1998 (4) TMI 515 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of issuing a notice under section 14(1) by an Inspector of Commercial Taxes for periods already assessed.
2. Constitutionality of section 14(1) on the ground of conferring arbitrary powers without prescribed conditions.

Detailed Analysis:

Issue 1: Validity of Notice under Section 14(1)
The applicant, a registered dealer, was served a notice under section 14(1) of the Bengal Finance (Sales Tax) Act, 1941, directing the production of books of accounts for periods already assessed. The applicant contended that such notice was beyond the jurisdiction of the Inspector and argued that re-examination of documents should only occur if a proceeding under section 11E(2) or section 20(3) was pending.

The Tribunal held that section 14(1) allows the Commissioner to require any person to produce accounts, registers, or documents deemed necessary for the purposes of the Act. This power is not restricted to pending proceedings. The Tribunal distinguished this from the Income-tax Act cases cited by the applicant, where summons under section 131 required a pending proceeding. The Tribunal emphasized that section 14(1) is more comprehensive and can be exercised for preliminary inquiries to determine the necessity of reopening an assessment. The Tribunal concluded that the notice issued was valid and did not amount to reopening the assessment but was a preparatory step for potential reassessment.

Issue 2: Constitutionality of Section 14(1)
The applicant challenged the constitutionality of section 14(1), arguing it conferred untrammeled and arbitrary power due to the absence of prescribed conditions. The Tribunal rejected this contention, noting that Rule 68 of the Bengal Sales Tax Rules, 1941, provides conditions for exercising power under section 14(1). These conditions ensure that the business of the dealer is not unduly disturbed and restrict requisitions to necessary information.

Moreover, the Tribunal referred to the Supreme Court's decision in Surinder Singh v. Central Government, which held that the absence of rules does not invalidate the exercise of statutory power unless expressly provided by the statute. Section 14(1) stands on its own and can be implemented without additional rules. The Tribunal concluded that section 14(1) is not ultra vires the Constitution.

Additional Observations:
The Tribunal also addressed the applicant's argument that the notice was intended to reopen assessments based on external material not considered by the original assessing authority. The Tribunal clarified that the Commissioner's power under section 20(3) allows consideration of escaped items and that the enquiry initiated by the Bureau of Investigation was within legal bounds. The Tribunal emphasized that the Bureau's role under section 19A includes investigating suspected tax evasion, which justifies the issuance of the notice under section 14(1).

Conclusion:
The Tribunal dismissed the application, upholding the validity of the notice under section 14(1) and the constitutionality of the section. The interim order was vacated, and no costs were awarded. The Tribunal affirmed that the powers conferred by section 14(1) could be exercised without the need for additional rules, and the Bureau of Investigation's actions were within its jurisdiction to investigate potential tax evasion.