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HIGH COURT OF CALCUTTA
D. Basu
DILIP KUMAR MUKHERJEE - Appellant
Versus
COMMERCIAL TAX OFFICER - Respondent
Civil Rule 344 (W) Of 1961
Decided On : MARCH 28, 1963
SALES TAX - Assessment - Best of judgment assessment - Principles of natural justice - Disclosure of materials - Levy of tax on declared goods - Restrictions and conditions - Exemption - Ultra vires - Fundamental right - Violation.
Fact of the Case:
The petitioner, a dealer in zarda, challenged the assessment order of the Sales Tax Officer (Respondent 1) and the order of the Appellate Authority (Respondent 2) on various grounds, including violation of principles of natural justice, exemption from sales tax, and infringement of fundamental rights.
Finding of the Court:
1. The assessment order was quashed on the ground of violation of principles of natural justice, as the Sales Tax Officer failed to disclose the materials upon which he made the best of judgment assessment, thereby depriving the petitioner of a reasonable opportunity to be heard. 2. Zarda was held to be a variety of manufactured tobacco and, therefore, covered by the definition of 'tobacco' under the Central Excises and Salt Act, 1944. 3. The imposition of sales tax on zarda was held to be ultra vires from 1-10-1958, as the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act) violated the restrictions and conditions imposed by Section 15 of the Central Sales Tax Act, 1956, which came into force on that date. 4. The petitioner was entitled to exemption from sales tax on zarda with effect from 3-3-1958, as per the notification issued by the State of West Bengal under the Bengal Act, which exempted tobacco from any taxation under the Bengal Tax. 5. The impugned assessment infringed the petitioner's fundamental right under Article 19(1)(g) of the Constitution, as it constituted an illegal imposition on sales.
Issues: 1. Whether the assessment order was vitiated by a violation of the principles of natural justice? 2. Whether zarda is 'tobacco' within the meaning of the Central Excises and Salt Act, 1944? 3. Whether the imposition of sales tax on zarda was ultra vires? 4. Whether the petitioner was entitled to exemption from sales tax on zarda? 5. Whether the impugned assessment infringed the petitioner's fundamental right under Article 19(1)(g) of the Constitution?
Ratio Decidendi: 1. The principles of natural justice require that the assessing authority disclose the materials upon which it makes a best of judgment assessment, to provide the assessee with a reasonable opportunity to be heard. 2. Zarda is a variety of manufactured tobacco and, therefore, covered by the definition of 'tobacco' under the Central Excises and Salt Act, 1944. 3. The imposition of sales tax on zarda was ultra vires from 1-10-1958, as the Bengal Act violated the restrictions and conditions imposed by Section 15 of the Central Sales Tax Act, 1956, which came into force on that date. 4. The petitioner was entitled to exemption from sales tax on zarda with effect from 3-3-1958, as per the notification issued by the State of West Bengal under the Bengal Act, which exempted tobacco from any taxation under the Bengal Tax. 5. The impugned assessment infringed the petitioner's fundamental right under Article 19(1)(g) of the Constitution, as it constituted an illegal imposition on sales.
Final Decision: The impugned assessment orders were quashed, and the respondents were restrained from proceeding further against the petitioner except according to law and subject to the exemption for the period from 3-3-1958 to 31-3-1958. No relief by way of refund was granted, as it awaited the fresh proceedings for assessment.
( 1 ) THIS is an application under Article 226 for appropriate writs to quash the assessment order of Respondent 1, dated 10-5-59 (Ann. A), assessing sales tax upon the petitioner for the period from 1-4-57 to 31-3-58, rejecting the Petitioner's claim for exemption, as well as the order of the Appellate Authority (Respondent 2), dated 27-1-61 (Ann. C), and also for an order for refund and ancillary reliefs.
( 2 ) THE Petitioner challenges the order of assessment on various grounds, namely,i. That the assessment for the entire period is vitiated by a violation of the principles of natural justice inasmuch as Respondent 1 made the assessment under Section 11 (1) of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to in this judgment as the 'bengal Act'), arbitrarily and without disclosing any materials upon which such 'best of judgment' assessment was made. II. That the Petitioner is entitled to exemption from sales tax under the Bengal Act with respect to the period from 14-12-57 to 31-3-58 inasmuch as the goods in respect of which tie tax has been assessed, namely, 'zarda', is 'tobacco' (within the meaning of item 9 of the First Schedule to the Central Excises and Salt Act, 1944 ). which has been exempted by reason of Section 7 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 read with the Central Sales Tax Act, 1956. III. That such exemption is also claimable under certain rules ana notifications issued under the Bengal Act. IV. That the impugned assessment constitutes double taxation' which has been prohibited by the Central Sales Tax Act, 1956. V. That such assessment in violation of the statutory exemption violates the Petitioner's fundamental right under Article 19 (1) (g ).
( 3 ) THE relevant facts will be stated under each of the above grounds.
( 4 ) AS already stated, this ground relates to the entire period covered by the impugned order of assessment and is independent of the petitioner's claim for exemption under the relevant law, and if the petitioner succeeds on the present ground, the impugned orders will be liable to be quashed even though the petitioner's claim for exemption fails.
( 5 ) THE facts relating to this ground will be evident from the assessment order of respo dent 1 at Ann. A. Respondent 1 rejected the returns and books of accounts submitted by the petitioner on the ground that they were produced only at the hearing and that they were unreliable. Assuming that the Tax Officer was within his jurisdiction to apply Section 11 (1) of the Bengal Act, in these circumstances, the terms of the statutory provision must yet be complied with. The sub-section requires that the Officer, "in making such assessment shall give the dealer a reasonable opportunity of being heard," But no opportunity of being heard can be said to be 'reasonable' unless the authority discloses to the person aggrieved the materials upon which he proposes to decide (vide R. v. Westminster Assessment Committee, (1940) 4 All ER 132 (141) ). In the case be-fore me, the petitioner stated his gross turnover as 39,261/- in his return. The Tax Officer, according to the best of his judgment, assessed it at as nigh a figure as 1,00,000/- and the tax due upon such assessment has since been recovered from the petitioner. The ground upon which he arrived at this figure was "the merits of the case and other collateral circumstances. " So, nothing tangible is stated in his order as the basis or his assessment. The rejection of the return and the assessment took place by the same order (Ann. A ). If the officer had disclosed to the petitioner the basis upon which he was going to make his assessment, the petitioner might have an opportunity of; adducing materials to rebut that assumption of the Tax Officer. As matters stand, it cannot be said that the petitioner was given any 'reasonable opportunity as required by the statute.
( 6 ) APART from the above express requirement of the statute, it must
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