1997 (9) TMI 590 - AT - VAT and Sales Tax

Issues Involved:
1. Constitutionality of Section 11E(2) of the Bengal Finance (Sales Tax) Act, 1941.
2. Levy of sales tax on resales of declared goods (iron and steel) and its contravention with Article 286 of the Constitution and Section 15(a) of the Central Sales Tax Act, 1956.
3. Limitation period for reopening deemed assessments under Section 11E(2) and making fresh assessments under Section 11(1) of the 1941 Act.
4. Authority of a lower-ranking officer to make fresh assessments following the reopening of deemed assessments by a superior officer.

Detailed Analysis:

1. Constitutionality of Section 11E(2) of the Bengal Finance (Sales Tax) Act, 1941:
The applicants argued that Section 11E(2) renders Section 11E(1) nugatory and is violative of Article 14 of the Constitution. They contended that the legal fiction in Section 11E(1) should not be destroyed by Section 11E(2). The Tribunal held that Section 11E(1) and 11E(2) are integrated and should be interpreted together. The legal fiction in Section 11E(1) is conditional and subject to Section 11E(2). Therefore, Section 11E(2) is not ultra vires the Constitution or Section 11E(1).

2. Levy of sales tax on resales of declared goods:
The applicants contended that sales tax on M.S. wires is levied at a single point and should be at the first point of sale. The respondents argued that tax is levied only at one stage, not necessarily the first stage. The Tribunal found that Section 5(2)(a)(vd) of the 1941 Act specifies a definite and ascertainable stage for tax payment, complying with Section 15(a) of the 1956 Act. Since M/s. Eco Industries, the first seller, did not pay tax due to a tax holiday, the applicants, as second sellers, were liable to pay tax on resale. The Tribunal held that Section 5(2)(a)(vd) is not discriminatory and does not violate Article 14 or other constitutional provisions.

3. Limitation period for reopening deemed assessments:
The applicants argued that reopening deemed assessments under Section 11E(2) is barred by the two-year limitation period in Section 11(2a). The Tribunal held that the second proviso to Section 11(2a) extends the limitation period to four years for fresh assessments following an order under Section 11E(2). The special period of limitation in Section 11E(2) (six years) and the extended period for fresh assessments (four years) are valid and not contrary to the Constitution. The Tribunal rejected the contention that Section 11E(2) is ultra vires.

4. Authority of a lower-ranking officer to make fresh assessments:
The applicants contended that fresh assessments by a Commercial Tax Officer, subordinate to the Deputy Commissioner, would be at the behest of a superior authority, violating principles of natural justice. The Tribunal found that the Deputy Commissioner's role under Section 11E(2) is limited to reopening deemed assessments, and the actual fresh assessments under Section 11(1) are to be made independently by the assessing authority. The Tribunal held that the assessing authority, even if subordinate, acts as a quasi-judicial authority and is not influenced by the Deputy Commissioner's orders. The Tribunal found no impropriety in making fresh assessments by a lower-ranking officer.

Conclusion:
The Tribunal dismissed the applications, holding that:
- Section 11E(2) is constitutional and does not render Section 11E(1) nugatory.
- Levy of sales tax on resales of declared goods complies with Section 15(a) of the 1956 Act and is not discriminatory.
- The limitation periods for reopening deemed assessments and making fresh assessments are valid.
- Fresh assessments by a lower-ranking officer following reopening by a superior officer are valid and not influenced by the superior's orders.

The applications were dismissed with no order as to costs.

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