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TMI Blog1991 (7) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... respective States in sales tax laws as well as the Central Sales Tax Act, 1956 (for short, "the Central Act"). So far as the investment company as well as the company are concerned, they are also registered under the Rajasthan Sales Tax Act, 1954 (for short, "the State Act'). There is another concern, namely, Videocon International Limited (for short, "the VIL"). The investment company receives the washing machines from its factory situated at Aurangabad, octroi is paid by it, the machines are kept in the godown taken by the VIL and all machines are alleged to have been first sold to the VIL and sales tax is paid on the turnover of the investment company. The VIL in its turn sells the washing machines at a much higher price. Similarly, the company is manufacturing colour television sets at its Noida factory and at its Jaipur branch, the company has no godown of its own which is taken on rent by VIL. It is the VIL which thereafter further sells the television sets and the company pays sales tax on the turnover which it receives after sale to the VIL. 3.. The Commercial Taxes Officer, Anti-evasion, Headquarters-II, Jaipur, raided the business premises of the investment company as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Rs. 2,56,500 and interest under section 11-B(1)(f) of Rs. 11,305, the total amount which was payable by the investment company was Rs. 4,85,482.75. So far as the company is concerned, the assessing authority came to the conclusion that with a view to avoid the payment of tax it has shown in its account books sale of television sets at a price lower than the prevailing market price and taking into consideration the price charged by the VIL, the assessing authority came to the conclusion that it was the prevailing market price and therefore the difference in the price charged by the company and the VIL, i.e., Rs. 76,28,171.20 was held to be the amount on which the company evaded the tax and it was called upon to pay the tax and penalty, etc., amounting to Rs. 23,61,417. 4. The investment company and the company challenged the aforesaid orders of the Commercial Taxes Officer, Anti-evasion, Headquarter-II, Jaipur, on the following grounds: (i) The orders are without jurisdiction because of the plurality of the assessing authorities and the notification conferring jurisdiction on the Commercial Taxes Officer, Anti-evasion, Headquarter-II, is without jurisdiction; (ii) the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will have to agitate the matter in appeal, etc., which may be prescribed under the State Act. 7.. The Notification dated July 3, 1986, as amended vide Notifications dated July 21, 1988 and June 2, 1989 reads as under: * * * Under the aforesaid notification the Commercial Taxes Officer, Antievasion, Headquarter-I, Commercial Taxes Officer, Anti-evasion Headquarter-II, and Commercial Taxes Officer, Anti-evasion, Headquarter-III, Jaipur, have been conferred jurisdiction for whole of the Rajasthan and the circles created are Anti-evasion I, Headquarters, Jaipur, Anti-evasion II, Headquarters, Jaipur and Anti-evasion III, Headquarters, Jaipur. It was contended by Mr. V.K. Singhal, learned counsel for the petitioners, that the Commissioner, Commercial Taxes, after having appointed more than one Commercial Taxes Officer, Anti-evasion, under rule 3 of the Rules, as required by rule 4 of the Rules must have distributed business among them. He further contends that under rule 4, whole or part of the State could not be the circle. According to the learned counsel, there cannot be plurality of assessing authorities under rule 3 read with rule 4 of the Rules and under the scheme of the Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard, make an order determining the said question and the order made by the Commissioner shall be final. Section 12-B was inserted vide section 2 of the Rajasthan Act No. 1 of 1968. Thus, the objection having not been raised as aforesaid by the investment company and the company, as to the jurisdiction of the assessing authority, it cannot be allowed to be raised now. That apart, in our opinion this point has no force, firstly because there is no challenge to the vires of section 12-A of the State Act and secondly because even otherwise there is no merit in this submission. We may now refer to the Notification No. F. 3(a)(28)Tax/CCT/67/130 dated October 23, 1967 and the said notification reads as under: "In pursuance of rule 3 of the Rajasthan Sales Tax Rules, 1955 and in supersession of all previous notifications or orders issued in this behalf, I, Ram Singh, Commissioner of Commercial Taxes, Rajasthan hereby fix the areas shown in column 3 of the Schedule below as the areas of jurisdiction of the Commercial Taxes Officers mentioned in column 2 of the said Schedule. These areas shall be called the circles of these Commercial Taxes Officers and named as in column 4 of the Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at area and such area shall be called his "circle". Under sub-rule (2) the jurisdiction of an assessing authority shall be determined with reference to the place of business of the dealer. If a dealer carries on business within the limits of the jurisdiction of more than one assessing authority, the assessing authority within whose jurisdiction, the principal place of business is situated, shall be assessing authority in respect of such dealer. Under explanation to subrule (2) where the dealer has declared a place to be his principal place of business in writing that place shall ordinarily be regarded as his principal the place of business. Whenever there is doubt in respect of jurisdiction of the assessing authority, it is the Commissioner who shall determine which assessing authority shall have the jurisdiction over the dealer and his decision shall be final. Under rule 4 where there are more than one Commercial Taxes Officers in a Circle, their respective jurisdiction and the distribution of business amongst them shall be such as may be fixed by the Commissioner. It is in exercise of the aforesaid powers above notifications were issued by the Commissioner, Commercial Taxes. A ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers competent to assess in respect of such matters. Learned counsel has referred to the cases Sri Balaji Rice Company v. Commercial Tax Officer [1984] 55 STC 292 (AP), McDowell & Co. Ltd. v. Commercial Tax Officer [1988] 68 STC 124 (AP) and Mansa Ram v. J.S. Rajyana, Excise and Taxation Officer [1966] 18 STC 57 (Punj). In the first of the aforesaid three cases, i.e., in the case of Sri Balaji Rice Company [1984] 55 STC 292 (AP), the court was dealing with section 4 of the Andhra Pradesh General Sales Tax Act, 1957. Under the aforesaid section the Government could appoint as many as Joint Commissioners of Commercial Taxes, Deputy Commissioners of Commercial Taxes, Assistant Commissioners of Commercial Taxes, Commercial Tax Officers and Deputy Commercial Tax Officers as they thought proper. That section further provided that such officers shall perform the said functions within such local limits as the State Government or any authority or officer empowered by them in this behalf may assign to them. The Government had delegated the aforesaid powers on the Board of Revenue to notify the local limits within which the aforesaid officers may perform them in their respective areas. The off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exclusion of not only other two Commercial Taxes Officers, Anti-Evasion, but also the regular Commercial Taxes Officer or the Commercial Taxes Officer, Special Circle, if any. "Assessing authority" has been defined in section 2(b) of the State Act and in relation to a dealer it means the Commercial Taxes Officer or the Assistant Commercial Taxes Officer having jurisdiction for the time being. Under rule 3(1) of the Rules the Commercial Taxes Officer for the area within his jurisdiction as fixed by the Commissioner is the assessing authority for that area and such area is called his circle. Under rule 4 where there are more than one Commercial Taxes Officers in a circle, their respective jurisdiction and the distribution of business amongst them shall be such as may be fixed by the Commissioner. It will appear from the Notification dated July 3, 1986, as amended from July 21, 1986 and June 2, 1986, a reference to which has already been made in the earlier part of this order, that so far as three Commercial Taxes Officers, Anti-evasion, Headquarters I, II and III are concerned, their jurisdiction is throughout the State of Rajasthan and their circle is Anti-evasion, Headquarters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. In our opinion that case has no application to the facts of this case. In the aforesaid case the court on the material placed before it came to the conclusion that the officer concerned was biased. In the instant case so far as personal bias is concerned, it is not even alleged and so far as official bias is concerned merely because he detected the evasion of tax and thereafter passed assessment order having been conferred jurisdiction as assessing authority, no case of any official bias can be said to have been made out. In Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1, the Supreme Court was examining the question of guarantee of equal protection of laws given in article 14 of the Constitution of India. The court also examined the jurisdiction of the Commission under the provisions of section 5(4) of the Taxation on Income (Investigation Commission) Act, i.e., (Act 30 of 1947) as well as both the assessing authorities under section 34 of the Income-tax Act. The court also examined the scheme of the provisions of the aforesaid Act as well as Income-tax Act. The court said that a person dealt with under section 5(4) of the said Act has no right of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot possibly be said that Shri A.N. Mukherji when he was later appointed as Enquiry Officer constituted himself both as prosecutor and judge. Anybody who is familiar with the working of criminal courts will at once realise that there is nothing strange in the same magistrate who finds a prima facie case and frames charges, trying the case also. It cannot for a moment be argued that the magistrate having found a prima facie case at an earlier stage and framed charges is incompetent to try the case, after framing charges. In the instant case under section 22 of the State Act the assessing authority, and we have already said that the Commercial Taxes Officer, Anti-evasion, is the assessing authority, has power to seize the books of account of a dealer. Under sub-section (3) of section 22 of the State Act, if any such authority or person has reason to suspect that any dealer is attempting to evade payment of any tax or other dues under that Act, he may for reasons to be recorded in writing, seize such accounts, registers or other documents of the dealer as he may consider necessary and shall give the dealer or any other person from whose custody such accounts, registers or other docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessing authority that it has been done with a view to evade payment of tax. In case these conditions are satisfied, the assessing authority has power to estimate the price of such goods on the basis of prevailing market prices and assess or reassess the dealer to the best of his judgment after affording the dealer a reasonable opportunity of being heard. Rule 30-A which too has been extracted just above contains the guidelines for the best judgment assessment to be completed under subsection (4-A) of section 10 of the State Act. As per the aforesaid guidelines, the assessing authority has to compare the prevailing market price in the case of manufacturers with prices being charged by the manufacturers, in the case of wholesalers with the prices being charged by the wholesalers and in the case of retailers with the prices being charged by the retailers. According to sub-rule (2) of rule 30-A of the Rules where according to the practice prevailing in a trade, if any kind of discount is allowed at the time of sale, such discount shall also be kept in view while comparing prevailing market price. A perusal of sub-section (4-A) of section 10 of the State Act as well as rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sales or supplies of goods exceeds the limits prescribed therein is liable to pay tax under that Act on his taxable turnover. Under the explanation to that section for the purpose of limits specified in clause (a), (b) or (c) the turnover shall include the aggregate amount for which all goods are sold or supplied irrespective of the fact whether any of such goods are imported or manufactured or otherwise obtained by the dealer concerned or whether or not they are exempted from payment of tax. "Taxable turnover" is defined in clause (s) of section 2 which means that part of a turnover which remains after deducting therefrom the aggregate amount of the proceeds of sale of goods, (i) on which no tax is leviable under the Act, (ii) which have already been subjected to tax under the Act, (iii) which have been sold to persons outside the State for consumption outside the State and (iv) which are taxable at a point of sale within the State subsequent to the sale by the dealer and such sale is covered by a declaration as may be required under any provision of that Act or the rules made thereunder. "Turnover" has been defined in section 2(t) which means the aggregate amount of sale pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as may be determined by the assessing authority, if the bill of sale does not set out correctly the amount for which the goods are sold. Section 14-B which was brought on the statute book with effect from July 1, 1985, reads as under: "Section 14-B. Assessment of the sales shown in accounts at low prices.-(1) If the assessing authority is satisfied that a dealer has, with a view to evade the payment of tax, shown in his account, sales or purchases of any goods at prices which are abnormally low compared to the prevailing market prices of such goods, it may, at any time within a period of four years from the date on which any order of assessment was served on the dealer, assess or reassess, the dealer to the best of the judgment on the turnover of such sales or purchases after making such enquiry as may be necessary and after giving the dealer a reasonable opportunity to show cause against such assessment. (2) The provisions of section 14 including penalty shall apply to assessment and reassessment of escaped turnover under this section." Notices had been issued which were challenged in the writ petition. The only allegation levelled was that the rates charged by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be enforced from such date." It will therefore be clear that so far as provisions of section 14-B of the aforesaid Act are concerned, they were struck down primarily on the ground that no guidelines were prescribed by the Legislature for exercising discretion conferred upon the assessing authority. In the instant case it will appear that not only sub-section (4-A) of section 10 of the State Act was inserted with effect from April 1, 1990, but the guidelines were provided in rule 30-A of the Rules and a perusal of the guidelines will show that in the aforesaid guidelines it has been provided what shall be the market price and the assessing authority shall compare the prevailing market price in the case of manufacturers with the prices being charged by the manufacturers, in the case of wholesaler with the prices being charged by the wholesaler and in the case of retailers with the prices being charged by the retailers. It will further appear that if according to the practice prevailing in the trade if any kind of discount is allowed at the time of sale such discount shall also be kept in view while prevailing market price. It can therefore not be said that no guidelines have been pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may also be stated that the VIL sold the television sets during the period in question at a higher price. The earlier law that it is open to everyone to so arrange his affairs as to reduce the brunt of taxation to the minimum and such a process does not constitute tax evasion has not been approved by the Supreme Court in the case of McDowell and Company Ltd. v. Commercial Tax Officer [1985] 59 STC 277; [1985] 3 SCC 230. The court said that colourable measures are discouraged. Chinnappa Reddy, J., who gave concurring judgment concurring with R.N. Misra, J. who gave the main judgment on his behalf as well as on behalf of Y.V. Chandrachud, C.J. as well as D.A. Desai and Venkataramiah, JJ. said in para 17 that (at page 286 of STC): "We think that time has come for us to depart from the Westminster [1936] AC 1 principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah, J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare State like ours. Next there is the serious disturbance caused to the economy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and scheme to avoid taxation. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation (sic as) was done in Ramsay [1982] AC 300, Burmah Oil [1982] Simon's TC 30 and Dawson [1984] 1 All ER 530, to expose the devices for what they really are and to refuse to give judicial benediction. " It will therefore be clear from the judgment of the Apex Court that proper way to construe taxing statute is whether or not a transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. The provisions of sub-section (4-A) of section 10 as well as rule 30-A of the Rules were introduced to see that a dealer is not able to avoid tax and that they were introduced to facilitate the working of the department. In the present case, as said by the assessing authority, the prices at which the VIL sold washing machines was about 35 per cent more than the price charged by the investment company. The investment company sold it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in writing from the assessee, stay the recovery of the disputed amount of tax or any part thereof, during the pendency of the appeal, if the assessee furnishes sufficient security to his satisfaction in such form and in such manner as may be prescribed, but before the application can be disposed of it is incumbent upon the concerned authority to give and record reasons. Therefore, it was necessary for the Additional Commissioner to record reasons to come to the conclusion that there was no prima facie case in favour of the assessee. No doubt, it depends upon the facts and circumstances of the case and in a given case the court may despite the existence of alternative remedy of appeal, may interfere under article 226 of the Constitution, but a perusal of section 13 of the State Act under which the first appeal will lie will show that no appeal can be entertained under sub-section (1) of section 13 unless it is accompanied by a satisfactory proof of the payment of tax or other amounts admitted by the appellant to be due from him or such instalment thereof as might have become payable or twenty per cent of the tax or other amounts assessed, whichever is higher as the case may be. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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