1968 (10) TMI 101 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of the Sales Tax Officer to make best judgment assessments under Rule 41(3) of the U.P. Sales Tax Rules.
2. Validity of provisional assessment orders under Section 7(3) of the U.P. Sales Tax Act.
3. Completeness of returns filed by the petitioner without treasury chalans.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Sales Tax Officer to make best judgment assessments under Rule 41(3) of the U.P. Sales Tax Rules:

The petitioner, M/s. Steel Enterprises (Pvt.) Ltd., challenged the jurisdiction of the Sales Tax Officer to make best judgment assessments for the quarters ending 30th June and 30th September, 1967, and to initiate assessment proceedings for the quarter ending 31st December, 1967. The petitioner argued that Rule 41(3) does not permit the Sales Tax Officer to make a best judgment assessment solely because sales tax had not been deposited by the dealer, especially when the dealer does not admit liability. Rule 41(3) allows the Sales Tax Officer to determine the turnover to the best of his judgment and provisionally assess the tax payable if no return is submitted or if the return is submitted without payment of tax in the prescribed manner. Since the petitioner filed returns stating no tax liability and did not deposit any tax, the court held that the Sales Tax Officer had no jurisdiction to make any assessment at that stage. The jurisdiction to assess the turnover was not conferred upon the Sales Tax Officer by Rule 41(3) when the dealer filed returns and did not admit any tax liability.

2. Validity of provisional assessment orders under Section 7(3) of the U.P. Sales Tax Act:

The respondents contended that the Sales Tax Officer had jurisdiction under Section 7(3) of the U.P. Sales Tax Act to make the impugned assessment orders. Section 7(3) allows the assessing authority to determine the turnover to the best of his judgment and assess the tax if no return is submitted or if the return appears to be incorrect or incomplete. However, the court noted that Section 7(3) does not contemplate provisional assessments but rather final or regular assessments. The court emphasized that provisional assessment orders are not covered under Section 7(3), which is intended for final assessments after the assessment year has expired. The court concluded that the assessment orders made by the Sales Tax Officer were not valid under Section 7(3) as they were provisional in nature.

3. Completeness of returns filed by the petitioner without treasury chalans:

The respondents argued that the returns filed by the petitioner were incomplete because they were not accompanied by treasury chalans. The court clarified that a treasury chalan is required only if the dealer admits liability to tax and needs to comply with Rule 41(2). Since the petitioner did not admit any tax liability, there was no requirement to submit a treasury chalan with the returns. The court held that the absence of treasury chalans did not render the returns incomplete. Therefore, even if Section 7(3) was invoked, the condition precedent for exercising jurisdiction under that provision was not met.

Conclusion:

The court held that the impugned assessment orders and the proceedings proposed by the Sales Tax Officer were without jurisdiction. The assessment orders dated 8th January, 1968, for the quarters ending 30th June, 1967, and 30th September, 1967, along with the consequential notices of demand, were quashed. The notice dated 18th February, 1968, issued for the quarter ending 31st December, 1967, was also quashed, and the Sales Tax Officer was restrained from taking any further assessment proceedings pursuant to that notice. The petitions were allowed with costs.

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