1984 (6) TMI 208 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the disputed turnover should be assessed under entry 121 of the First Schedule or entry 45 of the First Schedule and item 3(ii)(k) of the Second Schedule to the Kerala General Sales Tax Act, 1963.
2. Whether the assessment order (Exhibit P3) is a non-speaking order and violates principles of natural justice.
3. Whether the adjustment of excess surcharge for a future year (1983-84) is unauthorized and without jurisdiction.
4. The appropriateness of invoking Article 226 of the Constitution in tax matters when alternative remedies are available.

Issue-wise Detailed Analysis:

1. Assessment of Disputed Turnover:
The petitioner, a firm engaged in manufacturing iron and steel materials, claimed that the turnover related to umbrella ribs and tubes made of steel should be taxed at 6% and 4% respectively under entry 45 of the First Schedule and item 3(ii)(k) of the Second Schedule to the Kerala General Sales Tax Act, 1963. However, the respondent, Additional Sales Tax Officer, assessed these items at 8% under item 121 of the First Schedule as per the amended Act in 1980. The petitioner filed objections (Exhibit P2) reiterating their stand but the respondent assessed the disputed turnover at 8% as proposed.

2. Non-speaking Order and Violation of Natural Justice:
The petitioner argued that the respondent failed to consider Exhibit P2 in accordance with law and that Exhibit P3 is not a speaking order. The respondent did not provide reasons for assessing the disputed turnover under entry 121, thus acting illegally and violating principles of natural justice. The court emphasized that a quasi-judicial authority must provide reasons in support of its decisions to ensure fairness and transparency. The court found Exhibit P3 to be arbitrary, mechanical, and in violation of the principles of natural justice, declaring it illegal and void.

3. Unauthorized Adjustment of Excess Surcharge:
The respondent adjusted an excess surcharge of Rs. 7,920.26 for the year 1980-81 towards the year 1983-84, a period yet to commence. The court noted that there was no statutory provision allowing such an adjustment and deemed it unauthorized and without jurisdiction. The adjustment was made unilaterally without the petitioner's consent, which the court viewed as an abuse of power by the statutory authority.

4. Invoking Article 226 of the Constitution:
The Government Pleader contended that the petitioner had an equally efficacious alternative remedy by way of appeal and that the court should not exercise its jurisdiction under Article 226. However, the court held that when an order is unauthorized, illegal, and without jurisdiction, the resort to Article 226 is justified. The court cited the Supreme Court's decision in Titaghur Paper Mills Co. Ltd. v. State of Orissa, emphasizing that in cases of violation of natural justice or jurisdictional errors, the court can intervene under Article 226.

Conclusion:
The court quashed Exhibit P3 assessment order and Exhibit P4 consequential notice of demand. It directed the assessing authority to refund the excess surcharge amount of Rs. 7,920.26 within one month. The court also ordered an investigation by the Deputy Commissioner of Sales Tax (Zone), Ernakulam, into the unauthorized adjustment and submission of a detailed report to the Board of Revenue (Taxes) for further action. The Original Petition (O.P.) was allowed with costs.

← Previous Next →