CHAKRAVARTTI, C.J. - (1.) THE facts of this appeal illustrate two of three evils which seem to be growing in connection with proceedings under Article 226 of the Constitution of India. In the interest of good administration of justice, it is imperative that these evils should be checked.
(2.) THE appellant before us, the Indian Iron and Steel Company, is a limited liability company, carrying on the business of manufacturing iron, steel and allied products for sale. Its undertaking is a vast one, as would appear from its own statement in the application that according to the balance-sheet for the year ended on the 31st of March, 1954, its paid-up was Rs. 7,88,32,480 and the value of its assets Rs. 28,78,80,584. Since the appellant manufactures iron and steel goods for sale and sells them, it is a "dealer" within the meaning of section 2(c) of the Bengal Finance (Sales Tax) Act, 1941. That Act provides that every dealer who, in view of the volume of his turnover, is liable to pay tax under the provisions of section 4(1), must get himself registered and obtain a registration certificate. The certificate is granted under section 7(3). So far as is material, that section provides that when granting the certificate, the prescribed authority "shall specify the class or classes of goods for the purposes of sub-clause (ii) of clause (a) of sun-section (2) of section 5" in the certificate itself. Sub-clause (ii) of clause (a) of sub-section (2) of section 5 provides for the exemption of certain sales from the liability to sales tax, but the provision is of a very roundabout character. The whole of section 5(2) is concerned with the computation of the taxable turnover and the provision contained in sub-clause (ii) of clause (a) of the sub-section is that in computing the taxable turnover of a dealer, sales made by him to a registered dealer "of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for re-sale by him, or for use by him in the manufacture of goods for sale or for use by him in the execution of any contract" shall be deducted from his gross turnover. Since that portion of the gross turnover which is constituted by sales made to a registered dealer of goods of the class or classes mentioned in section 5(2)(a)(ii) is to be excluded in computing the taxable turnover, the effect of the provision is that such sales are not chargeable to tax. The combined effect of section 7(3) and section 5(2)(a)(ii) is that if the prescribed authority, whose concern it is to grant a registration certificate, is satisfied that the grantee of the certificate shall have occasion to purchase any goods which will be resold by him or which will be used by him in the manufacture of goods for sale or used in execution of any contract, he shall specify such goods in the certificate and when such goods have been so specified, no tax shall be payable on the sales of such goods to the grantee of the certificate by the dealer who sells them to him. One can see that the entry of certain goods or classes of goods in the registration certificate as falling within section 5(2)(a)(ii) of the Act is advantageous to the holder of the certificate, because since the person selling such goods to him will not be charged to sales tax, he, in his turn, will not to include the sales tax in the price paid by him to his seller.
(3.) IT is, however, not sufficient, in order to earn exemption from tax, that the goods sold to a registered dealer are specified in the certificate held by him as coming within section 5(2)(a)(ii), but a further precaution has been taken by the rules framed under the Act that the goods concerned shall really be put to the uses contemplated by the section. Rule 27A provides that if a dealer wishes to deduct from his gross turnover an amount in respect of a sale on the ground that he is entitled to make such deduction under section 5(2)(a)(ii), he shall have to procure and produce a declaration in writing singed by the purchasing dealer or by some person authorised on his behalf to the effect that the goods specified in the certificate of registration and purchased by him are "intended for resale" or "are required by such dealer for use by him either in the manufacture of goods for sale" or are required for use "in the execution of any contract", as the case may be. Sub-rule (5) of rule 27A prescribes the form to be used in making such declaration and the form is Form XXIV which is to be found among the annexures to the Rules. In view of rule 27A, the prescribed authority, when making an entry in a registration certificate under section 7(3) regarding goods which come within section 5(2)(a)(ii), adds a further condition that, in the case of every sale, the goods purchased must be certified by the purchasing dealer as required for one or other of the uses contemplated by the Act.;