1986 (1) TMI 364 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction to initiate reassessment proceedings under Section 18 of the Bihar Sales Tax Act.
2. Validity of the reassessment order and penalty.
3. Applicability of Section 5 of the Bihar Sales Tax Act.
4. Obligation of the petitioner to disclose primary facts.
5. Validity of the imposition of penalty.
6. Assessment of the value of goods for taxation purposes.
7. Constitutional validity of Section 5 of the Bihar Sales Tax Act.

Issue-wise Detailed Analysis:

1. Jurisdiction to Initiate Reassessment Proceedings Under Section 18 of the Bihar Sales Tax Act:
The petitioner argued that no turnover had escaped assessment or had been under-assessed, thus questioning the jurisdiction to initiate reassessment proceedings under Section 18. The court examined the statutory provisions, particularly Sections 3, 5, and 7 of the Bihar Sales Tax Act, which outline the conditions for taxable turnover and exemptions. It was determined that the petitioner had failed to disclose the despatch of packing materials outside Bihar, which constituted an omission leading to escapement of turnover. The court held that the reassessment proceedings were within jurisdiction as there was a failure to disclose fully and truly all material facts necessary for assessment.

2. Validity of the Reassessment Order and Penalty:
The petitioner contested the reassessment order and the penalty imposed. The court found that the petitioner had not included the value of despatches outside Bihar in the Gross Turnover (G.T.O.), leading to escapement of turnover. The court upheld the reassessment order but quashed the penalty, noting that the law was confusing and the petitioner might have been under a mistaken impression regarding their obligations.

3. Applicability of Section 5 of the Bihar Sales Tax Act:
The petitioner contended that Section 5 did not apply as there was no series of sales. The court rejected this argument, stating that every item passes through a series of sales, and the petitioner was at the threshold of these series. The court emphasized that the concession granted to the petitioner was based on the undertaking to use the materials for packing goods for sale inside Bihar, which was violated when the materials were despatched outside Bihar.

4. Obligation of the Petitioner to Disclose Primary Facts:
The petitioner argued that they had disclosed all primary facts and were not required to state inferences. The court disagreed, stating that the petitioner had failed to disclose the despatch of materials outside Bihar in the return and accompanying statements. This omission led to escapement of turnover, and the court held that the petitioner had not fulfilled their obligation to disclose all relevant materials.

5. Validity of the Imposition of Penalty:
The court quashed the penalty imposed on the petitioner, noting that the law was confusing and the petitioner might have been under the impression that the information supplied in form XXVIII-B absolved them of their obligations. The court called for a liberal view and found that this was not an apt case for the imposition of a penalty.

6. Assessment of the Value of Goods for Taxation Purposes:
The court noted that the assessing officer should have ascertained the value of the goods purchased from Rohtas Industries rather than relying on the value of the despatches by the petitioner. The book value of the goods despatched to the sister units of the petitioner might swell due to processes like printing, shelling, and cutting. The court directed the assessing officer to proceed with the assessment based on the correct valuation of the turnover escaping assessment.

7. Constitutional Validity of Section 5 of the Bihar Sales Tax Act:
The petitioner challenged the constitutional validity of Section 5, arguing that it taxed fictional sales. The court rejected this argument, stating that the sale was real, and the incidence of tax had been shifted from the seller to the purchaser. The court held that the State Government could prevent the shifting of the incidence of tax and make it conditional, and there was no legislative power issue in this regard.

Conclusion:
The applications were dismissed with costs, and the court upheld the reassessment order while quashing the penalty. The court also advised the State Government to consider deleting the condition of "sale inside Bihar" from form IX to benefit industries.

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