1997 (7) TMI 640 - AT - VAT and Sales Tax

Issues Involved:

1. Maintainability of the writ petition.
2. Validity of Section 12 of the Rajasthan Sales Tax Act.
3. Scope and ambit of reassessment under Section 12 of the Act.
4. Validity of categorization of soap cakes and washing powder for taxation purposes.

Issue-wise Detailed Analysis:

1. Maintainability of the writ petition:

The department contended that the writ petition was not maintainable as the petitioner-firm did not avail itself of the alternative remedy provided under the Act. However, this contention was rejected. Firstly, the validity of Section 12 of the Act and the notifications dated June 27, 1990, and March 4, 1992, was under challenge, which could not be adjudicated by lower authorities. Secondly, the writ petition was transferred from the High Court to the Tribunal, and Section 8(5) of the RTT Act mandates the Tribunal to decide the subject matter on merits. Thus, this point was decided against the department.

2. Validity of Section 12 of the Act:

The petitioner challenged the validity of Section 12, arguing it allowed reassessment merely on a change of opinion. However, the Tribunal found that Section 12 and Section 147 of the Income-tax Act, 1961, were vitally different. Section 12 does not require the assessing authority to record reasons or have "reason to believe" before issuing a notice. The Tribunal held that Section 12's language "if for any reason" is broad enough to cover all cases of escapement or assessment at too low a rate, provided it is not done arbitrarily. The Tribunal found the provisions of Section 12 valid and constitutional.

3. Scope and ambit of reassessment under Section 12 of the Act:

The petitioner argued that reassessment cannot be done merely on a change of opinion. The Tribunal noted that the earlier taxable turnover was assessed at 8%, but later it was found that washing powder fell under the residuary entry 103, making it taxable at 10%. The Tribunal held that the reassessment was valid under Section 12, as the turnover was initially assessed at too low a rate. The Tribunal cited various decisions to support that reopening of assessment is permissible when the assessing officer has information indicating escapement of income or under-assessment.

4. Validity of categorization of soap cakes and washing powder for taxation purposes:

The petitioner argued that soap cakes and washing powder are homogeneous products used for cleansing purposes and should not be treated differently for taxation. However, the Tribunal found that the terms "soap," "soap cake," and "washing powder" were not defined in the notifications or the Act. The Tribunal referred to the New Encyclopaedia Britannica, which defines soaps and detergents as substances used for cleansing. The Tribunal emphasized that fiscal statutes' words should be given their ordinary meaning, and entry 64 explicitly excluded soaps in powder form from soap cakes, making them taxable under the residuary entry 103 at 10%. The Tribunal held that the classification made by the State Government was legal and sustainable.

Conclusion:

The writ petition was dismissed, and the Tribunal upheld the validity of Section 12 of the Act, the reassessment order, and the categorization of soap cakes and washing powder for taxation purposes. The Tribunal found no invidious discrimination or arbitrariness in the classification and taxation rates applied to these products.

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