1977 (10) TMI 45 - HC - VAT and Sales Tax

Summary

Issues:
1. Jurisdiction of the STO to reassess under section 35
2. Disclosure of purchase of ship "ss. Bhudh Jayanthi" and levy of purchase tax

Analysis:

Jurisdiction of the STO to reassess under section 35:
The case involved the reassessment of an assessee dealing in iron and steel, specifically regarding the purchase of discarded ships for breaking and selling as scrap. The STO had initially granted a set-off under Rule 41A on one of the ships dismantled for sale. However, a revised order by the Assistant Commissioner disallowed this set-off. The STO then discovered that the assessee had purchased an old ship from an unregistered dealer, leading to the initiation of action under section 35 of the Bombay ST Act, 1959. The assessee challenged the jurisdiction of the STO on various grounds, including the competence to pass orders under section 35. The High Court analyzed the sequence of events, including the revision of orders and the subsequent actions taken by the STO. The Court held that the STO was not competent to pass the impugned order as the proper course would have been to report to the appropriate revising authority. The failure to follow this procedure rendered the STO's order invalid.

Disclosure of purchase of ship "ss. Bhudh Jayanthi" and levy of purchase tax:
Another issue raised in the case was the disclosure of the purchase of the ship "ss. Bhudh Jayanthi" and the subsequent levy of purchase tax. The assessee contended that full disclosure regarding the purchase was made before the STO at the time of assessment. The balance sheet filed before the STO at the assessment stage clearly showed the purchase and sale of the ship. The STO, however, levied purchase tax on the ship, alleging that the purchase was not shown in the return and constituted knowingly furnished incorrect returns. The High Court examined the documentary evidence presented by both parties, including ledger accounts, journal entries, and the balance sheet. The Court noted that the STO had all the material facts before him during the original assessment and could not now rely on section 35(1)(b) to rectify his oversight. Relying on relevant legal precedents, the Court held that the case did not fall within the scope of section 35(1)(b) and that the action taken was beyond the statutory limitation period of 5 years. Consequently, the Court ruled in favor of the assessee, setting aside the orders passed by the lower authorities and allowing the second appeal.