Compounding orders under sales tax law must follow a proper assessment and notice; failure to do so violates natural justice.

ORDER :

PRAYER in W.P. No. 36776 of 2004: PETITION under Article 226 of the Constitution of India praying for issuance of writ of Certiorari calling for the records of the case on the file of the first respondent herein in G.D 15/04-05 dated 6-12-2004 issued under Sec. 46 of the Tamil Nadu General Sales Tax Act, 1959 and quash the same.

PRAYER in W.P. No. 36777 of 2004: PETITION under Article 226 of the Constitution of India praying for issuance of writ of Certiorari calling for the records of the case on the file of the first respondent herein in G.D 15/04-05 dated 6-12-2004 issued under Sec. 42 of the Tamil Nadu General Sales Tax Act, 1959 and quash the same.

1. A common order is passed in respect of both the Writ Petitions under consideration, since the facts involved as well as the cause of action are one and the same.

2. The petitioner is a company engaged in the importation and trading of edible oils, iron and steel scrap. It claims to have applied for registration under the provisions of the Tamil Nadu General Sales Tax Act, 1959 (in short ‘TNGST Act’) by way of application dated 22.09.2004. The application was returned for rectification of defects and according to the petitioner was re-presented on 07.10.2004.

3. The writ affidavit concedes to the position that no registration certificate has been issued. Per contra, in counter dated 17.12.2004 filed by the Commercial Taxes Department, the authority denies the aforesaid averments. However, there is nothing specific in the counter in regard to the registration status of the petitioner. As the hearing proceeds however, we find that this aspect may not be very material to decide the legal issue that arises in this matter.

4. The petitioner had imported RBD Palmolien oil in bulk (6000 Metric Tonnes) from Malaysia Southern Edible Oil Industries through National Agricultural Cooperative Marketing Federation of India Limited. The import is dated 05.10.2004 and the consignment was received on 08.10.2004 at Chennai Port Trust. According to the petitioner, the transaction was on high sea sales basis. The consignment was kept in a licensed private bonded warehouse inside the customs area and the petitioner states that it had filed necessary bill of entry for bonding.

5. While so, and the petitioner believed that the sale was in the course of import per Section 5(2) of the Central Sales Tax Act, 1956 (in short ‘CST Act’), it came to understand that the bonded warehouse had received a detention notice on 17.11.2004. The notice, the petitioner was given to understand, was to verify the genuineness of the transaction. The petitioner claims to have explained the transaction to the authorities reiterating its claim for exemption in terms of Section 5(2) of the CST Act.

6. Thereafter on 23.11.2004, the petitioner was in receipt of a notice calling for various particulars including foreign commercial invoice, bill of lading, bill of entry for ware housing, bills of entry for home consumption, registration certificate under sales tax laws, proof of renewal of registration and other documents to support its claim under the CST Act.

7. This was followed by notice dated 06.12.2004, which is the subject matter of challenge in W.P. No. 36776 of 2004. On the same day, the petitioner has also received a document, also dated 06.12.2004, styled as order passed by the Assistant Commercial Tax Officer (Bill Trading Prevention Squad, Central Enforcement Wing II), Chennai. That order is the subject matter of challenge in W.P. No. 36777 of 2004.

8. We have heard Mrs. Lakshmi Sriram, learned counsel for the petitioner and Ms. Amirta Dinakaran, learned Government Advocate for the respondent.

9. Several arguments have been raised before us touching upon the legality or otherwise of the notice and order, both dated 06.12.2004. We have perused the impugned notice as well as the order and find that order dated 06.12.2004 proceeds to examine the legality of the import transaction and the exemption claimed under Section