2008 (7) TMI 839 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case, the Tribunal is correct in sustaining the addition of 10 per cent of the purchased quantity of mohua flower disclosed by the petitioner and supported by the certificate issued by the Superintendent of Excise towards driage and wastage to determine the purchase turnover of mohua flower which is liable to tax on turnover of purchase for the purpose of levy of tax? Whether, on the facts and in the circumstances of the case, in absence of any adverse material on record the turnover of the dealer can be enhanced on mere suspicion and conjecture? Whether, on the facts and in the circumstances of the case, the Tribunal has committed error of law in deciding an issue which was neither taken in the grounds of appeal nor raised by the petitioner or the opposite party before the Tribunal at the time of hearing of the appeal? Held that - In the present case the learned assessing officer has not conducted any enquiry as provided in sub-section (9) of section 12 of the Act before enhancing the purchase price shown by the dealer from ₹ 140 to ₹ 150 per quintal. Another important aspect is that only when the assessing officer shall be satisfied that the purchase/sale price shown by the appellant is unreasonably low compared to the prevailing market price of such goods, he is authorised to enhance the same by following the procedure laid down in sub-section (9) of section 12 of the Act. In the present case while the petitioner disclosed the purchased price at ₹ 140 according to the learned assessing officer the same should be ₹ 150 without bringing any supporting material on record. Thus, it cannot be said that the purchase shown by the petitioner is unreasonable. In that view of the matter, the Tribunal is not justified to sustain the action of the assessing officer in estimating the purchase price of mohua flower at ₹ 150 per quintal on mere suspicion and conjecture. In absence of any adverse material on record to disprove the turnover shown by the petitioner-dealer, the same cannot be enhanced on mere suspicion and conjecture. Even in a case where a best judgment assessment is called for, it is trite law that the estimate should be based on material. The ground of appeal which has been annexed to the petition as annexure 4 does not reveal that any specific ground has been taken with regard to addition of 10 per cent towards driage and wastage made by the assessing officer and deleted by the first appellate authority. By a cryptic order the Tribunal has restored the order of assessment. The order does not reveal whether any argument has been advanced by the Revenue against deletion of addition 10 per cent of purchased quantity of mohua flowers by the first appellate authority. Tribunal on its own cannot make out a new case particularly when no such point was taken in ground of appeal and argued before it. Thus answer all the questions in favour of the dealer and against the Revenue.

Summary

Issues Involved:
1. Sustaining the addition of 10% of the purchased quantity of mohua flower for driage and wastage.
2. Enhancement of the dealer's turnover in the absence of adverse material.
3. Tribunal's error in deciding an issue not raised in the grounds of appeal.

Detailed Analysis:

1. Sustaining the Addition of 10% for Driage and Wastage:
The Tribunal's decision to add 10% to the purchased quantity of mohua flower for driage and wastage was challenged. The petitioner argued that the quantity disclosed was supported by a certificate from the Superintendent of Excise. The court referred to the definitions of "turnover of purchase" and "purchase price" under the Orissa Sales Tax Act, 1947. It concluded that "driage and wastage" is an event subsequent to the purchase and does not affect the purchase price. The court held that the Tribunal was not justified in sustaining the addition of 10% towards driage and wastage for the purpose of levying tax on the turnover of purchase.

2. Enhancement of Turnover in Absence of Adverse Material:
The petitioner disclosed a purchase turnover of 4,380.60 quintals of mohua flower, supported by a certificate from the Superintendent of Excise. The assessing officer enhanced this to 4,818 quintals and estimated the purchase price at Rs. 150 per quintal based on suspicion. The court emphasized that any enhancement should be based on material evidence. It referred to Section 12(9) of the Act, which requires an enquiry and reasonable opportunity for the dealer to be heard before any enhancement. The court found that the assessing officer did not conduct any such enquiry and that the enhancement was based on mere suspicion. The court cited several precedents, including State of Kerala v. C. Velukutty and Khandelwalla v. State of Orissa, to support its view that arbitrary assessments without material evidence are not justified. It concluded that the turnover shown by the petitioner could not be enhanced on mere suspicion and conjecture.

3. Tribunal's Error in Deciding an Issue Not Raised:
The court examined whether the Tribunal erred in deciding an issue not raised in the grounds of appeal. It found that the grounds of appeal did not specifically address the addition of 10% towards driage and wastage. The Tribunal's order did not indicate that any argument was advanced by the Revenue on this issue. The court held that the Tribunal cannot make out a new case on its own, particularly when no such point was argued before it. It emphasized that deciding an issue not raised would violate the principles of natural justice, as the other party would not have the opportunity to address it. The court cited New Delhi Municipal Committee v. State of Punjab and V.K. Majotra v. Union of India to support its view. It concluded that the Tribunal's findings on this issue could not be sustained in the eyes of the law.

Conclusion:
The court answered all the questions in favor of the dealer and against the Revenue, agreeing with the petitioner's contentions and finding the Tribunal's actions unjustified.