JUDGMENT Rajes Kumar, J.
1. This revision under Section 11 of the U.P. Sales Tax Act, 1948 (hereinafter referred to as "the Act") is directed against the order of the Sales Tax Tribunal, Saharanpur, dated November 3, 1990 relating to assessment year 1984-85 arising out of the proceedings under Section 21 of the Act.
2. The brief facts of the case are that the applicant is a manufacturer and a dealer of papers. During the year under consideration, the applicant had sold papers to various parties against form III-B. On the basis of form III-B received from various purchasers, the applicant had claimed exemption during the assessment proceedings. The assessing authority while passing original assessment order had granted exemption on the basis of form III-B to the applicant. Subsequently, the assessing authority received information from various assessing authorities of the dealer who had issued forms in some cases that the alleged forms had not been issued to such dealer and in some cases the recognition certificate under Section 4-B was can- celled prior to the date of transaction and in some cases the record of issuing dealer shows that the alleged forms had been issued to the different parties for different amount than the amount shown in the forms. On the basis of such information, proceeding under Section 21 was initiated and the case had been reopened. The reopening of the case is not in dispute. During the course of proceedings under Section 21, a show cause notice dated September 27, 1989 was issued. The said show cause notice was replied by the applicant. On the consideration of the show cause notice and its reply, the assessing authority vide its order dated September 30, 1989 passed the assessment order. The assessing authority had disallowed the claim of exemption against the forms III-B to the extent of Rs. 77,02,180 and levied tax at Rs. 4,85,237.35. The dealer filed appeal before the Deputy Commissioner (Appeal), Saharanpur which was allowed in part. The applicant filed second appeal before the Tribunal, Saharanpur, which was rejected. Being aggrieved by the said order, the present appeal has been filed.
3. During the course of hearing by this Court on March 11, 2003, the Standing Counsel was directed to produce the assessment record and to file copies of disputed forms. The Standing Counsel filed counter-affidavit, in which, a details of disputed forms against which the claim was disallowed and reasons for disallowed was also stated. The photostat copies of form III-B was also submitted on the basis of which, exemption was claimed, along with the letters of various assessing authorities, by which, the information was given about the disputed forms III-B.
I have heard Sri Bharatji Agarwal, learned Senior Advocate and Sri U.K. Pandey, learned Standing Counsel.
4. The details of disputed form III-B and the reasons for disallowance as stated in the counter-affidavit are as follows :
5. The learned counsel for the applicant contended that the applicant has received such forms from various parties under the bona fide belief as a prudent dealer. He contended that form III-B are issued by the department. All the disputed forms have been issued by the sales tax authorities. It is not the case of assessing officer that the disputed forms have not been issued by the sales tax department and are forged and obtained from any third agency. The assessing officer of the dealer might have not issued the forms to its dealer from whom the applicant has obtained forms but the forms as such which are printed and issued by the trade tax department and therefore, it is not the responsibility of the applicant-dealer to make any query while making purchases about the forms. When the forms were received it had a stamp and seal of the sales tax department and properly signed by the issuing dealer and therefore, it was bona fidely accepted. He further contended that merely because when the counter-foil was filed the dealer has filed different amount and has shown that the said form was issued to some different parties. The applicant cannot be held responsible because in two copies of the form, the amount of bill was clearly mentioned and the form was duly signed by the dealer which was issued form and therefore, for any mistake or misrepresentation made by the issuing dealer, the applicant cannot be held responsible. In the end, he submitted that for fault or the mistake committed by issuing dealer, necessary action should be taken under the provisions of the Act against such dealer and not against the applicant. In support of his contention, he placed reliance on the decisions of this Court in the case of Indra Steels Private Ltd., Ghaziabad v. Commissioner of Sales Tax 1995 UPTC 4, Gaurav Trader, Meerut v. Commissioner of Trade Tax, U.P., Lucknow reported in (1996) 9 NTN 262 and the latest judgment in Commissioner of Sales Tax v. Rana Steel, Saharanpur reported in (2003) 22 NTN 218.
6. The learned Standing Counsel placed reliance on the orders of assessing authority, first appellate authority and the Tribunal.
7. Before dealing with the objection relating to each individual forms, it is necessary to refer provisions of the Act and the law laid down by this Court in this regard :
"Section 4-B(l)(a) :
Where any goods liable to tax under sub-section (1) of Section 3-D are purchased by a dealer who is liable to tax on the turnover of first purchases under that sub-section or where any goods are purchased by any dealer in circumstances in which such dealer is liable to purchase tax in respect thereof under Section 3-AAAA and the dealer holds a recognition certificate issued under sub-section (2) in respect thereof, he shall be liable in respect of those goods to tax at such concessional rate, or be wholly or partly exempt from tax, whether unconditionally or subject to the conditions and restrictions specified in that behalf, as may be notified in the Gazette by the State Government in that behalf.
Rule 25-A(l), (4), (9) and (10) :
An application for the issue of recognition certificate under sub- section (2) of Section 4-B shall be made to the Sales Tax Officer in form XVIII. It shall be signed in the case of a business carried on by-
(a) an individual, by the proprietor or by a person having due authority to act on behalf of such proprietor ;
(b) a firm, by a partner thereof ;
(c) a Hindu undivided family, by the Karta or manager of the family ;
(d) a body corporate (including a company, a co-operative society, a corporation or a local authority), by a director, manager, secretary or the principal officer thereof, or by a person duly authorised to act on its behalf ;
(e) an association of individuals to which clause (b), (c) or (d) does not apply, by the principal officer or person managing the business ;
(f) a department of the State Government, the Central Government or any other State Government, by a person duly authorised to act on its behalf ;
and shall be verified in the manner provided in the said form XVIII.
(4) If the Sales Tax Officer is satisfied, after making such enquiry as he thinks necessary, that the particulars contained in the application are correct and complete, the fee referred to in subrule (3) has been paid and the security, if any, required to be furnished under sub-section (3) of Section 4-B has been furnished by the dealer within the time and in the manner required by the Sales Tax Officer, he shall grant him a recognition certificate in form XIX for use at the principal place of the business and also furnish, free of cost, an attested copy of such certificate for every other place of business within the State, if any.
(9) The Sales Tax Officer on his own motion, where he is satisfied that any of the events mentioned in sub-section (4) of Section 4-B, has occurred, may, after giving the dealer a reasonable opportunity of being heard, cancel or amend the recognition certificate, as the case may be.
(10) When the Sales Tax Officer cancels or amends the recognition certificate under sub-rule (8) or (9), he shall forthwith publish a notice in that behalf on the notice board of his office, stating therein the name, address and other particulars of the dealer whose recognition certificate is cancelled or amended, specify in the order of cancellation or amendment the date from which such cancellation or amendment shall take effect, and shall send a copy of the order to the dealer. Where the certificate is cancelled or amended in accordance with sub-rule (9), the dealer shall, within fifteen days from the date of receipt by him of the copy of the order of cancellation or amendment, surrender to the Sales Tax Officer all copies of the recognition certificate held by him.
Rule 25-B(l) :
Where a dealer holding a recognition certificate purchases any goods referred to in clause (b) of sub-section (1) of Section 4-B for use as raw material for the purpose of manufacture of any notified goods, he shall, if he wishes to avail of the concession referred to therein, furnish to the selling dealer a certificate in form III-B (hereinafter called a 'declaration form')."
8. Section 4-B of the U.P. Trade Tax Act contemplates special relief to certain manufacturers in the matter of levy of sales tax. Sub-section (2) of this section envisages that a manufacturer may apply and obtain in the prescribed form a recognition certificate in respect of goods referred to in sub-section (1) which are required by him for use as raw material for the purpose of manufacture in the State of U.P. of notified goods which are intended to be sold by him in the State or in the course of inter-State trade or commerce or in the course of export out of India. Sub-section (1), apart from referring to the category of goods about which a recognition certificate may be obtained, also lays down, amongst others, that where a dealer sells those to a manufacturer who holds a recognition certificate in respect of those goods he shall not be liable to levy of sales tax upon the turnover of those sales to the extent that they have been exempted from such levy. Under the U.P. Trade Tax Rules, 1948, provision has been made about the procedure for issuance of a certificate of registration. Rules 25-A and 25-B deals with the matter. The competent authority to whom an application is made, for issuance of a recognition certificate may make necessary enquiries as it thinks necessary. Assessing authority issues form III-B only to those manufacturers who holds recognition certificate. Thereafter, the dealer who holds the recognition certificate while making the purchases of material issues form III-B to the selling dealer. Selling dealer claims exemption on the basis of the said form III-B during the course of assessment proceedings.
9. In the case of Commissioner of Sales Tax, U.P. v. Metal Cans, Kanpur reported in 1982 UPTC 858, fact of the case was that M/s. Metal Cans sold the tin containers to M/s. Jain Chemical Industries, Kanpur against form III-B. The claim of the exemption against said form III-B was refused by assessing authority in the case of M/s. Metal Cans on the ground that the sale was made in the year 1972-73 while in the recognition certificate issued to M/s. Jain Chemical Industries, Kanpur packing material was added w.e.f. May 26, 1975. The Tribunal has accepted the claim of exemption which was uphold by this Court.
10. In the State of Madras v. Radio & Electricals Ltd. [1966] 18 STC 222 (SC) a similar question had arisen before the Supreme Court in regard to the power of the assessing authority to decide whether the goods covered by a certificate of registration issued under the provision of the Central Sales Tax Act" and the Rules framed thereunder, which entitled them to a concessional rate of tax, were rightly so included in the certificate of registration or not. The Supreme Court held that while it may be open to the assessing authority to scrutinize the certificate to find out whether the certificate was genuine, normally it would not be open to him to question the wisdom of the authority which issued that certificate including a particular article therein. Following this decision a division Bench of the Bombay High Court in Bowen Press v. State of Maharashtra [1977] 39 STC 367 held that normally it would not be open to the assessing authority to refuse the benefit of the inclusion of an article in the recognition certificate in the matter of exemption or concession in the rate of tax where it could not be in dispute that the selling dealer had made the sale to a purchaser who had produced a genuine recognition certificate mentioning that article in it.
11. In the case of Bharat Iron Stores v. Commissioner of Sales Tax reported in 1994 UPTC 130 this Court observed as follows :
"The liability of the selling dealer, who accepts form III-A is only to check them to ensure that there is no defect on them which can be reasonably detected by an intelligent person. It is not his duty to ensure by all possible means that the firm is genuine or is not being misused. A dealer cannot be expected to consult a document expert or to send the certificate to the Sales Tax Officer, who issued the same, for verification before accepting the same. Any such things would make in the Act placing specifically or by necessary implication, such a burden on the selling dealer indicates that the Legislature had no intention to do so."
12. In the case of Gaurav Trader v. Commissioner of Trade Tax, U.P., Lucknow (1996) 9 NTN 262 this Court observed as follows :
"I have already mentioned the relevant provisions in the Act and the Rules which made it clear, as emphasized by the honourable Supreme Court as well as in my judgment in Bharat Iron Stores 1994 UPTC 130 that the selling dealer is expected to act only as a careful businessman and the Act does not place on the selling dealer the burden of making all sorts of verification. If there is nothing in form III-A raising a doubt about its genuineness or the genuineness of the purchasing dealer of the fact that the purchasing dealer is a registered dealer the selling dealer having acted on such a form III-A cannot be burdened with any liability if later on it is found that the purchasing dealer was non-existent or its registration certificate had already been cancelled."
13. The contention of the learned Standing Counsel that the furnishing of form III-A was not enough and the selling dealer has to prove to the satisfaction of the assessing authority that the sale was not made to a consumer, is not tenable. Section 3-AAA has to be interpreted in a reasonable manner as pointed out by the honourable Supreme Court in Chunnai Lal Parshadi Lal [1986] 62 STC 112. Unless it is shown that the declaration in form III-A was apparently "farzi" or there was collusion between the selling and the purchasing dealers, the furnishing of form III-A is enough proof so as to relieve the selling dealer of his liability and if it is found that the purchasing dealer was not authorised to issue the declaration in form III-A and had furnished a false certificate the remedy of the department is in proceeding against the purchasing dealer and not against the selling dealer who acted bona fide.
14. In the present case the dealer had made sales to some other parties as well and on enquiries nothing adverse had been found. So far as M/s. Loha Krishi Udyog is concerned the only information gathered by the assessing officer was that no such firm was registered at Bareilly. None of the authorities below has recorded any finding that the forms III-B issued by the purchasers in the name of M/s. Ratesh Steel, Kanpur, or M/s. Loha Krishi Udyog, Bareilly, were not the forms printed by the Government and issued by the sales tax department. The forms are statutory forms and have to be issued by the Sales Tax Officer under his seal and signature and he has to fill in the form the various details including the name of the dealer to whom the certificate is issued and his registration number. The disputed forms were produced before me by the learned Standing Counsel that purport to bear the seal of the Sales Tax Officer mentioning the name of the officer and bearing his signatures. No information has been collected by the department to the effect either that the seal or the signatures of the officer were forged or that these forms were issued to some other dealer and the original particulars of the dealer filled in by the issuing authority were erased and the particulars of M/s. Loha Krishi Udyog were interpolated. Learned Standing Counsel did not point out any such characteristic in the disputed forms purporting to have been issued by M/s. Loha Krishi Udyog and M/s. Ritesh Steel, Kanpur. So far as M/s. Ritesh Steel, Kanpur, is concerned, it is a firm registered with the sales tax department and in respect of the disputed forms purporting to have been issued by this party also non-information and details of the nature referred to above has been gathered not any signs of interpolation were pointed out.
15. As observed in the case of Bharat Iron Stores v. Commissioner of Sales Tax 1994 UPTC 130 an extract of which was reproduced in the case of Indra Steels Private Ltd. 1995 UPTC 4, the liability of the selling dealer is only to check the form to ensure that there is no defect which can be reasonably detected by an intelligent person. It is not his duty to ensure by all possible means that the form is genuine or is not being misused. In the present case the assessing authority did not probe deep into the matter and has acted merely on the information that the forms in question were not issued by the sales tax department to the two purchasing dealers referred to above. What was further required to establish was that the present dealer acted in a manner lacking bona fides or that he was in collusion with the purchaser and knowingly accepted fictitious forms. A dealer acting bona fide may be cheated by a purchasing dealer by issue of forms that were not genuine for one reason or the other but merely because some one had cheated the selling dealer, the later cannot be subjected to liability for sales tax without showing that he acted in a manner that lacks the care and caution of a reasonable man. Nothing of this sort has been shown in the conduct of the revisionist. Learned Standing Counsel laid stress on an averment made by the assessing officer in the assessment order for assessment year 1981-82 that Sri Arun Kumar the owner of the business in the name of the revisionist had stated that he had been doing business with this party for the past several years and the forms were genuine and that he accepted the responsibility for any defect in the disputed form III-Kha. After the initiation of action under Section 21 no statement of Arun Kumar seems to have been recorded to extract from him any information which may indicate that while entering into the transactions of sale in question and accepting forms III-B, he knew that the said firm do not exist and the forms are forged and fictitious. No information has been gathered about the manner in which the transactions were executed. The payment for the sales were made and the goods were transported. Therefore, from the mere information that the forms in question were not issued by the sales tax department to the two parties referred to above without indicating to whom they were actually issued, the present revisionist cannot be assumed to have any guilty intention to avoid payment of tax by accepting the disputed forms. In my view therefore, the Tribunal's finding that the dealer was wrongly allowed exemption in the original assessment or that the transactions of sales purporting to have been made to the two parties against form III-B were liable to tax is legally erroneous. The sales in question were granted exemption in the original assessment and no good reason had been made out to withdraw that exemption and bring to tax the sales in question.
16. Now in the background of the principle of law laid down in the cases referred to above, each and individual cases are being considered as below :
M/s. Tarun Enterprises Form No. 497540 for Rs. 42,210 Claim of exemption against form Nos. 497540 and 497536 was disallowed on the ground that the registration of M/s. Tarun Enterprises was cancelled on January 23, 1985 while the firm subjected to the transactions after January 23, 1985. In this case, it is not disputed that M/s. Tarun Enterprises was registered dealer and the aforesaid disputed forms were issued to it and the forms were genuine. It is not the case that the applicant was aware about the cancellation of the registration on January 23, 1985, still, received those forms. In the circumstances, it cannot be said that the applicant has not received forms bona fidely and thus the benefit against the aforesaid two forms cannot be denied to the applicant. For the mistake committed by M/s. Tarun Enterprises, the necessary action can be taken against it.
M/s. Kishore Enterprises, Unnao
(i)Form No. 250014 for Rs. 3,49,660 Against this form, the exemption was disallowed on the ground that as per information, the said form was not issued from the office of M/s. Kishore Enterprises, Unnao, and hence forged. The perusal of the assessment year shows that the proper enquiry with regard to this form was not made. The assessing authority should make the enquiry from M/s. Kishore Enterprises, Unnao, whether this form was issued by it or not and in case, if it denies then the proper opportunity of cross examination should be given to the applicant. The claim against the form cannot be denied merely on the information that the said form was not issued from the office of M/s. Kishore Enterprises, Unnao. It is not the case that the form was non-genuine or it was not printed by the department. If it is not the case of the department that the form was not printed by the department and is forged and there was collusion between M/s. Kishore Enterprises and the applicant, the benefit against the said form cannot be denied. Therefore, in respect of those forms, the matter requires reinvestigation.
(ii) Form No. 29357 for Rs. 36,87,178 and form No. 29358 for Rs. 1,20,993 The claim for exemption has been disallowed against the aforesaid two forms on the ground that as per information these forms were not issued by M/s. Kishore Enterprises, Unnao, to the applicant but have been issued to the parties of Agra and Lucknow for Rs. 7,706.35 and Rs. 9,867.60. The perusal of the assessment order shows that in respect of these two forms also the proper enquiry was not made. If the information was that these two forms have not been issued by M/s. Kishore Enterprises, Unnao, to the applicant and have been issued to the parties of Agra and Lucknow, the assessing authority should have made the enquiry from M/s. Kishore Enterprises, Unnao. In case if there is any denial on the part of M/s. Kishore Enterprises, Unnao, about the issuance of those two forms to the applicant, the opportunity of the cross-examination to such parties should be given to the applicant before drawing any adverse inference. Further the enquiry should be made that whether M/s. Kishore Enterprises, Unnao, has actually made purchases from the applicant to the extent of Rs. 36,87,178 and for Rs. 1,20,993 or not and for this the bills, the mode of supply and mode of payment, etc., should be examined. It is further to be enquired whether M/s. Kishore Enterprises, Unnao, had made any transaction of purchases from the alleged Agra and Lucknow parties to whom, as per information the forms were issued for Rs. 7,706.35 and Rs. 9,867.60. The enquiry with regard to the genuineness of the forms should also be made which was filed by the applicant as to whether the forms provided by the department or not. If such forms are found to be genuine and it is found that the applicant has made the sales to M/s. Kishore Enterprises, Unnao, the claim of exemption could not be disallowed, in the case of the applicant, for the wrong entries or any mistake committed by M/s. Kishore Enterprises, Unnao, in this regard.
(iii) Form No. 29389 for Rs. 6,77,001 The claim of exemption has been disallowed on the ground that the transaction relates to March, 1985 while the firm M/s. Kishore Enterprises, Unnao, closed on February 28, 1985. In this case, it is not disputed that M/s. Kishore Enterprises was registered dealer and the aforesaid disputed forms were issued to it and the forms were genuine. It is not the case that the applicant was aware about the cancellation of the registration on January 23, 1985 still, received those forms. In the circumstances, it cannot be said that the applicant has not received forms bona fidely and thus the benefit against the aforesaid two forms cannot be denied to the applicant. For the mistake committed by M/s. Kishore Enterprises, the necessary action can be taken against it.
M/s. Bhagwati Printing Press Form No. 289123 for Rs. 5,592.38 It is alleged that the said form was issued to the old firm in the assessment year 1983-84 and the said firm was reconstituted on April 1, 1984 and was registered under Section 4-B of the Act.
Claim of exemption against form No. 289123 was disallowed on the ground that the registration of M/s. Bhagwati Printing Press, Khatima was cancelled on January 23, 1985 while the firm subjected to the transactions after April 1, 1984. In this case, it is not disputed that M/s. Bhagwati Printing Press, Khatima was registered dealer and the aforesaid disputed form was issued to it and the form was genuine. It is not the case that the applicant was aware about the reconstitution of the registration on April 1, 1984, still, received the form. In the circumstances, it cannot be said that the applicant has not received form bona fidely and thus the benefit against the aforesaid form cannot be denied to the applicant. For the mistake committed by M/s. Bhagwati Printing Press, Khatima, the necessary action can be taken against it.
M/s. Rattan Paper Convertors, Kanpur Form No. 115023 for Rs. 20,09,249 Claim of exemption against form No. 115023 was disallowed on the ground that the registration of M/s. Rattan Paper Converters, Kanpur, was cancelled on January 9, 1984 while the firm subjected to the transactions after April 9, 1984. In this case, it is not disputed that M/s. Rattan Paper Converters, Kanpur, was registered dealer and the aforesaid disputed form was issued to it and the form was genuine. It is not the case that the applicant was aware about the cancellation of the registration on January 9, 1984, still, received the form. In the circumstances, it cannot be said that the applicant has not received form bona fidely and thus the benefit against the aforesaid form cannot be denied to the applicant. For the mistake committed by M/s. Rattan Paper Convertors, Kanpur, the necessary action can be taken against it.
M/s. Kumar Packers, Kanpur Form No. 154525 for Rs. 8,344 The claim for Rs. 8,344 was disallowed on the ground that as per information in respect of the said amount, M/s. Kumar Packers, Kanpur had issued another form No. 154526 while the amount of Rs. 8,344 is added in form No. 154525 along with another transaction A for Rs. 10,604. In my view, the claim cannot be disallowed. It is not the case that the applicant had added the amount of Rs. 8,344 in the form. It is also not disputed that M/s. Kumar Packers, Kanpur, had made the purchases for Rs. 8,344 and has also issued form III-B in respect of the said amount.
M/s. Bareilly Packing Industries, Bareilly Form No. 123963 for Rs. 38,572 The exemption has been disallowed on the ground that on investigation, it is found that the form was issued for Rs. 46,244 and in respect of Rs. 38,572, no form III-B was issued. The perusal of the form shows that the amount of Rs. 38,572 is mentioned in the form. It is not the case that the applicant has added the amount in the form. Therefore, form being genuine, the claim of exemption cannot be denied. The party, who has issued the form has not disputed about the purchases for Rs. 38,572. Therefore, thus, the benefit of exemption on the amount of Rs. 38,572 should be allowed.
S/Sri Envelop India Co., Bareilly Form No. 126788 for Rs. 74,518 The exemption has been disallowed on the ground that on investigation, it is found that the form was issued for Rs. 79,920 and in respect of Rs. 74,518 no form III-B was issued. The perusal of the form show that the amount of Rs. 74,518 is mentioned in the form. It is not the case that the applicant has added the amount in the form. Therefore, form being genuine, the claim of exemption cannot be denied. The party, who has issued the form has not disputed about the purchases for Rs. 74,518. Therefore, thus, the benefit of exemption on the amount of Rs. 74,518 should be allowed.
S/Sri Hony Packers, Saharanpur Form No. 117312 for Rs. 7,730 The exemption has been disallowed on the ground that on investigation, it is found that the form was issued for Rs. 6,495 and in respect of Rs. 7,730 no form III-B was issued. The perusal of the form show that the amount of Rs. 7,730 is mentioned in the form. It is not the case that the applicant has added the amount in the form. Therefore, form being genuine, the claim of exemption cannot be denied. The party, who has issued the form has not disputed about the purchases for Rs. 7,730. Therefore, thus, the benefit of exemption on the amount of Rs. 7,730 should be allowed.
17. In the result, revision is allowed and the order of Tribunal dated November 3, 1990 is set aside and the matter is remanded back to the Tribunal to pass appropriate order in the light of observations made above,