TMI Blog1990 (3) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1985-86. W.P. No. 15975 of 1988 relates to the assessment years 1984-85 and 1985-86. W.P. No. 15976 of 1988 relates to the assessment years 1984-85 and 1985-86. W.P. No. 15981 of 1988 relates to the assessment year 1985-86. W.P. No. 18364 of 1988 relates to the assessment year 1985-86. As facts in all the cases are almost identical, we take up for consideration the facts in Writ Petition No. 18364 of 1988. Writ Petition No. 18364 of 1988 is filed by M/s. Vinayaka Wines, Nellore, a firm engaged in the business of distribution of I.M.F.L. (Indian made foreign liquor) products of McDowell Company Limited at Nellore assailing the show cause notice dated 10th October, 1988, issued under section 14(4) read with section 14-B of the Act by the Commercial Tax Officer-II, Nellore, proposing to reopen the assessment made for the assessment year 1985-86 and determining the alleged escaped turnover at Rs. 38,77,207. For the said assessment year, the assessee returned a net turnover of Rs. 1,67,14,347 and claimed exemption on a turnover of Rs. 2,85,08,541. Completing the assessment, the Commercial Tax Officer-II, Nellore, by his order dated 12th May, 1987, determined the net turnover at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding point of sale. Explanation I.-In this Schedule 'country liquor' means liquor manufactured in India, other than liquor manufactured and compounded in India and coloured and flavoured to resemble gin, brandy, whisky, vodka, wine or rum imported from outside the territory of India'. Explanation II.-The point of last sale mentioned in this Schedule shall be the sale by a dealer holding a licence other than a wholesale licence under rule 23 of the Andhra Pradesh (Foreign Liquor and Indian Liquor) Rules, 1970. In the case of a dealer holding a wholesale-cumretail licence, it shall be his sale to individual consumer as specified in the said rule." Section 2(1)(s) of the Act defines the expression "turnover". The definition was amended by the legislature by the A.P. General Sales Tax (Amendment) Act (18 of 1985) which came into force on 1st July, 1985. The definition of the expression "turnover" as it stood prior to the amendment read thus: "Section 2(1)(s).-'Turnover' means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash, def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings, the assessment years being 1983-84, 1984-85 and 1985-86, as the case may be. While some of the respondent-authorities traced their power to section 14(4) of the Act, some of them specifically invoked section 14-B of the Act. At this stage, we may enumerate the contentions put forward by the learned counsel appearing for the petitioners: (1) Section 14-B of the Act which enables the assessing authorities to reassess the turnover submitted by a dealer where prices charged by the dealer are found to be abnormally low compared to the prevailing market prices is a substantive provision which affects the vested right of the assessees and is, therefore, prospective in its operation and effective from 1st July, 1985, the date when it was brought into the statute book in the absence of any legislative intent, express or implied, giving it any retrospective effect. The expression "turnover" defined in section 2(1)(s) of the Act as it stood prior to the Amendment Act 18 of 1985, encompasses only the total amount charged as consideration for the sale or purchase of goods. It is only by virtue of the enlarged definition of the expression "turnover" under the Amendment Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essees were less than the prevailing market prices. Section 14-B of the Act read with section 2(1)(s)(ii) of the Act brought into the statute book with effect from 1st July, 1985, confers power on the assessing authority to assess or reassess to the best of its judgment the turnover of such sales or purchases of goods returned by a dealer where the assessing authority is satisfied that the dealer has shown in his account sales or purchases of the goods at prices which are abnormally low when compared to the prevailing market prices of such goods. The new method of assessment contemplated under section 14-B read with section 2(1)(s)(ii) of the Act affects the vested rights which accrued to the assessees in matters of assessment or reassessment. There cannot be two opinions that no retrospectivity can be given to such substantive provisions affecting the vested rights of the assessees unless the legislature specifically or by necessary implication conferred retrospectivity on such provisions. In Govinddas v. Income-tax Officer [1976] 103 ITR 123, their Lordships of the Supreme Court held: "Now, it is a well-settled rule of interpretation hallowed by times and sanctified by ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting the substantive rights and, therefore, the amended section could not be given retrospective effect so as to affect assessments completed before the amendment. It, therefore, follows that any substantive provision which affects the vested rights that accrued to the assessees can only be given prospective effect unless the legislature expressly or by implication intended otherwise. There is nothing in the Amendment Act 18 of 1985, indicating retrospectivity to section 2(1)(s)(ii) or section 14-B of the Act. Indisputably the said two provisions are substantive in nature and the same can be invoked only in respect of the transactions relatable to the period subsequent to 1st July, 1985 and not for the period anterior thereto. The learned Government Pleader, however, fairly conceded that for the period prior to 1st July, 1985, proposed or sought to be reassessed in the impugned notices, the Government of Andhra Pradesh granted relief by issuing G.O. Ms. No. 938, Revenue (CT-II) Department, dated 18th September, 1989 and that the said Government Order is binding upon the assessing authorities. The material portions of the G.O. Ms. No. 938, Revenue (CT-II) Department, dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Section 14(4) empowers the assessing authority to reopen the assessment and determine the escaped turnover to the best of his judgment where the turnover of a dealer has escaped assessment to tax or has been under-assessed or assessed at a rate lower than the correct rate. Section 14(4-C) of the Act empowers any higher authority, including the Assistant Commissioner, the Deputy Commissioner and the Joint Commissioner to exercise the powers of the assessing authority under section 14(4) of the Act. Section 14(2) read with section 14(8) of the Act empowers the authority exercising the power under sub-sections (2) and (4) of section 14 to impose penalty which shall not be less than three times but which may extend to five times the tax or the fee in a case where the assessing authority is satisfied that the failure on the part of the dealer to disclose the whole or part of the turnover or any other particulars correctly was wilful. Where such failure was not wilful the penalty shall not exceed one-half of the tax due. The scope and ambit of section 14(1), (3) and (4) of the Act has been the subject-matter of various decisions of the High Court. It is settled law now that where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay hold different views with respect to classification of certain goods. The exercise cannot be an endless one. However, we must qualify this principle by stating that if a decision is rendered either by the Supreme Court or this Court, or by the Sales Tax Appellate Tribunal, or the Commissioner of Commercial Taxes, and if the assessing authority finds that an assessment already made by him ought to be reopened in the light of such decision, it is always open to him to do so. In such a case, it cannot be said that the assessment is reopened on a mere change of opinion of the assessing authority. This can be equated to a situation where an assessment is reopened on information, and even under the Income-tax Act, it has been held that the decision of the Supreme Court, or the High Court, constitutes information. Similarly, if there is a change in law with retrospective effect, it would be a good ground for reopening the assessment. While it is neither possible nor practicable to exhaustively lay down a situation in which the said power can be exercised, all we need to emphasize is that the assessing authority cannot reopen an assessment on a mere change of opinion on his own part." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are 'reason to believe' and not 'reason to suspect. The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings." From the aforesaid discussion, it is evident that in order to reopen assessment under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward on behalf of the petitioners. The notice issued by the Commercial Tax Officer to M/s. Diplomat Department Wines, Hyderabad, petitioner in Writ Petition No. 15299 of 1988, reads as follows: "As it is clearly established that the dealer with a view to evade the payment of tax, had resorted to under-invoicing of the sale values, which are abnormally lower than compared with the earlier rates charged by similarly placed distributors and also the then prevailing market prices of these McDowell IMFL products, it has become necessary to work out the quantum of under-billing amount with reference to the number of cases under-billed, by a verification of each sale invoice issued by the assessee." It is thus evident that the assessing authority issued the reassessment notices proposing to determine the escaped turnover, by comparing the prices charged by the assessee with the alleged prevailing market price. The reassessment notices though styled as having been issued under section 14(4) of the Act, has to be treated as one issued only under section 14-B of the Act having regard to the fact that the reassessment is proposed only on the ground of variation between the prices ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute that the Act does not define as to what is meant by the expression "prevailing market prices". If section 14-B(1) of the Act is sought to be applied to the commodities which are regulated by the statute, no problem arises, but it should be borne in mind that in respect of 99 per cent of the goods taxable under the A.P. General Sales Tax Act, there is no law or regulation prescribing fixed prices and prohibiting sales in excess of the fixed prices. It is therefore, open to the dealers to fix sale price of their goods depending upon various factors such as, purchase price, terms of sale, freight, creditworthiness, solvency of the buyers, their overheads and liquidity and the rapport with the buyers. One dealer may make heavy turnover at lesser rates and make more profits with lesser overheads and another dealer may sell at higher rate and make less business with equal or less profit. It is common knowledge that in cases of cash sales, seller gives heavy discount to buyers. The Sales Tax Act cannot compel the sellers to sell their goods at a particular price. But section 2(1)(s)(ii) of the Act enacts that a dealer can be assessed on the turnover determined by the assessing autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the normal course dealers would arrange their affairs keeping in view the commercial expediency of each of them. In order to highlight this aspect, the petitioners placed before us the rate schedules of various hotels in the city of Hyderabad. A comparable chart has also been prepared in respect of one of the items namely idly, the price of which item varies from Re. 1.60 to Rs. 4. It reads as follows: Statement showing the selling price of idly in the hotels situated in the twin cities ---------------------------------------------------------------------------- SI. Name of the Name of the place Status Price in No. hotel rupees. ---------------------------------------------------------------------------- 1 Hotel Shaubhag Panjagutta Air-conditioned 4.00 2 Hotel Minerva Himayatnagar do. 4.00 Coffee Shop 3 Hotel Ashoka Lakadikapool do. 3.50 4 Hotel Sarovar Secretariat Road do. 3.50 5 Hotel Annapurna Nampally do. 2.50 6 Hotel Gayatri Himayatnagar Non-Air-conditioned 3.00 7 Hotel Tajmahal Abids do. 1.80 8 New Hotel Sudha Chikkadpally do. 1.75 9 Tajmahal Cafe Narayanguda do. 1.60 --------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ardship and more often than not, they may be eliminated even from the trade, if redressal is delayed. There is also every scope for enforcing section 14-B(1) of the Act in an arbitrary manner, as is evident from the very case of the petitioner in Writ Petition No. 18364 of 1988. It is submitted before us that the petitioner returned gross profit at 12 per cent for the assessment year 1985-86. According to the proposed notice of reassessment issued to the petitioner the turnover which escaped assessment by reason of sale of his goods at alleged lower prices is proposed to be determined at Rs. 38,77,207 which approximately works out to 9.43 per cent of his turnover. If variation between the prices charged by the petitioner as disclosed in his accounts and the alleged prevailing market prices is about 9.43 per cent, can it be said that the prices charged by the petitioner are abnormally low? It is common knowledge that khadi products are sold at a discount of 20 per cent throughout the year and during festival seasons the discount is increased even up to 40 per cent. Some of the dealers also resort to "reduction sales" and announce discount of 30 per cent to 40 per cent as part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, 19(1)(g) and 301 of the Constitution of India and the two provisions are therefore liable to be struck down. It is, however, settled law now that a provision in any enactment can be read down in order to avoid rendering the statutory provision, void and inoperative by striking it down and every effort should be made by the court to interpret the provisions in a harmonious way without striking it down as unconstitutional. We, therefore, hold that sections 2(1)(s)(ii) and 14-B(1) of the Act must be read down so that the said provisions would come into force as and when guidelines are prescribed by the legislature for determination of the two expressions, "prevailing market prices" and "abnormally low". Yet another contention put forward on behalf of the petitioners in support of their last submission is that even for invoking section 14-B(1) of the Act it is not sufficient for the department to allege that the prices charged by the assessee are abnormally low when compared to the prevailing market prices, and that for the purpose of assumption of jurisdiction under section 14-B(1) of the Act, the department must show that the assessee collected more than the ostensible sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aspects raised before us was either put forward or decided. The contention put forward by the learned Government Pleader that the writ petitions cannot be entertained as there is an alternative remedy is absolutely without substance. It is settled law now that the writ petitions cannot be rejected on the ground of availability of alternative remedy when the writ petitions had already been admitted, and rule nisi was issued and the writ petitions have been pending for quite some time in the High Court. Apart from this the question of vires of a provision cannot be raised before the statutory authorities like the assessing authority and the appellate authority because they are creatures under the Act. The other submission made by the learned Government Pleader that the prices charged by the same dealer were varying on the same date and therefore resort to section 14-13(1) by the assessing authority was proper, cannot also be countenanced. In the first instance, the statement at page 17 of the counter-affidavit that "a dealer in liquor had shown two different prices on the same day" is too vague and uncertain. It is also submitted on behalf of the petitioners that different pr ..... 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