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Supreme Court of India
M/S Star Paper Mills Limited vs M/S Beharilal Madanlal Jaipuria … on 16 December, 2021Author: Hemant Gupta
Bench: Hemant Gupta, V. Ramasubramanian
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4102 OF 2013
M/S STAR PAPER MILLS LIMITED …..APPELLANT(S)
VERSUS
M/S BEHARILAL MADANLAL JAIPURIA LTD. &
ORS. …..RESPONDENT(S)
JUDGMENT
HEMANT GUPTA, J.
1. The present appeal is directed against an order passed in an intra-
court appeal by the Division Bench of the High Court of Delhi at
New Delhi on 28.5.2012 whereby the judgment and decree passed
by the learned Single Bench of the High Court was set aside and
the suit filed by the appellant-plaintiff was dismissed. The learned
Single Bench decreed the suit of the appellant for a sum of
Rs.96,41,765.31 along with simple interest @ 15% p.a. from the
date of institution of the suit i.e., 5.10.1987, till the date of
payment, on the principal amount of Rs.71,82,266/-.
Signature Not Verified
Digitally signed by
Jayant Kumar Arora
Date: 2021.12.16
16:27:17 IST
Reason:
2. The appellant filed a suit for recovery of Rs.96,41,765.31 on the
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ground that appellant is a manufacturer of various varieties of
Kraft, writing and printing papers which are sold to customers
through wholesalers. The appellant sells its products through
direct payment or payment against hundies payable on due date
with the bank by such wholesalers. Respondent-defendant No. 1
was a wholesale dealer of the appellant company in the territory of
Delhi since 1984 and was purchasing paper from the Delhi Sales
Office of the appellant as well as from its mills situated at
Saharanpur. The tentative stock lifted by respondent no. 1 was
worth Rs.15-20 lakhs per month. The respondents were making
regular payments and were enjoying immense confidence of the
appellant. The appellant further explained the terms of the
payment in the plaint filed. The terms of the sale of paper to
respondent No. 1 were stated to be through limited credit of 45-60
days as well as through hundi documents. Fifteen days interest-
free credit facility from the date of delivery was available and
thereafter interest was charged. Any default of payment carried
interest @ 21 % p.a. from the date of delivery till the date of
payment and further penal interest @ 3 %.
3. The Respondent No. 1 lifted huge stocks in the month of November
1985 to January, 1986 but did not make the due payments. Even
some of the hundi documents were dishonored. The appellant
supplied goods worth Rs.72,27,079/- by 189 consignments against
the term of direct payment. The goods were duly received by
respondent no.1 with the signatures of respondent no. 2, its
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director, but they defaulted in making the payments. The
respondents made a payment of Rs.2,99,480/- for 9 consignments
by hundi documents but the hundi documents were also returned
by the bank unpaid. It was pointed out that since respondent No. 1
was a wholesaler, they were getting trade discount of Rs.700-750
per ton. Thus, the appellant claimed the following amount:
Principal amount Rs.71,82,266.00
Interest on outstanding Bills Rs.24,59,499.31
Total Rs.96,41,765.31
4. In the written statement, it was alleged that the appellant company
was owned and controlled by the family of Bajoria headed by S.S.
Bajoria prior to May 1986. The said family was closely connected
to the respondents. The appellant installed a paper manufacturing
mill at Saharanpur in 1935-36 and offered dealership to the
respondents for Delhi and Bombay markets. The dealership of
Bombay was given up in or about 1955-56. The management of the
appellant changed in May, 1986. It was asserted by the
respondents that the appellant has not rendered true and proper
receipts and a sum of Rs.45 lakhs are due from the appellant. It
was also alleged that the bills raised by the appellant are based on
fictitious transactions which are tainted with fraud, deceit and
circumvention of law. Such transactions are therefore against
public policy and void ab initio. The respondents further alleged
that in 1972-73, the Managing Director of the appellant approached
Shri Nagarmal Jaipuria and suggested that the respondents should
receive certain bills drawn on them inasmuch as the appellant
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intended to sell certain quality of paper in open market at prices
higher than the Mill price. The goods could not be taken out from
the Mill unless accepted by one of the wholesalers or dealers. At
the threat of termination of the wholesaler agreement, the
respondents agreed for such proposal. The respondents averred as
under:
“10. Near about the same time, the plaintiff, in addition to
the selling of papers in cash in open market, also indulged in
tax evasion the sales tax on direct sale from Saharanpur was
4%. The sales tax if the goods were transported to Delhi
Depot of the plaintiff and sold from the said depot was Nil.
Thus, there was a net tax saving of the value of the goods
sold in the open market at Delhi. There is no sales tax
leviable on the sale of paper from the Dealer to Dealer at
Delhi. If the sales were made directly from Saharanpur the
Sales Tax leviable was 4%. The dealer to dealer transaction
of sale did not attract payment of anysales tax whatsoever
at Delhi. The Plaintiff in addition to making profit by sale of
paper in the open market at the price higher than the Mill
price also wanted to pocket the sales tax which would have
ordinarily been payable had the sales been made from their
Mills at Saharnapur. This whole ingenious scheme and device
was tainted with fraud and the Jaipuria under undue
influence and coercion were made to submit to the illegal
transactions which were indulged in by the Bajorias/Plaintiff.”
5. One of the issues framed after completion of pleadings was
whether the alleged bills forming the claim in the suits have been
raised on the basis of the fictitious and fraudulent transactions.
The suit has been dismissed by the Division Bench on such issue
inter-alia on the ground that documents had not been proved by
summoning the person, who had issued such large number of
documents (Ex-P1 – Ex-P976).
6. The appellant filed an affidavit of Shri A.S. Bhargava, Retainer,
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formerly General Manager-Management Services on 8.12.2003. In
such affidavit, the appellant has produced 976 documents
including copies of all the invoices, debit notes, delivery challan,
ST-1 Form, interest debit notes, letter of the respondents, credit
notes and the statement of accounts. All the invoices are stamped
and signed by the respondents. The appellant also produced ST-1
Form in respect of each of the invoices stamped and signed by
respondents. In the cross-examination, the witness stated that in
case of sale transaction by the company/manufacturer with any
wholesaler, the sales tax can be avoided against ST-1 Form.
However, if the manufacturer would sell these goods directly to any
retailer or consumer, sales tax would be payable. He further
deposed that he has not placed on record the copies of the books
of accounts and that the Bills-cum-Challans have not been
acknowledged by the respondents in their presence. He stated
that the respondents used to lift the material from their godown.
He further deposed that sales tax number is given on the top of the
invoices though he could not say if the sales tax number is not of
Delhi but of Calcutta. He further stated that the transactions in the
suit were from Delhi and no transaction took place from
Saharanpur. The suggestion that the suit transactions are fictitious
was denied.
7. The respondents produced an affidavit of Shri R.C. Jaipuria in
evidence. It was stated that the books of accounts were not
produced for the reason that the office of the respondents was
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reconstructed during the period 1993-1995 when there were
torrential rains and the records kept on the open roof got spoiled
and eaten by pests. Though, it is averred that income tax, sales
tax returns of these years have been finalized on the basis of
destroyed books of accounts. The respondents have denied the
receipt of goods and produced documents Ex. DW-1/1 to Ex. DW-
1/5. He accepted his signatures on the invoices, ST-1 Form and the
debit notes but denied signatures on the delivery challans as not of
any of the employee of the respondents. It was stated that
signatures got signed from him on large number of documents
under pressure and duress in the circumstances stated in his
affidavit. He admitted that books of accounts pertaining to
transactions in question have not been filed. He denied that the
respondents had not paid a sum of Rs.2,72,08,398.29 to the
plaintiff between the period 1.5.1985 to 19.3.1987. In respect of
signatures on ST-1 Form, he deposed that he used to sign such
forms under duress and bear his signatures.
8. On the basis of the evidence led, the learned Single Bench decreed
the suit. However, the first appeal was accepted inter alia on the
ground that the appellant has failed to prove that it was registered
as a dealer with the Sales Tax Authorities in Delhi and it failed to
prove having any godown in Delhi. Since the appellant has failed
to prove that it was a registered dealer, it could not effect any sale
of paper at Delhi without paying Central Sales Tax. The Division
Bench of the High Court held as under:
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“31. We may summarize. The respondent No.1 has failed to
prove that it was registered as a dealer with the Sales Tax
Authorities in Delhi. It failed to prove having any godown at
Delhi. As per the laws applicable to Sales Tax, unless
respondent No.1 proved being a dealer registered at Delhi, it
could not effect any sale of paper at Delhi without paying
Central Sales Tax. It is obvious that respondent No.1
surreptitiously removed its goods from its mill at Saharanpur
not under the cover of the invoices raised in favour of the
appellant, for the reason these invoices show an intra-city
sale and not an inter-city sale. The respondent No.1 has not
led any evidence with respect to goods receipts pertaining to
movement of goods from its mill at Saharanpur to Delhi and
much less shown delivery by any transporter to the
appellant. The aforesaid has been totally ignored by the
learned Single Judge and therefrom it is apparent that the
sales were fictitious i.e. appellant was shown as a name-
lender. Respondent No.1 managed to cheat the revenue.”
9. Learned counsel for the appellant argued that the finding of the
High Court is patently erroneous as the respondents have not
denied that the appellant is a dealer in the State of Delhi which is
evident from Para 10 of the written statement reproduced above.
It was further pointed out that the respondents have not disputed
the registration of the appellant in the written statement nor any
issue was framed about the appellant being a registered dealer in
Delhi. Therefore, the High Court had made out a new case for the
respondents when such case was not even referred to in the
written statement filed.
10. The appellant had filed a registration certificate as the reseller
dealer in Delhi as Annexure P/12 along with an application to
produce such certificate. The said certificate shows that the
appellant was registered as a Dealer under Section 14 of the Delhi
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Sales Tax Act, 1975. The nature of business being Reselling of
Paper and Boards only. There is a mention of godown in the
registration certificate as well.
11. Learned counsel for the respondents supported the judgment of
the learned Division Bench and relied upon judgment of this Court
reported as Subhra Mukherjee and Another v. Bharat Coking
Coal Ltd. and Others1 to contend that the onus of proof whether
transactions were genuine and bonafide has to be discharged by
the appellant. Learned counsel for the respondents also relied upon
the judgment of this Court reported as Ishwar Dass Jain v. Sohan
Lal2 to contend that the appellant has not produced account books
but only extracts which are not admissible in evidence and hence
suit was rightly dismissed by the High Court in appeal.
12. We have heard learned counsel for the parties and find that the
Division Bench of the High Court has gravely erred in law in
accepting the appeal of the respondents on wholly erroneous and
untenable grounds. Each of the invoices produced bears the
registration No. S.T. No. 36/102499/08/84 and also bears the stamp
and signatures of the Managing Director/ Director of the
respondents. Apart from such invoice, the appellant has proved
the debit note which has also been stamped and signed by the
Managing Director/ Director. The ST-1 Form also bears the stamp
and signature of the Director of the respondents. Such ST-1 Form
1 (2000) 3 SCC 312
2 (2000) 1 SCC 434
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bears the invoice number and the date as well as the value of the
goods. The witness of the respondent has admitted his signatures
on the ST-1 Form, invoice and debit notes. The respondent
company has only denied the signatures of its representative only
on the Delivery Challan.
13. The judgments referred to by the learned counsel for the
respondents are not applicable in the present case. The
respondents have alleged that the alleged bills have been raised
on the basis of fictitious and fraudulent transactions. Since such
stand was of the respondents, the onus of proof of such issue was
on the respondents. Such issue necessarily implies that the raising
of the invoices is not in dispute but it was alleged that such bills
are fictitious and fraudulent. The onus of proof of issue no. 4,
whether the defendant no.1 accepted the bills without actual
delivery of goods to it is also upon the respondents as it is their
stand that the bills were accepted without actual delivery of goods.
14. The reasoning of the Division Bench that the witness examined by
the appellant was not in Delhi when the transactions took place is
wholly irrelevant to determine whether the invoices, debit notes
and ST-1 Form are proved or not. It is not a case of mere exhibition
of documents. Such documents were proved by a witness as such
documents were kept by the appellant in their ordinary course of
business. All these documents are stamped and counter-signed by
the representatives of the respondents. Such documents have
come from the records of the appellant. It is not necessary for the
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witness to be signatory of such documents or such documents
were executed in his presence. The documents were maintained in
the regular course of business of the appellant. In fact there is no
dispute about the maintenance and production of such documents.
The witness of the respondent has admitted the execution of all
the invoices, debit notes and ST-1 Form which bear their stamp and
also the signatures of the authorized representative. Therefore, the
reasoning given by the High Court is bereft of any merit.
15. The judgments referred to by the learned counsel for the
respondents are not applicable to the facts of the present case at
all. In Subhra Mukherjee, it was held that a person who attacks a
transaction as sham, bogus and fictitious must prove the same. It
is the respondent, who have alleged the transaction as fraudulent.
In fact, in the aforesaid case, the transaction of sale was found to
be bogus and appeal of the alleged purchasers was dismissed.
Thus, the onus of proof was on the respondents but the
respondents have failed to discharge the same.
16. In Ishwar Dass Jain, it was suit for redemption of usufructuary
mortgagee which was dismissed by the High Court. The appellant
before this Court was the plaintiff. The defence of the respondent
was that there was no relationship of mortgagor and mortgagee
between the parties but that the relationship was as landlord and
tenant. It was the defendant who has not produced his books of
accounts to show that he was paying various amounts as rent to
the appellant every month. In these circumstances, the extract of
accounts produced by the respondent was found to be
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unbelievable and the suit decreed. In fact, the respondents in the
written statement itself denied that they do not have the account
books as they got damaged in rain and eaten by pests when they
were kept on the roof of a building during the process of
reconstruction. Such defence on the face of it appears to be made
up defence. The account books were not produced by the
respondents to discharge the onus on them. Therefore, the adverse
inference had to be drawn against the respondents rather than
against the appellant who are not relying upon the entries in the
account books alone to maintain suit but reliance is on the
invoices, debit note as well as ST-1 Form which had been issued
only after the receipt of goods. Though the respondents have
denied the receipt of goods but the receipt of goods is proved by
numerous documents stamped and signed by the respondents.
17. Section 4(2)(a)(v) of the Delhi Sales Tax Act, 1975 excludes the sale
made to the registered dealer from the taxable turnover, which
reads thus:
“(2) For the purposes of this Act, “taxable turnover” means
that part of a dealer’s turnover during the prescribed period
in any year which remains after deducting therefrom,—
(a) his turnover during that period on—
(i) sale of goods ……………………….
xxx xxx
(v) sale to a registered dealer-
(A) of goods of the class or classes specified in the certificate
of registration of such dealer, as being intended for use by
him as raw materials in the manufacture in Delhi of any
goods, other than goods specified in the Third Schedule or
newspapers,-
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(1) for sale by him inside Delhi; or
(2) for sale by him in the course of inter-State, trade or
commerce, being a sale occasioning, or effected by transfer
of documents of title to such goods during the movement of
such goods from Delhi; or
(3) for sale by him in the course of export outside India being
a sale occasioning the movement of such goods from Delhi,
or a sale effected by transfer or documents of title to such
goods effected during the movement of such goods from
Delhi, to place outside India and after the goods have
crossed the customs frontiers of India; or”
18. Rule 7 of the Delhi Sales Tax Rules, 1975 allows the dealer to claim
deduction from his turnover if he files a declaration in ST-1 Form
duly filled in and signed by the purchasing dealer or a person
authorized by him in writing. The said Rule reads thus:
“7. Conditions subject to which a dealer may claim
deduction from his turnover on account of sales to registered
dealers. –
(1) A dealer who wishes to deduct from his turnover the
amount in respect of sales on the ground that he is entitled
to make such deduction under the provisions of sub-clause
(v) of clause (a) of sub-section (2) of section 4, shall produce-
(a) copies of the relevant cash memos or bills according at
the sales are cash sales or sales on credit; and
(b) a declaration in Form ST-1 duly filled in and signed by the
purchasing dealer or a person authorised by him in writing:”
19. The respondents have admitted that no sales tax is payable by a
dealer to a dealer. By necessary implication, the respondents are
admitting the appellant to be a dealer as also the respondents to
be dealer under the Delhi Sales Tax Act, 1975. It is only on account
of sales made by a dealer to a dealer that the sales tax is not be
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payable as the incidence of payment of tax would be when the
goods are sold to a consumer. The respondents as wholesaler,
were getting the benefit of trade discount, which is an agreed term
of sale.
20. The High Court, in the impugned judgment erred in holding that
the appellant had not examined the author of the documents. Such
reasoning is absolutely erroneous as in the written statement, the
respondents had not denied their signatures on the documents
referred to by the appellant but pleaded duress in executing of
these large number of documents. The witness examined by
respondent no.1 in his cross examination admitted his signature or
that of the representative of company on invoices, debit notes and
on ST-1 Form. The respondent had led no evidence in respect of
fraud or duress apart from self-serving statement. The
consignment of goods was sent from the month of November 1985
to January 1986. The respondent had signed large number of
documents during this period. However, no complaint was made to
any person or authority or even to the plaintiff. It is a denial of
receipt of goods without any basis raised only in the written
statement filed. Such stand is wholly bereft of any truth and is thus
rejected.
21. The debit notes stamped and signed by the respondents were in
respect of trade discount on the wholesale price mentioned in the
invoice. Having accepted the trade discount, which is evident from
the stamp and signatures not only on the debit notes but also on
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the invoice as well as on ST-1 Form, shows that the goods were
actually lifted by the respondents for which payment has not been
made. The respondents have taken up wholly untenable ground
that the documents were signed under duress. Large number of
documents such as invoices, debit notes and ST-1 Form spread
over 3 months is unbelievable to be an exercise of duress. The
stand of the respondents is wholly untenable and unjustifiable in
law and is only to defeat the legitimate claim raised by the
appellant. The High Court in the appeal has gravely erred in
setting aside the reasoned order of the learned Single Bench on
the grounds which were not even raised by the respondents.
22. In view of the said fact, the order of the Division Bench of the High
Court dated 28.5.2012 is set aside. The suit is decreed for
recovery of Rs.96,41,765.31 and future interest on the principal
sum of Rs.71,82,266/- @9% p.a. from the date of filing of the suit
till realisation. The appeal is thus hereby allowed.
………………………………………J.
(HEMANT GUPTA)
………………………………………J.
(V. RAMASUBRAMANIAN)
NEW DELHI;
DECEMBER 16, 2021.
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