1997 (11) TMI 512 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of best judgment assessments and demand notices.
2. Interpretation of the term "edible oil" under the relevant notifications.
3. Compliance with principles of natural justice.
4. Jurisdiction and authority of the respondent to pass the assessments.
5. Imposition of tax, interest, and penalty.

Detailed Analysis:

1. Validity of Best Judgment Assessments and Demand Notices:
The petitioner challenged the best judgment assessments and demand notices dated May 31, 1996, for the assessment years 1994-95 and 1995-96. The assessments were made on the grounds that hydrogenated vegetable oil is not considered edible oil under the notification dated March 7, 1994. The respondent issued notices under various sections of the 1954 and 1994 Acts. The petitioner's representative requested an adjournment, but the applications were delivered late, leading to the assessments being passed in their absence.

2. Interpretation of the Term "Edible Oil":
The petitioner argued that "edible oil" is not defined in the Rajasthan Sales Tax Act, the Rules, or the notifications. They referenced definitions from other orders and past judgments to assert that hydrogenated vegetable oil is considered edible oil. The Tribunal examined past Supreme Court judgments, including *Tungabhadra Industries Ltd. v. Commercial Tax Officer* and *Champaklal H. Thakkar v. State of Gujarat*, which concluded that hydrogenated vegetable oil retains the essential properties of oil and is considered edible oil. The Tribunal found that the petitioner did not breach the conditions of the notifications, as the manufactured product (vanaspati ghee) is an edible oil.

3. Compliance with Principles of Natural Justice:
The petitioner contended that the principles of natural justice were violated as the respondent did not grant an adjournment and proceeded with the assessments despite the pending transfer application. The Tribunal agreed that the respondent should have waited for the decision on the transfer application, noting that justice should not only be done but should also be seen to be done. The Tribunal emphasized that the respondent could have waited for a few more days, given the seriousness of the case and the multiple adjournments already granted.

4. Jurisdiction and Authority of the Respondent:
The petitioner challenged the jurisdiction of the respondent, arguing that the respondent was not specifically authorized by the Commissioner as required under section 77(1) of the 1994 Act. The Tribunal did not find substantial evidence to support the petitioner's claim of lack of jurisdiction. However, the Tribunal's decision to set aside the assessments was primarily based on the interpretation of "edible oil" and the procedural fairness issues.

5. Imposition of Tax, Interest, and Penalty:
The Tribunal found that since the petitioner's product (hydrogenated vegetable oil) is considered edible oil, the petitioner did not violate the conditions of the notifications. Consequently, no tax was leviable, and therefore, the imposition of interest and penalty was also unjustified. The Tribunal concluded that the best judgment assessments and the subsequent orders were not sustainable.

Conclusion:
The Tribunal allowed both original applications, setting aside the assessment orders dated May 31, 1996, the demand notices, and the orders dated July 30, 1996. The Tribunal held that the petitioner's product qualified as edible oil under the relevant notifications, and thus, no tax, interest, or penalty was due. The applications were allowed without any order as to costs.