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TMI Blog2007 (7) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The brief facts of the case giving rise to the present petition are as follows: The petitioner is a registered dealer under the provisions of U.P. Trade Tax Act, J 948 (hereinafter referred to as the Act) and is engaged in the business of broken glass, which has been carried in its own account as well as in commission agency. For the assessment year 1994-95 the petitioner had sold broken glass for Rs. 1,30,27,655.45 which it had purchased within the State of Uttar Pradesh from unregistered dealers in its commission agency business. According to the petitioner, complete details relating to sales of broken glass in its commission agency, which were purchased in Uttar Pradesh from unregistered dealers were disclosed in the course of assessment proceedings. The Assistant Commissioner (Assessment), Trade Tax, Modinagar, Ghaziabad- respondent No. 2, who was the assessing authority of the petitioner while making the assessment after examination of the transactions exempted the turnover of such broken glass on the ground that liability of tax was at the point of manufacturer or importer and not at the point of the petitioner. Thereafter the respondent No. 2 sought permission from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment order and, therefore, the respondent No. 1 had rightly authorized the respondent No. 2 to initiate proceedings under Sub-section (2) of Section 21 of the Act. The notice dated 4th March, 2002 has rightly been issued. The old broken glass is liable to tax at the point of sale to consumer vide Notification No. ST-II-5785/X(10)(1) dated 7.9.1981 and as such the petitioner was liable to pay tax @ 5% which was completely over looked due to non application of mind by the respondent No. 2 and thus there was prima facie reason to believe that the turnover of the petitioner has escaped assessment to tax and as such the impugned show cause notice has been issued under Section 21(2) of the Act. The petitioner is required to give explanation/reply to the respondent No. 2, which shall be considered in accordance with law. The proceedings under Section 21(2) of the Act has been justified on the ground that it can be initiated even on a change of opinion. RIVAL SUBMISSIONS: 3. We have heard Sri Kunwar Saxena, learned Counsel for the petitioner and Sri M.R. Jaiswal, learned standing Counsel for the respondents. 4. Learned Counsel for the petitioner submitted that the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixes the liability at the point of sale to consumer and as the petitioner had purchased broken glass from unregistered dealer within the state of Uttar Pradesh the liability of paying the tax would be of the petitioner. He further submitted that under Section 21(2) of the Act the assessment could be reopened on the change of opinion also and in any event in the assessment order the respondent No. 2 had not taken into consideration the decision of this Court in the case of Kabar Khana, Turkmanpur (supra) which is binding. He has justified the proceedings already imitated. In support of the various pleas he has relied upon the flowing decisions: 1. Maharaj Kumar Kamal Singh v. Commissioner of Income Tax, Bihar and Orissa ; 2. Hiralal Rattanlal etc. etc. v. State of U.P. Anr. etc. etc. ; 3. The Commissioner of Sales tax, U.P., Lucknow v. Parson Tools and Plant, Kanpur ; 4. Additional Commissioner (Legal) and Anr. v. Jyoti Traders and Anr. 1999 U.P.T.C. 45; 5. Shyam Babu Vaishya and Co. and Anr. v. Assistant Commissioner of Trade Tax, Khand-2, Banda and Ors. 2004 U.P.T.C. 210; 6. State of U.P. and Anr. v. Anil Kumar Ramesh Chandra Glass Works and Ors. (2005) 11 SCC 451; 7. Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist, the High Court rightly refused the prayer for the issue of a writ of prohibition restraining the Authorities from continuing the proceedings pursuant to the notices issued. As indicated by this Court in State of Uttar Pradesh v. Brahm Datt Sharma a show cause notice is issued under statutory provision calling upon the person concerned to show cause, ordinarily that person must place his case before the Authority concerned by showing cause and the courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued palpably without any authority of law. On the facts of this case, it cannot be said that these notices are palpably without authority of law. In that situation, the appellants cannot successfully challenge the refusal by the High Court of the writs of prohibition prayed for by them. 11. In the case of L.K. Verma v. HMT Ltd. and Anr. , the Apex Court has held as under: 20. The High Court in exercise of its jurisdiction under Artie e 226 of the Constitution, in a given case although may not entertain a writ petition inter alia on the ground of availability of an alternative remedy, but the said rule cannot be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ i ' it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The Court, in extraordinary circumstances may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted. 8. Another Constitution Bench of this Court in State of Madhya Pradesh and Anr. v. Bhailal Bhai etc. etc. held that the remedy provided in a writ jurisdiction is not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defence legitimately open in such actions. The power to give relief under Article 226 of the Constitution is a discretionary power. Similar view has been reiterated m N.T. Veluswami Thevar v. G. Raja Nainar and Ors. ;Municipal Council, Khurai and Anr. v. Kamal Kumar and Anr. , Siligun Municipality and Ors. v. Amalendu Das and Ors. ; S.T. Muthusami v. K. Natarajan and Ors.; R.S.R.T.C. and Anr. v. Krishna Kant and Ors.; Kerala State Electricity Board and Anr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made in violation of the principles of natural justice. We may add that where the proceedings itself are an above of process of law the High Court in an appropriate case can entertain a writ petition. 12. The above position was recently highlighted in U.P. State Spinning Co. Ltd. v. R.S. Pandey and Anr. 13. The question whether the Assessing Officer had reasons to believe is not a question of limitation only but is a question of jurisdiction, a vital thing, which can always investigated by the Court in an application under Article 220 of the Constitution as held in Daulatram Rawatmal v. ITO (1960) 38 1TR 301 (Cal); Jamna Lal Kabra v. ITO ; Calcutta Discount Co. Ltd. v. ITO (1961) 41 1TR 191 SC; C.M. Rajgharia v. ITO (1975) 98 1TR 486 (Pat) and Madhya Pndesh Industries Ltd. v. Income Tax Officer . 14. The words "has reason to believe" are stronger than the words "is satisfied". The belief entertained by the Assessing Officer must not be arbitrary or irrational. It must be reasonable or, in other words, it must be based on reasons which are relevant and material as held by the Apex Court in Ganga Saran & Sons P. Ltd. v. ITO . 15. The expression "reason to believe" in Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the case of GKN Driveshafts (India) Ltd. (supra) the Apex Court has held as follows: When a notice under Section 148 of the Income-tax Act, 1961, is issued, the proper course of action for the notice is to file the return and, if he so desires, to seek reasons for issuing the notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notices is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. On receiving notices under Section 148 the appellant filed the returns. The appellant also received notices under Section 143(2) calling for further information on certain points in connection with the returns. Thereupon the appellant filed writ petitions challenging the notices. The High Court dismissed the writ petitions holding that the petitions were premature and the appellant could raise its objections to the notices by filing reply to the notices before the Assessing Officer see e.g. The appellant preferred appeals and the Supreme Court dismissed the appeals, observing that since the reasons for reopening of assessments under Section 148 had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be accepted. 20. The aforesaid two decision relied upon by the learned standing Counsel would not be applicable to a case where an officer assumes to issue notice like the present one issued under Section 21(2) of the Act where in a case certain condition is a must for assuming the jurisdiction and where the very extent of conditions to be fulfilled is under challenge. The Court cannot exercise its power by declining to entertain the petition under its extraordinary jurisdiction under Article 226 of the Constitution Notice under Section 21(2) of the Act is a jurisdictional notice and can be challenged. 21. Before going into the merits of the matter it would be apt to reproduce the relevant provisions of the Act which may have material bearing on the issues involved herein: Statutory Provisions of the U.P. Trade Tax Act, 1948 Section 2. Definitions. 22. In this Act, unless there is anything repugnant in the subject or context: (c) 'Dealer' means any person who carries on in Uttar Pradesh (whether regularly or otherwise) the business of buying, selling supplying or distributing goods directly or indirectly, for case o deferred payment or for commission, remuneration or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod) for case, deferred payment or other valuable consideration.; (e) 'importer' in relations to any goods means the dealer who makes the first sale of such goods after their import into the state. (e-1) 'Manufacture' means producing, making, mining, collecting, extracting, altering, ornamenting, finishing, or otherwise processing, treating or adapting any goods; but does not include such manufacture of manufacturing processes as may be prescribed; (ee) 'Manufacture' in relating to any goods means the dealer who makes the first sale of such goods in the State after their manufacture and includes: (i) a dealer who sells bicycles in completely knocked down form; (ii) a dealer who makes purchases from any other dealer not liable to tax on his sale under the Act other than sales e empted under Section 4, 4-A and 4-AAA. 23. The aforesaid definition has been substituted by the U.P. Trade Tax (Amendment) Act, 1997 (U.P. Act No. 11 of 1997) published in the U.P. Gazette Extra-ordinary dated 8.8.1998. 24. Before its amendment the term manufacturer was defined as follows: (ee) 'Manufacturer' in relation to any goods means the dealer who makes the first sale of such goods in the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buying agent to his principal, if the agent is found, in either of the cases aforesaid,- (i) to have sold the goods at one rate and passed on the sale proceeds to his principal at another rate; or to have purchased the goods at one rate and passed them on to his principal at another rate; or (ii) to have purchased the goods at one rate and passed tin n on to his principal at another rate; or (iii) not to have acceded, to his principal for the entire collection or deduction made by him, in the sales or purchases effected by him on behalf of his principal; or (iv) to have acted for a fictitious or non-existent principal; Section 21. Assessment of tax on the turnover not assessed during the year. (1) If the assessing authority has reason to believe that the whole or any part of the turnover of the dealer, for any assessment year or part there of, has escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than at which it is assessable under this Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making, such inquiry as it may consider nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or reassessment in! pursuance thereof may be made within six months, after the expiration of such period. (4) If an. order of assessment s set aside and the case is remanded for reassessment by any authority under the provisions of this Act or by a competent Court, the order of re-assessment may be m;.le within one year from the date of receipt by the Assessing Authority of the copy of the order remanding the case, or by December 31, 1982, whichever is later. (4-A) If an order of assessment is quashed on the ground of want of jurisdiction of the assessing authority on any other like ground, by any competent authority or Court, fresh order of assessment may be made by the assessing authority having jurisdiction within one year from the date of receipt by the assessing authority whose order is so quashed, of the copy of order of such authority or court by March, 31 1993 whichever is later. (5) If an order of assessment or reassessment for any assessment year is set aside under Section 30, a fresh order of assessment or reassessment for that year may be made within six months from the date on which such earlier order was set aside. (5-A) If an expert order of assessment or reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid provisions we find that very vide a d inclusive meaning of the word 'dealer' has been given under the Act. It, inter alia, includes the commission agent also. Importer has been defined to mean the dealer who makes the first sale of such goods after their import in the State where as manufacture has been given artificial meaning and includes even such process which ordinarily may not amount to manufacture. Manufacturer during the relevant period was defined to mean a dealer who makes first sale of goods in the State after their manufacture whereas sale under the Act had been, given, a very vide meaning and an inclusive definition has been given in Explanation II. Two independent sales or purchases are deemed to have taken place when the goods have been transferred to selling agent and from selling agents to the purchaser. Under Section 21 of the Act the Assessing Authority upon having reasons to believe that the whole or any part of the turnover of the dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax or where the tax rate applied is law or any deductions or exemptions have been wrongl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) this Court was considering a case where the assessee was dealing in plastic, chappals, sutli, emply bottles, scrap etc. He had not accepted any taxable turn over. A best judgment assessment was made and tax was imposed which was ultimately upheld by the Tribunal. The Tribunal had held thaty the liability of tax could not be fastened on the assessee in the absence of any finding as neither the assessee was a manufacturer nor importer and as he is neither manufacturer nor importer of old and discarded plastic and glass goods and even though it has been sold to the consumer, no tax can be imposed on the assessee. This Court has relied upon the notification No. S.T. II-5785/X-10(1)80 U.P. Act No. 15/48 Order 81 dated September 7, 1981; wherein the old, discarded, unserviceable or obsolete machinery stores or vehicles including waste products except cinder, coal ash and such items as are included in any other notification was liable to tax on the point of sale to Consumer. This Court had held that the Tribunal had committed an error in ignoring the aforementioned notification wherein the goods mentioned therein are liable to tax on the point sale to consumer. Even though in the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an activity amounts to manufacture has to be factually determined. There cannot be a direction to treat a particular type of transaction to be a manufacturing activity without examining the factual scenario. There cannot be a generalization in such matters. 30. From the aforesaid decision of the Apex Court it is now well set led that there cannot be a direction to treat a particular type of transaction to he a manufacturing activity without examining the factual scenario and, therefore, there cannot be a generalization in such matters. 31. In the case of Maharaj Kumar Kamal Singh (supra) the Apex Court was dealing a case of reassessment made under Section 34(I)(b) of the India Income Tax Act, 1922 which empower the assessment authouriyt to reopen the cases on information. It has held as follows. On the other hand, one of the case specially mentioned in Section 34(I)(b) necessarily postulates that the word "information" must have reference to information as to law. Where in consequence of information in this possession, the Income Tax Officer has reason to believe that income has been assessed at too low a rate, he is empowered to revise the assessment; and thee can be no doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sales Tax v. Gram Udyog Lalitpur 1984 UPTC 501; Commissioner of Sales Tax v. Govind Ram Harbans Lal 1984 UPTC 1006 and Ram Lal Balak Ram, v. Commissiner of sales Tax U.P. 1986 UPTC 195. The proposition of law laid down in the above decisions squarely apply to the facts found in the instant case. Since the view taken by the Tribunal is in consonance with the view expressed by this Court, in the cases aforesaid, I do not find any merit in this revision. This revision is accordingly dismissed with costs. 34. In the case of Ram Lal Balak Ram v. Commissioner of Sales Tax 1986 UPTC 195 this Court has held as follows: In the teeth of finding recorded by the Tribunal that poppy seeds were not imported by the assessee, the assessee cannot be held to be importer. Similarly, the assessee cannot also be held to be a manufacture inasmuch as, he did not collect the same. Collection in fact was made by the farmers and not by the assessee and the assessee only purchases those poppy seeds from the farmers. 35. In State of Karnataka and Ors. v. C. Lalitha , the Apex Court has observed: A judgment, as is well known, is not to be read as a statute. But, it is also well known that the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant period the petitioner cannot treated either as an importer or as a manufacturer because he has not ejected first sale of goods after their import or after its manufacture in the State of Uttar Pradesh. 43. So far as the question that the petitioner is being treated as manufacturer is concerned, we may mention here that the definition of word 'manufacturer' as it stood during the relevant period, various processes mentioned therein should be done by the person concerned, i.e. the dealer either by itself or got done on its behalf. If the process is not being carried out by the dealer he would not be a manufacturer in respect thereof. NATURAL JUSTICE: 44. The first proviso to Sub-section (2) of Section 21 or in that matter provisions of Section 21 of the Act do not provide for any opportunity of hearing to the dealer by the Additional Commissioner/Commissioner before he grants approval to the proposal if any made by the assessing authority for making the reassessment. 45. In the case of Rajesh Kumar and Ors. v. Dy. CIT and Ors. the Apex Court was Considering the provisions of Section 142(2-A) of the Act which Empowers the Assessing Officer after obtaining the approval o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en saddled with a heavy expenditure. An appeal against the order of assessment, as noticed hereinbefore, would not serve any real purpose as the appellate authority would not go into such a question since the direction issued under Section 142(2A) of the Act is not an appellate order. 46. In the case of Manaktala Chemicals Pvt. Ltd. v. State U.P. and Ors. 2006 UPTC 1128 this Court has held as follows: 9. Section 21(2) though specifically does not say that opportunity is to be afforded to the leader before granting the sanction by the Commissioner but the principle is well recognized, that even f there is no specific provision in the Statute, such opportunity need be given to make the action taken or order passed in consonance with the principles of natural justice, unless, of course, the Statute specifically excludes the applicability of principle of natural justice, such an opportunity is deemed to be inbuilt in the provision, in case am action taken or order passed would effect the rights of any person adversely. In the case of Indian Oil Corporation, Agra v. Commissioner Trade Tax, reported in 1999 UPTC p. 365, a division bench of this Court after holding the Circular issued o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer for reopening the assessment. 13. Whether the Commissioner or the higher authority permits the assessing officer to proceed under the extended period of limitation either on his own or on the reason recorded by the assessing authority, in both cases, the dealer would have a right to put forward his defence for not reopening the assessment. This opportunity, if is excluded or shredded out from the aforesaid proviso, it would leave tin dealer with no opportunity/remedy to challenge the very authority of the assessing officer to reopen the assessment nor there would be any opportunity to challenge the approval granted by the Commissioner under any of the remedies under the Act, 14. When an order is passed on the basis of the reasons recorded, it naturally means that the reason must be rationale, genuine and relevant. Any reason which cannot be termed as rationale, genuine or relevant would not make out a case reopening of the assessment and for that matter also, the dealer has to be associated in the proceedings initiated seeking approval from the Commissioner or the Additional Commissioner, as case may be. 15. Admittedly, the Commissioner before granting sanction/a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and to make the reassessment under the extended period of limitation, the order dated 1st June, 2001 cannot be sustained and is therefore set aside. Consequently all proceedings taken in pursuance of the said order also falls and are set aside. CHANGE OF OPINION: 50. First proviso to Sub-section (2) of Section 21 of the Act empowers the authority to inmate proceedings for reassessment even in the east, where there is a change of opinion. The change of opinion may arise even if some material has been brought on record after assessment has been completed or it may be because of result of lack of care or inadvertence on the pas of tin Assessing Officer. 51. In the case of Shyam Babu (Supra) a Division Bench of this Court has held that Section 21 of the Act is wider than that of Section 147(a) of the Act and the escapement envisaged by Section 21 of the Act need not necessarily spring from a source extraneous to the original record and acting under Section 21 can be taken on the basis of material already on record at the time of the original assessment, if the escapement of assessment to tax was a result of lack of care or inadvertence on the part of the Assessing Officer. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pex Court has held that even if the period of time fixed under Section 132(5) of the Act is held to be mandatory that was satisfied when the first order was made. Thereafter, if any direction is given under Section 132(2) or by Court in writ proceedings, as in the case, we do not think an order made in pursuance of such a direction would be subject to the limitations prescribed under Section 132(5) of the Act. 55. The aforesaid decision has been followed by the Madras High Court in the case Deputy Commissioner of Commercial Taxes Tiruchirapalli Division, Tiruchirapalli v. A. Abdul Shukoor and Co. (1977) 39 STC 137 wherein the Madras High Court has held as follows: The Supreme Court had occasion to consider a similar imitation prescribed in Section 132(5) of; the Income Tax Act. Under the provision, the Income Tax Officer had to make an order within a period of 90 days. Such an order was made by the Income Tax Officer in a particular case within the period of 90 days. The assessee filed a writ petition in the Delhi High Court, which set aside that order on the ground that the principles of natural justice had been violated and directed the Income Tax Officer to reconsider the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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