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TMI Blog2013 (9) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... y strange that when the assesses had produced umpteen material before the assessing authority to show genuineness of the sale transactions why the assessing authority had shown utmost haste in drawing the drastic conclusion that the alleged inter-State transactions were sham and in fact are intra-State sale transactions. State of Kerala Vs. M.M. Mathew & Anr. [1978 (8) TMI 178 - SUPREME COURT OF INDIA] - The methodology, which was pressed into service by the assessing authority for drawing this sort of conclusion solely on the basis of sample transaction and statements of truck owners and drivers prima facie falls short of the requisite enquiry for unearthing the truth - The Court was quite conscious about the fact that evasion of tax was a menace to the society and the revenue authorities acting as watchdogs were empowered to unearth truth for penalizing potential tax evaders - The Court cannot lose sight of a very vital aspect of the matter that no revenue authority should term a genuine sale transaction as a sham on mere conjectures and surmises. Before castigating an assessee for a fake, or spurious transaction, or for his conduct of evasion of tax, a proper and meaningfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of Ahmedabad, namely, Chhaganlal Jain Halwala, and Ratanlal Gautam Kumar Jain. Both these dealers are having registration with the Gujarat Sales Tax Department and CST number to their credit. Despite a billed purchase by the petitioner, the assessing authority after formal enquiry, which was made in a slip shod manner, branded the transactions of the petitioner with these dealers as fake one, passed the assessment orders for all these three years, and imposed tax, interest and penalty of a huge sum. Being aggrieved from the assessment orders passed by the assessing authority, the petitioner laid three separate appeals before the Deputy Commissioner (Appeals), Commercial Taxes Department, and the appellate authority, after hearing rival submissions partly allowed all the three appeals of the petitioner-assessee and waived the penalty imposed against it by the assessing authority. Feeling disgruntled from part of the appellate order, the petitioner yet again made an endeavour by way of preferring appeals before the learned Tax Board for assailing all the three assessment orders of the assessing authority which were partly upheld by the appellate authority. The waiver of penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed dealers of Ahmedabad. According to Mr. Singhvi, the finding of the assessing authority with which the learned Tax Board has concurred, that purchase of raw material is intra-State and not inter-State, is based on mere ipse dixit of the assessing authority. Castigating the methodology of the assessing authority for indictment of the assessee, Mr. Singhvi submits that by upholding the said finding the learned Tax Board has miserably failed to adjudicate the lis involved in the matter in proper perspective. On this vital issue, the learned counsel would urge that recording of finding that inter-State purchase was bogus and drawing affirmative conclusion that it was a intra-State transaction on the basis of sampling of individual transaction and on the basis of statements of truck owners/drivers is unusual and dehors the prescribed principles and norms for such drastic conclusions. Emphasizing the genuineness of all these inter-State transactions, Mr. Singhvi has argued that the taxing authorities having accepted the fact that the assessee has paid entire price of raw material to the registered dealers of Ahmedabad by Demand Draft, cannot take a topsy turvy stand that transaction wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with law, was bound to examine each individual transaction and then decide whether it constituted an inter-State sale exigible to tax under the provisions of the Act. With a view to strengthen his contentions in this behalf, Mr. Singhvi has also placed reliance on a decision of Apex Court in case of Kerala Glue Factory Vs. Sales Tax Tribunal Ors. [(1987) 66 STC 292]. The Apex Court in this verdict upset the conclusion of the assessing authorities that the transaction was an inter- State sale solely on the ground that the assessing authorities have placed reliance on statement of one Bankey Lal which was not tested by cross-examination. The learned Senior Counsel has also urged that strong suspicion, strange or co-incidences and grave doubts cannot take the place of legal proof. On this proposition, the learned counsel for the petitioner has placed reliance on a decision of Apex Court in case of State of Kerala Vs. M.M. Mathew Anr. [(1978) 42 STC 348]. The Apex Court made following observations in this behalf: It is now well settled that strong suspicion, strange coincidences and grave doubts cannot take place of legal proof. To establish the charges against the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to thank themselves for the result of the prosecutions upon which it seems to have launched without seeking expert legal assistance. The decision of this Court in Girdharilal Gupta Vs. D.N. Mehta, Collector of Customs, which is heavily relied upon by the learned counsel for the State of Kerala is of no assistance to the State. In that case, it was established that the account slips were recovered from the premises of the accused which undoubtedly established their connection with them. Accordingly we do not find ourselves in a position to differ from the conclusions arrived at by the Additional Sessions Judge and the High Court. Yet another judgment of Apex Court on which the learned counsel for the petitioner has placed reliance is a decision of Apex Court in State of Kerala Vs. K.T. Shaduli Yusuff [(1977) 39 STC (SC) 478]. The Apex Court proceeded to make following observations in this behalf: One of the rules which constitutes a part of the principles of natural justice is the rule of audi alteram partem which requires that no man should be condemned unheard. It is indeed a requirement of the duty to act fairly which lies on all quasi-judicial authorities and this duty ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the dealer shall be given a reasonable opportunity of being heard and, where a return has been submitted, to prove the correctness or completeness of such return. It is clear on a plain natural construction of the language of this provision that it empowers the Sales Tax Officer to make a best judgment assessment only where one of two conditions is satisfied: either no return is submitted by the assessee or the return submitted by him appears to the Sales Tax Officer to be incorrect or incomplete. It is only on the existence of one of these two conditions that the Sales Tax Officer gets the jurisdiction to make a best judgment assessment. The fulfillment of one of these two prerequisites is, therefore, a condition precedent to the assumption of jurisdiction by the Sales Tax Officer to make assessment to the best of his judgment. Now, where no return has been submitted by the assessee, one of the two conditions necessary for the applicability of section 17, sub-section (3), being satisfied, the Sales Tax Officer can, after making such inquiry as he may consider necessary and after taking into account all relevant materials gathered by him, proceed to make the best judgment ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a decision of Gauhati High Court in Dwijendra Kumar Bhattacharjee Vs. Superintendent of Taxes Ors. (1990) 78 STC 393 (Guh)]. Elaborating the need for adherence of principles of natural justice, the Court proceeded to make following observations in Para 9 to 13 of the verdict laying down parameters for its observance: 9. The assessing officer invested with the power to make assessment of tax discharges quasi-judicial functions and he is bound to observe the principles of natural justice in reaching his conclusions. The fact that he is not fettered by technical rules of evidence of pleadings and is entitled to act on material which may not be accepted as evidence in a court of law, does not absolve him from the obligation to comply with the fundamental rules of justice which have come to be known in the jurisprudence of administrative law. One of the rules which constitutes a part of the principles of natural justice is the rule of audi alteram partem which requires that no man should be condemned unheard. It requires an opportunity to be heard to be given to a person likely to be affected by a decision. But this rule is also not an inflexible rule having a fixed connotation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferred on the assessee and that vitiated the orders of assessment made against him. 12. At this stage, it may be pertinent to emphasise that the opportunity of hearing to the assessee, contemplated above, is not an empty formality or ritual or a pretence. It is a valuable right granted to the assessees and, in fact, is an important safeguard against arbitrary assessments. It cannot be taken lightly by the authorities. The opportunity must be real and reasonable. If an assessee, who is asked to furnish certain particulars or submit explanations within a specified time, prays for further time stating his difficulties and/or reasons, his prayer should be considered judiciously. Sometimes, as in the present case, hearings, for assessment for a number of years are taken up together and the assessee is asked to appear and produce evidence in support of his returns. On consideration of the evidence produced by the assessee the assessing officer might require some further particulars and/or information which it might not be possible for the assessee to submit instantaneously or at short notice. He may require reasonable time to furnish the same and pray for the same before the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by reason of something that had happened subsequent to the date of the purchase, namely, the cancellation of the selling dealers registration with retrospective effect, that the tax-free resales had become liable to tax, would be tantamount to levying tax on the resales with retrospective effect. 5. In our view, the High Court was right. A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf of the department that it was the duty of persons dealing with registered dealers to find out whether a state of facts exists which would justify the cancellation of registration must be rejected. To accept it would be to nullify the provisions of the statute which entitle persons dealing with registered dealers to act upon the strength of registration certificates. For authenticating his submissions on this proposition, the learned counsel for the petitioner has placed reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on the certain bills. Interalia, on this basis it was found that it cannot be said that the assessee had purchased the goods from the unregistered dealer. Assailing the impugned order passed by the learned Tax Board, the learned Senior Counsel for the petitioner-assessee has articulated his third contention that burden of proving that the impugned sale transaction is intra-State and not inter-State lies on the department more significantly when the assessee has produced all relevant details including names and identity of the vendors, details about their registration and the requisite payment made to the dealers. The learned Senior Counsel further submits that once it was pleaded by the assessee that goods have been taxed in State of Gujarat then burden of proof to the converse obviously lies on the department and it is not desirable from the Revenue to brush aside the plea of the assessee without proper verification of the facts. In order to strengthen this argument, the learned counsel for the petitioner has placed reliance on a decision of Apex Court in case of Commissioner of Sales Tax U.P., Lucknow Vs. Suresh Chand Jain [(1998) 70 STC 45]. The Apex Court, in the said verd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aulted for the simple reason that enquiry was conducted for the purpose of ensuring evasion of tax by the assessee. Countering all the contentions of the learned counsel for the petitioner, Mr. Mathur has argued that the learned Tax Board has examined the matter threadbare and thereafter it has restored the orders of the assessing authority which suffers from no infirmity much less legal infirmity and as such there is no question of law involved in the matter warranting interference in the revisional jurisdiction. I have heard the learned counsel for rival parties, scanned the materials on record and examined the legal precedents throwing light on the question of law involved in the matter. On examining the assessment orders with bird s eye view, it is amply clear that the assessing authority has not at all cared to verify the genuineness of the bills from the dealers of Gujarat and has categorized those bills as fictitious bills castigating the assessee for camouflaging the said transaction. For arriving at this conclusion, the enquiry procedure adopted by the assessing authority is per-se an empty formality. It is really strange that when the assesses has produced umpteen mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions as inter- State transactions. Moreover, not allowing the assessee to cross-examine the witnesses, who have deposed against them, and their statements were construed as incriminating material for discrediting the requisite material placed on record by the assessee to prove genuineness of the transactions, the bonafide purchase of the raw material from a registered dealer of Ahmedabad was yet another mitigating factor throwing prima facie light on the genuine inter-State transaction but the assessing authority has not addressed on this vital issue while passing the impugned order. At the appellate stage, the appellate authority has examined the matter afresh and has found that the statements of the witnesses recorded by the department are not worth reliance unless the assessee is permitted to cross-examine those witnesses. With these observations, the appellate authority has maintained the tax and interest but reversed the order of the assessing authority imposing penalty on the assessee. The learned Tax Board, by the impugned order, has restored the order of the assessing authority and while passing the said order the learned Tax Board has not at all cared to examine th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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