TaxTMI 
TaxTMI 
2013 (9) TMI 147
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....etitioner is involved in manufacturing of Gwar Gum powder for its supply within the State, out of the State and for its export abroad. For manufacturing Gwar Gum, the petitioner company purchased the raw material i.e. Gwar split from the registered dealers out of the State during the assessment years 1995-96, 1996-97 and 1997-98. The petitioner company purchased huge raw material from two registered firms of Ahmedabad, namely, Chhaganlal Jain Halwala, and Ratanlal Gautam Kumar Jain. Both these dealers are having registration with the Gujarat Sales Tax Department and CST number to their credit. Despite a billed purchase by the petitioner, the assessing authority after formal enquiry, which was made in a slip shod manner, branded the transactions of the petitioner with these dealers as fake one, passed the assessment orders for all these three years, and imposed tax, interest and penalty of a huge sum. Being aggrieved from the assessment orders passed by the assessing authority, the petitioner laid three separate appeals before the Deputy Commissioner (Appeals), Commercial Taxes Department, and the appellate authority, after hearing rival submissions partly allowed all the three app....
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....sitions for assailing the impugned order. At the threshold, challenging the impugned order, the learned counsel has contended that while castigating the petitioner-assessee for fake and spurious transactions of purchase for raw material of Gwar Gum, the taxing authority has not conducted thorough enquiry and survey including inspection of the account books and other relevant record of the registered dealers of Ahmedabad. According to Mr. Singhvi, the finding of the assessing authority with which the learned Tax Board has concurred, that purchase of raw material is intra-State and not inter-State, is based on mere ipse dixit of the assessing authority. Castigating the methodology of the assessing authority for indictment of the assessee, Mr. Singhvi submits that by upholding the said finding the learned Tax Board has miserably failed to adjudicate the lis involved in the matter in proper perspective. On this vital issue, the learned counsel would urge that recording of finding that inter-State purchase was bogus and drawing affirmative conclusion that it was a intra-State transaction on the basis of sampling of individual transaction and on the basis of statements of truck owners/dr....
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....act the Assistant Commissioner based his order on mere generalities. It has been suggested that all the transactions were of similar nature and the appellant's representative had himself submitted that a specimen transaction alone need be examined. In our judgment this was a wholly wrong procedure to follow and the Assistant Commissioner, on whom the duty lay of assessing the 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 Act." With a view to strengthen his contentions in this behalf, Mr. Singhvi has also placed reliance on a decision of Apex Court in case of Kerala Glue Factory Vs. Sales Tax Tribunal & Ors. [(1987) 66 STC 292]. The Apex Court in this verdict upset the conclusion of the assessing authorities that the transaction was an inter- State sale solely on the ground that the assessing authorities have placed reliance on statement of one Bankey Lal which was not tested by cross-examination. The learned Senior Counsel has also urged that strong suspicion, strange or co-incidences and grave doubts cannot take the place of legal proof. On this ....
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....ecret books of account could also have been established by producing some of the customers whose names are admittedly to be found in the secret books of account to testify that the deals evidenced by the entries were transacted by them with the Kallupalam Lad's Jewellery Mart of which the respondents were the proprietors. As the prosecution has failed to resort to any of these methods, they have to thank themselves for the result of the prosecutions upon which it seems to have launched without seeking expert legal assistance. The decision of this Court in Girdharilal Gupta Vs. D.N. Mehta, Collector of Customs, which is heavily relied upon by the learned counsel for the State of Kerala is of no assistance to the State. In that case, it was established that the account slips were recovered from the premises of the accused which undoubtedly established their connection with them. Accordingly we do not find ourselves in a position to differ from the conclusions arrived at by the Additional Sessions Judge and the High Court." Yet another judgment of Apex Court on which the learned counsel for the petitioner has placed reliance is a decision of Apex Court in State of Kerala Vs. K.T. Sha....
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....n (1) within the prescribed period, or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such enquiry as it may consider necessary and after taking into account all relevant materials gathered by it, assess the dealer to the best of its judgment: Provided that before taking action under this sub-section the dealer shall be given a reasonable opportunity of being heard and, where a return has been submitted, to prove the correctness or completeness of such return." It is clear on a plain natural construction of the language of this provision that it empowers the Sales Tax Officer to make a best judgment assessment only where one of two conditions is satisfied: either no return is submitted by the assessee or the return submitted by him appears to the Sales Tax Officer to be incorrect or incomplete. It is only on the existence of one of these two conditions that the Sales Tax Officer gets the jurisdiction to make a best judgment assessment. The fulfillment of one of these two prerequisites is, therefore, a condition precedent to the assumption of jurisdiction by the Sales Tax Officer to make ....
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....ls to decide this question since we find that in any event the assessee was entitled to this opportunity under the second part of the proviso." Arguing with full emphasis learned Senior Counsel submits that assessment is a quasi-judicial proceeding and as such assessment pre-supposes adherence of principles of natural justice. For this proposition, the learned counsel has placed reliance on a decision of Gauhati High Court in Dwijendra Kumar Bhattacharjee Vs. Superintendent of Taxes & Ors. (1990) 78 STC 393 (Guh)]. Elaborating the need for adherence of principles of natural justice, the Court proceeded to make following observations in Para 9 to 13 of the verdict laying down parameters for its observance: 9. The assessing officer invested with the power to make assessment of tax discharges quasi-judicial functions and he is bound to observe the principles of natural justice in reaching his conclusions. The fact that he is not fettered by technical rules of evidence of pleadings and is entitled to act on material which may not be accepted as evidence in a court of law, does not absolve him from the obligation to comply with the fundamental rules of justice which have come to be kn....
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....smuch as cross-examination is one of the most efficacious method of establishing truth and exposing falsehood. As in that case the assessing officer refused to summon the said person for cross-examination, the Supreme Court held that the act of the assessing officer in refusing to summon the said person for cross-examination by the assessee clearly constituted infraction of the right conferred on the assessee and that vitiated the orders of assessment made against him. 12. At this stage, it may be pertinent to emphasise that the opportunity of hearing to the assessee, contemplated above, is not an empty formality or ritual or a pretence. It is a valuable right granted to the assessees and, in fact, is an important safeguard against arbitrary assessments. It cannot be taken lightly by the authorities. The opportunity must be real and reasonable. If an assessee, who is asked to furnish certain particulars or submit explanations within a specified time, prays for further time stating his difficulties and/or reasons, his prayer should be considered judiciously. Sometimes, as in the present case, hearings, for assessment for a number of years are taken up together and the assessee is a....
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....were otherwise not taxable. The condition precedent for becoming entitled to make a tax-free resale was the purchase of the goods which were resold from a registered dealer and the obtaining from that registered dealer of a certificate in this behalf. This condition having been fulfilled, the right of the purchasing dealer to make a tax-free sale accrued to him. Thereafter to hold, by reason of something that had happened subsequent to the date of the purchase, namely, the cancellation of the selling dealers' registration with retrospective effect, that the tax-free resales had become liable to tax, would be tantamount to levying tax on the resales with retrospective effect. 5. In our view, the High Court was right. A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf of the department that it was the duty of persons dealing with registered dealers to find out whether a s....
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..../s. Bajranglal Vinod Kumar against declarations ST-17, and therefore, if any action was required to be taken, it was required to be taken against the sellers, regarding registration of the vehicles, it was found that the registering authority had certified the existence of registration of the concerned vehicles. Then bonafide endorsement of Krishi Upaj Mandi Samiti were also found on the certain bills. Interalia, on this basis it was found that it cannot be said that the assessee had purchased the goods from the unregistered dealer. Assailing the impugned order passed by the learned Tax Board, the learned Senior Counsel for the petitioner-assessee has articulated his third contention that burden of proving that the impugned sale transaction is intra-State and not inter-State lies on the department more significantly when the assessee has produced all relevant details including names and identity of the vendors, details about their registration and the requisite payment made to the dealers. The learned Senior Counsel further submits that once it was pleaded by the assessee that goods have been taxed in State of Gujarat then burden of proof to the converse obviously lies on the depa....
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....pondent would urge that taxing authorities are well within their rights to ascertain genuineness of a transaction so as to find out whether the alleged transaction is intra-State or inter-State. Mr. Mathur has argued with full vehemence that the respondent department has conducted an enquiry to find out nature of transaction in a fair and transparent manner which cannot be faulted for the simple reason that enquiry was conducted for the purpose of ensuring evasion of tax by the assessee. Countering all the contentions of the learned counsel for the petitioner, Mr. Mathur has argued that the learned Tax Board has examined the matter threadbare and thereafter it has restored the orders of the assessing authority which suffers from no infirmity much less legal infirmity and as such there is no question of law involved in the matter warranting interference in the revisional jurisdiction. I have heard the learned counsel for rival parties, scanned the materials on record and examined the legal precedents throwing light on the question of law involved in the matter. On examining the assessment orders with bird's eye view, it is amply clear that the assessing authority has not at all ca....
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....material i.e. Gwar split was transported from State of Gujarat to Rajasthan and there was no receipt of the border check-post, I am afraid, the conclusions of the assessing authority that the transactions in question were intra-State transactions, prima facie, cannot be sustained on the touchstone of umpteen material placed on record by the assessee to prove the said transactions as inter- State transactions. Moreover, not allowing the assessee to cross-examine the witnesses, who have deposed against them, and their statements were construed as incriminating material for discrediting the requisite material placed on record by the assessee to prove genuineness of the transactions, the bonafide purchase of the raw material from a registered dealer of Ahmedabad was yet another mitigating factor throwing prima facie light on the genuine inter-State transaction but the assessing authority has not addressed on this vital issue while passing the impugned order. At the appellate stage, the appellate authority has examined the matter afresh and has found that the statements of the witnesses recorded by the department are not worth reliance unless the assessee is permitted to cross-examine ....