1976 (6) TMI 68 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction to review the assessment order.
2. Validity of the Commercial Tax Officer's (CTO) decision to disallow the exemption.
3. Application of the Supreme Court's decisions in K.G. Khosla & Co. and Binani Bros. cases.
4. Error of law and principles applied in the assessment.

Issue-wise Detailed Analysis:

1. Jurisdiction to Review the Assessment Order:
The petitioner challenged the CTO's power to review the order under Section 20(4) of the Bengal Finance (Sales Tax) Act, 1941. It was argued that there was no error apparent on the face of the record nor any new evidence warranting a review. Section 20(4) allows any assessment or order to be reviewed by the person passing it, either on their own motion or upon application, provided it is done within four years and after giving reasonable opportunity to the affected party. The court held that the power of review under Section 20(4) is not circumscribed by the necessity of an apparent error or new evidence, and it is not arbitrary or naked as it is bound by certain procedural safeguards like a speaking order and reasonable opportunity to the affected party. Therefore, the CTO had jurisdiction to review the order.

2. Validity of the CTO's Decision to Disallow the Exemption:
The petitioner contended that the CTO could not ignore the directions given by the Assistant Commissioner of Commercial Taxes in his order dated 4th February 1969, which directed a fresh assessment in accordance with the law. The court clarified that the Assistant Commissioner had not conclusively found that the sales were in the course of import but had directed the CTO to examine the facts in light of the Supreme Court's decision in K.G. Khosla & Co. The CTO was thus free to re-examine the transactions to determine if they were sales in the course of import.

3. Application of the Supreme Court's Decisions:
The CTO initially allowed the exemption based on the Supreme Court's decision in K.G. Khosla & Co. but later disallowed it referring to the Supreme Court's decision in Binani Bros. The court noted that the test to be applied is whether the sale is in the course of import, meaning the importation must be a result of the sale and form an integrated transaction. The CTO's observation that each transaction consisted of two distinct sales (one from the foreign supplier to the dealer and another from the dealer to the customer in India) was not sufficient. The CTO failed to discuss the evidence on record and whether the two operations formed an integrated transaction.

4. Error of Law and Principles Applied:
The court found that the CTO did not apply the correct principles as laid down by the Supreme Court in the latest judgment in Mod. Serajuddin v. State of Orissa. The CTO's order lacked detailed reasons for the conclusions reached and did not indicate why a different view was taken from the original assessment. This constituted an error of law apparent on the face of the record.

Conclusion:
The court held that while the CTO had jurisdiction to review the order, the impugned order contained errors of law due to non-application of correct principles and lack of detailed reasons. The order dated 24th June 1974 was set aside, and the case was remanded for a fresh review order to be passed in accordance with the law and principles indicated by the court. The rule was made absolute to the extent indicated, with no order as to costs.