1975 (11) TMI 151 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Additional Commissioner to issue the notice.
2. Legality of the notice concerning banquet charges.
3. Competence of the Commissioner to revise cafeteria sales.
4. Validity of the notice concerning cash discounts.
5. Revisability of the quantum of amounts added back.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Additional Commissioner to Issue the Notice:
The petitioner challenged the jurisdiction of the Additional Commissioner to issue the notice dated 2nd February 1974, under Section 20(3) of the Bengal Finance (Sales Tax) Act, 1941. The petitioner argued that the order of the Sales Tax Officer had merged into the appellate order of the Assistant Commissioner, and thus, the original assessment order could not be revised by the Additional Commissioner. The court referred to the Supreme Court's decision in State of Madras v. Madurai Mills Co. Limited, which established that only the part of the assessment order adjudicated upon in appeal merges with the appellate order. Therefore, the Additional Commissioner had jurisdiction to revise aspects not covered by the appellate order.

2. Legality of the Notice Concerning Banquet Charges:
The court found that the assessment order concerning banquet charges had merged into the appellate order of the Assistant Commissioner, which confirmed the Sales Tax Officer's decision to allow a 15% deduction on banquet sales. Citing the Supreme Court's ruling in Commissioner of Income-tax v. Amritlal Bhogilal & Co., the court held that the original assessment order ceases to be operative once it merges into the appellate order. Consequently, the impugned notice concerning banquet sales was deemed without jurisdiction and illegal, as the Commissioner cannot revise something that no longer subsists.

3. Competence of the Commissioner to Revise Cafeteria Sales:
The court examined whether the hotel could be considered a "dealer" concerning its cafeteria activity, which provided refreshments to employees on a no-profit-no-loss basis. The definition of "dealer" under Section 2(c) of the Act requires a person to carry on the business of selling goods with a commercial motive. The court referenced decisions from various High Courts, including Indian Iron & Steel Co. Ltd. v. Member, Board of Revenue, and Gannon Dunkerley & Co. v. State of Madras, which emphasized the necessity of a profit motive in defining "business." The court concluded that the hotel could not be regarded as a "dealer" for the cafeteria activity, thus lacking jurisdiction to issue the impugned notice concerning cafeteria sales.

4. Validity of the Notice Concerning Cash Discounts:
The petitioner admitted that special customers received periodic bills with a 15-20% discount on refreshments. The court noted that the definition of "sale" and "sale price" under Sections 2(g) and 2(h) of the Act made the turnover computation a moot point. The court held that the issue of whether the turnover should be based on original bills or consolidated bills could be better decided through a reference to the High Court rather than a writ petition. Therefore, the impugned notice concerning cash discounts was deemed valid.

5. Revisability of the Quantum of Amounts Added Back:
The court found that the calculation of the quantum to be added back was certainly revisable, even if it was based on a best judgment assessment. The court rejected the petitioner's argument that there was no patent error warranting revision, affirming that each assessment year is a fresh assessment. Consequently, the Commissioner was within his rights to issue a notice for suo motu revision regarding the quantum of amounts added back.

Conclusion:
The court quashed the impugned notice concerning banquet charges and cafeteria sales due to lack of jurisdiction but upheld the notice concerning cash discounts and the quantum of amounts added back. The petition was partly allowed, with no order as to costs due to partial success for both parties.