1990 (2) TMI 276 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the notices issued by the Commercial Tax Officers and Assistant Commissioner of Commercial Taxes.
2. Whether sales through the State Trading Corporation of India (STCI) qualify as sales in the course of export under Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941, and Section 5 of the Central Sales Tax Act, 1956.
3. Applicability of Article 286(1)(b) of the Constitution of India to the sales in question.
4. Compliance with procedural requirements under the Bengal Finance (Sales Tax) Act, 1941, and the Bengal Sales Tax Rules, 1941.
5. Jurisdiction and authority of the tax officers to revise assessments.

Detailed Analysis:

1. Validity of the Notices:
The petitioner challenged the validity of three notices issued by the Commercial Tax Officers and Assistant Commissioner of Commercial Taxes for the years ending 31st December 1970, 1971, and 1972. The notices proposed to revise the original assessments to include certain sales amounts under the levy of tax. The petitioner argued that these notices were ultra vires and violated Article 286(1)(b) of the Constitution of India. The court held that the notices were invalid as they did not provide reasons for revising the original assessment orders, violating the principles of natural justice and the provisions of the Bengal Act and Bengal Rules.

2. Sales Through STCI as Sales in the Course of Export:
The core issue was whether sales through STCI qualified as sales in the course of export under Section 5(2)(a)(v) of the Bengal Act and Section 5 of the CST Act. The petitioner contended that the sales through STCI were integrated sales where the property in the goods passed only after the goods crossed the customs barrier, thus qualifying as exports. The court agreed, citing Supreme Court precedents, and held that such sales were indeed in the course of export and exempt from sales tax under Article 286(1)(b) of the Constitution.

3. Applicability of Article 286(1)(b) of the Constitution:
The court referred to the Supreme Court's interpretation of Article 286(1)(b) in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory and J.V. Gokal & Co. (Pvt.) Ltd. v. Assistant Collector of Sales Tax. It held that sales are in the course of export if the goods cross the customs barrier of the seller country and do not cross the customs barrier of the purchaser country. Applying this principle, the court ruled that the petitioner's sales through STCI fell within the exemption provided by Article 286(1)(b).

4. Compliance with Procedural Requirements:
The court noted that under Section 20(3) of the Bengal Act and Rule 82 of the Bengal Rules, the authority must record and communicate reasons for revising an assessment order suo motu. The impugned notices failed to meet this requirement, rendering them procedurally defective. Additionally, the court observed that the power of revision could not be invoked when an appeal was pending, as was the case for the year ending 31st December 1970.

5. Jurisdiction and Authority to Revise Assessments:
The court found that the original assessments were made by different officers, and the revisions were proposed by their successors without following the proper procedure. Rule 82 of the Bengal Rules stipulates that no officer below the rank of Commissioner can review an order passed by a predecessor without applying to the next higher authority. The court held that the respondents lacked the jurisdiction and authority to revise the original assessments, thus invalidating the impugned notices.

Conclusion:
The court allowed the writ applications, quashing the impugned notices and directing the Commercial Tax Officer to complete the assessments in accordance with the court's findings. The judgment covered all three writ applications, affirming that the sales through STCI were exempt from sales tax under Article 286(1)(b) of the Constitution and relevant provisions of the Bengal and Central Sales Tax Acts.

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