1970 (12) TMI 76 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Assessing Authority.
2. Definition and status of the petitioner as a "dealer."
3. Validity of the assessment date and period.
4. Requirement of specific findings for assessment.
5. Legality of ex parte enquiries and natural justice.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Authority:
The petitioner, Messrs Atul Glass Industries, challenged the jurisdiction of the Assessing Authority under the Punjab General Sales Tax Act, asserting that it was not engaged in any business of sale and purchase at Faridabad or anywhere in Punjab or Haryana, but only in manufacturing mirrors in Faridabad. The petitioner claimed that all taxes were assessed and paid in the Union Territory of Delhi, where its administrative offices were located.

2. Definition and Status of the Petitioner as a "Dealer":
The petitioner argued that it was not a "dealer" as defined in section 2(d) of the Punjab General Sales Tax Act, 1948, or section 2(b) of the Central Sales Tax Act, 1956. The Assessing Authority's conclusion that the petitioner was an "importer-manufacturer" did not suffice to establish it as a dealer. The petitioner contended that there was no evidence of sales from Faridabad during the relevant assessment year (1961-62).

3. Validity of the Assessment Date and Period:
The petitioner contended that the assessment was null and void as the exact date from which the liability was created in January 1961 was not specified. The assessment was based on transactions from 1964-65, which were irrelevant to the 1961-62 period.

4. Requirement of Specific Findings for Assessment:
The petitioner asserted that no assessment could be made without a specific finding that it was a dealer within the meaning of the Punjab General Sales Tax Act and the Central Sales Tax Act. The Assessing Authority failed to establish that the petitioner's business exceeded the taxable quantum during the relevant year.

5. Legality of Ex Parte Enquiries and Natural Justice:
The petitioner argued that the assessment was based on ex parte and secret enquiries, which were not disclosed to the petitioner, thus violating principles of natural justice. The petitioner was not given an opportunity to rebut the information gathered during these enquiries.

Judgment Analysis:

Jurisdiction and Definition of Dealer:
The court held that the petitioner must be proven to be a "dealer" within the meaning of section 2(d) of the Punjab Act and section 2(b) of the Central Act. The burden of proof lay with the sales tax authorities, which they failed to discharge. The mere fact that the petitioner was an importer-manufacturer did not make it a dealer. The court emphasized that each assessment year is a separate unit, and the department could not base its findings for 1961-62 on transactions from 1964-65.

Assessment Date and Period:
The court found that the Assessing Authority did not specify the exact date in January 1961 from which the liability was created, rendering the assessment null and void. The assessment for 1961-62 could not be based on transactions from 1964-65.

Specific Findings for Assessment:
The court held that there was no material evidence to prove that the petitioner was a dealer during the assessment year 1961-62. The Assessing Authority failed to establish that the petitioner's business exceeded the taxable quantum during that year.

Ex Parte Enquiries and Natural Justice:
The court found that the assessment was based on private ex parte enquiries, which were not disclosed to the petitioner. This violated principles of natural justice as the petitioner was not given an opportunity to rebut or respond to the information gathered. The impugned orders were set aside on this ground.

Conclusion:
The court allowed the writ petition, quashing the orders of the Assessing Authority and the Appellate Authority. It observed that the Assessing Authorities could reopen the matter for the relevant year if legally permissible. The petitioner was awarded costs.

Separate Judgment by Suri, J.:
Suri, J. dissented, emphasizing the petitioner's non-cooperation and repeated defiance of the Assessing Authority's process. He argued that the independent enquiries conducted by the department provided sufficient prima facie evidence of the petitioner's business activities. He concluded that the best judgment assessment was justified due to the petitioner's failure to produce its books and records. Suri, J. would have dismissed the writ petition with costs.

Final Judgment by Harbans Singh, C.J.:
Harbans Singh, C.J. agreed with Narula, J., holding that there was no material evidence to prove that the petitioner was a dealer during the assessment year 1961-62. He quashed the impugned order of assessment and awarded costs to the petitioner.