1970 (9) TMI 93 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Presumption of suppressed turnover being used for inter-State sales.
2. Deduction of extra turnover included in the original assessment.
3. Legality of notice issued under section 21 of the U.P. Sales Tax Act.

Issue-wise Detailed Analysis:

1. Presumption of Suppressed Turnover Being Used for Inter-State Sales:
The court addressed whether a presumption could be raised that the suppressed hill (liquid gold) was used for making inter-State sales. The assessee contended that there was no material or finding to show that goods had moved from one State to another in pursuance of a contract of sale, and hence, the turnover could not be subjected to Central sales tax. The court noted that this question did not arise out of the revisional order since it was not discussed or raised before the Judge (Revisions), the Sales Tax Officer, or the appellate authority. Consequently, the court declined to answer this question, emphasizing that only questions arising out of the revisional order could be referred under section 11.

2. Deduction of Extra Turnover Included in the Original Assessment:
The court examined whether the extra turnover included in the original assessment on a best judgment principle should be deducted from the estimate of turnover due to the escaped hill worth Rs. 4,714. The assessee argued for a set-off of Rs. 14,000 against the enhancement of Rs. 17,000 made by the Judge (Revisions) to avoid double taxation. The court clarified that a set-off depends on the facts and circumstances of each case, particularly whether the original enhancement was made due to specific suppression or a general unreliability of account books. In this case, the original assessment included an estimate of Rs. 14,000 due to the unreliability of the hill register. Since the department later discovered a specific item of purchase of hill, the court held that the sum of Rs. 14,000 should be excluded from the figure of Rs. 17,000 to avoid double taxation. Thus, the court answered this question in the affirmative, in favor of the assessee.

3. Legality of Notice Issued Under Section 21 of the U.P. Sales Tax Act:
The court considered the validity of the notice issued under section 21, which did not mention the escapement of turnover under inter-State sales. The court noted that there is no separate provision under the Central Sales Tax Act for reopening an assessment, and by virtue of section 9(3) of the Act, such an assessment can only be made by issuing notice under section 21 of the U.P. Sales Tax Act. The omission to mention section 9(3) was deemed not material as it did not mislead or prejudice the assessee, who was only dealing in inter-State sales. The court cited a similar case, Pawansut Bangle Stores v. Assistant Sales Tax Officer, where it was held that the notice's validity depends on whether it succeeds in informing the assessee of the proposed action. The court concluded that the notice was legal and proper, answering this question in favor of the department.

Conclusion:
The court provided a comprehensive analysis of each issue. It declined to answer the first question due to procedural reasons, affirmed the assessee's contention on the second question to avoid double taxation, and upheld the legality of the notice under section 21, favoring the department on the third question. No order as to costs was made, and the counsel's fee was assessed at Rs. 100.