Holding

The original C‑Form must be furnished as mandated by Rule 6(b)(ii) and Rule 12; without it the dealer cannot claim the concessional rate of tax.

Summary

India Agencies (Regd.) Bangalore claimed a concessional 4% tax rate on inter‑state sales under Section 8 of the Central Sales Tax Act. The original portions of Form‑C were lost, and the dealer submitted duplicate copies and indemnity bonds. The assessing authority disallowed the benefit, the Joint Commissioner allowed it, but the Additional Commissioner set aside that order and the Karnataka High Court dismissed the appeal. The Supreme Court held that Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 and Rule 12(2)‑(3) of the Central Sales Tax (Registration and Turnover) Rules, 1957 require the original C‑Form to be filed; the provisions are mandatory and must be strictly construed. Consequently, the dealer was not entitled to the concessional rate, and the appeal was dismissed.

Issues considered

The requirement of filing the original portion of Form‑C under Rule 6(b)(ii) and Rule 12 for claiming the concessional tax rate.
Whether a duplicate C‑Form and indemnity bond can satisfy the statutory requirement.
Whether strict construction of the tax provisions precludes liberal interpretation in cases of hardship.

Legislation cited

Central Sales Tax Act, 1956s. 13, s. 8
Central Sales Tax (Registration and Turnover) Rules, 1957s. 12(1), s. 12(2), s. 12(3)
Indian Evidence Act, 1872s. 62

Subjects

Central Sales Taxconcessional rateForm Coriginal duplicate requirementstrict statutory constructiontax exemptioninter‑state tradeindemnity bond

Judgment

, INDIA AGENCIES (REGD.), BANGALORE A
v.
ADDLITIONAL COMMISSIONER OF COMMERCIAL TAXES,
BANGLORE

DECEMBER 16, 2004
B
[S.N. VARIAVA, DR. AR. LAKSHMANAN AND
S.H. KAPADIA, JJ.]

Central Sales Tax Act :
c
Section 8-Rule 12 of the Central Sales Tax (Registration and
Turnover) Rules' 195-Inter state trade or Commerce-Concessional rate
of sales tax-To avail the benefit of-Requirement-Held, the requirement
prescribed under the Rules are mandatory and strict compliance of the same
is called for. D

Central Sales Tax (Karnataka) Rules' 1957-Filing of return-
Furnishing of Original Form 'C'-To avail concessional rate of tax-Held,
Not a mere formality or technicality-Rule being clear and categorical,
can't be liberally construed but should be construed strictly-Rule consistent
with the provisions of the Central Sales Act. E

Interpretation of Statutes :

Fiscal legislation-Taxing Statutes-Has to be construed strictly--
Can't be liberally construed. F
Statute law-Provision clear and unambiguous-Hardships-Softning
the rigour of-Can be by way of legislation, subordinate or delegated-
Can !f. b.e ,/Jy the court.

For the inter state trade effected by the appellant, the Assessing G
authority disallowed the benefit of Concessional rate of sales tax cor-
responding to the 'duplicate' C-Forms and the indemnity bond fur-
nished for the loss ofForm-C marked as original. Being of the view that
the assessing authorities should not have denied the benefit, the Joint
Commissioner, upsetting the order, directed to accept the duplicate H
987
988 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A Form 'C' and the indemnity bond and allow the benefit to the appellant.
The matter was taken up before the additional commissioner concurred
with the assessing authorities and set aside the order of the Joint Com-
missioner. The Hon'ble High Court dismissed the appeal filed against.
Hence this appeal.
B
It was contended by the appellant that filing of original portion of
the Form 'C' is not mandatory but directory. In case the original
portion of Form 'C' is lost and the selling dealer furnishes the indemnity
bond together with the portion marked 'duplicate' of the Form 'C', that
would amount to sufficient compliance for the levy of concessional rate
C of tax. It was further contended that having lodged Police complaint
regarding the lost F_orms and having undertaken all possible efforts is
order to confirm the transactions from the purchasing dealers like
obtaining attested copies of the triplicate and also a letter from them
confirming the transactions, the bonafide of the appellant was not in
D dispute and also the bonafide of the efforts made to obtain duplicate
Form 'C' from its customers in terms of the Rule 12(3) of the Central
Sales Tax rules, the approach of the authorities was inequitable and was
to the great hardship. Further, the High Court ought to have been less
rigid in interpreting rule 6(b)(ii) of the Central Sales Tax (Karnataka)
E Rules, 1957 requiring filing of the 'original' portion of Form 'C' alongwith
the return to claim concessional rate of Sales tax.

Dismissing the appeal, the court

HELD: 1.1. The Rule 6(b)(ii) of the Central Sales Tax (Karnataka)
F Rules, 1957 and Rule 12(2) and 12(3) of the Central Sales Tax (Regis-
tration and Turnover) Rules, 1957 has to be strictly construed. The
selling dealer not complying with the said provisions is not entitled to
the concessional rate of tax under Section 8 of the Central Sales Tax.
In order to claim concessional rate of tax, the original C-Form has to
G be attached to the return as provided under Rule 6(b)(ii) of the Central
Sales Tax (Karnataka) Rules, 1957. [1002-F-G]

Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer, Cal-
cutta and Ors., (1965) 3 SCR 626 and Delhi Automobiles (P) Ltd. v.
H Commissioner of Sales Tax, Delhi, (1997) IO SCC 486, followed.
INDIA AGENCIES (REGD.) BANGALORE v. ADDL. COMMNR. OF COMM., TAXES, BANGALORE 989

Maganese Ore (India) Limited v. Commissioner ofSales Tax, Madhya A
Pradesh, (1991) 83 STC 116, distinguished on facts.

1.2. It is not a mere formality or technicality but it is intended to
achieve the object of preventing the forms being misused for the com-
mission of fraud and collision with a view to evade payment of taxes and B
as such Rule 6(b)(ii) which is clear and categoric cannot be liberally
construed but it should be construed strictly. Without producing the
original of the C-Form as prescribed under Rule 6(b)(ii) of the Rules
the appellant is not entitled for concessional rate of tax under sub-
section (4) of Section 8 of the Act. [1004-D-E]
c
1.3. The dealer has to strictly follow the procedure prescribed under
Rule 6(b)(ii) and produce the relevant materials required under the said
rule. Without producing the specified documents as prescribed there-
under a dealer cannot claim the benefits provided under Section 8 of
the Act. The requirements contained in Rule 6(b)(ii) of the Central Sales D
Tax (Karnataka) Rules, 1957, therefore, are mandatory. [1003-F}

2.1. Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957
which provides for furnishing of the original C-Form in order to claim
the concessional rate of tax is consistent with the provisions of the
Central Sales Tax Act and there is no conflict between the provisions E
of Rule 12(2) and (3) of the Central Sales Tax Rules and Rule 6(b)(ii)
of the Central Sales Tag (Karnataka) Rules, 1957. [1004-C]

State of Madras v. R Nandlal and Co., AIR (1967) SC 1758, relied
upon.
F
Maganese Ore (India) Limitedv. Commissioner of Sales Tax, Madhya
Pradesh, (1991) 83 STC 116, distinguished on facts.

2.2. Liberal construction is not justified having regard to the scheme
of the Act and the Rules in this regard and if there is any hardship, it G
is for the legislature to take appropriate action to make suitable pro-
visions in that regard. [1009-C]

2.3. It is also settled rule of interpretation that where the statute is
penal in character, it must be strictly construed and followed. [1009-C) H
990 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A 3. Contention that there no suggestion anywhere that there is
anything wrong with the genuineness of the transaction or any doubts
as to the possession by the purchasing dealer on a certificate enabling
the sellers to obtain the concessional rate of tax under Section 8 of the
Act, the authorities should not have taken the strict view in rejecting
B the claim of the concessional rate of tax is not acceptable considering
the mandatory nature of the provisions of the Act and Rules. (1008-F]

Commissioner of Sales Tax, Delhi v. Delhi Automobiles, (1981) 48
STC 333 and Sales Tax, MP., Indore v. Gajanan Bidi Leaves Co., (1986)
62 STC 2003, referred to.
c
CIVIL APPELLATE JURISDICTION Civil Appeal No. 1922 of
1999.

From the Judgment and Order dated 12.11.98 of the Karnataka High
D Court in S.T.A. No. 75 of 1998.

A.B. Saharya, Atul Sharma, Anoop Rawat and Dinesh Pardarani for
the Appellant.

Sanjay R. Hegde, Anil Kumar Mishra and A. Rohan Singh for the
E Respondent.

The Judgment of the Court was delivered by

DR. AR. LAKSHMANAN, J. : In the above appeal, the appellant has
F impugned the judgment dated 12.11.1998 passed by the High Court of
Karnataka whereby the order of the Additional Commissioner of Commer-
cial Taxes dated 22.05 .1998 was upheld. By this order, the Additional
Commissioner of Commercial Taxes disallowed the claim of the appellant
for concessional rate of tax on the inter-state sales effected by the appellant
on the basis of portions of"Form-C" marked as duplicate and the indemnity
G bonds furnished by the appellant for the loss of portions of Form-C marked
as original.

The Assessing Authority has disallowed the benefit of concessional
rate of tax corresponding to duplicate C-Forms filed on the ground that the
H appellant did not file original of the C-Forms issued by the purchasing
INDIA AGENCIES (REGD.) BANGALORE,. ADDL. COtvL'\1NR OF COMl\1., TAXES, BANGALORE [LAKSHi\1ANAN. J.] 991

dealers for the inter-state sales effected by the appellant. The main conten- A
tion before the authorities was with regard to non-consideration of duplicate
portion ofC-Forms filed in support ofthe claim for benefit of concessional
rate of tax under Section 8(2)(a) of the Central Sales Tax, I 956. The
appellant challenged the order of the Deputy Commissioner of Commercial
Taxes, Bangalore on various grounds before the Joint Commissioner of B
Commercial Taxes, Bangalore. The Joint Commissioner for the reasons
recorded in his order was of the opinion that the assessing authorities should
not have rejected the duplicate portion of the C-Forms and the indemnity
bonds filed by the appellant and should not have denied the benefit of
concessional rate of tax on such turnover covered by duplicate C-Forms. The
Assessing Authority was directed to accept the duplicate C-Forms and allow C
the benefit of concessional rate of tax under Section 8(2)(a) of the Central
Sales Tax, I 956. In the light of the above direction, the assessment order
was modified and the Assessing Authority was directed to issue revised
demand notice accordingly.
D
Aggrieved by the order passed by the Joint Commissioner of Commer-
cial taxes (Appeals), the matter was taken up before the Additional Com-
missioner of Commercial Taxes who, by his order, dated 22.05. I 998 re-
jected all the objections filed by the appellant/controller and confirmed the
proposal made by the authorities in the show-cause notice dated I 4.11.1998.
The Additional Commissioner allowed the appeal and set aside the order of E
the Joint Commissioner to the extent it allowed concessional rate of tax on
the inter-state sales effected by the controller on the basis of the portions
of the C-Forms marked as duplicate and the indemnity bonds furnished by
the dealer for the loss of the portions of the C-Forms marked as original.
Aggrieved by the above order, the appellant filed sales tax appeal No. 75 F
of 1998 before the High Court of Karnataka. The High Court refused to
interfere with the order passed by the Additional Commissioner of Commer-
cial Taxes and dismissed the appeal accordingly. Aggrieved by the judgment
and order passed by the High Court, the above appeal was filed in this Court
by the dealer.
G
We heard Mr. A.B. Saharya, learned senior counsel for the appellant
. and Mr. Sanjay R. Hegde, learned counsel for the respondent. Mr. A.B.
· Saharya made the following propositions at the time of hearing: -

1) The prescribed Form-C is executed in several identical parts marked H
992 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A 'Original', 'Duplicate' and 'Counterfoil' respectively. Where the part
marked 'Original' is lost but, the dealer selling the goods furnishes to
the prescribed authority the other part marked 'Duplicate' which is also
primary evidence of the said document by virtue of the principles
enshrined in Sec 62 of the Evidence Act, 1872, the same should be
B accepted as complete compliance of the requirement under Rule 12(1)
of the Central Sales Tax (Registration and Turnover) Rules, 1957
(Central Rules) and Rule 6(b)(ii) of the Central Sales Tax (Karnataka)
Rules 1958 (State Rules) for levy of tax @ 4% under sub-section (1)
and (4) of Section 8 of the Central Sales Tax Act, 1956 (Central Act).

c 2) In any event, filing of the 'Original' portion of the C-Form is not
mandatory, but directory; and, filing 'Duplicate' part thereof is suffi-
cient compliance for levy of lower rate of tax under Rule 12 (I) Central
Rules read with Rule 6(b )(ii) of the State Rules and Section 8 of the
Central Act. [Maganese Ore (India) Limited v. Commissioner of Sales
Tax, Madhya Pradesh, (1991) 83 STC 116 Para 10 and 13] In the
D
Alternative.

3) Where the portion marked 'Original of the C-Form is lost and the
selling dealer furnishes the indemnity bond together with the portion
marked 'Duplicate' of the C-Form, which would be the best secondary
E evidence of the lost counterpart of the original C-Form, the same
should be accepted as sufficient compliance of the alternative require-
ment of Rule 12 (2) and (3) of the Central Rules and Rule 6(b )(ii) of
the State Rules for the levy of tax @ 4% under Sub-section (1) read
with Sub-section (I) and (4) of Section 8 of the Central Act.

F Justification for the alternative proposition:

(a) When lower rate of 4% tax would be admissible on production of
additional duplicate of the C-Form with the prescribed endorsement
recorded in red ink on all the three portions of such declaration Form,
that too on the basis of the third part of the Form marked 'Counterfoil'
G
retained by the purchasing dealer; it should be admissible where the
selling dealer produces the 'Duplicate' part,of the very same declara-
tion form duly received by him from the buying dealer in normal
course of the sale transaction in the first instance.

H (b) Where only the first part marked Original is lost, but, the portion
INDIA AGENCIES (REGO.) BANGALORE 1·. ADDL. COMMNR. OF COMM, TAXES, BANGALORE [LAKSHMANAN, J.] 993

marked 'Duplicate' of the declaration form furnished by the purchas- A
ing dealer is in existence and is produced by the selling dealer, together
with the indemnity bond, the requirement is fulfilled under Rule I 2(1)
and 12(2); and, the additional provision made for production of another
duplicate declaration Form would not be attracted under Rule 12(3) of
the Central Rules. B
4) Where both the parts marked "Original" and "Duplicate" of the dec-
laration form furnished by the dealer purchasing the goods are Jost, the
dealer selling the goods would have the option, in addition to furnish
the indemnity bond, he "may" demand from the dealer who purchased
the goods another duplicate of the declaration form, and the same shall C
be acceptable as sufficient compliance of the requirement under Rule
12(2) and (3) of the Central Rules read with Sub-section (I) and (4)
of Section 8 of the Central Act.

5) Central Sales Tax v. Delhi Automobiles, (1981) 48 STC 333 upheld D
by the Hon'ble Supreme Court in [1997] 10 SCC 486 was a case where
both portions marked 'Original' and 'Duplicate' were Jost and the
dealer claimed benefit of lower rate of tax on the basis of photocopies
of the 'Counterfoil' of the C-Forms, which was rejected. This case is
clearly distinguishable on facts.

There is no conflict between the observations made in this case by
Delhi High Court in (1981) 48 STC 333 or in the judgment of the
Hon'ble Supreme Court in [1997] JO SCC 486 and the observations
made in Commissioner of Sales Tax, MP., Indore v. Gajanan Bidi
Leaves Co., (1986) 62 STC 203 and also the ratio in Manganese Ore F
(India) Limited v. Commissioner ofSales Tax, Madhya Pradesh, (1991)
83 STC 116 where 'Duplicate' portion of the C-Form was accepted as
sufficient compliance under Rule 12(1) of the Central Rules.

Mr. Saharya has also made the following submissions at the time of
hearing: G

a) That the High Court has failed to note that the fact of bona fides of
the loss of original portion of the statutory form is not disputed and
as such Rule 6(b)(ii) ofthe Central Sales Tax (Karnataka) Rules, 1957
is not applicable; H
994 SUPREME COURT REPORTS (2004) SUPP. 6 S.C.R.

A b) The bonafides of the appellant in the matter of loss oforiginal portion
of the C-Forms is not in dispute and also when the bonajides of the
efforts made by the appellant to obtain duplicate C-Forms from its
customers in terms of Rule 12(3) of the Central Rules which proved
to be only marginally successful is also not in dispute, the view of the
B High Court that even in such a situation the appellant is not entitled
to concessional rate of tax on the basis of the duplicate portion of the
C-Form is inequitable and works great hardship on the appellant;

c) The appellant has collected only the lower rate of tax from its custom-
ers and has paid the same to the Government the High Court ought to
c have been Jess rigid in interpreting Rule 6(b)(ii) of the Central Sales
Tax (Karnataka) Rules, 1957;

d) Section 8(4) or Rule 12(1) does not say which part of the form was
required to be filed before the Assessing Authority. It is the form itself,
which by use of the words "original", "duplicate" and "counter foil"
D gives an indication as to which part of the form is required to be filed
before the Assessing Authority. All the three parts are identical in
terms and they all form part ofForm-C. Therefore, filing the duplicate
marked portion there was sufficient compliance of the provisions of
the Act and rules so as to entitle the assessee to get the benefit of
E concessional rate of tax under Section 8(1) of the Central Act;

e) The High Court and the Assessing Authority is not justified in rejecting
the claim for concessional rate of tax on the disputed turnover rejecting
the duplicate portions of the original C-Forms without considering the
facts and circumstances under which the appellant have produced the
F duplicate portions of the C-Form;

f) Rule 12(1) of the Central Sales Tax (R&T) Rules, 1957, prescribes that
the declaration and the certificate referred to in sub-section (4) of
section 8 shall be in Form-C and D respectively, it does not say that
the original portion of C-form only to be accepted and that under no
G circumstances the duplicate portion should not be accepted. Nowhere
in the Act or Rules it is specified that duplicate portion of the form
is not admissible by the assessing authority under any circumstances.
The duplicate portion is meant to be used in extraneous circumstar1ces
by the dealer to claim the concessional rate as a proof of quantity of
H the transactions.
INDJA AGENCIES (REGO.) BANGALORE,._ ADDL COMMNR. Of CO~!M., TAXES, BANGALORE [LAKSHMANAN, J.) 995

g) The duplicate C-Form is nothing but a replica of the original C-Form A
is meant for extreme circumstances. The act itself has provided what
procedure to be followed in the event of loss of C-Form. This having
been fulfilled the High Court and the Assessing Authority have grossly
erred in not considering the same and rejected the concessional rate
of tax. It is submitted that all possible efforts have been made in order
B
to confirm the transactions from the purchaser like obtaining attested
copies on the triplicate and also a letter from them confirming the
transactions. This is full compliance of Rule 12(2) as well as Rule
12(3). The appellant has also lodged a police complaint for having lost
the forms. Having done all these acts, which are humanly possible, the
appellant should not have been denied the option of getting the c
concessional rate of tax.

h) Placing reliance on Section 62 primary evidence afthe Evidence Act,
it is submitted that where a number of documents are made by a
uniform process, namely, printing, photocopy, cyclostyle they are not
copies in the legal sense of the term and that they are D
of counter part originals and each is primary evidence of the contents
of the rest but only secondary evidence of the common original.

Mr. Sanjay R. Hegde, learned counsel appearing for the respondent,
submitted that the order passed by the High Court does not call for any
interference and no case is also made out by the appellant for such inter-
E
ference.

In the above background, the High Court was called upon to answer
the question as to whether the appellant is entitled to claim concessional rate
of tax without complying with the requirement contemplated under Rule F
6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957. The High Court
answered it in the negative and in favour of the revenue. The assessee is
in appeal before us.

The provisions of law involved in the present matter are as
under: - G
"8. Rates of tax on sales in the course of inter-State trade or
commerce -

( l) Every dealer, who in the course of inter-State trade or com-
merce - H
996 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A (a) sells to the Government any goods; or

(b) sells to a registered dealer other than the Government goods
of the description referred to in sub-section (3)

shall be liable to pay tax under this Act, with effect from such date
B
as may be notified by the Central Government in the Official
Gazette for the purpose which shall be two per cent, of his turnover
or at the rate applicable tot he sale or purchase of s11ch goods inside
the appropriate State under the sales tax law of that State, or as the
case may be, under any enactment of that State imposing value
c added tax, whichever is lower:

Provided that the rate of tax payable under this sub-section by
a dealer shall continue to be four per cent, of his turnover, until the
rate of two per cent, takes effect under this sub-section
D
(2) The tax payable by any dealer on his turnover in so far as
the turnover or any part thereof relates to the sale of goods in
the course of inter-State trade or commerce not falling within
sub-section (1) -

E (a) In the case of declared goods, shall be calculated at twice the
rate applicable to the sale or purchase of such goods ·inside the
appropriate State;

(b) In the case of goods other than declared goods, shall be
F calculated at the rate often per cent or at the rate applicable to the
sale or purchase of such goods inside the appropriate State, which-
ever is higher; and

(c) In the case of goods, the sale or, as the case may be, the
purchase of which is, under the sales tax law of the appropriate
G State, exempt from tax generally shall be nil,

and for the purpose of making any such calculation under clause
(a) or clause (b), any such dealer shall be deemed to be a dealer
liable to pay tax under the sales tax law of the appropriate State,
H notwithstanding that he, in fact, may not be so liable under that law.
INDIA AGENCIES (REGO.) BANGALORE •·. ADDL COMMNR. OF COMM., TAXES, BANGALORE [LAKSHMANAN, J .] 997

Explanation - For the purposes of this sub-section, a sale or pur- A
chase of any goods shall not be deemed to be exempt from tax
generally under the sales tax law of the appropriate State if under
that law the sale or purchase of such goods is exempt only in
specified circumstances or under specified conditions or the tax is
levied on the sale or purchase of such goods at specified stages or B
otherwise than with reference to the turnover of the goods.

(3) The goods referred to in clause (b) of sub-section (1)

(b) are goods of the class or classes specified in the certificate of
registration of the registered dealer purchasing the goods as C
being intended for re-sale by him or subject to any rules made
by the Central Government in this behalf, for use by him in
the manufacture or processing of goods for sale or in the tele-
communications network or in mining or in the generation or
distribution of electricity or any other form of power;
D
(c) are containers or other materials specified in the certificate of
registration of the registered dealer purchasing the goods,
being containers or materials intended for being used for the
packing of goods for sale;

( d) are containers or other materials used for the packing of any
E
goods or classes of goods specified in the certificate of reg-
istration referred to in clause (b) or for the packing of any
containers or other materials specified in the certificate of
registration referred to in clause (c).
F
(4) The provisions of sub-section (I) shall not apply to any sale
in the course of inter-State trade or commerce unless the dealer
selling the goods furnishes to the prescribed authority in the pre-
scribed manner -

(a) a declaration duly filled and signed by the regis!ered dealer G
to whom the goods are sold containing the prescribed particu-
lars in a prescribed form obtained from the prescribed author-
ity; or

(b) if the goods are sold to the Government, not being a H
998 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A registered dealer, a certificate in the prescribed form duly
filled and signed by a duly authorized officer of the Govern-'
ment
...
Provided that the declaration referred to in clause (a) is fur-
nished within the prescribed time or within such further time
B
as that authority may, for sufficient cause, permit"

(5) Xxxxxx

(6) Xxxxx
c
(7) Xxxx

(8) The provisions of sub-sections (6) and (7) shall not apply to
any sale of goods made in the course of inter-State trade or
commerce unless the dealer selling such goods furnishes to
D
the prescribed authority referred to in sub-section (4) a dec-
laration in the prescribed manner on the prescribed form
obtained from the authority specified by the Central Govern-
ment under sub-section (6) in sub-section (5), duly filled in
and signed by the registered dealer to whom such goods are
E sold.

Explanation.- For the purposes of sub-section (6), the expression
"special economic zone" has the meaning a~signed to it in clause
(iii) to Explanation 2 to the proviso to section 3 of the Central
F Excise Act, 1944 (I of 1944 )"

Sec.13 (I) (a) (aa) (b) & (3) read as under:-

"13. Power to make rules~ ( 1) The Central Government may,
by notification in the Official Gazette, make rules providing for -
G
(a) the manner in which application for registration may be made
under this Act, the particulars to be contained therein, the
procedure for the grant of such registration, the circumstances
in which registration may be refused and the form in which
the certificate of registration may be given;
H
INDIA AGENOES (REGO.) BANGALORE,., ADDL. COM:v!NR. OF COMM, TAXES, BANGALORE [LAKSHMANAN, J.] 999

(aa) the form and the manner for furnishing declaration under sub- A
section (8) of Section 8;

·(b) the period of turnover, the manner in which the turnover in
relation to the sale of any goods under this Act shall be
determined, and the deductions which may be made under B
clause (c) of sub-section (1) of section 8A in the process of
such determination;

(c) ............. .

(d) c
(2)

(3) The State Government may make rules, not inconsistent with
the provisions of this Act and the rules made under sub- D
section (1 ), to carry out the purposes of this Act."

Rule 12 of the Central Sales Tax (Registration and Turnover) Rules,
1957 reads thus:

"12(1) the declaration and the certificate referred to in sub-section E
4 of section 8 shall be in Forms-C and D respectively:

Provided that Form-C in force before the commencement of
the Central Sales Tax (Registration and Turnover) (Amendment)
Rules 1974, or before the commencement of the Central Sales Tax F
(Registration and Turnover) (Amendment) Rules 1976, may also
be used upto the 31st December 1979 with suitable modifications;

Provided further that a single declaration may cover all trans-
actions of sale, which take place in one financial year between the
same two dealers. G

Provided also ...................... .

(2) Where a blank or duly completed form of declaration is
lost, whether such loss occurs while it is in the custody of the H:
1000 SUPREME COURT REPORTS [2004) SUPP. 6 S.C.R.

A purchasing dealer or in transit to the selling dealer, the purchasing
dealer shall furnish in respect of every such form so lost an indem-
nity bond in Form-G to the notified authority from whom the said
form was obtained, for such sum as the said authority may having
regard to the circumstances of the case, fix. Such indemnity bond
shall be furnished by the selling dealer to the notified authority of
B
his State if a duly completed form of declaration received by him ..
is lost, whether such loss occurs while it is in his custody or while
it is in transit to the notified authority of his State

Provided that where more than one form of declaration is lost,
c the purchasing dealer or the.selling dealer, as the case may be, may
furnish one such indemnity bond to cover all the forms of decla-
ration so lost.

(3) Where a declaration form furnished by the dealer purchas-
D ing the goods or the certificate furnished by the Government has
been lost, tht>. dealer selling the goods, may demand from the dealer
who purchased the goods or, as the case may be, from the Govern-
ment, which purchased the goods, a duplicate of such form or
certificate, and the same shall be furnished with the following
declaration recorded in red ink and signed by the dealer or author-
E ized officer or the Government, as the case may be, on all the there
portions· of such form or certificate -

"I hereby declare that this is the duplicate of the declaration
form/certificate No ........ signed on ........ and issued to ......... who is
F registered dealer of......... (State) and whose registration certificate
number is .......... "}

Rule 6(a)(i) of the Central Sales Tax (Karnataka) Rules, 1957 reads
thus:

G "6. (a) (i). A registered dealer, who wishes to purchase goods
from another such dealer on payment of tax at the rate applicable
under the Act to sales of goods by one registered dealer to another,
for the purpose specified in the purchasing dealer's certificate of
registration, shall obtain on payment of {fifty paise per form or Rs.
H 12.50 per book of 25 forms or Rs. 45-00 per book of 100 forms}
INDIA AGENCIES (REGO.) BANGALORE 1·. ADDL. COMMNR OF COMM .. TAXES, EANGALORE [LAKSHMANA1'J, J.J 1001

from the assessing authority in whose jurisdiction the principal A
place of business is situated, a blank declaration Form prescribed

- {under sub-rule (1) of Rule 12} of the Central Sales Tax (Regis-
tration and Turnover) Rules, 1957 for furnishing it to the selling
dealer. Before furnishing the declaration to the selling dealer the
purchasing dealer, or any responsible person authorized by him in B
this behalf, shall fill in all required particulars in the Form, and shall
also affix his usual signature in the space provided in the Form for
this purpose. Thereafter, the counterfoil of the Form shall be re-
tained by the purchasing dealer and the other two portions marked
"original" and "duplicate" shall be made over by him to the selling
dealer. c
****
****
(b)(i) The procedure for advance payment of tax shall be for the D
same as that prescribed by the rules framed under the Karnataka
Sales Tax Act, 1957, and for this purpose, every dealer shall submit
every month, to the assessing authority, a statement in the form
prescribed by the rules framed under the Karnataka Sales Tax Act,
1957, and it shall be accompanied by a receipt from a Government
E
treasury or crossed postal order or crossed cheque or crossed de-
mand draft in favour of the assessing authority for the amount of
the tax paid in advance.

(ii) A registered dealer who claims to have made a sale to another
registered dealer or to Government shall, in respect of such claim, F
attach to his return to be filled in Form IV the portion marked
'original' of the declaration or the certificate in Form-D, received
by him from the purchasing dealer or Government, as the case may
be. The assessing authority may, in his discretion, also direct the
selling dealer to produce for inspection the portion marked 'dupli-
G
cate' of the declaration or certificate in Form-D, as the case may
be.

- ****
**** H
1002 SUPREME COURT REPORTS [2004) SUPP. 6 S.C.R.

A (d) Every declaration form obtained from the assessing authority
by a registered dealer shall be kept by him in safe custody and he
shall be personally responsible for the loss, destruction or theft of
any such form or the loss of Government revenue, if any, resulting -
dir~ctly or indirectly from such theft or loss.
B
(e)(i) Every registered dealer to whom any declaration form is
issued by the assessing authority shall maintain, in a register in
Form III a true and complete account of every such form received
fro:n the assessing authority. If any such form is lost, destroyed or
stolen, the dealer shall report the fact to the said assessing authority
c immediately, shall make appropriate entries in the remarks column
thereto and take such other steps to issue public notice of the loss;
destruction or theft as the assessing authority may direct."

We have carefully considered the elaborate submissions made by the
D learned senior counsel. It is contended on behalf of the appellant that in
respect of the inter-state sales transactions, the appellant had collected 279
original C-Forms and duplicates and that the appellant had separated origi-
nal C-Forms for submitting the same to the Assessing Officer and kept the
duplicate separately. The entire file containing the original had thereafter
been misplaced and, therefore, the appellant could file only the duplicate.
E It is submitted that under Rule 12(2) of the Central Sales Tax (Registration
and Turnover) Rules, 1957 in case ofloss oforiginal C-forms, ifhe complies
with the above rule, the appellant will be eligible for the concessional rate
of sales-tax. It is stated that when the appellant had complied with the said
rule, there is no reason for denial of the concessional rate. The impugned
F order passed by the respondent was, therefore, erroneous and it is set aside
restoring the order of the Assessing Authority. In our opinion, the said
contention is not tenable and has no force. We have already extracted Rule
6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 and Rule 12(2)
and 12(3) of the Central Sales Tax (Registration and Turnover) Rules, 1957.
In our view, the Rule has to be strictly construed. Admittedly, the appellant
G has not complied with the said provisions and, therefore, he is not entitled
to the concessional rate of tax under Section 8 of the Central Sales Tax.

-
Section 8(4) specifically provides that the provisions of sub-section (I) shall
not apply to any sale in the course of inter-state trade or commerce unless
the dealer selling the goods furnishes to the prescribed authority in the
H prescribed manner. Rule 8( 4)(a) also provides that a declaration duly filled
INDIA AGENCIES (REGD.) BANGALORE,. ADDL. COMMNR OF COMM., TAXES, BANGALORE [LAKSINANAN. J.) l 003

and signed by the registered dealer to whom the goods are sold containing A
the prescribed particulars in a prescribedform obtained from the prescribed
authority. On the above provision, a registered dealer will not be entitled
to the concessional rate of tax in respect of inter-state sales made by him
without the production of the declaration referred under clause (a) of sub-
section (4) noted above. B

Under the Central Sales Tax (Karnataka) Rules, 1957, the dealer is
required to submit along with his return the original of the prescribed forms.
As could be seen from the rule extracted above a registered dealer who
claims that he has made a sale to another registered dealer is required to
attach the original of the declaration forms on the certificate in the pre- C
scribed form received by him from the prescribed dealer along with his
return filed by him. We have already extracted Section 13 of the Central
Sales Tax Act, which deals with the power of the Central Government to
make rules, the form and the manner for furnishing declaration under sub-
section (8) of Section 8. Sub-clause (3) of Section 13 provides that the State D
Government may make rules not inconsistent with the provisions of the
Central Sales Tax Act, 1956 and the rules made under sub-section (1) to
carry out the purposes of the Act. In exercise of the powers conferred by
sub-section 3,4, and 5 of Section 13 of the Central Sales Tax, 1956, the
Government of Karnataka made the Central Sales Tax (Karnataka) Rules,
1957. Under rule 6(b) (ii) of the Karnataka Rules, the State Government has
prescribed as to the procedures to be followed and the documents to be
produced for claiming concessional r~te of tax under Section 8(4) of the
Central Sales Tax Act. Thus, the dealer has to strictly follow the procedure
and the Rule 6(b)(ii) and produce the relevant materials required under the
said rule. Without producing the specified documents as prescribed there- F
under a dealer cannot claim the benefits provided under Section 8·ofthe Act.
Therefore, we are of the opinion that the requirements contained in Rule
6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 are mandatory.
Section 12(1)(2) and (3) of the Central Sales Tax (R&T) Rules, 1957
provides that the registered dealer is required to file the declaration and the
certificate referred to in Section 8(4) in Form-C and D respectively. Form- G
C is a declaration divided into three parts. All the three parts are identical,
the first part of the form being the counter foil and the second part being
the duplicate and the third part being the original. The counter foil is to be
retained by the purchasing dealer. The original is to be filed before the
Assessing Officer by the selling dealer to claim the concessional rate. The H
1004 SUPREME COURT REPORTS (2004) SUPP. 6 S.C.R.

A duplicate is to be retained by the selling dealer. If the C-Form or the original
part of it is lost whilst in the custody of the purchasing dealer or in transit,
the purchasing dealer shall have to furnish an indemnity bond for the same
~~,.;:1.~::::g~ed by the concerned authority. If the original part of C-Form is Jost
by the selling dealer whilst it is in his custody or in transit, the selling dealer
B shall furnish an indemnity bond as fixed by the concerned authority and
follow the procedure prescribed under Rule 12(3).

We are of the view that the Rule 6(b)(ii) of the Central Sales Tax
(Karnataka) Rules, 1957 which provides for furnishing of the original C-
Form in order to claim the concessional rate of tax is consistent with the
C provisions of the Central Sales Tax Act and there is no conflict between the
provisions of Rule 12(2) and (3) of the Central Sales Tax Rules and Rule
6(b )(ii) of the Central Sales Tax (Karnataka) Rules, 1957 as contended by .
the appellant. Rule 12 of the rule is intended to prevent mis-use ofC-Fotms
by unscrupulous and mischievous dealers and makes it obligatory for the
D dealer to furnish indemnity bond. In other words, in order to claim
concessional rate of tax, the original C-Form has to be attached to the return
as provided under Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules,
1957. It is not a mere formality or technicality but it is intended to achieve
the object of preve.nting the forms being mis-used for the commission of
fraud and collision with a view to evade payment of taxes. In our opinion,
E Rule 6(b)(ii) which is clear and categoric cannot be liberally construed but
it should be construed strictly. We, therefore, hold that without producing
the original of the C-Form as prescribed under Rule 6(b )(ii) of the Rules
the appellant is not entitled for concessional rate of tax under sub-section
(4) of Section 8 of the Act.
F
The very purpose of prescribing the filing of C-Forms is that there
. should not be suppression of any inter-state sales by a selling dealer and
evasion of tax to the State from wheFe the actual sales are affected. Secondly,
the purchasing dealer also cannot suppress such purchases once he issues
C-Form to the selling dealer. Since the dealer should issue C-Form has to
G maintain a detailed account of such C-Forms obtained from the department
prescribed under the States Taxation law. The C-Form is a declaration to .
be issued only by the sales tax authorities of concerned States. By issuing
declaration in C-Form the purchasing dealer would be benefited as he is
entitled to purchase goods by paying only concessional rate of tax of 4%
H as prescribed by the concerned State of purchasing dealer otherwise the
INDIA AGENCIES (REGD) BANGALORE 1·. ADDL. COMMNR. OF COMM., TAXES, BANGALORE [LAKSHMANAN,J.] 1005

purchasing dealer has to pay tax at a higher rate besides additional taxes on A
such sales effected within the State where selling dealer is situated.

The authorities cited and relied on by learned senior counsel fqrA~
appellant to support his views that concessional rate of tax at 4% should be ·
allowed even on the basis of the duplicate portion of C-Form cannot be B
accepted and the judgments relied on by the learned counsel for the appellant
are distinguishable on facts and law and particularly in view of the specific
provisions contained in Rule 6(b)(ii) of the Central Sales Tax (Karnataka)
Rules, 1957 which requires that the portion of C-Form marked original
should be furnished by the selling dealer to avail the concessional rate of
tax on his inter-state sales. It is not open to the Assessing Officers under C
the Act to go into the rationale of Rule 6(b)(ii) of the Central Sales Tax
(Karnataka) Rules, 1957. Their duty is to simply implement it without going
into the question of any hardship that may be caused even to an honest
dealer.
D
We shall now consider the rulings and pronouncements made by this
Court on the very subject.

In Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer,
Calcutta and Ors., [ 1965] 3 SCR 626, the question that arose in this case
was whether under Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) E
Act, 1941, the furnishing of declaration forms issued by the purchasing
dealers was a condition for claiming the exemption thereunder. This Court
held as under:.

"Section 5(2)(a)(ii) of the Act in effect exempts a specified turn- p
over of a dealer from sales tax. The provision prescribing the
exemption shall, therefore, be strictly construed. The substantive ~·
clause gives the exemption and the proviso qualifies the substantive· ---
clause. In effect the proviso says that part of the turnover of the
selling dealer covered by the terms of sub-clause (ii) will be ex-
empted provided a declaration in the form prescribed is furnished. G
To put it in other words, a dealer cannot get the exemption unless
he furnishes the declaration in the prescribed form. It is well settled
that 'the effect of an excepting or qualifying proviso, according to
the ordinary rules of construction, is to except out of the preceding
portion of the enactment, or to qualify something enacted therein, H
1006 SUPREME COURT REPORTS (2004] SUPP. 6 S.C.R.

A which but for the proviso would be within it. There is an under-
standable reason for the stringency of the provisions. The object of
s. 5(2)(a)(ii) of the Act and the rules made thereunder is self-
evident. While they are obviously intended to give exemption to
a dealer in respect of sales to registered dealers of specified classes
of goods, it seeks also to prevent fraud and collusion in an attempt
B
to evade tax. In the nature of things, in view of innumerable
transactions that may be entered into between dealers, it will wellnigh
be impossible for the taxing authorities to ascertain in each case
whether a dealer has sold the specified goods to another for the
purposes mentioned in the section. Therefore, presumably to achieve
c the twofold object, namely, prevention of fraud and facilitating
administrative efficiency, the exemption given is made subject to
a condition that the person claiming the exemption shall furnish a
declaration form in the manner prescribed under the section. The
liberal construction suggested will facilitate the commission of
D fraud and introduce administrative inconveniences, both of which
the provisions of the said clause seek to avoid."

In State of Madras v. R. Nandlal and Co., AIR (1967) SC 1758, this
Court while construing the rule making power of Central Government has
observed as under:-
E
"The Central Government has, in exercise of the power under S.
13(1 )( d), prescribed the form of declaration and the particulars to
be contained in the declaration. A direction that there shall be a
separate declaration in respect of each individual transaction may
F appropriately be made in exercise of the power conferred under
S.13(l)(d). The State Government is undoubtedly empowered to
make rules under sub-ss.(3) and ( 4) of S.13; but the rules made by
the State Government must not be inconsistent with the provisions
of the Act and the rules made under sub-s.(l) ofS.13 to carry out
the purposes of the Act."
G
In a similar matter - Commissioner of Sales Tax, Delhi v. Delhi Au-
tomobiles (P.) Ltd., STC Vol. 48 1981, the Delhi High Court held that the
production of a declaration form is a condition precedent for the availability
' of the concession. The Bench also has observed that these detailed provi-
H sions are intended as a measure of safeguard against possible mis-utilisation
INDIA AGENCIES (REGO.) BANGALORE,.. ADDL. COMMNR OF COMM., TAXES, BANGALORE [LAKSHMANAN, J J 1007

of the forms and also to ensure that relief is not obtained by more than one A
selling dealer in respect of the same declaration form by using the various
parts of it differently.

This Court has further held that the essence of these rules and regu-
lations is that before a selling dealer is able to claim the benefit of concessional B
tax he should be able to produce the original and duplicate issued by him
by the purchasing dealer in the first instance or the duplicate which will also
contain these two portions of the forms issued along with a declaration
subscribed to by the purchasing dealer subsequently on the strength of his
earlier records and his personal knowledge and for which he will have to
count in due course to the Sales Tax Authorities from whom he obtained C
these declarations. The bench was of the opinion that the production of the
Photostat copy of the counter foil cannot be said to be strict or even
substantial compliance of Rule 12(3) and that by merely producing the
photostat copy of the counter foil, it cannot be said that the Act and the Rules
have been complied with. D
The case of Manganese Ore (India) Ltd. v. Commissioner ofSales Tax,
Madhya Pradesh, STC Vol.83 (1991), was relied on by learned counsel for
the appellant. In the above case, in order to obtain the benefit of Section
8(1) of the Central Sales Tax Act, it was argued before the High Court that
Form-C consists of three parts-original, duplicate and counter foil and all E
the three parts are identical in terms of them and form part of form-C and
that Section 8(4) or Rule 12(1) does not say which part of the form is
required to be filed before the Assessing Authority. In that case, the dealer
filed the duplicate part of form-C instead of the original, the High Court held
that there was sufficient compliance with the provisions of Section 8(4) of F
the Central Sales Tax Act and those of Rule 12(1) of the Central Sales Tax
(R&T) rules so as to entitle the dealer to get the benefit of concessional rate
of tax under Section 8(1) of the Central Sales Tax Act. The High Court as
a result of their discussion held that the filing of original parts of declaration
in C-Form is not mandatory but directory under the Central Sales Tax Act,
1950 read with rules thereunder and in the facts and circumstances of the G
case, the assessee was entitled to the concessional rate of tax as if it had filed
the original parts of the declaration in C-Form as it had filed the original
parts in Maharashtra. The Assessing Authority which was also sought to be
summoned by an application for their production and further the duplicate
parts thereof were filed before the Assessing Authority in Madhya Pradesh. H
1008 SUPREME COURT REPORTS [2004) SUPP. 6 S.C.R.

A The above judgment does not help the appellant in the present case.
The facts in the above case and the case on hand are different. This apart,
there is no similar rule in this case to the one found in the case on hand,
namely, Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957 that
makes of the difference for it is the rule 6(b)(ii) imposes the condition in
B the "instant case.

Against the decision in Commissioner of Sales Tax, Delhi v. Delhi
Automobiles (P.) Ltd., (supra) of the High Court of Delhi, the Delhi Auto-
mobiles (P) Ltd. preferred an Appeal in this Court - Delhi Automobiles (P)
Ltd. v. Commissioner of Sales Tax, Delhi, [1997) IO SCC 486 which was
C dismissed by this Court. The learned judges of this Court has observed in
para 7 as under:

In our view, in the first place, the assessee had not done all that
it could; it could, and should, have preferred an appeal against the
D order of the learned Single Judge and persisted in his application
for obtaining from the Official Liquidator duplicates of the 'C'
Form declarations, as required by Rule 12(3). Since it did not, in
the face of the clear language of the rule, its case can hardly be said
to be a hard case. The judgment cited by the learned counsel has
no application because that was a case where the language of the
E statute was found to be ambiguous The language of the provision
here is clear and was rightly applied by the High Court.

The learned senior counsel for the appellant submitted that there is no
suggestion anywhere that there is anything wrong with the genuineness of
F the transaction or any doubts as to the possession by the purchasing dealer
on a certificate enabling the sellers to obtain the concessional rate of tax
under Section 8 of the Act. Under such circumstances, the authorities should
not have taken the· strict view in rejecting the claim of the concessional rate
of tax. At first sight, the argument of the learned counsel for tpe appellant
appears to be genuine and acceptable but considering the mandatory nature
'\
G of the provisions of the Act and Rules, this Court is called upon to decide
the questions involved in this case. The provisions being mandatory they
should have been complied with. The appellant made no attempt to comply
with Rule 12(3) till after his claim was rejected by the Assessing Authority.
Having made no attempt to comply with the mandatory provisions, he
H disentitled himself from getting the concessional rate. Even otherwise, in
INDIA AGENCIES (REGO.) BANGALORE 1·. ADDL COMMNR OF COMM. HXES, BANGALORE [LAKSHMANAN, J.J l 009

our view, it is a pure question of law as to the proper interpretation of the A
provisions of Section 8 of the Central Sales Tax Act and the provisions of
Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957
and Rule 6(b)(ii) of the Central Sales Tax (Karnataka) Rules, 1957. In view
of the decision of this Court in the case of Kedarnath Jute Manufacturing
Co. (supra) and of the decision in Delhi Automobiles (P) Ltd. (supra), it is B
clear that these provisions have to be strictly construed and that unless there
is strict compliance with the provisions of the statute, the assessee was not
entitled to the concessional rate of tax.

We are of the opinion that a liberal construction was not justified
having regard to the scheme of the Act and the Rules in this regard and if C
there was any hardship, it was for the legislature to take appropriate action
to make suitable provisions in that regard. It is also settled rule of interpre-
tation that where the statute is penal in character, it must be strictly construed
and followed.
D
We also realize that the section and the rules as they stand may
conceivably cause hardship to an honest dealer. He may have lost the
declaration forms by a pure accident and yet he will be penalized for
something for which he is not responsible but it is for the legislature or for
the rule making authority to intervene soften the rigour of the provisions
and it is not for this Cou11 to do so where the provisions are clear, categoric E
and unambiguous.

There is no merit in the appeal and the same shall stand dismissed. We
say no costs.
F
B.K. Appeal dismissed. ;