To Date :- 11th May, 2007

The President,

The Sales-tax Practitioners Association of

Maharashtra, Mumbai

Respected Sir,

Our Association has been rendering yeoman service to Tax Payers and Tax Practitioners in the State, by its various activities. I would like to bring to your notice the difficulties faced by the dealers in obtaining Registration Certificate under MVAT Act, 2002. Applying for the R.C. is first contact of Dealers with Sales-tax Department Any Dealer who has crossed Turnover Limit of Rs 5.00 lakhs in a year is compulsorily required to obtain R.C. Now, at the time of application, Department insists that at least two proofs in the name of applicant be given for place of Residence and one proof be given for place of business. It should be appreciated that limit of Rs. 5.00 lacs is very small limit and even panwalas are likely to exceed the limit if they fully declare the turnover. Further, there is no law in India which requires that a person must have his own residence or he must have two independent proofs for his place of residence, before he can commence any business. It is not always possible to have two proofs for place of residence in name of the applicant, especially when Ration Card and Telephone Bill are excluded from eligible proofs. If different persons in a family are carrying on different business, how they can get two independent proofs for place of residence? In case of Partnership firms, the problem gets compounded as such proofs are required for all the partners.

When it is not illegal to carry on any business without having such proofs, the MVAT Act virtually makes carrying on of any business without such proofs illegal, as no dealer is supposed to carry on business without obtaining R.C. and he cannot apply for R.C. if he does not have such proof.

Further, when R.C. application is accepted, the Department gives only three days to appear before Registering Authorities and application may be rejected if dealer does not present himself within three days. It may not be possible for dealers and Tax Practitioners to appear with such short notice.

I request our Association to take up these matters with the Hon'ble Commissioner of Sales Tax and impress upon him to take a practical view in above matters.

Thanking you,

Yours faithfully
(VASANT K. MANGE)

To,

The Sales Tax Association

Mazgaon, Mumbai

Sir,

My party is doing composite contract (Material & Labour) of buildings & complex. The party registered under Vat Act in the month of October, 2006 till then they are paying Vat on total @ 5%. What about the tax liability before registration for F.Y. 2005-06 & from April, 2006 to Sept., 2006 & What about the Service tax, whether they are liable to pay service tax also & if yes what should be the method of calculation.

Please clarify in detail about the above, we will obliged.

A. A. Khan

To,

Hon'ble Jayant Patil

Minister of Finance

Sachivalaya, Mumbai.

Respected Sir,

Appropos above, I have to submit that the Sales Tax Officer, Registration Branch, Kolhapur is not accepting Application in Form 101 if the applicant has no Permanent Account Number.

The Income Tax Department takes one to two months to give PAN, the work is allotted to private bodies to issue Permanent Account Number.

As per sec. 3 of MVAT Act, 2002 time limit for Fresh Registration is 30 days A person, who has started new business or in case of Transfer-Transferee as No Application in Form 101 is accepted by Registration Officer without PAN which is creating a great hardship.

All persons apply for PAN in time but PAN is usually received late by one to two months.

There is delay in getting Registration of TIN No. Naturally there is unregistered period of one to two months.

Please let me know what will be the remedy for this unregistered period for no fault of the traders.

Suitable instructions may please be issued to Registering Authority immediately.

Thanking You

Yours faithfully,
JAYANT DODWAD

Respected Sir,

Ref : (1) M/s. Universal Kids Fashion BST R.C 400043/S/533.

(2) Your order No DC/ADM/Ghat. Div/Revision/43/S/533/B-63 DT. 6-1-2007. Received on 12-3-2007 for the period 2000-01

Sub : Request to consider true facts and rectify the order
u/s. 62 of BST Act 1959

We are in receipt of your above referred order issued to our above clients on 12-03-2007 and on behalf of them, we would like to make some humble submissions for your kind consideration.

That our clients have been assessed for the year 2000-01 by STO C-511 Ghatkopar Div. Navi Mumbai u/s. 33(3) of the BST Act 1959. The assessing officer has verified the books of A/Cs and records and has allowed sales against Form
14-B worth Rs.20,33,925/- u/s. 5(3) of the CST Act 1956.

That the same case was taken for revision u/s. 57 of the BST Act, 1959 and Notice in form 40 has been issued, but due to carelessness of then consultant the case was not handled properly and finally on dated 6-1-2007 exparte revision order has been passed by your office and disallowed total claim of sales u/s. 5(3) of CST Act.

That in the said revision order it is mentioned that dates of purchase order was subsequent to the date of purchases by the exporter. As per our observation it is found that only in 3 forms 14-B the dates are subsequent. It was a clerical mistake of the exporter party. The details of those 3 forms 14-B are as follows;

BILL NO. DATE PURCHASE DATE OF SALES FORM 14-B
ORDER NO. PUR. ORDER AMOUNT NUMBER

11 02-01-2001 231 13-02-2001 2,59,500/- 373

12 01-02-2001 235 16-02-2001 1,92,000/- 375

13 25-02-2001 243 26-02-2001 2,37,825/- 376

TOTAL – 6,89,325/-

The copy of Air freight bills were attached with these forms 14-B to confirm the export of goods supplied by our clients. In remaining forms 14-B, the dates of purchase orders are in accordance with the date of purchases but in the revision order it is mentioned "purchase order number and date was not indicated on form 14-B" which is not correct.

To promote export the allowance u/s. 5(3) of CST Act 1956 and Rule 21-A has been enacted to exempt the tax in respect of sales claimed to be exported. Here there is no doubt about the export of goods in question. Due to a clerical mistake of declaration form issuing party, a huge tax penalty has been imposed on the dealer, that tax has not been collected or concealed by the dealer which may please be taken in your kind consideration.

At the instance we would like to refer an appeal order No. S.A. 1309 of 1997, M/s. Extrusions Process vs. State of Maharashtra it was mentioned that "The appellant produced two H forms issued by the exporter, it is noticed that those corrections were incorporated by putting signature and rubber stamp thereunder. Carrying out corrections at number of places in the declaration from cannot be the ground to disallow the claim, when those corrections are authentic. There is difference between overwriting and correction. The corrections on ‘H’ forms were made by the issuing party and those cannot be considered as ground to disallow the claim. On both forms there was a major defect that no purchase order with a date of foreign buyer were mentioned on both forms. But later on appellant produced Xerox copies of the purchase order therefore objections raised by the appellate authority cannot be sustained" – matter was decided on 16-6-2001.

We would also like to refer the wording of a Tribunal order in the case No. S.A. 1288 of 1993, M/s. Bombay Wire Ropes. It was stated that ‘The Revision Authority ought to take all the factors into the consideration and arrive at a just and proper decision once for all" the appeal was rejected by the Tribunal.

We would like to state that the dealers are belonging to lower middle class. They are tailors by profession and while getting an opportunity from a garment exporter, they have started this business, which remained unsuccessful for them and the same has been discontinued w.e.f. 1-1-2002. They have no sound financial capacity either to pay such huge Tax penalty or to afford expenses of further legal procedures. In addition to that the accounts records are also badly damaged in the flood of July, 2005. Hence we request you to please consider the above facts and rectify the order accordingly. Any further details, documents, clarifications required, please intimate to us.

Thanking you, Yours faithfully,

For Gaziani & Associates.

Read :- 1) Assessment Order passed by the Sales Tax Officer C-511, Ghatkopar Divn, Navi Mumbai on 20-3-2004 in case of M/s. Universal Kids Fashion holder of B.S.T. R.C. No. 400043/S/533 for the period
1-4-2000 – 31-3-2001

2) Relevant assessment record submitted by the Sales Tax Officer C-511 Ghatkopar Divn., Navi Mumbai.

3) Notice in form 40 along with gist issued on 13-6-05 & properly served upon assessee in respect of the period 1-4-2000 – 31-3-2001

Heard :- None

Order

(U/s. 57 of the Bombay Sales Tax Act 1959)

No. DC(ADM)/Ghat. Div/Revision/43/S/533/B-63

Navi Mumbai
Dt. 6-1-2007

The dealer M/s. Universal Kids Fashion is registered under B.S.T. Act holder of R.C. No. 400043/S/533. The dealer is a manufacturer in readymade garments. The dealer was assessed for the period 1-4-2000 to 31-3-2001 by the Sales Tax Officer C-511 Ghatkopar Division, Navi Mumbai u/s. 33(3) of the B.S.T. Act, 1959. The assessment resulted in Nil dues

While going through the assessment record it was noticed that Sales allowed u/s. 5(3) on Form 14B of Rs. 20,13,925/-. As per details on Form 14B the agreement order date from foreign buyer was subsequent to the date of purchases by the exporter. Also the purchase order number and date was not indicated on form 14B. This indicated that the exports were not made in pursuance of the import order hence not in keeping with the provisions of section 5(3) of C.S.T. Act. Hence these sales treated as local Sales and tax levied at 5.4%. Hence there is short levy of tax. It is necessary to correct the same. As on 30-6-2005, 23-9-2005 Shri Z. H. Shaikh (S. T. P.) attended & requested for adjournment. But he has not submitted any details.

In view of the above facts stated I.R.A, Sawadekar Deputy Commr. of Sales Tax (Adm) Ghatkopar Divn., Navi Mumbai in exercise of the powers delegated to me u/s. 57 of Sales Tax Act, 1959 revise the order as under

Assessing officer is directed to recover the amount at Rs. 1,92,053/- as per the provision of law.

(R. A. Sawadekar)
Dy. Commr. of Sales Tax (Adm) M-36
Ghatkopar Divn, Navi Mumbai

To
V. V. Mody
Advocate
1704, Pancharatna,
Opera House, Mumbai – 400004

No. Sr. DC (A & R)/Vat/Audit/1007/3/Adm-3/B-55 Mumbai, dated, 17-2-07

Ref: Your letter dated 11-01-2007

With reference to above mentioned subject, the clarification is as follows:

1. It is to be noted that DEPB used for payment of custom duty for import of goods becomes part of dealer’s purchase price. If such goods are sent on Branch Transfers, the retention of 4% would be applicable as per rule 53(3) of Maharashtra Value Added Tax Rules, 2005.
    

2. After Vat Audit the dealer may file a single revised return for the period ending March of the F.Y. If it is not possible then he have to file revised return for every month, quarter or, as the case may, be for six months. Since there is no provision for filing annual return in Maharashtra Value Added Tax Act, 2002, filing of revised annual return would be bad in law. Kindly note.

Jt. Commissioner of Sales Tax – VAT,
(Shri Dilip Dixit),
Mumbai.

Many of my clients are purchasing Duty Entitlement Pass Books from the local market. The said DEPB is covered by Entry C-39. Thereafter the said Duty Entitlement Pass Book (DEPB) is utilized for payment of Customs Duty for import of bulk drugs covered by Entry C-17. Under the law, set off is available on the purchase of Duty Entitlement Pass Book. In many cases, the dealer transfers the imported goods on which duty is paid by utilization of DEPB to the branch outside Maharashtra State.

The question is whether under Rule 53(3), set off equal to 4% of the proportionate DEPB purchased is to be disallowed to the extent of the branch transfer.

Your immediate clarification in the matter shall be appreciated.

VAT Audit

With reference to the VAT audit, I find in many cases that the 12 monthly returns are to be revised in order to give effect to the charges being made after the time of filing return. In such cases, the dealer who has already filed 12 returns as original one has to file 12 revised returns for each month for the year 2005-06.

In my opinion, filing of revised return for 12 months or for few months will load the Department with greatest possible paper work and there will be absence of annual figures which are very relevant for audit.

I, therefore, suggest that Form 221, 222, 223, 224, and 225 may be allowed to be utilized for filing one single annual return for the period 1-4-2005 to
31-3-2006 so that it will take into consideration all the adjustments effected in each month. Please note that the advice of the Commissioner regarding filing the return in the month of March creates a problem particularly when there is a change of entry, absence of 6(2) claim, goods returned, price rebate, cancellation of bill, etc. The same may be the position of purchase side. Possibility of a negative return in the month of March arises and therefore the same is not proper in my opinion.

I give the following illustration which will make the position very clear why annual return is a better alternative rather than revising one return for March.

"Suppose, in the month of June 2005, the transactions are shown under 6(2) and dealer does not want to claim 6(2) and wants to file revised return for C.S.T. In other words, column of 6(2) is to be reduced and the column of ‘C’ Form plus tax is to be increased. Now if there are no transcations of 6(2) in March, how to file a negative return?

The same will be the position in respect of goods returned, price rebate, cancellation of bill. Similarly it will also be the position on purchase side."

Yours faithfully,

(V. V. Mody)

Dated 12th June, 2007.

To
The Commissioner of Sales Tax,
Maharashtra State, RN-829,
Mumbai-400 010.

Sir,

Sub: Working of Refund Section and Refund Audit Section under the VAT System.

Ever since the VAT system has been introduced two separate Departments for granting Refund as per Returns have been created. Earlier to this all the Refunds used to be granted as per Assessment Orders passed, but it was considered necessary to grant Refund as soon as the same is due as per Returns filed and accordingly the system of VAT Refund was introduced. This Department is divided into two parts one is known as VAT Refund Department and other one is known as VAT Refund Audit and the working of both together is just not only Duplicacy, but Triplicacy. The following lines will clarify the position.

When we file the Return for March 2006 or March 2007, we show the Net Amount Refundable during the whole year. Now, since there is Refund, we have to apply in Form-501 which is accepted by VAT Refund Department. This Department now process the application for Refund – ask us to furnish the details of purchases – verify the periodicity minutely – saying that you are supposed to file quarterly Return – who you have filed monthly Return – Hence, you are again compelled to file Four Separate Returns – though the annual figures remains the same.

After we file the four Returns they will ask for the Zerox copies of all the statement of purchases etc.etc. and copies of Four Returns Filed.

Sir, is it not Duplicacy of work – when we have filed Returns twice—why the Refund section should ask us again the Zerox copies of the Returns filed.

Presumingly all the requirements are completed, still the Refund Section has no power to grant us the Refund. They shall forward the file to Refund Audit Section who shall take their own time to verify the details and hence the matter becomes Triplicate.

One more instance, I may point out that when we file Revised Returns as per the periodicity dicted by the Department. – they say that your earlier application was pertaining to monthly Returns. Now you have filed fresh or Revised Return so you must file separate application in Form -501.

May, I, therefore request you to kindly investigate the procedure and simplify the same rather than making it more complicated. I feel the earlier system of Granting Refund only in response to Assessment order was far better than the present system and before the matter becomes worst, we should do the needful.

Awaiting an early favour and thanking you in anticipation.

With warmest regards,

Yours sincerely,
(MAHABIRPRASAD S. DEORA)

Dated : 26.07.2006

To

The Commissioner of Sales Tax
Maharashtra State,
Mumbai.

Dear Sir,

We refer to the verification of Cross check by Enforcement (C) Mumbai. We enclose herewith copy of one such notice received in case of our client M/s. Bharat Pharmaceuticals.

It can be seen that the learned S.T.O. AV-17 has asked for books of 1999-2000. As per Rule 54 of BST Rules,1959 (copy enclosed for ready reference) the books etc. are to be preserved for Five years. Therefore the time limit for books of 1999-2000 is over by 31.3.2005. The learned S.T.O. therefore cannot ask for details pertaining to such year like, 1999-2000. We have received such notices for some other clients also.

We feel that above procedure is not as per law. We request to instruct the lower authorities suitably and also to inform us about correct position.

Meanwhile we request to instruct the learned S.T.O. to keep above matter pending.

Awaiting your early response,

Thanking you,

Yours faithfully,

C. B. THAKAR
Advocate

To

Shri C. B. Thakar,
2nd Floor, Katha Bazar,
413, Narsi Natha Street,
Mumbai 400 009

No. VAT/MMB-1006/151/Adm-3/B-432 Mumbai, Dt. 10-05-2007

Sir,

As per the Bombay Sales Tax Rules, 1959 the books of accounts are to be preserved for a period of five years from the expiry of the year to which they relate. If any proceedings under Bombay Sales Tax Act, 1959 are initiated or are pending then the books of accounts should be preserved, till the period for the said proceedings is over.

Yours faithfully,

(S.D. BHANDARE)
Sr. Deputy Commissioner of Sales Tax,
(Act & Rule) Maharashtra State, Mumbai

1. Recovery of Tax, whether property of the dealer is to be charged for recovery of sales tax arrears? Who is bona fide purchaser? Whether purchaser having knowledge of existence of arrears? Wilful Negligence?
    

2. What is "Charge"?,
    

3. Plaintiff must plead facts which he intend to prove, without pleading, evidence cannot be considered.

Division bench of Madras High Court, referred this matter to the Full Bench for decision. The petitioner purchased house property from the persons who were dealers under Tamil Nadu General Sales Tax Act. The Sales Tax Department noticed that, seller of the property was defaulter in payment of assessment dues. The Deputy Commissioner, therefore issued notice to plaintiff calling upon them to pay tax arrears of sum of Rs. 1,01,879.67. The plaintiff denied his liability, saying that they are bona fide purchasers for value without notice on any manner of claim by anyone against the same. Not satisfied with this answer the Deputy Commissioner initiated recovery proceedings under Tamil Nadu Revenue Recovery Act, The house is attached and brought to sale after service of notice of demand, because defaulters have executed a sale deed in respect of the said properties in favour of the plaintiff in order to defraud the Dept. The sale is not binding on the Sales Tax Department. The plaintiff is not personally liable but the property purchased by them is subject to charge and is liable for the said arrears.

Against this order, the plaintiff came before the trial court, who framed the questions, that whether the sale deed in favour of the plaintiff is true, valid and binding on the defendant?, whether charge had been created by operation of law over the suit properties prior to said sale?, Whether there was no valid notice u/s 80, of CPC? And so on....

The important question was, whether the plaintiff are bona fide purchasers of the suit property without notice. Court referred to sec 3 of Transfer of Property Act which says, ‘a person is said have notice’ of a fact when he actually knows that fact, or when, but for wilful abstention from an enquiry or search which he ought to have made. Or gross negligence, he would have known it.

Madras High Court, Division Bench in the case of Dy. Commercal Tax Officer vs. R. K. Steel (1998) 108 STC 161 has observed that in Ahmedabad Municipal Corporation of the City of Ahmedabad vs. Haji Abdul Gafur Haji Hussenbhai AIR 1971 SC 1201, unless a provision is made in any statute contrary to the rule of section 100 of the Transfer of Property Act, a bona fide purchaser for consideration without notice of the charge is protected.

Following this court held that, the respondent is bona fide purchaser without notice of the charge u/s 24(2) of the Sales Tax Act and therefore, his property cannot be proceeded against for the recovery of sales tax arrears.

In Shreyas Papers Pvt. Ltd. 144 STC 331 Supreme Court while considering the enforceability of the charge created u/s 13(2)(i) of Karnataka Sales Tax Act, 1957 observed that; the expression Charge is not defined in the KST Act, the concept is well known in properly law and has been defined in Transfer of Property Act, 1882.

Sec 100 of Transfer of Property Act, defines Charge as, ‘Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.

Nothing in this section applies to a charge of a trustee on the trust property for expenses properly incurred in the execution of his trust and save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.

Sec 19 of the Transfer of Property Act, when the firm is liable to pay tax under the Act, firm and each of the partners of the firm shall be jointly and separately liable for payment of such tax, Under this section, for the liability of the firm, the partners are also liable and therefore their properties cannot escape the tax liability. When such a person has effected transfer of his property after the assessment proceedings under the Act are completed it cannot be stated he did not intend to evade the tax and as such the sale will not be binding on the department. But, at the same time, the sale will not be binding on the department. But, at the same time, the Legislature has intended to protect the honest person who had purchased the property from such a seller, if he had not colluded with the seller and he had no notice of the liability of the vendor. While sub-section(1) of section create ‘Charge’ on the properties of a defaulter to the extent of his dues, sub-section (2) states that the dues will have priority over all other claims against those properties, except land revenue and claims of Land Development Bank in regard to property mortgaged to it.

The meaning of the term "charge on the property" is to be found in section 100 of the Transfer of Property Act, in which it has been equated to "simple mortgage", and it has also been laid down therein that, in the absence of a specific provision in any law, no charge shall be enforced against any in the hands of a person to whom such property has been transferred for consideration and without notice of a charge. Thus while section 24 (1) of the Act gives the tax dues only the status of a simple mortgage over the properties of the defaulter, section 24(2) gives these dues a priority over all other claim against that property except claims for land revenue and Land Development Bank.

A reading of section 3 of the Transfer of Property Act, 1882 leads to the conclusion that, not only a wilful abstention from an enquiry which a person ought to have made, but the gross negligence to make enquiry also would amount to notice of fact to him. When the prudence of a person requires him to make an enquiry, but due to his own negligence he failed to make enquiry, in falls in the category of a person, with notice. A purchaser of the property who claims the transaction to be bona fide without notice, the yardstick to be applied for the "notice" is given in sec. 3 of the Transfer of Property Act, 1882 and only by the application of this provision; a purchaser who seeks protection is to be identified, whether he is purchaser for value without notice. The necessity of the purchase, the intention of the transfer, the relationship between the vendee and vendor are all vital factors to find out the reasonableness of the person in purchasing the property. Sometimes unexplained secrecy or the hest in the transaction may also throw some light on bona fides or mala fides, all facts relating to the conduct of the parties to the transaction have to be weighed as whole.

U/s 101 of the Evidence Act, 1872 whoever desires any court to give judgment as to any legal right or liability depending on the existence of facts which he asserts, must prove, that those facts existed. Therefore, it is for him to establish that there was no wilful abstention of enquiry or search of the facts, on his part about the vendor before the sale transaction was completed.

In this context court referred to Order, Rule 2 of the CPC, which says "every pleading shall contain only a statement in concise form of the material facts on which the party pleading relies for his claim or defence, as the case may be, but not the evidence by which they are to be proved.

On careful reading of the above provisions shows that the party must plead all material facts on which he means to rely at the trial. If anyone of the material fact is omitted, the statement of claim is bad and it would mean no pleading and no cause of action for suit. If material facts are not pleaded, a court cannot permit evidence to be laid. In Udhav Sign vs Madhav Rao Scindia (1977) 1 scc 511; AIR 1976 se 744, the Supreme Court has defined the expression "material facts" in the word: "All the primary facts which must be proved at the trail by the party to establish the existence of a cause of action or his defence, are material facts."

The distinction between "material facts" and "particulars" cannot be overlooked. Material facts are primary and basic facts which must be pleaded by the party in support of the case set up by him, either to establish his cause of action or defence. Since the object and purpose is to enable the opposite party to know the case he has to meet, in the absence of pleading, a party cannot be allowed to lead evidence. Failure to state even a single material fact, hence, will entail dismissal of the suit. Particulars on the other hand, are the details of the case. They amplify, refine and embellish material facts. They give the finishing touch to the basic contours of a picture already drawn so as to make it full, more clear and more informative.

In this case the defendant submitted that, the defence of purchase without notice is one which ought to be specifically pleaded and proved by one plead so and placed his reliance on various decisions of court; viz, Murat Singh vs Pheku Singh AIR 1928 Patna 587, In this case division bench of Patna High Court has held that" "If the defendant wished to avail themselves of the defence that they were purchasers for value without notice, they should have pleaded it." In MT. Renukabai w/o Sitaraji Wankhede vs Bheosan Hapsaji Junghare AIR 1939 Nagpur 132. it has been observed that" Whether the matter falls squarely within section 100 or whether it comes under a more general rule of law, the burden is on the transferee to establish that he is the bona fide transferee for value without notice". In the background of these decisions the defendant submitted that as per section 101 of the Evidence Act, burden of proving the same is on the plaintiff but they have not discharged that burden, the plaint does not contain the primary facts which must be proved at the trial by the plaintiff to establish their case that they are bona fide purchasers for value without notice. In the absence of specific pleadings in the plaint the plaintiffs are precluded from letting in any oral evidence on this aspect.

What is wilful abstention? Court referred to Supreme Court's observation on this, that "Wilful abstention suggest conscious or deliberate abstention and gross negligence is indicative of higher degree of neglect. Negligence is ordinarily understood as an omission to take such reasonable care as under the circumstances it is the duty of a person of ordinary prudence to take. In other words, it is an omission to do something which a reasonable man guided by consideration which normally regulate the conduct of human affairs would do or doing something which normally a prudent and reasonable man would not do. The question of wilful abstention or gross negligence and therefore, of constructive notice considered from this point of view is generally a question of fact or at best mixed question of fact and law depending primarily on the facts and circumstances of each case and except for cases directly falling within the three explanations, no inflexible rule can be laid down to serve as straight jacket covering all possible contingencies. The question one has to answer in circumstances like the present is not whether the purchaser had the means of obtaining and might with prudent caution have obtained knowledge of the charge but whether in not doing so, he acted with wilful abstention or gross negligence. Being a question depending on the behaviour of a reasonably prudent man the courts have to consider it in the background of Indian conditions."

With these observations and findings court dismissed the petition of plaintiff.

B. Suresh Chand vs State of Tamil Nadu & Another 148 STC 477 Madras [FB]

2. Export Sale not part of Gross Turnover, not included in for calculation of notional tax liability. Interpretation of provision of an enactment should be made keeping in mind the objects sought to be achieved.

The dealer was engaged in the business of manufacture and sale of paper and packing material. Exemption was granted to him u/s 13-B of Haryana General Sales Tax Act. While assessing the dealer, assessing authority calculated notional tax liability, without including turnover of export sales in gross turnover of sales. The revising authority revised the assessment order, holding that export sales had to be included in the turnover for the purpose of calculation of notional tax liability. This view of revision authority was upheld by the Tribunal in appeal referring to rule 28-A(4)(a) and observed that "The provision leaves no doubt that the benefit of tax exemption extend to gross turnover only, which as per the definition in the Act, includes sales in the course of export also. Therefore while determining the tax benefit, the gross turnover which also includes export sales has to be considered and it cannot be excluded while calculating the tax benefit of finished goods."

In reference before the High Court, the appellant submitted that; State legislature does not have competence to tax export sales. Once this is so, even for the purpose of calculation of notional tax liability for exemption, export sales cannot be included in the turnover. Turnover can include only sales which can legally be subject tax. On the other hand submission of revenue was in terms of rule
28-A(4)( a) the benefit of exemption from payment of tax is available to a unit on its gross turnover and gross turnover is the total receipt on account of sales made by a dealer. Of whatever kind it may be, which will certainly include even the export sales.

After elaborate discussion and referring to various provisions in the Act and Rules, court found that, what is exempted under the Act and Rules is the payment of tax by a class of dealer who has been issued eligibility and exemption certificates. As per the scheme of the Act, stage for payment of tax comes only when either the assessee pays tax on the basis of self assessment at the time of filing of returns or when the assessment is framed. The word payment of tax pre suppose that liability to pay tax under the Act is existing, only then the stage of payment of tax would arise for exemption from/deferment of which the scheme in the form of rule 28A has been framed under the Act. Court referred to distinction between exemption from non payment of tax and non imposition of taxes made by constitution bench of Supreme Court in the case of A.V. Fernandez vs State of Kerala 8 STC 561 in following terms There is a broad distinction between the provisions contained in the Statute in regard to the exemptions of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non-imposition of tax on the other. In the former case, but for the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The Legislature cannot enact a law imposing or authorising the imposition of a tax on such sales and they should be excluded from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed.

The issue in this case was whether the turnover of export of goods outside the territory of India would form part of the turnover on which notional tax liability is to be calculated so as to adjust the same from the exemption limit available to the unit. As to whether there is any liability on the dealer to pay tax on the turnover of export of goods outside the country so that there may arise need to provide exemption or deferment from payment of such tax with a view to promote industrialisation, need examination. Article 286 of the Constitution of India clearly debars the State Legislature to impose tax on the turnover of goods exported outside the country.

Court also referred to decision of Supreme Court in the case of Associated Cement Companies Ltd. vs State of Bihar 137 STC 389 on the question whether the appellant had any ‘liability’ under the Act. Court also referred to dictionary meaning of word liable in Concise Oxford Dictionary and in Black’s Law Dictionary.

Then court came principle of purposive construction, and referred to observations of Supreme Court in Sri Ram Saba vs State of West Bengal 11 SCC 497 on interpretation of statutes. In this case Supreme Court has observed that "It is well settled principle of interpretation that a statute is to be interpreted on its plain reading; in the absence of any doubt or difficulty arising out of such reading of a statute defeating or frustrating the object and purpose of an enactment, it must be read and understood by its plain reading. However, in case of any difficulty or doubt arising in interpreting a provision of an enactment, court will interpret such a provision keeping in mind the object sought to achieved and purpose intended to be served by such a provision so as to advance the cause for which the enactment is brought into force. If two interpretations are possible, the one which promotes or favours the object of the Act and purpose it serves is to be preferred.

With this reference of appellant is allowed.

Kagaz Print N Pack (I) Pvt Ltd. vs. State of Haryana 5VST 26

3) Whether supply of cement and steel in execution of works contract, at a agreed cost and deducting the cost from monthly bill amounts to Sale? Yes.

but the Dy. Commissioner

Having regard to the clear and categorical views expressed by the Supreme Court in Ahmedabad Municipal Corporation of the City of Ahmedabad vs Haji Abdul Gafur Haji Hussenbhai AIR 1971 SC 1201, we are not inclined to accept the two Division Bench judgments of this Court in Dy. Commercial Tax Officer’s case (1985) 14 STL 164 (Mad.) and Coramandel Indag Products India Ltd’s case (1993) 3 MTCR 8. We would have normally referred the issue for decision by a Full Bench, but for the fact that the judgment of the Supreme Court is crystal clear. To repeat unless a provision is made in any statute contrary to the rule of section 100 of the Transfer of Property Act, a bona fide purchaser for consideration without notice of the charge is protected. This proposition of law is too very clear and so categorically emphasised by the Supreme Court that we are inclined to follow the rule decidendi of the Supreme Court in Ahmedabad Municipal Corporation case AIR 1971 SC 1201. We therefore with respect differ from the views expressed by the two Division Bench judgments referred to above and propose to follow the judgment of the Supreme Court.

BEFORE SHRI S HANUMANTHA RAO
APPELLATE AUTHORITY U/S. 19(1) OF RIGHT TO
INFORMATION ACT 2005

APPEAL NO. 1 OF 2007

BETWEEN

SHRI KISHOR T LULLA, SANGLI ….. APPELLANT

AND

CHIEF PUBLIC INFORMATION OFFICER
Electronics Corporation of India Limited, Hyd 500 062 ….. RESPONDENT

Shri Kishore T Lulla, the appellant herein sent on 28-12-2006 a request under provisions of Right To Information Act (RTI for brevity) 2005 seeking information on issue of VAT (TIN) Certificates and Sales Tax Certificates issued by ECIL for and on behalf of and as Contractor with Maharashtra Sales Tax Department (MSTD for short). Further, on 9-3-2007 contending that no reply was received from the Chief Public Information Officer (CPIO), ECIL, Shri Lulla sent appeal to the Appellate Authority. The Appellate Authority on 17-3-2007 relied Shri Lulla that he had directed the CPIO, ECIL to furnish the information within the stipulated time. The CPIO, ECIL vide letter dated 16-4-2007 indicated that the information sought remains partly in domain of MSTD and the rest cannot be furnished in view of Sec 8(d) of the said RTI Act. Aggrieved by this, Shri Lulla preferred an appeal dated 30-4-2007 by enclosing the necessary fees under the rules.

The points for consideration before this Authority is (a) whether the Respondent is justified in refusing to divulge requisite information to the appellant, and (b) what are the consequences thereof.

The respondent CPIO indicated that the agreement with MSTD has been under negotiation and has not yet been finalised. The Appellant quoted U/s. 8(d) which provides for non disclosure of "information including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the Competent Authority satisfies that larger public interest warrants the disclosure of such information. The Appellant further contended that the CPIO, ECIL wrongly interpreted the provision, in that the information should not harm the competitive position of a third party, that ECIL is not a third party, that it is a Govt undertaking and hence the question of applicability of this provision does not arise.

Provisions of RTI Act clarifies that "third party" means a person other then citizen making a request for information and includes the public authority. Thus it applies to an organisation which is seeking information and such organisation could also be the public authority. However, the point in question is whether the CPIO ECIL is justified in taking umbrage U/s. 8(d). Admittedly the contract has been awarded to the Respondent in an open competition and nothing much remains if the information is furnished to the Appellant. The Respondent contended that the contract has not yet been finalised in view of the negotiations regarding certain clauses, though execution of the contract has not been stalled. In view of this position and in absence of the purpose for which this information is sought, it will be premature to furnish any information relating to the contract which incidentally has not yet been finalised and signed by the parties.

I therefore dispose of this appeal accordingly.

S. Hanumantha Rao
Director (P), ECIL
Appellate Authority under RTI Act

Chartered Accountants eligible to appear Charity
before Office of the Charity Commissioner

CA. Tarun Ghia had applied under Right to Information Act, 2005 seeking information as to whether a Chartered Accountant is allowed to appear, make written submissions, do alterations, amendments in the papers and documents and to represent and act on behalf of their clients applying for registration as a society under the provisions of Societies Registration Act, 1860 and/or a trust under the provisions of Bombay Public Trust Act, 1950 under an authority letter from such clients and if not allowed to appear and represent as above, then is there any provision of law/notification/circular/ or any such document to under which he is so disallowed?

The Public Information Officer replied in a very vague manner and pleaded ignorance at any such circular and advised Mr. Ghia to approach Delhi Office.

Mr. Ghia filed an appeal before the Appellate Authority under RTI Act stating that in response, the learned PIO did not provide any specific information in this regard. Rather the learned PIO in round about words asked the appellant to approach an office in Delhi.

Mr. Ghia stated that by providing vague reply the learned PIO had in effect refused to provide information.

In his grounds of appeal Mr. Ghia stated that the appellant is likely to use the information for the benefit of chartered accountants who are wrongly disallowed to appear in various proceedings before the Office of the Deputy Charity Commissioner which is a quasi judicial authority. It is therefore logical to contend that to deprive the appellant from doing so, the information has been refused.

The appeal came up for hearing on 15-6-2007. The appellate authority went through various internal circulars of the department and found out of circular no. 23 dated 18 th August, 1952. An excerpt from the circular is reproduced below :

"A Chartered Accountant or any other person, other than a pleader, can appear in an inquiry under the Bombay Public Trusts Act, 1950 as a recognised agent only on production of a power of attorney on properly stamped paper."

A copy of the circular was provided and appeal was allowed.

24th May, 2007.

The Commissioner of Sales Tax,
Maharashtra State,
RN 829,
Mumbai – 400 010

Sir,

Kindly refer to the above circular dated 21st May, 2007 which has come in our hands on 24-5-2007 and the trade at large may even get the same by 28-5-2007.

Your Honour is aware that last date of filing the Returns for April, 2007 was 21st May, 2007 and several dealers have asked whether they can adjust the Refund of March 2007 to April, 2007 and in the absence of this circular we have to pay tax and file Form-501 which itself is a lengthy procedure.

Sir, if this circular could have been issued by 15th May, 2007, perhaps we could have been issued by 15th May, 2007, perhaps we could have saved lot of working hours both for the dealers as well as for the Department and hence at this stage I can only request you to kindly get the Refund applications expedited.

Thanking you,

With warm regards

Yours sincerely