2003 (9) TMI 753 - AT - VAT and Sales Tax

Issues Involved:
1. Whether the respondent No. 3 can revise the appellate order passed by the respondent No. 2 in suo motu revisional proceeding.
2. Whether the notice in form No. 33 and imposition of turnover tax is illegal and invalid.

Issue-wise Detailed Analysis:

Issue 1: Revising the Appellate Order in Suo Motu Revisional Proceeding
The petitioner submitted a return for the fourth quarter ending March 31, 1993, claiming a benefit of a concessional rate of tax under the Bengal Finance (Sales Tax) Act, 1941. The respondent No. 1 rejected the books of accounts, estimated the gross turnover at Rs. 9,42,03,364, disallowed claims for a concessional rate of tax, levied turnover tax, imposed a penalty of Rs. 25,000, and demanded interest exceeding Rs. 3,00,000. The order of assessment was modified on appeal by respondent No. 2, reducing the gross turnover by Rs. 30,00,000 and allowing claims under relevant sections of the Act, 1941. However, respondent No. 3 initiated suo motu proceedings to revise the appellate order based on alleged suppression of Rs. 2,23,62,320, adding this amount to the gross turnover and demanding additional tax.

The petitioner argued that the suo motu revision by respondent No. 3 was illegal and arbitrary, influenced by the Bureau of Investigation's report without independent application of mind. It was contended that the material used against the petitioner was not disclosed, denying the petitioner an opportunity to defend. The petitioner also cited the principle of merger, arguing that the appellate order should be the operative decision, and the Deputy Commissioner was not justified in reopening the appellate order based on issues not considered by the appellate authority.

The court referred to the principle of merger as discussed in [1967] 19 STC 144 (SC) (State of Madras v. Madurai Mills Co. Ltd.) and [1975] 35 STC 601 (AP) (State of Andhra Pradesh v. Sri Rama Laxmi Satyanarayana Rice Mill), stating that the doctrine of merger is not rigid and depends on the nature of the appellate or revisional order. The court concluded that the assessment order had merged with the appellate order, and the Deputy Commissioner was not justified in revising the appellate order suo motu on the issue of suppression of sales. The impugned order dated December 13, 2000, was thus set aside.

Issue 2: Notice in Form No. 33 and Imposition of Turnover Tax
The respondents admitted that the notice in form No. 33 was issued erroneously instead of form No. 28, and the turnover tax was wrongly levied at 2% instead of 1 1/2 %. The court found that the demand issued in form No. 33 was unwarranted under law and liable to be set aside. The petitioner argued that the imposition of turnover tax at 2% was illegal and arbitrary, and the notice of demand was invalid due to being issued in the wrong form.

The court noted that the learned Deputy Commissioner had not given the petitioner an opportunity to refute the allegations of suppression of sales. The court referred to [1992] 87 STC 43 (WBTT) (Black Diamond Beverages Pvt. Ltd. v. C.T.O., Central Circle), emphasizing that there could not be initiation of revisional proceedings without independent application of mind. The court also referred to [1993] 89 STC 120 (WBTT) [M.K. (Imports & Exports) Pvt. Ltd. v. Assistant Commissioner of Commercial Taxes], where it was held that an order passed on grounds not mentioned in the show cause notice was liable to be struck down.

The court concluded that the suo motu revision was intended to be initiated on the ground of suppression of sale, and the petitioner should have been given an opportunity to defend. Consequently, the notice dated September 22, 2000, and the purported notice of demand issued in form No. 33 were set aside.

Conclusion:
The application was allowed without costs, setting aside the order dated December 13, 2000, passed by the learned Deputy Commissioner, and the notice dated September 22, 2000, issued for initiating suo motu revisional proceedings. The purported notice of demand issued in form No. 33 under the Act, 1994, was also set aside.

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