2019 (3) TMI 1801 - HC - VAT and Sales Tax

Jurisdiction to entertain petition - Validity of assessment order - levy of Purchase Tax - purchase of goods by commission agents on behalf of petitioners (principal) - intra-State purchase or not - Section 28(2) read with Section 25(6) of the Uttarakhand VAT Act - applicability of Section 3(10)(b) of the Uttarakhand VAT Act - HELD THAT - Issuance of a show-cause notice contemplates that the response shall be considered and only thereafter will the matter be decided. The person asked to show cause has therefore full opportunity to satisfy the authorities that no action should be taken against him - The purpose of issuing a show-cause notice is to afford an opportunity of hearing and once cause is shown it is open to the authority to consider the matter in the light of the facts and submissions placed and only thereafter can a final decision be taken in the matter. Interference by the court before that stage would be premature. Jurisdiction to entertain petition - HELD THAT - Ordinarily a writ court would not exercise its discretionary jurisdiction to entertain a writ petition questioning a notice to show cause unless the same inter alia appears to have been issued without jurisdiction - In very rare and exceptional cases the High Court can quash a show-cause notice if it is found to be wholly without jurisdiction. A showcause notice does not give rise to any cause of action as it does not amount to an adverse order which affects the rights of any party. It is quite possible that after considering the reply to the show-cause notice the authority concerned may drop the proceedings and/or hold that the allegations are not established. A show-cause notice does not infringe the rights of anyone. It is only when a final order otherwise adversely affecting a party is passed that the said party can be said to have any grievance. The jurisdiction of the High Court under Article 226 of the Constitution should not be permitted to be invoked in order to challenge a show-cause notice unless accepting the facts in the show-cause notice to be correct the show-cause notice is ex facie without jurisdiction i.e. the notice is ex facie a nullity or non est in the eye of the law for absolute want of jurisdiction of the authority to even investigate into the facts or totally without jurisdiction in the traditional sense of that expression - i.e. even the commencement or initiation of the proceedings on the face of it and without anything more is totally unauthorised. In all other cases it is only appropriate that the party shows cause before the authority concerned and takes up the objection regarding jurisdiction therein. The learned Single Judge has also without expressing any opinion on merits relegated the appellants-writ petitioners to the remedy of filing a reply to the show-cause notice. Interference in an intra-Court appeal would be justified only if the order under appeal suffers from a patent illegality. The order under appeal does not suffer from any such infirmity - Appeal dismissed.

Issues Involved:
1. Jurisdiction of the Assessing Authority under Section 28(2) read with Section 25(6) of the Uttarakhand VAT Act.
2. Classification of the transaction as inter-State or intra-State sale.
3. Applicability of Section 3(10)(b) of the Uttarakhand VAT Act.
4. Relevance of the agreement between the principal and commission agents.
5. The appropriateness of invoking Article 226 of the Constitution of India.
6. The validity of the show-cause notice issued by the Assessing Authority.
7. The procedural propriety of the learned Single Judge’s order.

Detailed Analysis:

1. Jurisdiction of the Assessing Authority:
The appellants questioned the jurisdiction of the Assessing Authority under Section 28(2) read with Section 25(6) of the Uttarakhand VAT Act. They argued that the notice issued was without jurisdiction as the transactions were inter-State sales. The court highlighted that the Assessing Authority must first determine the nature of the transaction, whether it was inter-State or intra-State, based on the facts and agreements presented.

2. Classification of the Transaction:
The appellants contended that their purchases of mentha oil and peppermint oil through commission agents from farmers in Uttarakhand were inter-State sales under Section 3(a) of the Central Sales Tax Act (CST Act), and thus not subject to Uttarakhand VAT. The court noted that this classification is a mixed question of fact and law, which should initially be determined by the Assessing Authority.

3. Applicability of Section 3(10)(b) of the Uttarakhand VAT Act:
The appellants argued that Section 3(10)(b) of the Uttarakhand VAT Act did not apply to their case as the transactions were inter-State sales. The court emphasized that the Assessing Authority must examine the agreements and determine the nature of the transactions to decide the applicability of this provision.

4. Agreement Between Principal and Commission Agents:
The appellants relied on their agreements with commission agents to assert that the transactions were inter-State sales. The court stated that the authenticity and terms of these agreements must be scrutinized by the Assessing Authority to ascertain whether the transactions were indeed inter-State.

5. Appropriateness of Invoking Article 226:
The court observed that invoking Article 226 of the Constitution to challenge a show-cause notice is generally inappropriate, especially when an alternative remedy is available. The court stated that disputed questions of fact should be addressed by the Assessing Authority and not in writ proceedings.

6. Validity of the Show-Cause Notice:
The appellants claimed that the show-cause notice was without jurisdiction and should be set aside. The court held that a show-cause notice provides an opportunity for the appellants to present their case and does not constitute a final adverse order. The court stated that interference at this stage would be premature unless the notice was ex facie without jurisdiction.

7. Procedural Propriety of the Learned Single Judge’s Order:
The learned Single Judge had directed the appellants to respond to the show-cause notice and present their case before the Assessing Authority. The court upheld this direction, stating that the Single Judge’s order did not suffer from any patent illegality and that the appellants should utilize the opportunity to file their reply and present their arguments before the Assessing Authority.

Conclusion:
The appeals were dismissed, and the appellants were granted an additional 30 days to file their reply to the show-cause notice. The Assessing Authority was directed to consider the objections and pass a reasoned order in accordance with law. No coercive steps were to be taken until the Assessing Authority passed its order. The court reiterated that the appellants must first exhaust the alternative remedy before seeking judicial intervention.

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