1976 (1) TMI 154 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction and validity of the order determining tax liability under section 4(2) of the Bengal Finance (Sales Tax) Act, 1941.
2. Whether the petitioner was a manufacturer liable to be assessed to tax.
3. Legality of best judgment assessments made by the Commercial Tax Officer.
4. Validity of assessments for the period after the exemption of flowers from sales tax.

Detailed Analysis:

1. Jurisdiction and Validity of the Order Determining Tax Liability:

The petitioner challenged the order dated 4th October 1963, which determined his liability to pay tax from 30th Jyaishta, 1363 B.S., arguing that it was a nullity and without jurisdiction. The court examined sections 4(2) and 11(2) of the Bengal Finance (Sales Tax) Act, 1941, and concluded that the determination of liability to pay tax from a certain date under section 4(2) cannot be made independently and prior to the initiation of any proceeding under section 11(2). The court referenced the case of Surajmal Jain v. Commercial Tax Officer [1973] 32 S.T.C. 601, which supported the view that section 4 is a charging section and does not contemplate the fixation of the date of commencement of liability independently of section 11(2) proceedings. Therefore, the order dated 4th October 1963, was held to be without jurisdiction and illegal.

2. Whether the Petitioner was a Manufacturer Liable to be Assessed to Tax:

The petitioner argued that he was not a manufacturer as making garlands and bouquets from flowers did not constitute manufacturing. The court reviewed various legal definitions and precedents, including Union of India v. Delhi Cloth & General Mills, which held that "manufacture" implies the creation of a new substance with a distinctive name, character, or use. The court concluded that garlands and bouquets do not undergo a change in substance or character and are not durable or resalable commodities. Therefore, making garlands and bouquets was not considered manufacturing, and the petitioner was not liable to be assessed as a manufacturer.

3. Legality of Best Judgment Assessments:

The petitioner contended that the best judgment assessments made by the Commercial Tax Officer were arbitrary and capricious. The court noted that the petitioner did not file returns, and the tokcha book was rejected due to lack of supporting vouchers and cash memos. The Commercial Tax Officer estimated the turnover without recording any reason or basis for the estimate. The court cited Ramdhari Saha v. State of West Bengal and State of Kerala v. C. Velukutty, emphasizing that best judgment assessments must have a reasonable nexus to available material and circumstances. Since the assessments were made without any material basis, they were deemed arbitrary and unsustainable.

4. Validity of Assessments for the Period After the Exemption of Flowers from Sales Tax:

The court noted that flowers were exempted from sales tax from 10th May 1963. Therefore, any assessment made for the period from 10th May 1963 to 3rd September 1963 was illegal and without jurisdiction. The court set aside the assessments and certificate proceedings for this period.

Conclusion:

The court concluded that the order determining the petitioner's liability under section 4(2) was without jurisdiction, the petitioner was not a manufacturer, the best judgment assessments were arbitrary, and the assessments for the period after the exemption of flowers were illegal. Consequently, the orders of assessment and Certificate Case No. 49 S.T. (TL) 67/68 were set aside, and the petition was allowed.