1984 (12) TMI 291 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of reassessment proceedings under section 21 of the U.P. Sales Tax Act.
2. Classification of 'mill board' as 'paper' under Notification No. 332 dated 15th November, 1971.

Detailed Analysis:

Issue 1: Jurisdiction of Reassessment Proceedings under Section 21 of the U.P. Sales Tax Act

The primary contention was whether the reassessment proceedings initiated under section 21 of the Act for the assessment years 1975-76, 1976-77, and 1977-78 were justified. The Revenue argued that the original assessments were a result of non-application of mind by the Sales Tax Officer and not a mere change of opinion. The Tribunal, however, found that the reassessment was initiated due to a change of opinion, which is not permissible under section 21.

The court referenced the principle established in Commissioner of Sales Tax v. Jagdish Prasad Satish Prasad, which clarified that the term "reason to believe" in section 21 requires a reasonable belief based on objective facts, not a mere change of opinion. Furthermore, the court noted that the same Sales Tax Officer had previously treated mill board as paper in the assessment year 1974-75, indicating that the reassessment was indeed due to a change of opinion.

The court concluded that the initiation of reassessment proceedings was unjustified and answered the first question against the Revenue, affirming that the original assessments were not due to non-application of mind.

Issue 2: Classification of 'Mill Board' as 'Paper' under Notification No. 332 dated 15th November, 1971

The second issue was whether mill board should be classified as 'paper' under the relevant notification. The Revenue argued that mill board is a distinct commodity and should not be classified as paper. They cited cases like Kilburn and Company Ltd. v. Commissioner of Sales Tax and Sree Rama Trading Company v. State of Kerala to support their stance.

The respondent-assessee contended that the notification's language was broad enough to include mill board under the term 'paper.' The Tribunal had found that mill board, used for various purposes such as printing, drawing, and packing, falls under the definition of paper in common parlance and commercial sense.

The court reviewed the legislative history and various notifications, noting that the term "paper of all kinds" in the 1971 notification was intended to be broad and inclusive. The court also considered the Central Excise Tariff, which includes mill board under the category of paper, lending further support to the assessee's argument.

The court upheld the Tribunal's finding that mill board should be taxed as paper under the 1971 notification and not as an unclassified item. Consequently, the second question was answered in favor of the respondent-assessee.

Conclusion:

The court dismissed the revisions filed by the Commissioner of Sales Tax, U.P., and upheld the Tribunal's decision, affirming that:
1. The reassessment proceedings under section 21 were initiated due to a change of opinion and were therefore unjustified.
2. Mill board is to be classified as paper under Notification No. 332 dated 15th November, 1971.