a purchasing dealer has applied for ST-1 Forms but has not received them for any reason, the selling dealer is not automatically exonerated from liability. It is their statutory duty to collect tax, since the ST-1 Form is not forthcoming. Likewise, no reason for the State to lose its revenue merely because the purchasing dealer is unable to obtain such forms because of its falling in arrears. It is the dealer, because of its own acts of omission, who has broken the chain whereby tax is arranged and devised by the Department to be collected at a single point only.
30.It is settled law that equity plays only a minuscule role in fiscal matters, even if such considerations were to be applied, there would still be no justification for an application adverse to the interest of the State. The dealer who has chosen to trust the other dealer must suffer for his mercantile recklessness. This is the risk they run and if for any reason, including a subsequent decision of the Sales Tax Department to withhold the supply of ST-1 forms to a purchasing dealer they are put in an uncomfortable position of having to pay the tax and initiate appropriate legal action for recovering it from the purchasing dealer. The state is entitled to its tax, where the requisite ST-1 Form is unavailable for any reason.
31.The scheme of the Act is that either ST-1 Form should be available or tax should be collected. If a dealer shows such indulgence as to delivery of ST-1 Forms for a particular period, he takes the risk. It would have been further the best advised to insist on their supply even for the transaction intended to be completed by them.
32.This Court in A.V. Fernandez v. The State of Kerala, opined that, however great the hardship may appear to the judicial mind, "In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substances of the law. If the revenue satisfies the Court that the case falls strictly within the law, the subject can be taxed. "A few years later another Constitution Bench in the case of Commissioner of Sales Tax, U.P. v. Modi Sugar Mills Ltd., observed thus "In interpreting a taxing statute, equitable consideration are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of which is clearly expressed; it cannot imply anything which is not expressed it cannot import provisions in the statute so as to supply any assumed deficiency."
37.It is the contention of the selling/purchasing dealers that selling dealers are made to suffer the consequences of failures and defaults on the part of the purchasing dealers in which they have played no part whatsoever they are in helpless position and would be compelled to incur Sales Tax liability for events which are not within their control and that Rule 8(4)(c) travels beyond the ambit of Section 4(2)(a)(v) of the Act. A Division Bench of the Delhi High Court, by their judgment dated 12.07.2002, which is impugned in these civil appeals dismissed the challenge in regard to the vires of Rule 8(4)(c).
38.We have carefully gone through the judgment of the Division Bench in Simran Engineering Works etc. The reasoning given by the Bench in rejecting the challenge in regard to the vires of Rule 8(4)(c) are very sound. As rightly pointed out by the Division Bench, the Sales Tax Department is neither privy to nor is it concerned with any assurances that might have been exchanged inter se between the selling and purchasing dealers in the matter of furnishing AR-1 Forms. There is no reason for the consequences of the dealers acts of omission or commission to visit the Department. The Act and the Rules do not prohibit the simultaneous furnishing of ST-1 Forms, they, in fact, envisage it. Supply of ST-1 Forms by the Department under the Rules is in advance, however, the actual practice may be different (para 7 onwards of page 36 of the judgment).
39.In our opinion, the generality of the provision of Section 71(1) should be given its full effect so as to enable the making of Rules for the full implementation of any provisions of the Act. The impugned rule also gives effect to Section 43(5) of the Act which deals with appeals and contains the requirement of pre-deposit of tax and penalty. Other situations where the Commissioner has the discretion to cancel the dealers registration for failure to pay tax including penalty, furnishing a false declaration etc. which must be borne in mind while considering the sweep of Section 71(1) of the Act. Thus, the primary intendment of the Act is to levy and collect tax and every devise, including of stipultions pertaining to the dealer friendly declaration forms are incorporated to implement the objective of the Act itself as pointed out by the High Court they cannot be conceived as ultra vires the statute (pages 63-64 of the judgment).
41.We are of the opinion that the judgment and order of the High Court in Shri Krishna Engineering Co. case (CWP 3304 of 1997) is passed on a mis-construction of the clear statutory provisions contained in Section 4, 71(1), 71(2)(b) and (s) of the Delhi Sales Tax Act, 1975 and that the High Court has also not appreciated the true scope of the rule making power which has been conferred on the Lt. Governor of Delhi by Section 71(1) of the Act which lays down that the administrator may make rules for carrying out the purposes of the Act. A general power has thus been conferred upon the administrator to make appropriate rules to carry out the purposes of the Act. The purpose of the Act is not just to fix liability but also to recover the liabilities which are so fixed. The High Court also has not noticed that Section 71(2)(s) of the Act confers a residual power on the administrator to make rules in respect of any other matter which is required to be or may be prescribed. We are, therefore, of the opinion that the impugned amendment was within the rule making power of the Lt. Governor of Delhi under section 71(2)(b) read in conjunction and harmoniously with Section 71(2)(s)."
We do not see any reason to take a different view. Following the reasoning given in the cases of M/s. K.B. Hides (supra) and Shri Krishna Engineering Co. (supra) the validity of Rules 12-A, 12-B, 12-C and 25-B of the Rules are upheld.
Now coming to the question of submissions of learned counsel for the petitioner that the Rule may be read down in the manner suggested by him. We do not find any substance. The question of reading down any provision arises only in a situation to save the provision. Once the provision is held to be valid, there is no question of reading down the provision in the manner suggested by him. It has to be read as such and nothing can be added and nothing can be substracted from it.
So far as various decisions cited by learned counsel for the petitioner are concerned, they are not directly on the issue. Since the Division Bench decision of this Court in the case of M/s. K.B. Hides (supra) and the decision of the Supreme Court in the case of Shri Krishna Engineering Co. (supra) are directly on the issue, we are of the view that it is not necessary to deal with individual cases.
In the result, all the writ petitions fail and are dismissed.
Dated : 16.12.2010.
PG.