TMI Blog1970 (12) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... re of mirrors at Faridabad, while its administrative offices are situate in the Union Territory of Delhi at 69, Deshbandhu Gupta Road, New Delhi, and being a registered dealer in the Union Territory of Delhi under the Sales Tax Act of that State and under the Central Sales Tax Act, all taxes leviable are being assessed and paid by the petitioner in respect of its business in that territory. The Assessing Authority proceeded to assess the petitioner to sales tax after recording a brief order, dated 3rd December, 1965, which is in these words: "None is present. The dealer is liable to pay tax from January, 1961, as an importer-manufacturer." Despite the petitioner's objection, the assessment for that year was made by the Assessing Authority, Gurgaon, on 3rd December, 1965, when a demand for Rs. 17,000 was created against the petitioner. This included Rs. 1,000 assessed as penalty under section 11(6) of the Punjab General Sales Tax Act. The petitioner took the matter to the Excise and Taxation Commissioner, Haryana, assailing the validity of the assessment on the plea inter alia that the Assessing Authority had no jurisdiction in the matter for reasons noted above and the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore my Lord the Chief Justice for necessary orders. In pursuance of the above-said order of reference, the petition came on for hearing before the Division Bench consisting of R.S. NARULA and C.G. SURI, JJ., and the learned Judges delivered the following judgment on 17th September, 1970. Bhagirath Dass with B.K. Jhingan and S. K. Hirajee, for the petitioner. C.D. Dewan, Additional Advocate-General (Haryana) with C. B. Kaushik, for the respondents. JUDGMENT NARULA, J.-Messrs Atul Glass Industries, Faridabad, a partnership concern, has impugned the order of assessment of sales tax in respect of the year 1961-62 (annexure 'A') and the appellate order upholding the same (annexure 'B') on the main ground that the assessment has been made under the Punjab General Sales Tax Act, 1948 (hereinafter called the Punjab Act) and under the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act) without the authority having arrived at any legal and valid finding about the petitioner-firm having been a "dealer" of Faridabad within the meaning of that expression as defined in the two Acts. Reference to the other infirmities in the impugned orders on account of which those order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t mention about the result of those enquiries was, for the first time, made in the impugned order of the Assessing Authority and no hint about the information gathered during those enquiries was ever given to the petitioner before that. The order of the Assessing Authority shows that as a result of those private ex parte enquiries alone, he was convinced that the petitioner had been effecting sales from Faridabad itself, and, therefore, the Assessing Authority started issuing notices to the petitioner to produce its books of account in order to make a proper and fair assessment of the tax to be levied on it. It is not disputed by Mr. Dewan that the sole object of sending notices to the petitioner after the private departmental enquiries was to fix the quantum of tax by invoking the machinery provision relating to assessment proceedings and no further information was sought from the petitioner for deciding the basic jurisdictional question, the petitioner being or not being a dealer of Faridabad. Whatever may be the reason for not complying with the several notices issued to the petitioner for that purpose, the fact remains that the books of accounts were not produced till the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Authority on the ground that the order fixing liability has to be read in this case along with the impugned order of assessment (annexure 'A') as both the orders were framed on the same day and the order fixing liability just preceded the order of assessment. It was for the issuance of a writ in the nature of certiorari to quash the orders of the Assessing Authority and the Appellate Authority (annexures 'A', 'B' and 'B-1') that this petition was filed on 3rd December, 1966, in the circumstances detailed above. The writ petition has been contested on behalf of the respondents, who are (i) the State of Haryana, (ii) the Excise and Taxation Commissioner, Haryana, and (iii) the Assessing Authority, Gurgaon. In the written statement dated 3rd February, 1967, filed by the Excise and Taxation Commissioner of Haryana, substantial parts of the impugned order of the Assessing Authority have been copied almost verbatim to justify the passing of that order. The correctness of the orders passed in the assessment proceedings on 8th April, 21st April and 3rd May, 1965, as reproduced in paragraph 5 of the writ petition has not been disputed. It has, however, been stated that the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including a Department of Government who in the normal course of trade sells or purchases any goods that are actually delivered for the purpose of consumption in the State of Punjab, irrespective of the fact that the main place of business of such person is outside the said State and where the main place of business of any such person is not in the said State, 'dealer' includes the local manager or agent of such person in Punjab in respect of such business." "Sale " under that Act means any transfer of property in goods for valuable consideration. The tax is leviable on the annual gross turnover of the dealer. The proceeds of any sale made outside the State by a dealer who carries on business, both inside and outside the State, is not included in the turnover of the dealer. "Import" in the Punjab Act means the bringing of goods into the State from any place outside its limits. A dealer who was carrying on business in question for at least a year or more preceding the commencement of the Punjab Act is liable to pay tax under that Act if his gross turnover in the year immediately preceding the commencement of the Act exceeded the taxable quantum. The petitioner was admittedly not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following terms: "A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another; (b) is effected by a transfer of documents of title to the goods during their movement from one State to another." At the hearing of this petition, Mr. Bhagirath Dass pressed before us only the following points: (i) The burden of proving that a particular assessee was carrying on the business of buying or selling as a regular activity during the financial year in question and was, therefore, a dealer in that year within the meaning of section 2(b) of the Central Act or section 2(d) of the Punjab Act, was on the sales tax authorities, which burden they have failed to discharge in this case: (a) because the mere fact that an assessee manufactures goods out of the material imported by him into the State does not make him a dealer within the meaning of either the Punjab Act or the Central Act; and the respondents have not gone beyond that point and have recorded any finding about the petitioner having, in fact, been a dealer at Faridabad during 1961-62; (b) bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the services or executing the contract stands transferred to the other party. He further submitted that if the taxing authorities do not make any investigation and come to the conclusion merely because of the frequency and volume of the sale, the inference of the department cannot be sustained. He laid particular emphasis on the observation of the Supreme Court in the case of Travancore Rubber and Tea Co.(4) to the effect that merely making an assessment on the determination of the turnover of the assessee without discussing the question whether the assessee was a "dealer" or not, within the meaning of the Central Act, could not be sustained. Mr. C.D. Dewan, learned Additional Advocate-General for the State of Haryana, who appeared before us on behalf of the respondents, did not question the correctness of the proposition relating to the burden of proof (of the essential prerequisite of being a "dealer" under the Acts) being on the department and about the necessity of recording a proper finding to that effect in every case in which the claim of the department in that respect is disputed. Learned counsel for the petitioner then referred in detail to the respective definitions of " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over, J. (with which the other four learned Judges of the Constitution Bench of the Supreme Court agreed) in Tata Engineering Locomotive Co. Ltd. v. The Assistant Commissioner of Commercial Taxes and Another[1970] 26 S T.C. 354 (S.C.); A.I.R. 1970 S.C. 1281. At the suggestion of the assessee, the department examined one specimen transaction alone and held in that case that other transactions were presumed to be of similar nature. The Supreme Court struck down that order and held that this was a wholly wrong procedure to follow and the Assistant Commissioner of Sales Tax on whom the duty lay of assessing tax in accordance with law, was bound to examine each individual transaction and then decide whether it constituted an inter-State sale exigible to tax under the provisions of the Central Act or not. It is unnecessary to dilate on this subject for the simple reason that the petitioner was admittedly carrying on the business of manufacture of mirrors, etc. in Faridabad (in the then existing State of Punjab) during the year 1961-62 on an extensive scale and the only ground on which it is sought to be held that the petitioner was not a dealer within the meaning of the sales tax law d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time during 1961-62. The decision is based on transactions of 1964 and is, therefore, not sustainable. The petitioner is on a still more firm ground regarding its grievance about the material collected in the ex Parte private enquiry having been used by the Assessing Authority for recording a finding against it without informing the petitioner of that material before passing the impugned orders. On the facts relevant for this proposition, there is no dispute. Even the learned Additional Advocate-General very fairly and frankly stated that the Assessing Authority did not have any material other than that collected at the ex Parte private enquiries for holding that the petitioner had been carrying on the business of sale from Faridabad during the relevant year and admitted that the said material was never divulged to the petitioner before passing the impugned order of assessment. In the face of the authoritative judgment of their Lordships of the Supreme Court in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal[1954] 26 I.T.R. 775 (S.C.); A.I.R. 1955 S.C. 65. and M/s. Raghubar Mandal Harihar Mandal v. State of Bihar[1957] 8 S.T.C. 770 (S.C.); A.I.R. 1957 S.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bar to such course being adopted by them. Counsel's fee Rs. 250. SURI, J.-I regret my inability to agree with my Lord, Narula, J. This dissenting note may however be read in continuation of my Lord's judgment. There is no dispute with regard to the legal principles so well brought out by my Lord by reference to the provisions of the statute and a large number of decided cases but the question still remains how far these legal principles would have a bearing upon or be applicable to the facts of any particular case. In none of these cited cases were the courts dealing with an assessee like the petitioner who was breathing defiance of the authority of the Taxing Officer and repeatedly spurning the process issued to him from time to time in accordance with law. The basic controversy in this case revolves around a simple question of fact and I would like to throw better light on certain aspects of the case. Even at the risk of earning the censure which respondent No. 2 has earned by reproducing in the return certain portions of the impugned order (annexure 'A') of respondent No. 3, I feel that facts have the unfortunate habit of not changing very often and that a restatement of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65. On this date Shri Duggal appeared with a counsel and some accounts were partly examined. As further scrutiny of the accounts was necessary the case was adjourned to 3rd May, 1965, when Shri Duggal made a statement and submitted a list of transfers of consignments to Delhi. At this stage the Assessing Authority adjourned the case sine, die for making independent enquiries. Concrete information which may appear to demolish the contention put forth on 8th April, 1965, by Shri Duggal, a partner of the petitioner-firm, was forthcoming at this independent inquiry. The nature of this information is indicated by a portion of the impugned order recorded by respondent No. 3, which runs as follows: "The examination of record of transport companies revealed that the goods are supplied directly to their customers inside as well as outside the State. Although the goods receipt shows that the goods are consigned to "self" yet these are endorsed by a slip to the customers to whom the goods are delivered directly by the assessee who discloses himself either as Atul Glass Industries or as Indo Auto Glass Industries. For instance M/s. Atul Glass Industries, Delhi, actually booked from Faridabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependent enquiries. An office memo dated 7th September, 1965, was sent to the petitioners for appearance on 13th September, 1965. As nobody appeared the case was adjourned at the petitioners' request to 23rd October, 1965. The request for adjournment was repeated again and the case was adjourned a second time to 3rd December, 1965. There was a repetition of the same request for adjournment a third time and respondent No. 3 therefore proceeded to record the impugned order (annexure 'A') the same day. I have not been referred to any provision of statute or any ruling of court which may say that all the information gathered at the independent enquiry conducted by the department had to be set out in detail in the notice sent to the assessee. The assessee was being called upon to produce his books and other records for the assessment years 1960-61 and 1961-62 and there is no reason to believe that what had been ascertained against the assessee would not have been divulged to him if he had appeared before the Assessing Authority on the dates intimated in the process issued in accordance with law or that the assessee's explanation with regard to the material appearing against him in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source of the necessary information was the books and records of the petitionercompany which were being withheld for obvious reasons. The elementary principles enunciated in section 114 of the Indian Evidence Act may, under the circumstances, be a better guide as to the inferences to be drawn from the withholding of such books than any number of decided cases which do not deal with identical facts. It is true that the information gathered in respect of the year 1964 was no indication that the same thing had been going on during the earlier years but that does not mean that we cannot draw the inferences permissible under the law from the contrary behaviour of the petitioners or their failure to get themselves registered with the sales tax authorities for a number of years after they had started their manufacturing business at Faridabad. There was no question of the petitioners having remained within any taxable quantum because in the case of sales made by a manufacturer the taxable quantum was nil and the very first sale made by them from Faridabad would have justified their assessment under the Punjab Act. Again there is no dispute with the legal proposition that each assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r manufactured products to customers within and without the State. There is nothing to indicate that these sales were of by-products or of old or discarded items of packing material or capital goods or that these sales were not made in the regular course of the business of the company. The best evidence available on the point was in the possession of the assessee and was being withheld by it. There was therefore no other course left open to the respondents than to make a best judgment assessment which had necessarily to be based on inferences which the law fully entitles the respondents to draw from the petitioners' conduct. No rules of natural justice may appear to have been violated and it cannot be said that the petitioners were denied an opportunity to explain the information that had been collected against them in the independent enquiries conducted by the department. Ample opportunity had been given to the petitioners to appear before the respondents after that information had been gathered by the department and the respondents cannot be held to blame if that opportunity remained unavailed of by the petitioners. The information collected during the local enquiry had been se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to as "the assessee") was established in December, 1960, and started manufacturing mirrors at its factory at Faridabad, having its registered and sales office at Delhi. On 3rd of March, 1965, notice in form S.T. 14, for the assessment year 1961-62 was issued to the assessee for 8th of March, 1965. After a number of adjournments and after partly examining the accounts of the assessee, the matter was adjourned on 3rd of May, 1965, sine die for enquiry. Thereafter the assessee was called on a number of hearings, which he did not attend for causes into which I need not go, and finally, on the 3rd of December, 1965, the impugned order of assessment was passed. The points taken up on behalf of the assessee inter alia were-(1) that the assessee can be assessed to sales tax by the Assessing Authority at Gurgaon only if the assessee is proved to be a "dealer" at Faridabad within the meaning of section 2(d) of the Punjab General Sales Tax Act, or section 2(b) of the Central Sales Tax Act; (2) that the burden of proving that the assessee did fall within the definition of "dealer", as stated above, for the assessment year 1961-62, was on the department; (3) that each assessment year has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this writ petition must succeed on the short point that there was no material whatever available with the Assessing Authority to come to the conclusion that the assessee was a dealer during the assessment year 1961-62 with which year alone the Assessing Authority was concerned. It is, therefore, not necessary for me to give in detail the provisions of the two Acts and the definition of the expression "dealer". Narula, J., has gone into the whole matter in great detail and cited authorities for the various propositions accepted by him. Before me it is not disputed that before an assessee can be held to be a dealer, two things are necessary: first, that the assessee must buy or sell goods, and, secondly, this must be done in the course of his business. The mere fact that the assessee, in the present case, did enter into some transaction of sale of the goods manufactured by him in the year 1964 is not sufficient for coming to the conclusion that he must have sold those manufactured goods also three years earlier, that is, during the year 1961-62. The learned counsel for the department appearing before me did not contest this proposition. This alone is sufficient for the disposal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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