1991 Supreme(Guj) 104

G.T. Nanavati, S.D. Shah, JJ.
BHAVNAGAR CHEMICAL WORKS (1946) LTD.
Versus
COMMISSIONER OF SALES TAX, AHMEDABAD.
Sales Tax Reference No. 5 of 1982
Decided On: Decided On : 27-03-1991

The revisional authority has power to revise the order of the subordinate officer and to pass any order which such authority thinks to be just and proper. Such a revisional power cannot be restricted to a case where the subordinate authority has positively exercised power and has committed some error or illegality in exercise thereof. Even in cases where the authority has either failed or omitted to exercise power to levy tax, the revisional authority can exercise its power.

Headnote:

SALES TAX - REVISIONAL JURISDICTION - EXERCISE OF - VALIDITY - PURCHASE TAX - LEVY OF - VALIDITY - PENALTY - IMPOSITION OF - VALIDITY - CIRCUMSTANCES.

Fact of the Case:

The applicant, a public limited company, was registered under the Gujarat Sales Tax Act, 1969 and the Central Sales Tax Act, 1956. During the calendar year 1973, the applicant purchased hexine oil from dealers inside and outside the State of Gujarat for use in the process of extraction of oil. The applicant held recognition under section 7 read with section 13(1)(B) of the said Act, and had accordingly purchased hexine oil during the said year without payment of any tax from the locally registered dealers by issuing certificate in form 19 and declaring therein that it will use that oil in the manufacture of de-oiled cakes for sale by it. The applicant was also registered as a dealer under the Central Sales Tax Act, 1956 and it had similarly purchased hexine oil from outside the State of Gujarat against form "C" in order to use the said oil for manufacturing of de-oiled cakes for sale by it. The applicant had mixed up and stocked the hexine oil purchased from both sources in a single storage tank. Out of the said stock, the applicant had used certain quantity of hexine oil in the manufacture and sale of its own de-oiled cakes. A part of said hexine oil was also used by the applicant to manufacture de-oiled cakes for third parties on whose behalf the applicant has undertaken job-work contract. Said de-oiled cakes which were manufactured for third parties were meant for sale by such third parties and not by the applicant itself. The applicant had committed breach of recitals contained in the declaration in form 19 inasmuch as the applicant had failed to use hexine oil in the manufacture and sale of its own de-oiled cakes as declared, and secondly it had used such hexine oil in a job-work of third parties while manufacturing de-oiled cakes for such third parties. The applicant had, thus, committed breach of recitals contained in form 19 and, therefore, it had become liable to pay purchase tax on the purchase of hexine oil as required under section 16(1)(a) of the said Act. The Sales Tax Officer assessed the liability of the applicant to an extent of Rs. 1,50,306.14 and found that as against the said liability the applicant had paid an amount of Rs. 1,39,683.29 and therefore, found that there was recovery of Rs. 10,622.85. The Assistant Commissioner, on scrutiny of the order passed by the Sales Tax Officer and the record pertaining to such assessment, found that although certain quantity of hexine oil purchased and covered by certificate issued in form 19 under the said Act and in form "C" under the Central Act was used for purpose other than that of extraction of oil for the purpose of the company, the assessing officer had failed to notice that there was liability of applicant to pay purchase tax under section 16(1)(a) of the said Act. The Assistant Commissioner, therefore, invoked his revisional power under section 67 of the said Act, and after issuing notice to the applicant proceeded to pass the order to levy purchase tax of Rs. 14,362.08 under section 16(1)(a) of the said Act, and he also imposed penalty of Rs. 1,436.20 under section 45(1)(b) of the said Act.

Finding of the Court:

The Tribunal confirmed the order passed by the Assistant Commissioner. On reference, the High Court held that the exercise of revisional jurisdiction by the Assistant Commissioner of Sales Tax to levy purchase tax under section 16(1) of the said Act was legal and valid; the Assistant Commissioner of Sales Tax had correctly levied purchase tax under section 16(1)(a) of the said Act on 30 per cent of the purchases of hexine oil made by the applicant-company against certificates in form 19 from dealers inside the State of Gujarat on the presumption that the hexine oil so purchased was not used in the manufacture of goods for sale; and the imposition of penalty under section 45(1)(b) of the said Act by the learned Assistant Commissioner in suo motu revision was legal and valid (although the assessing officer had not imposed any penalty under the said provisions of law).

Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the exercise of revisional jurisdiction by the Assistant commissioner of Sales Tax to levy purchase tax under section 16(1) of the Gujarat Sales Tax Act, 1969, was legal and valid ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Assistant Commissioner of Sales Tax had correctly levied purchase tax under section 16(1)(a) of the Gujarat Sales Tax Act, 1969, on 30 per cent of the purchases of hexine oil made by the applicant-company against certificates in form 19 from dealers inside the State of Gujarat on the presumption that the hexine oil so purchased was not used in the manufacture of goods for sale ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the imposition of penalty under section 45(1)(b) of the Gujarat Sales Tax Act, 1969, by the learned Assistant Commissioner in suo motu revision was legal and valid (although the assessing officer had not imposed any penalty under the said provisions of law)?

Ratio Decidendi: 1. The revisional authority has power to revise the order of the subordinate officer and to pass any order which such authority thinks to be just and proper. Such a revisional power cannot be restricted to a case where the subordinate authority has positively exercised power and has committed some error or illegality in exercise thereof. Even in cases where the authority has either failed or omitted to exercise power to levy tax, the revisional authority can exercise its power. 2. The Assistant Commissioner of Sales Tax was justified in invoking revisional jurisdiction and the Tribunal was right in holding that exercising of revisional jurisdiction by the Assistant Commissioner of Sales Tax to levy purchase tax under section 16(1) of the said Act is valid. 3. The Assistant Commissioner of Sales Tax has adopted a rough and ready formula to work out the liability of the applicant to pay purchase tax. He has found that hexine oil which was purchased against form 19 and against form "C" was kept in common storage tank. The applicant was not in a position to state as to which quantity of hexine oil out of the said mixed up quantity of hexine oil was used for manufacturing de-oiled cakes for third parties on job-work basis. He, therefore, applied the method of proportion. He found that the goods manufactured by the applicant during the relevant year for third parties on job-work basis worked out to approximately 30 per cent of the total production of de-oiled cakes by the applicant. Therefore, he found that at least 30 per cent of hexine oil purchased by the applicant against form 19 was used by it for manufacturing de-oiled cakes for third parties on job-work basis, and that extent there was breach of terms of certificate under form 19 and consequent liability to pay purchase tax under section 16(1)(a) of the said Act. 4. The Assistant Commissioner of Sales Tax acted within his revisional jurisdiction in imposing penalty under section 45(1)(b) of the said Act. The Sales Tax Officer had initiated penalty proceedings by issuing show cause notice to the applicant under section 45(1)(b) of the said Act. The Assistant Commissioner of Sales Tax could very well exercise that power of imposing penalty.

Final Decision: All the three questions referred to the High Court were answered in the affirmative, i.e., in favour of the State and against the applicant.