CHUNNI LAL PARSHADI LALversusCOMMISSIONER OF SALES TAX, U.P., LUCKNOW

                                                                      A
                        CBIJNNl LAL PARSllAlll LAL
                                    v.
               <n!llISSIONER ()F SALES TAX, U.P., LUCKNOW

                            MARCH 18, 1986
                                                                      B
              [R. S. PATHAKAND SABYASACHI MUKl!ARJl, JJ. )

          Uttar Pradesh Sales Tax Act, 1948; s.3AA and Uttar
    Pradesh Sales Tax Rules, 1948, Rule 12-A - Sale of goods by·
    dealer deemed to be a sale to the consumer - Whether
    irrebuttable presumption raised - Sales Tax Authorities can
    only examine certificate in Form III as 'Farzi' or not.           c
          Interpretation of Statutes

          Interpretation which implements purpose of Act and makes
    effective provisions of Act to be preferred.
                                                                      D
           The turnover of cotton yarn wlis taxable under a.3-AA of
    the U.P. Sales Tax Act, 1948 at the point ·of sale of the
    coosumers. The assessee, a dealer in cotton yarn, in. the
    assess,,..nt year 1960-1961 was granted exemption on the
    turnover of cotton yarn amounting to Rs. 8, 70,810 by the Sales
    tax Officer on the basis of Form Il!A fil<!d by him.              E
    Sllbsequently, on receipt of information by the Sales-tax
    Officer that the purchasing dealer of cotton yarn had not
    actually sold it but had coosumed it hi11Self, proceedings were
    taken against the assessee under s.21 to reopen the assessment
    for the assessment year 196o-61. A list of dealers to llhoJI
    sales were made was also obtained from the aasessee. In his       F
    order under s. 21, the Sales-tax Officer had stated that on
    verification of the aforesaid list, it was learnt that two
    dealers had consumed the entire cotton yarn in mawfacturlag
    handlooms cloth and another dealer had consumed the yarn of
    Rs. 44,676.12 only out of the amount of Rs. 55,991.87; that
    dealer No. 4 in the list had adaitted the purchases of yarn       G
    and had also paid sales tax on the sale of yarn so purchased
    but the dealer at seri&l No. S in the list had deposed tbat he
    had coosumed the entire cotton yarn in mawfacturing coarse
    handlooa cloth. The order under s. 21 further stated that
    cotton yarn worth Rs. 8,17,905.39 was sold to dealers who did
    not resell the s - but actually coosumed the same and so the      11
    aasesaee vas liable to pay sales tax on this turnover.
r
i
    892                  SUPREME COURT REPORTS      [ 1986] 1 S, C. R,

A
          On behalf of the assessee it was contended that he
    was not liable to pay sales tax as he had fulfilled all the
    conditions laid down in s. 3AA of the Act read with Rule 12A of
    the U,P. Sales Tax Rules inasmch as he had sold the cotton
    yarn to registered dealers and had also obtained certificates
    of resale on Form 111-A and that it was not possible to find
B   out what the purchasers subsequently did because it had no
    control over purchasers of the yarn.   ·

           Rejecting this plea of the assessee the Sales Tax
    Officer held that the assessee had not proved beyond shadow of
    doubt that sale of cotton yarn was llllde to the consumers, that
c   the mere fact that the purchasers were registered dealers and
    they t.ad furnished certificates for resale was not sufficient,
    that the declaration forms given by the purchaser-dealers were
    'farzi' , that the assessee was in collusion with them, that
    the documentary evidence on record showed that the purchasers
    though registered dealers did not resell the cotton yarn in
D   the same condition in which they had purchased, rather they
    had themselves consumed cotton yarn and, therefore, the cotton
    yarn amounting to Rs. 8, 16, 905.39 was assessable to Sales
    Tax at 2%.

         In the appeal filed by the assessee, the Appellate
E   Authority Sales Tax, held that the assessee was not liable to
    tax.

          The revision filed by the Department was dismissed and
    it was held that there was not a single bit of evidence for
    showing that Form Ill-A certificates were 'fan:i' in the sense
F   that they did not bear any signature of the buyer nor there
    was any collusion between the buyer and the assessee; that the
    assessee had sold the goods and accepted the Forms in good
    faith and that the assessee had no control over the purchaser
    of the yarn.

G         In the reference under s .11 ( 5) of the U, P. Sales Tax
    Act 1948, the High c.ourt affirmed the view taken by the Sales
    Tax Officer.

           Allowing the appeal of the assessee on the question
    whether the sale of yarn made by him against certificates in
H   For11 111-A was liable to tax,


                                                                         !
                             CHUNNI LAL V• c.s.T.                 893
                                                                         A
              HELD : 1. Under s.3AA of the U.P. Sales Tax Act, 1948,
        the cotton yarn is to be taxed at a single point i.e. when the
        sale takes place to the consumer. To ensure this the legis-




,
        lature has enacted s.3-AA in the Act and the State Government
        has framed Rule 12-A of the U.P. Sales Tax Rules, 1948. Rule
        12-A proceeds on the basis that sale of any of ·the goods        B
        specified in s.3-AA of the Act shall be deemed to be a sale to
        the consumer, unless the dealer furnishes a certificate in
        Form III-A to the effect that the goods purchased are for
        resale in the same condition i.e. the tax shall not be realis-
        ed by a registered dealer from another registered dealer if a
        certificate in Form III-A is furnished that the goods
        purchased would not be consumed or used by the purchaser but     c
        it will be resold. [899 G; 900 D-G]


              2. The combined effect of su~.(l), (2) & (3) of s.3-AA
        of the Act is that tax would be payable if the goods in
                                                                         D
        question, that is cotton yarn, iri. this case, are sold to a
        dealer for consumption. Unless the dealer proves otherwise
        every sale by a dealer shall for the purposes of sub--s.(l) be
        presumed to be a sale to a consumer. Therefore, a registered
        dealer has to prove that a sale to another registered dealer
        or an unregistered dealer is not for consumption. [901 E-G]
                                                                         E


              3. Rule 12-A provides a method of proving that the sale
        is not a sale to the consumer. Furnishing of certificate in
        the form and with the particulars, is one of th~ methods of
        proving that sale by a registered dealer is not for
                                                                         F
·...\   consumption. Neither the rule nor the provision of the section
        suggests that this is the only method. If a dealer can prove
        by any other way then the way contenplated by Rule 12-A then
        he is not so precluded. The purpose of the rule would be
        frustrated if after the dealer proves in the manner indicated
        in Rule 12-A he has to prove again how the purchasing dealer
        has dealt with the goods after he obtains the certificates       G
        from a registered dealer. That would make the working of the
        Act and rule unworkable. Indubitably, in the instant case,
  ~     certificate as mentioned in Rule 12:-A were furnished. The
        furnishing of the certificate in the prescribed manner raises
        a presumption of proof that the goods were sold to dealer for
                                                                         H
    894                  SUPREME COURT REPORTS        [1986] 1 S.C.R,

A
    resale in the same condition and not to be consumed by the
    purchasing dealer, but that was not the only method. [ 901 G-1!;
    902 A-DJ

          The question is whether Rule 12-A raises an irrebuttable
    presumption by the assessing authority. Even if the assessee
B   had furnished a certificate in Form Ill-A and the details as
    stipulated in Form-IV, can the selling dealer be called upon          ~
    to prove further how the purchasing dealer has dealt with the
    goods after purchasing the goods. [904 C-D]

          4. The purpose of Rule 12-A was to make the object of
c   the provisions of the Act workable i.e. realisation of tax at
    one single point, at the point of sale to the consumer. The
    provisions of the rule should be so read as to facilitate the
    working out of the object of the rule. [906 A-Bl

          J.L lfanufacturers UcJ. v. 'Ille Sales Tax Officer, Sector
D   II, Xanpo.ir &Ors., 26 S.T.C. 310, relied upon,                     1--

          ec-lsaioner, Sales tax, Uttar Pradesh v. Shanltar Lal
    Chandra Prakash, 26 S.T.C. 386, overruled.

          the State of Madras v. 14/s. Radio and Electricals Ltd.
E   Etc., {1967] Supp. s.c.R. 198, referred to.

          5. The genuineness of the certificate and declaration
    may  be examined by the Taxing Authority but not the
    correctness or the truthfulness of the statements. The sales
    tax authorities can ex.amine whether certificate is 'Farzi' or
F   not, or if there was any collusion on the part of selling
    dealer - but not beyond - i.e. how the purchasing dealer has
    dealt with the goods.
          CIVIL APPELLATE JURISDICTION    Civil Appeal No.162 (NT)
    of 1974,
G
         From the Judgment and Order dated 19th April, 1973 of the
    Allahabad High Court in Sales TaK Reference No. 603 of 197\,

         E.C. Agarwal, V.K. Pandita and P.P. Srivastava for the         ...
    Appellant.
H
          S.C. Manchanda, J,D. Jain and Mrs, Kawaljit Kochar for
    the Respondent.
        CHUNN! LAL v. c.s.T. [SABYASACHI MUKHAR.JI, J.]       895

                                                                    A
     The judgment of the Court was delivered by

      SABYASACHI lllJKllABJl, J. This is an appeal by special
leave from the decision of the High Court of Allahabad in
Sales Tax Reference No. 603 of 1971 under section 11(5) of the
U.P. Sales Tax Act, 1948 (hereinafter called the 'Act'). The        B
question referred to the High Court under section 11(5) of the
Act was as follows:-

           "Whether, on the facts and in the circumstances of
           the case, the dealer could be declared non-taxable
           on sales of yarn for Rs.8,70,810, which he made
           agai-nst III-A Forms though the purchaser instead of     C
           selling the said yarn in ' the same condition,
           consumed the same? 11

     The division bench of the Allahabad High Court was of the
opinion that the controversy raised in the reference was
covered by the decision of the Full. Bench of the said High         D
Court in Coolllissioner, Sales Tax, Uttar Pradesh v. Shsnkar Lal
Chandra Prakash, 26 S. T.C. 386 where it was held that the
certificate in Form III-A was only a pri!lla facie evidence of
the fact that the goods had not been sold to a ·consumer. The
division bench of the Allahabad High Court was further of the
opinion that that certificate was not conclusive evidence and       E
the department could go behind the certif icat& and if it found
that the goods had not been resold in accordance with the
certificate given in Form Ill-A and had been consumed, in such
a case· the department could ignore the certificate and levy
tax on the selling dealer. In those circumstances the revising
authority was wrong, according to the High Court, in· holding       F
that the assessee was not liable to tax even if the department
had found that the yarn had been consumed by the purchaser and
not re-sold. The division bench answered the question in the
negative in favour of the Commissfoner and against the
assessee. The assessee has come up in appeal as mentioned
hereinbef ore by special leave.                                     G

     In order to appreciate the controversy, it is necessary
to refer to certain facts and findings.

     The assessee at the relevant time was a dealer in cotton
yarn at Moradabad.     In the assessment year      1960-61,   the   H
    896                  SUPREME COURT REPORTS      (1986] 1 S.C.R.

A                                                                     ,
    Sales-tax Officer had granted exemption to the dealer on the
    turn-over of cotton yarn amounting to Rs.8,70,810 on the basis
    of Form Ill-A filed by the assessee. The turnover of cotton
    yarn was taxable under section 3-AA at the point of sale to
    the consumers. The assessee filed certificate in Form Ill-A
    from the purchasers. Later, the Sales-tax Officer had received
B   certain information that the purchasing dealer of cotton yarn
    had not actually sold it but had consumed it himself. Hence
    the proceedings were taken against the assessee under section
    21 of the Act to reopen the assessment for the assessment year
    1960-61.

c        In view of the nature of the findings made, it would be
    relevant to refer to the order under section 21 of the Act. As
    mentioned hereinbefore, the assessee was a registered dealer
    and was originally assessed for the year .1960-61 under section
    41(5) of the Act on a net turnover of Rs.20,31,897.58 to a tax
    of Rs.38,027.60 vide assessment order dated 11th January, 1963
D   by the Sales-tax Officer.

         The attention of the dealer was drawn to the letter of
    the Sales-tax Officer, Bijnor. A list of dealers to whom sales
    were made was also obtained from the dealers and the Sales-tax
    Officer in his order under section 21 of the Act had stated
E   that the same was verified. In the list there were five names
    indicating the amount of cotton yarn sold to them. The
    Sales-tax Officer in his order under section 21 had stated
    that on verification, it was learnt that two dealers had
    consumed the entire cotton yarn in manufacturing handloom
    cloth and another dealer had consumed the yarn of Rs.44,676.12
F   only out of the amount of Rs.55,991.87 aold to him and he had
    resold the balance in the Sdme condition and paid the sales
    tax due thereon. It was further recorded that dealer No.2 in
    the said list had purchased cotton yarn worth Rs.60,514.87 and
    not for Rs.55,991.87 as given by the Kanth dealer. The other
    dealer, namely dealer No.4 mentioned in the list had admitted
G   the purchases of yarn and had also paid sales tax on the sale
    of yarn so purchased but the dealer at serial No.5 in the list
    had deposed that he had consumed the entire cotton yarn in
    manufacturing coarse hand.loom cloth.

         According to the Sales-tax Officer in his order under
H   section 21 of the Act, cotton yarn worth Rs.8,17 ,905.39 was
        ClllJNNI LAL v. c.s.T. [SABYASACHI MUKHARJI, J. J         897

                                                                        A
sold to dealers who did not resell the same but actually
consumed the same and so the instant dealer was liable to pay
sales tax on this turnover.

     It was contended on behalf of the dealer that he was not
liable to pay sales tax as he had fulfilled all the conditions          B
laid down under the provisions of section 3-AA of the Act read
with rule 12A of the U.P. Sales Tax Rules (hereinafter called
the 'rules') inasmuch as he had sold the cotton yarn to
registered dealers and had also obtained from them the
certificates of resale on Form Ill-A and it was not possible
nor was it his business to find out what the purchasers of the
cotton yarn subsequently did.                                           c
     The Sales-tax Officer found himself unable to accept this
contention and after referring to the relevant provisions
observed that the selling dealer had not proved beyond shadow
of doubt that sale of cotton yarn made by the dealer was to
the consumers and that the mere fact that the purchasers were           D
registered dealers and that they had furnished certificates
for resale was of not much avail. The Sales-tax Officer
concluded that the dD~umentary evidence on record showed that
those purchasers though registered did not resell the cotton
yarn in the same condition in which they had purchased these.
Accordingly, the Sales-tax Officer came to the conclusion that          E
cotton yarn amounting to Rs.8,16,905.39 was assessable to
sales tax at 2%.

     There was an appeal      from   the   said   decision   to   the
Appellate Authority Sales Tax, Moradabad• On consideration of
the evidence, the said Appellate Authority, apart from its              F
view on law after discussing evidence and the Textile Control
Order and_Licences, came to the categorical finding that there
was no case for assessment against the assessee in the year
1960-61, as purchaser named in the order had accepted some
resale of yarn to consumers and were assessed under section 21
and the rest three were registered dealers and yarn licencees           G
and admittedly had been assessed to tax under section 21 on
the same turnover which had been included in the present
assessment under section 21 of the Act.

     There was a further appeal to the Commissioner of Sales
Tax by revision. After discussing the position in law, the              H
revisional authorities dismissed the appeal.
    898                   SUPREME COURT REPORTS      [1986] 1 s.c.R.

A
          To the objection to the notice under section 21, the
    assessee had disputed his liability to tax on the ground that
    since .it had sold the yarn after scrutiny of requisite
    declaration, it was not liable to tax and further that it had
    no power to· control over the yarn sold to the purchaser. The
    Sales-tax Officer rejected this plea of the assessee and held
B   that the declaration forms given by the purchaser-dealers were
     'farzi' and that the opposite party was in collusion with
    them. He had' held that the purchasing dealers had consumed
    cotton yarn ... The assessment order was followed up by opposite
    party by appeal and the Appellate Authority nullified the same
    and held that the assessee was not liable to tax. The State
c   had pref erred a revision which was dismissed and the
    Additional Judge stated that he found that there was not a
    single· bit· of evidence for showing that III-A Form
    certificates were 'Iarzi' in the sense that it did not bear
    any signature of the buyer nor there was any collusion between
    the buyer . ·and the appellant. The dealer had sold the goods and
D   accepted the forms in good faith and that was so. The dealer
    had no control over the yarn of the purchaser. In those
    circumstances the question as mentioned to hereinbefore was
    referred to the High Court after stating these facts in the
    statement of case. The High Court answered the question
    against the dealer as indicated hereinbef ore.
E
         At the outset, in view of the statement of facts narrated
    before, we are of the opinion, that the question proceeded on
    misapprehension of facts. In this case though the Sales-tax
    Officer had held that the purchasers of yarn by giving
    certificates in Form Ill-A had consumed the said yarn instead
F   of selling the said yarn in the same condition, the said
    finding was not accepted and was in fact reversed by the
    Appellate Authority as. well as the revising authority.
    Therefore, the question proceeded on a mis-apprehension of the
    factual position.

G        In order to bring out the true controversy, we reframe
    the question as follows:

               "Whether, on the facts and in the circumstances of
               the case, the sale of yarn to the extent of
               Rs.8,70,810 sold by the dealer against certificates
H              in Form Ill-A was liable to tax?"
       CRUNNI LAL v. c.s.T. [SABYASACHI MUKHARJI, J. J    899

                                                                  A
     It is necessary in this connection to bear in mind the
relevant provisions of the Act as well as the rules with which
this _appeal is concerned. Section 3 of the Act imposes
liability to tax and provides inter alia, that every dealer
shall, for each assessment year, pay a tax at the rates
specified therein on his turnover of such year, which shall be    B
determined in such manner as might be prescribed.

     Section 3-A which was inserted by U. P. Act No. XXV of
1948 as well as U.P. Act No. XXVI of 1950 provides that
notwithstanding any-thing contained in section 3, the State
Government, msy, by notification in the Official Gazette,
declare that the turnover in respect of any goods or class of ·   c
goods shall not be liable to tax except at such single point
in the series of sales by success! ve dealers as _the State
Government might specify.

     Section 3-AA with which this appeal is concerned provides
that notwithstanding anything contained in section 3 or 3-A,      o
turnover in respect of certain goods mentioned therein shall
not be liable to tax except at the point of sale by a dealer
to the consumer and the rate was specified therein.

     Clause (ii-a) of sub-section (1) of section 3-AA included
inter-al.ia, cotton yarn with which this appeal is concerned,     E
but not including yarn waste. It is relevant to bear in mind
Rule 12A framed under The U.P. Sales Tax Rule, 1948 which is
in the following terms :

           "12-A. Exemption of sales under Section 3AA. - A
           sale of any of the goods specified in Section 3-AA     F
           shall be deemed to be a •Sale to the consumer,
           unless it is to a dealer who furnishes a
           certificate in Form Ill-A to the effect that the
           goods purchased are for re-sale in the same
           conditions. "Details of all such certificates shall
           be furnished by the selling dealer with his return     c
           in Form IV."

     The cotton yarn is to be taxed at a single point i.e.
when the sale takes place to the consumer. Section Ill-A and
the scheme thereunder was formulated under the provisions of
section 14 of the Central Sales Tax Act, 1956.                    H
    900                  SUPREME COURT REPORTS      [1986] l S.C.R.

A
         Section 14 of the Central Sales Tax Act specifies certain
    goods as goods of special importance in inter-state trade or
    commerce and clause (ii -b) includes cotton yarn, but not
    including cotton yarn waste.

         Section 15 imposes certain restrictions and conditions in
B   regard to tax on sale or purchase of declared goods within a
    State, and clause (a) imposes conditions that the tax payable
    under any law in respect of any sale or purchase of such goods
    inside the State shall not firstly exceed four per cent of the
    sale or purchase price thereof and secondly such tax shall not
    be levied at more than one stage.
c
         As cotton yarn is one of the goods which has been declar-
    ed goods of special importance, for the State to levy sales
    tax on these goods, it is necessary to follow the conditions
    laid down in section 15 which are essential to ensure that
    such sales tax should not exceed 4%, of the sale or purchase
D   price and secondly that it shall be imposed at one·point, This
    appeal is not concerned with the question of the limit. The
    limit in this case of 4% has been fulfilled. The second aspect
    is that it should not be imposed at more than one point. Law
    is so framed that it is collected from the consumer. In order
    to ensure this, the legislature has enacted section 3-AA in
E   the Act and State Govt. has framed Rule 12-A of the Rules.
    Rule 12-A as set out hereinbefore proceeds on the basis that
    sale of any of the goods specified in section 3-AA of the Act
    shall be deemed to be a sale to the consumer. The second
    aspect of the said rule enjoins that this will not be so that
    means to say that a sale of goods specified in section-3AA
F   shall not be deemed to be a sale to the consumer unless the
    dealer furnishes a certificate in Form III.A and further that
    that certificate DllSt be to the effect that the goods purchas-
    ed are for resale in the same condition i.e. the tax shall not
    be realised by a registered dealer from another registered
    dealer if a certificate in Form Ill-A is furnished that the
G   goods purchased would not be consumed or used by the purchaser
    but it will be resold. The Form IV provides for return of
    turnover, class of goods and then there is a.declaration and
    then details in respect qf sale of goods specified in section
    3-AA on which exemption is sought to be claimed. The names of
    the goods have to be indicated i.e. giving the name and
H   address of purchasing dealer, the Registration certificate
               CHUNNI LAL v. c.s.T. [SABYASACHI lfilKHAlUI, J, J   901

                                                                         A
       number, if any, of the registered dealer, date of sale, sale
       price and number of certificate in Form III-A noticed before.
       Sub-section (2) of section 3-AA of the said Act provides that
       unless the dealer proves otherwise, every sale by a dealer,
       shall, for the purpose of sub-section (1), be presumed to be
       to a consumer. An explanation was, however, added to sub-sec-     B
       tion (2) to section 3-AA by the Act of 1958 which provides,
·-\    inter alia, as follows:-

                  "Explanation - A sale of any of the goods specified
                  in sub-section (1) to a registered dealer who does
                  not purchase them for resale in the same condition
                  in which he has purchased them, or to an               c
                  unregistered dealer shall, for purposes of this
                  section, be deemed to be a· sale to the consumer."

            It means that a sale of any of the goods specified in
       sub-section (1) to a registered dealer who has purchased them
       or to any un-registered dealer, shall for the purpose of this     D
       section, be deemed to be a sale to the consumer unless the
       purchasing dealer . purchases the said goods for resale in the
       same condition. It merely strengthens the provisions of
       sub-section (2) of section 3-AA i.e. unless the dealer proves
       otherwise, every sale shall, for the purpose of sub-section
       (1), be presumed to a consumer. The combined effect of            E
       sub-sections(!), (2) and (3) of section 3-AA of the Act is
       that tax would be payable if the goods in question i.e. cotton
       yarn, in this case, are sold to a dealer for consumption.
       Unless the dealer proves otherwise every sale by a dealer
       shall for the purpose of sub-section (1) be presumed to be a
       sale to a consumer. A .sale of any of the goods mentioned in      F
-.\    sub-section (1) to a registered dealer who does not purchase
       them for resale in the same condition, without processing or
       sale to unregistered dealer shall be deemed to be a sale to
       the consumer. Therefore, a registered dealer has to prove that
       a sale to another registered dealer or an unregistered dealer
       is not for consumption. In order to facilitate the working of     G
       the Act, by rule 12A a method of proving has been provided
       that the sale is not a sale to the consumer. The reading of
       the rule along with relevant provisions of the Act leads to
 '"'   the conclusion that 12A method, - furnishing of certificate in
       the form and with the particulars, is one of the methods of
       proving that sale by a registered dealer is not for consump-      H
       tion. Neither the rule nor the provision of the section
     902                  SUPREME COURT REPORTS      [1986] 1 s.c.R.

A
    suggests that this is the only method. If a dealer can prove
    by any other way than the way contemplated by rule 12A then he
    is not so precluded. For the rule to say otherwise would be
    exceeding the provision of the section. The purpose for the
    malting of the rule would however, be frustrated if after the
    dealer proves in the manner indicated in rule 12A he has to
B   prove again how the purchasing dealer has dealt with the goods
    after he obtains the certificate from a registered dealer.
    That would make the working of the Act and rule unworkable,

         There is no dispute that in this case certificate as
    mentioned in rule 12A were furnished.
c
         The questions involved in this case are whether by
    furnishing certificate in Form III-A and the details of such
    certificate given in Form IV, the selling dealer got exeqition
    and Rule 12A created an irrebuttable presumption i.e. that no
    further evidence is required l'n this matter to prove that the
D   goods were sold to a dealer for resale in the same condition
    and not to be consumed by the purchasing dealer.

          The Full Bench of the Allahabad High Court in J,L
    Manufacturers Ltd. v. The Sales T"" Officer, Sector II,
    lanpur, and Others, 26 S.T.C, 310 had occasion to deal with
E   this question. In this case one of us (Pathak, J,) was a
    party. It was observed by Pathak, J, that Rule 12A 1111St be
    construed to mean to provide merely a convenient mode of
    proving that the purchase of the goods was for resale in the
    same condition. It was, however, observed that this rule did
    not lay down that the only mode of proving this was by
F   furnishing certificates in Form Ill-A. Beg, J. as the learned
    Chief Justice then was, observed that the primary object and
    plain meaning of rule 12A was to prescribe certification by
    the purchasing dealer as the only means of protection for the
    selling dealer which enabled him to repel the statutory
    presumption llllSt conveniently. The rule in addition, the
G   learned judge observed, to preventing the c01llllission of fraud
    and introducing administrative convenience, was designed to
    facilitate the task of the dealer who sold. It was further
    observed by learned judge that it was, therefore, reasonable
    and valid and did not go beyond the object of section 3-AA. It
    was further observed by Beg, J, that the questlon whether the
H   fair and reasonable but obligatory presumption raised by
        CHUNNI LAL v. C.S.T. [SABYASACHI MUKHARJI, .J,]       903

                                                                     A
section 3-AA(2) read with first part ,;f rnle 12-A was rebutted
or not in a particular case, could be decided, on the totality
of evidence before the Sales Tax Officer, when the evldence
had to be weighed and assessment· order had to be passed. At
that time, the Sales Tax Officer might fairly use non-compli-
ance with the last part of n1le 12-A as a piece of evidence          B
for concluding that some certificates filed before him in
assessment proceedings were not genuine~ It was further
observed that although the prescribed certificate might
provide prima facie evidence protecting the selling dealer lt
was not conclusive. Rule 12-A specified the ktnd of evidence
which was required for rebutting the presumption, b'.<t it did
not purport to regulate the question of time at which this           c
evidence should be admitted in the course of assessment
proceedings. Nor did it deal with evidence for other purposes
which might be needed for assessment. The Sales Tax Dfflcer
could only act on legally sustainable grounds in exclt1ding or
admitting evidence.
                                                                     D
     Referring to sub-section (2) of section 3-AA, Pathak, J.
observed that at first blush, the rule gave the impression
that unless the selling dealer is armed with a certificate tn
Form III-A from the purchasing dealer the sale made by him
rm.ist be considered to be a sale to the consumer. The learned
judge observed that he was unable to read the rule to mean
that. This rule meant a convenlent mode to the selling dealer
for proving that the goods had not been sold to the con..o;1.1mer.
It provided for no more than that. The certificate ln Form
III-A was one mode in which the dealer might establish that he
had not sold the goods to the consumer. But that was not the
only mode. If it was accepted that it was the onlf mode, then        F
it would limit the selling dealer to that mode alone and would
preclude him from adopting any other mode of proof.

     This case was considered by another Full Bench of the
Allahabad High Court in Comml.ssioll<!r, Sales Tax, Uttar Pradesh
v. Sbankar Lal atandra Prakash, 26 S. T.C. 386 where Beg, J.,        G
as the learned Chief Justice then was, observed that rule 12-A
prescribed an indispensable or an imperative mode of rebutting
th presumption laid down by section 3-AA(2) and then ln rule
12-A, so that other modes of proof were by a necessary
implication prohibited as substitutes for fulfilling the same
purpose. We are unable to accept this view a.s correct. The          H
    904                  SUPREME COURT REPORTS     [1986] l s.c.R.
A

    correct position was stated by the majority view in J.K.
    Manufacturers Ltd. (supra),

        As we read the rule, the furnishing of the certificate in
    the manner indicated raises a presumption, but as indicated
B   before that was not the only method, a registered dealer might
    prove otherwise also. As noted, rule 12-A first states that a
    sale of any goods specified in sub-section (1) shall be deemed
    to be a sale to the consumer. But this presumption will not be
    there if the dealer furnishes a certificate in Form III-A as
    indicated therein. But the question with which we are concern-
c   ed in this case did not arise in the form in either of the two
    cases. It is not the question whether it raises a presumption
    or not. But the question is whether it raises an irrebuttable
    presumption i.e. a presumption which cannot be rebutted by the
    relevant assessing authority.   In other words   even if the
    assessee had furnished a certificate in Form III-A, and the
D   details as stipulated in Form IV, can the selling dealer be
    called upon to prove further how the purchasing dealer has
    dealt with l~e goods after purchasing the goods?

         Mr. Aggarwala, learned counsel, contended that after a
    certificate was given, it should be deemed to be not for
E   consumption and the certificate raised an irrebuttable
    presumption in favour of the dealer and no further examination
    of evidence was permissible. In support of this contention,
    reliance was placed on certain observations of this Court in
    The State of Madras v. M/s Radio and Electricals Ltd. etc. ,
    [1967] Supp. S.C.R. 198. This Court had occasion to deal with
F   sections 7 and 8 of the Central Sales Tax Act, 1956 and rules
    framed thereunder. There Shah, J, speaking for the Court
    observed at page 207 of the report that the Act sought to
    impose tax on transactions, amongst others, of sale and
    purchase in inter-State trade and conlmerce and explaining
    similar provisions in the Central Act, this Court observed
G   that though the tax under the Act was levied primarily from
    the seller, the burden was ultimately passed on the consumers
    of goods because it entered into the price paid by them.
    Parliament with a view to reduce the burden on the consumer
    arising out of 1lllltiple taxation prescribed low rates of
    taxation, when transactions took place in the course of inter-
H   State trade or commerce. This Court observed that indisput-
    ably the seller could have in these transactions no control
                 CIIlJNNI LAL v. c.s.T. [SABYASACHI MUKHARJI, J. J    905
                                                                             A

         over the purchaser. ·ae had to rely. upon the representation
         made to him. He DJ.1st satisfy himself that the purchaser was a
         registered dealer, and the goods purchased were specified in
         his certificates but his duty extended no further. If he was
         satisfied on these two matters on a representation made to him      B
         in the manner prescribed by the rules and the representation
         was recorded in the certificate in Form 'C', the selling
         dealer was under no further obligation to see to the appli-
         cation of the goods for the purpose for which it was
         represented that the goods were intended to be used. If the
         purchasing dealer misapplied the goods he incurred a penalty
         under section 10 of that Act. That penalty was incurred by the      c
         purchasing dealer and could not be visited upon the selling
         dealer. The selling dealer was under the Act authorised to
         collect from the purchasing dealer the amount payable by him
         as tax on the transaction, and he could collect that amount
         only in the light of the declaration mentioned in the certifi-
         cate in Form 'C'. He could not hold an enquiry whether the          D
         notified authority who issued the certificate of registration
         acted properly, or ascertained whether the purchaser, notwith-
         standing the declaration, was likely to use the goods for a
         purpose other than the ·?ui:"pose mentioned in the certificate in
         Form 'C'. There ,was· ·nothing in the Act and the rules that for
         infraction ·0£ the law committed by the purchasing dealer by        E
         misappl ~c~tion of the goods after he purchased them, or for
         any''fraudulent misrepresentation by him, penalty might be
._ . / ·-Visited upon the selling dealer.

              This Court further observed that if the purchasing dealer
        held a valid certificate specifying the goods which were to be       F
        purchased and furnished the required declaration to the sell-
        ing dealer, the selling dealer became on production of the
        certificate entitled to the benefit of ·section 8(1) of that
        Act. It was of course open to the sales tax ai..lthorities to
        satisfy themselves that the goods which were purchased by the
        purchasing dealer under certificate in Form 'C' were specified       G
        in the purchasing dealer's certificate in Form 'C'. These
        observations as has been noted before were made in the context
        of the rules and the provisions of the Central Act, which were
        on similar lines, though their provisions were not in parl
 /.     .,.teria.
                                                                             H
             But it was contended by counsel for the dealer that. in
        order to make the provisions of the Act operative       and
    906                  SUPREME COURT REPORTS      [19861 1 s.c.R.
A
    effective, this was the intention in the instant case and
    though the rule did not say so that it raised an irrebuttable
    presumption. We are of the opinion that this submission has to
    be accepted. After all the purpose of the rule was to make the
    object of the provisions of the Act workable i.e. realisation            •
    of tax at one single point, at the point of sale to the
B   consumer. The provisions of rule should be so read as to
    facilitate the working out of the object of the rule.

         An interpretation which will make the provisions of the
    Act effective and implement the purpose of the Act should be
    preferred when possible without doing violence to the
c   language. The genuineness of the certificate and declaration
    may be examined by the taxing authority but not the correct-
    ness or the truthfulness of the statements. The Sales Tax
    Authorities can examine whether certificate is "farzi" or not,
    or if there was any collusion on the part of selling dealer -
    but not beyond - i.e. how the purchasing dealer has dealt with
D   the goods. If in an appropriate case it could be established
    that the certificates were "farzi" or that there was collusion
    between the purchasing dealer and the selling dealer,
    different considerations would arise•-r:it in the facts of this
    case as noticed before, the facts have-be!<n found to the
    contrary by the appellate authority though that'w•" the find-
E   ing of the Sales Tax Officer. The .question has been'i<~!,:.amed
    for that purpose i.e. to bring about the real controvers)".in
    the background of the facts found in this case.               '-. - ,    .
                                                                        •'
         In the facts and circumst~nces of this case, the question
    posed is academic because it has not been found by the
F   appellate authority that neither the goods have been consumed
    by the purchasing dealer and not sold to the consumer in terms
    of the registration certificates furnish"!f by the purchasing
    dealer, nor that the certificates were forged or fabricated.
         It mst be held that the Full Bench decision of the
G   Allahabad High Court in ~siooer, Sales Tax, Ottar Pradesh
    v. Shanltar Lal Qumdra Prakash (supra) was not correctly
    decided. In the premises the question reframed above mst be
    answered in the negative and in favour of the dealer. The
    appeal is, therefore, allowed and the judgment and order of
    the High Court are set aside. The appellant is entitled to the
H   costs of this appeal.

    A.P •.J.                                        Appeal all"'1ed•