1988 (1) TMI 330 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of a single Member Bench deciding an appeal involving disputed tax exceeding Rs. 10,000.
2. Legality of reassessment order u/s 21 based on change of opinion.

Summary:

Issue 1: Legality of a Single Member Bench Deciding the Appeal
The first issue questioned whether the Sales Tax Tribunal, Bareilly, was legally justified to decide an appeal involving disputed tax exceeding Rs. 10,000 by a single Member Bench instead of a two Members' Bench. Section 10(10)(a) of the U.P. Sales Tax Act mandates that appeals involving tax disputes over Rs. 10,000 should be heard by a Bench of two Members. However, the court clarified that the critical factor is the amount of tax "in dispute." In this case, the disputed tax was less than Rs. 10,000 after deducting the admitted liability. Consequently, the appeal was rightly tried by a single Member of the Sales Tax Tribunal. The learned Standing Counsel conceded this point, and the first question was decided accordingly.

Issue 2: Legality of Reassessment Order u/s 21 Based on Change of Opinion
The second issue addressed whether the reassessment order u/s 21, which corrected an inadvertent mistake or omission by the assessing authority, was legally sustainable. The reassessment was initiated because the Sales Tax Officer reconsidered the classification of saccharin, which was initially taxed at 3.5% as an unclassified commodity but later reassessed at 7% as a chemical due to the addition of soda-bi-carb in its manufacturing process.

The court examined whether the assessing authority had "reason to believe" that the turnover had escaped assessment or was under-assessed. It was found that the original assessment had already considered the manufacturing process, including the addition of soda-bi-carb. The reassessment was based on a change of opinion rather than new material facts. The court cited several precedents, emphasizing that reassessment u/s 21 cannot be justified on mere change of opinion without any new objective material.

The court concluded that the reassessment proceedings were an attempt to circumvent the original view, which had become final. Therefore, the order passed by the Sales Tax Tribunal annulling the reassessment proceedings was upheld. The revision was dismissed with costs.

Conclusion:
The petition was dismissed, affirming that the single Member Bench was justified in deciding the appeal and that the reassessment order u/s 21 was invalid as it was based on a change of opinion rather than new material facts.