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1970 Supreme(P&H) 226
PUNJAB & HARYANA HIGH COURT
Harbans Singh, R.S.Narula, C.G.Suri and Gurdev Singh JJ.
Atul Glass Industries
Versus
State Of Haryana
Civil Writ No. 2544 of 1966,
Decided On : DECEMBER 3, 1970
The burden of proving that a particular assessee was carrying on the business of buying or selling as a regular activity during the financial year in question and was, therefore, a dealer in that year within the meaning of the Acts, was on the sales tax authorities, which burden they had failed to discharge in this case. Each assessment year is a separate unit and the question of levy of sales tax in respect of each year has to be decided on the facts and circumstances and figures relating to that particular year, and the department could not lawfully base its finding relating to the year 1961-62 on the facts alleged to have been discovered by it relating to 1964-65. The impugned orders of the Assessing Authority on which the best judgment assessment (on account of non-production of books of accounts) had been based were liable to be set aside as having been passed in violation of the principles of natural justice.
Headnote:
SALES TAX - ASSESSMENT - JURISDICTION - DEALER - DEFINITION - MANUFACTURER-IMPORTER - FINDING OF FACT - BURDEN OF PROOF - BEST JUDGMENT ASSESSMENT - NATURAL JUSTICE - PRIVATE ENQUIRIES - MATERIAL COLLECTION - DISCLOSURE - OPPORTUNITY OF HEARING - EACH ASSESSMENT YEAR AS SEPARATE UNIT - RELEVANT YEAR'S TRANSACTIONS - SUBSEQUENT YEAR'S TRANSACTIONS - RELEVANCE - INFERENCE - INDEPENDENT ASSESSMENT - WRIT PETITION - QUASHING OF ASSESSMENT ORDER.
Fact of the Case:
The petitioner, a manufacturer of mirrors at Faridabad, Haryana, challenged the assessment order passed by the Assessing Authority under the Punjab General Sales Tax Act, 1948, and the Central Sales Tax Act, 1956, for the assessment year 1961-62, on the ground of lack of jurisdiction. The petitioner contended that it was not a 'dealer' within the meaning of the Acts as it did not carry on any business of sale and purchase at Faridabad or anywhere in the State of Punjab or Haryana, but was engaged only in the manufacture of mirrors at Faridabad, while its administrative offices were situate in the Union Territory of Delhi. The Assessing Authority, after conducting private enquiries, concluded that the petitioner was an 'importer-manufacturer' and proceeded to assess it to sales tax. The petitioner challenged the assessment order, contending that the Assessing Authority had no jurisdiction to assess it as it was not a 'dealer' within the meaning of the Acts, that the assessment was based on transactions that took place in a subsequent year, and that the private enquiries conducted behind its back violated the principles of natural justice.
Finding of the Court:
The Court held that the burden of proving that a particular assessee was carrying on the business of buying or selling as a regular activity during the financial year in question and was, therefore, a dealer in that year within the meaning of the Acts, was on the sales tax authorities, which burden they had failed to discharge in this case. The Court further held that each assessment year is a separate unit and the question of levy of sales tax in respect of each year has to be decided on the facts and circumstances and figures relating to that particular year, and the department could not lawfully base its finding relating to the year 1961-62 on the facts alleged to have been discovered by it relating to 1964-65. The Court also held that the impugned orders of the Assessing Authority on which the best judgment assessment (on account of non-production of books of accounts) had been based were liable to be set aside as having been passed in violation of the principles of natural justice.
Issues: 1. Whether the petitioner was a 'dealer' within the meaning of the Punjab General Sales Tax Act, 1948, and the Central Sales Tax Act, 1956? 2. Whether the Assessing Authority had jurisdiction to assess the petitioner to sales tax? 3. Whether the assessment was based on transactions that took place in a subsequent year? 4. Whether the private enquiries conducted behind the petitioner's back violated the principles of natural justice?
Ratio Decidendi: 1. The burden of proving that a particular assessee was carrying on the business of buying or selling as a regular activity during the financial year in question and was, therefore, a dealer in that year within the meaning of the Acts, was on the sales tax authorities, which burden they had failed to discharge in this case. 2. Each assessment year is a separate unit and the question of levy of sales tax in respect of each year has to be decided on the facts and circumstances and figures relating to that particular year, and the department could not lawfully base its finding relating to the year 1961-62 on the facts alleged to have been discovered by it relating to 1964-65. 3. The impugned orders of the Assessing Authority on which the best judgment assessment (on account of non-production of books of accounts) had been based were liable to be set aside as having been passed in violation of the principles of natural justice.
Final Decision: The Court allowed the writ petition and quashed the impugned assessment order.
Gurdev Singh, J.
1. The petitioner, Messrs Atul Glass Industries, Faridabad, has preferred two writ petitions (No. 2544 of 1966 and No. 2315 of 1967) for quashing the assessment order for the year 1961-62 passed by the Assessing Authority under the Punjab General Sales Tax Act and its subsequent order dated 4th September, 1967, relating to the assessment year 1962-63.
2. The petitioner-concern is carrying on manufacture of mirrors in its factory at Faridabad, now in the State of Haryana and formerly a part of the united Punjab as it existed before the reorganisation of the State on 1st November, 1966. The orders of the Assessing Authority passed under the General Sales Tax Act are assailed primarily on the ground of jurisdiction. It is asserted that the petitioner-concern is not carrying on any business of sale and purchase at Faridabad or anywhere in the State of Punjab or Haryana, but is engaged only in the manufacture of mirrors at Faridabad, while its administrative offices are situate in the Union Territory of Delhi at 69, Deshbandhu Gupta Road, New Delhi, and being a registered dealer in the Union Territory of Delhi under the Sales Tax Act of that State and under the Central Sales Tax Act, all taxes leviable are being assessed and paid by the petitioner in respect of its business in that territory.
3. The Assessing Authority proceeded to assess the petitioner to sales tax after recording a brief order, dated 3rd December, 1965, which is in these words:
None is present. The dealer is liable to pay tax from January, 1961, as an importer-manufacturer.
4. Despite the petitioners objection, the assessment for that year was made by the Assessing Authority, Gurgaon, on 3rd December, 1965, when a demand for Rs. 17,000 was created against the petitioner. This included Rs. 1,000 assessed as penalty under Section 11(6) of the Punjab General Sales Tax Act. The petitioner took the matter to the Excise and Taxation Commissioner, Haryana, assailing the validity of the assessment on the plea inter alia that the Assessing Authority had no jurisdiction in the matter for reasons noted above and the order was bad as the date in the month of January, 1961, from which the liability was created had not been specified.
5. In the course of these proceedings, Mr. Bhagirath Dass, appearing for the petitioner, has urged:
(1) that the petitioner was not a dealer as defined in Section 2(d) of the Punjab General Sales Tax Act, 1948 , within the State of Haryana or the State of Punjab as it existed prior to 1st November, 1966, and the mere finding of the Assessing Authority that the petitioner was an "importer-manufacturer" did not confer jurisdiction upon him to proceed with the assessment;
(2) that the exact date from which the liability was created in the month of January, 1961, having not been specified, the assessment made was null and void;
(3) that no assessment could be made without a specific finding that the petitioner was a "dealer" within the meaning of the Punjab General Sales Tax Act and under the Central Sales Tax Act, and that its business of sale and purchase of taxable goods conducted by it in the relevant year exceeded the taxable quantum;
(4) that no liability could be created against the petitioner for the year 1961-62 on the basis of the transaction that took place later in the year 1964-65 when admittedly there is no evidence of any transaction of purchase and sales pertaining to the relevant assessment year;
(5) that the nature of enquiries conducted behind the petitioners back having not been disclosed, the impugned orders suffer from a legal infirmity as in the absence of such a disclosure the petitioner was handicapped in representing its case to the higher authorities while challenging the legality of the quantum of the assessment.
6. The town of Faridabad, which is at present in the State of Haryana, has a huge and growing industrial complex. There are quite a number of businesses that have their administrative offi
