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1991 Supreme(Guj) 195
A.P. Ravani, S.D. Dave, JJ.
JAYANT EXTRACTION INDUSTRIES
Versus
STATE OF GUJARAT.
Sales Tax Reference No. 2 of 1985
Decided On: Decided On : 04-07-1991
R. D. Pathak, for S. L. Modi, for the applicant.
Kamal M. Mehta, Assistant Government Pleader, for M/s. H. V. Chhatrapati and Co., for the respondent.
The pro rata method of estimating the breach of declarations in form 19 was legal and proper in the absence of reliable records, and the dealer bore the burden of proving that the goods purchased against such declarations were not used in the manufacture of taxable goods.
Headnote:
GUJARAT SALES TAX ACT, 1969 - SECTION 16(1), 16(4), 59, 67 - REVISION OF ASSESSMENT - PURCHASE TAX - DECLARATION IN FORM 19 - PRO RATA BASIS OF USER OF RAW MATERIALS - BURDEN OF PROOF.
Fact of the Case:
The applicant, a registered dealer, manufactured hydrogenated vegetable oil using various raw materials, including those purchased against declarations in form 19. Some of the finished goods were sold outside the State. The Sales Tax Officer assessed purchase tax on a small portion of the purchases made against form 19 declarations, finding a breach of declaration. The Assistant Commissioner of Sales Tax revised the assessment, applying the pro rata method to estimate the breach of declarations and levied a higher purchase tax. The Tribunal upheld the Assistant Commissioner's order. The dealer challenged the revisional powers, the pro rata method, and the burden of proof.
Finding of the Court:
1. The Assistant Commissioner had the power to revise the assessment under section 67 of the Act, as the revisional powers were not wrongly invoked. 2. The pro rata method adopted by the Assistant Commissioner to estimate the breach of declarations in form 19 was legal and proper, given the lack of reliable records. 3. The burden of proving that the purchase price of goods purchased against form 19 declarations was not liable to be included in the turnover of purchases under section 16(1) of the Act lay with the dealer, and they failed to discharge this burden.
Issues: 1. Whether the Assistant Commissioner rightly invoked and exercised the suo motu revision powers under section 67 of the Act. 2. Whether the pro rata method adopted by the Assistant Commissioner for estimating the breach of declarations in form 19 was legal and proper. 3. Whether the dealer discharged the burden of proving that the purchase price of goods purchased against form 19 declarations was not liable to be included in the turnover of purchases under section 16(1) of the Act.
Ratio Decidendi: 1. The Assistant Commissioner had the authority to call for records and exercise revisional powers under section 59 and 67 of the Act. The dealer did not raise any objections before the Tribunal regarding the invocation of revisional powers, and the contention that the Assistant Commissioner relied on new material not part of the assessment record was not supported by evidence. 2. The pro rata method was justified given the lack of reliable records and the dealer's failure to maintain proper accounts. The Tribunal's finding that the production register was notional and did not reflect reality was supported by evidence. 3. The dealer had the burden of proving that the goods purchased against form 19 declarations were not used in the manufacture of taxable goods, but they failed to provide positive and unimpeachable evidence to discharge this burden.
Final Decision: The reference was answered in the affirmative, upholding the revisional powers, the pro rata method, and the burden of proof as applied by the authorities.
The judgment of the Court was delivered by
A. P. RAVANI, J. - This is a reference under section 69 of the Gujarat Sales Tax Act, 1969. The applicant is a registered dealer and it also holds recognition under section 32 of the Act. It manufactures groundnut oil, solvent extraction groundnut oil and hydrogenated vegetable oil. For manufacturing hydrogenated vegetable oil (popularly known as vegetable ghee), it uses (a) solvent extracted oil obtained from the oil-cakes, (b) groundnut oil extracted from oil-seeds purchased by it, and (c) other edible oil including groundnut oil purchased from the market. There are certain purchases of oil made from unrecognised dealers. Some purchases are from registered dealers against declaration in form 19. The end-product, i.e., vegetable ghee, is sold in the State and is also sold in the course of inter-State trade and commerce. Certain part of the vegetable ghee is also consigned to places outside the State for sale there.
2. The Sales Tax Officer while making the assessment for samvat year 2031 (from November 14, 1974 to November 13, 1975) found that, out of the total sales of Rs. 65,22,29,781 branch transfer sales outside the State were to the extent of Rs. 1,63,32,377. The Sales Tax Officer also found that there was breach of declaration given in form 19 to some extent. In form 19, a dealer makes a declaration to the effect that the goods purchased by him shall be used as raw material, processing material or consumable stores in the manufacture of taxable goods and that the taxable goods shall not be sold outside the State. In view of such declaration at the time of purchase, the dealer is not required to pay the purchase tax. The Sales Tax Officer found that there was breach of declaration made in form 19 to certain extent. Therefore he assessed the turnover of such breach to the extent of Rs. 1,02,533 and ordered to levy tax of Rs. 9,077.15. He also imposed penalty of Rs. 100 as provided under section 45(1) of the Act.
3. The Assistant Commissioner of Sales Tax examined the record of the applicant-dealer by way of audit. He found that the dealer had purchased goods worth Rs. 84,91,811 against declarations in form 19, and also on the strength of recognition. It was found by the Assistant Commissioner that the dealer sold vegetable ghee manufactured by it outside Gujarat State and also consigned vegetable ghee outside the State. The extent of such goods was 60 per cent of the total production. He felt that the breach of declaration in form 19 found by the Sales Tax Officer to the extent of Rs. 1,02,533 was little over one per cent only. The Assistant Commissioner thought it fit to call upon the dealer to produce certain documents before him and exercise his power under section 59 of the Act and issued notice in form 45 calling upon it to produce the account register, stock register, etc. On examination of the record, prima facie, it was found that the order passed by the Sales Tax Officer was not in accordance with law.
4. Therefore, he in exercise of his revisional powers under section 67 of the Act issued notice in form 49 and called upon the dealer to show cause as to why order of the Sales Tax Officer should not be revised. Before the Assistant Commissioner of Sales Tax, it was the case of the dealer that it could manufacture hydrogenated vegetable oil by using any of the raw materials, that is - (a) solvent extracted oil obtained from the oil-cakes, (b) groundnut oil extracted from oil-seeds purchased by it from the market and (c) other edible oils including groundnut oil purchased from the market. That it was not necessary for it to use all or any of the raw materials in specified proportion at a time. That it had maintained a register showing as to when which particular raw material was used in the manufacture of hydrogenated vegetable oil. It was contended that this register should be believed and the method of finding out user of each and every raw material on pro rata b
