1990 (11) TMI 377 - HC - VAT and Sales Tax

Issues Involved:
1. Rejection of returns and best judgment assessments.
2. Invocation of Section 17(3) and Section 19B of the Kerala General Sales Tax Act.
3. Reliability and authenticity of statistical data.
4. Compliance with procedural regulations.
5. Legal principles governing quasi-judicial proceedings.
6. Applicability and interpretation of Section 19B.

Detailed Analysis:

1. Rejection of Returns and Best Judgment Assessments:
The returns submitted by the dealers were rejected by the assessing authority on the grounds that the purchases were undervalued to lessen tax liability. The assessments were completed on a best judgment basis, adopting the average market rate of the goods as gathered by the assessing authority. The Appellate Assistant Commissioner upheld the finding of undervaluation but reduced the rate in a few cases. The Sales Tax Appellate Tribunal upheld the best judgment assessments in toto, reversing the modifications ordered by the Appellate Assistant Commissioner.

2. Invocation of Section 17(3) and Section 19B of the Kerala General Sales Tax Act:
In some cases, the assessing authority invoked Section 17(3) of the Act, while in most cases, action was initiated under Section 19B. The Tribunal upheld the compliance with both sections without independent consideration of cases where only one section was invoked. The assessees challenged the reliability of the figures relied upon by the Sales Tax Officer, which were gathered from the Office of the District Statistical Officer, Thrissur.

3. Reliability and Authenticity of Statistical Data:
The basic fact for rejecting the returns and making best judgment assessments was the information obtained from the District Statistical Office. The authenticity of this data was questioned as there was no original record or authenticated copy available in the files. The Deputy Director, Department of Economics and Statistics, Thrissur, testified that data was collected every Friday, not on the actual market day (Tuesday), raising doubts about its relevance and reliability.

4. Compliance with Procedural Regulations:
The evidence of the Deputy Director was not properly recorded in conformity with Regulation No. 48 of the Kerala Sales Tax Appellate Tribunal Regulations, 1966. The Tribunal failed to record reasons for the admission of additional evidence and did not specify the points to which the evidence was to be confined. The absence of a proper endorsement indicated a serious irregularity, making the recorded deposition unreliable.

5. Legal Principles Governing Quasi-Judicial Proceedings:
The assessing authority, in exercising its quasi-judicial function, must conform to the principles of natural justice, act fairly and reasonably, and afford the assessee an opportunity to rebut the case of the department. The authority must satisfy itself about the correctness or accuracy of the information before acting upon it. The Tribunal failed to investigate the truth and reliability of the materials forming the basis for the assessments.

6. Applicability and Interpretation of Section 19B:
Section 19B allows the assessing authority to estimate the value of goods based on the prevailing market price if it is satisfied that a dealer has shown lower prices to evade tax. The constitutionality of this section was upheld in a previous case. However, the Supreme Court's interpretation of a similar provision in the Income-tax Act requires the Revenue to prove that the assessee received more than what was declared. The absence of such a finding in the orders of the statutory authorities made the reliance on Section 19B misplaced. The Tribunal erred in sustaining the assessments without a definite finding that the assessees collected more than the amount shown in the accounts.

Conclusion:
The High Court set aside the common order of the Tribunal dated 1st December 1989, restoring the assessments made on a best judgment basis or by invoking Section 19B. The case was remitted to the Sales Tax Appellate Tribunal to consider the appeals afresh and pass new orders in accordance with law and the findings and observations of the High Court. The Tribunal was directed to complete this within three months. The petitions were allowed.

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