1976 (2) TMI 173 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Transfer of ownership of business under section 17 of the Bengal Finance (Sales Tax) Act, 1941.
2. Liability of the petitioner for assessment after the transfer.
3. Validity and arbitrariness of the best judgment assessment.

Issue-wise Detailed Analysis:

1. Transfer of Ownership of Business under Section 17 of the Bengal Finance (Sales Tax) Act, 1941:
The petitioner, a company owning several coal mines, challenged an order of assessment under section 9(2) of the Central Sales Tax Act, 1956, read with section 11(1) of the Bengal Finance (Sales Tax) Act, 1941, for the period from 1st April, 1972, to 30th January, 1973. The Coal Mines (Taking Over of Management) Act, 1973, and the Coal Mines (Nationalisation) Act, 1973, transferred the management and ownership of coal mines to the Central Government. The petitioner argued that this transfer constituted a transfer of the business under section 17 of the Bengal Finance (Sales Tax) Act, 1941, making the Coal Mines Authority Limited the registered dealer and liable for the assessment.

2. Liability of the Petitioner for Assessment After the Transfer:
The court examined whether the ownership of the business had been transferred from the petitioner. It was determined that while the right, title, and interest in relation to the coal mines were transferred to the Central Government, the ownership of the business itself was not transferred. The business of the petitioner continued, and the petitioner remained the registered dealer. The court referred to section 7, section 8, and section 32 of the Coal Mines (Nationalisation) Act, 1973, to conclude that the ownership of the business as such was not taken over. The court also cited the case of Kshitish Chandra v. State of West Bengal, which held that section 17 of the Bengal Finance (Sales Tax) Act, 1941, imposed an additional liability on the transferee without absolving the transferor of outstanding tax liabilities.

3. Validity and Arbitrariness of the Best Judgment Assessment:
The petitioner contended that the impugned assessment order was arbitrary and liable to be set aside. The assessment was made ex parte and to the best of the assessing officer's judgment, without proper basis. The court noted that a best judgment assessment must have a rational nexus to the assessment made and should not be arbitrary or whimsical. The assessing authority failed to refer to past records, comparable sales, or attempt to call for books or papers from the coal mines authority. The court found the assessment whimsical and arbitrary, thus liable to be set aside. The court directed the respondent to make a fresh assessment in accordance with the law, providing the petitioner with a reasonable opportunity.

Conclusion:
The rule was made absolute, and the assessment order was set aside. The respondent was directed to conduct a fresh assessment, ensuring compliance with section 21A of the Bengal Finance (Sales Tax) Act, 1941, if necessary. There was no order as to costs, and the coal mines authority did not file any affidavit-in-opposition, nor did it admit any allegations made in the petition.