1970 (11) TMI 85 - HC - VAT and Sales Tax

Issues Involved:
1. Legitimacy of best judgment assessment.
2. Alleged sales to the public.
3. Non-disclosure of the Sales Tax Inspector's report.
4. Imposition of penalties under section 43(1).
5. Imposition of penalties under section 27(2).
6. Imposition of penalties under section 17(3).

Issue-wise Detailed Analysis:

1. Legitimacy of Best Judgment Assessment:
The petitioner did not maintain proper accounts during the relevant years, justifying the Sales Tax Officer's decision to assess the petitioner to the best of his judgment under section 18(4)(d) of the Madhya Pradesh General Sales Tax Act. The court acknowledged that the assessment must not be based on pure guesswork but should have a reasonable nexus to the available material and circumstances. The assessment made by the Sales Tax Officer was found to be reasonable and not arbitrary, as it was based on the inquiry report of the Sales Tax Inspector and the petitioner's own statements.

2. Alleged Sales to the Public:
The Sales Tax Inspector's report and the petitioner's statements indicated that the petitioner sold sofa sets and other furniture to the public, in addition to supplying furniture to the Garrison Engineer. The presence of sofa sets in the shop and the petitioner's admission of selling waste products like saw-dust and fuelwood to the public supported the conclusion that the petitioner made sales to the public. The court found these materials sufficient to justify the best judgment assessment.

3. Non-disclosure of the Sales Tax Inspector's Report:
The petitioner argued that he was not given an opportunity to respond to the Sales Tax Inspector's report. However, the court noted that the assessment orders were passed long after the receipt of the Inspector's report, and the petitioner had multiple opportunities to address the report during the hearings. The court found no merit in the argument that the petitioner was unaware of the report or denied an opportunity to explain it.

4. Imposition of Penalties under Section 43(1):
The court upheld the penalty under section 43(1), finding that there was deliberate concealment of turnover and knowingly false returns. The petitioner failed to fully disclose sales made to the Garrison Engineer and offered no explanation for the non-disclosure. The court found no grounds to interfere with the penalty imposed under section 43(1).

5. Imposition of Penalties under Section 27(2):
For the year 1963-64, the court found no evidence that the petitioner's turnover exceeded fifty thousand rupees in the previous year, making the imposition of penalty under section 27(2) erroneous. However, for the year 1964-65, the court held that section 27(1) applied to the petitioner, as his turnover in the previous year exceeded fifty thousand rupees. The court rejected the argument that section 27 only applied to retail sales and upheld the penalty for not maintaining counterfoils of bills as required.

6. Imposition of Penalties under Section 17(3):
The court interpreted section 17(3) to mean that a dealer who submits returns late cannot be penalized under this section, as a late return is still a return furnished under section 17(1). Consequently, the penalties imposed under section 17(3) for both years were deemed unauthorized and quashed.

Conclusion:
The petitions were partly allowed. The penalties under section 27(2) for the year 1963-64 and under section 17(3) for both years were quashed. All other assessments and penalties were upheld. No order as to costs was made, and the security deposits were ordered to be refunded to the petitioner.

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