9911796707
TMI Blog1999 (11) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation by the sales tax authorities who issued show cause notice which was replied by the petitioners. The petitioners disclosed sales effected against certificate in form 17A. Such sales were the subject-matter of investigation in earlier proceedings. 3.. Special Civil Application No. 7072 of 1996 pertains to assessment year 1989-90, Special Civil Application No. 7073 of 1996 pertains to assessment year 1990-91, and Special Civil Application No. 7074 of 1996 pertains to assessment year 1988-89. For all these three years notices were issued on July 20, 1996 calling upon the petitioner to attend for the same reason which we have indicated hereinabove. Facts: 4.. The petitioner No. 1 is a company incorporated under the provisions of the Companies Act, 1956 and holding a valid registration certificate and a licence under the provisions contained in the Act and also under the Central Sales Tax Act, 1956. The petitioner No. 2 is the Branch Accountant of the petitioner No. 1-company. 5.. The petitioner No. 1 carries on the business of sale of electrical goods within the State of Gujarat which they receive as branch transfers from their manufacturing units in the State of Maha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.. On February 16, 1996 the Sales Tax Officer working in the office of the Commissioner of Sales Tax (Enforcement) along with other officers of the Sales Tax Department conducted a search at the petitioner's premises and said respondent No. 3 passed order under section 59 of the Act, books of accounts were seized, statement of the Branch Manager of the petitioner No. 1-company was recorded. Thereafter on July 20, 1996 notice of reassessment under section 44 of the Act was issued. The petitioners have challenged the aforesaid show cause notice in the present petitions on various grounds mentioned in the petition. Statutory background: 9.. However before we consider the said contentions it will be useful to refer to certain provisions of the Act in this behalf. The Gujarat Sales Tax Act, 1969 (Act 1 of 1970) is a law relating to the levy of a tax on the sale or purchase of certain goods in the State of Gujarat. Section 2(10) provides definition of "dealer" and section 2(28) provides definition of "sales" which means sales of goods made within the State. Under section 2(14) "licence" means a licence granted under section 31 or as the case may be. Under section 2(25) "registered dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me within eight years, and (b) in any other case, at any time, within five years, of the end of the period to which such turnover relates, serve, on the dealer liable to pay tax in respect of such turnover, a notice containing all or any of the requisitions which may be included in a notice in the prescribed manner and assess, not later than three years, from the date of service of the notice, the amount of tax due from such dealer to the best of his judgment. " 10.. Thus, it is very clear that sub-clause (a) of section 44 will be applicable in case of concealment of sale, specified sales or purchase or any material particulars relating thereto or has knowingly furnished incorrect declarations or returns. In such eventualities, the Commissioner is empowered to take action at any time within eight years of the end of the period to which such turnover relates. In case of non-concealment, action is required to be taken within five years of the end of the period to which such turnover relates. Section 86 provides for power to make rules. In exercise of said powers the State of Gujarat prescribed rules which are called the Gujarat Sales Tax Rules, 1970. Rule 24 provides for form of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble when (i) the respondent No. 3 had reason to believe that the petitioners have concealed such sales, (ii) or any material particulars relating thereto, (iii) or have knowingly furnished incorrect return. It was submitted that there is no question of concealment of sales effected against form 17A to dealers within the State of Gujarat holding valid registration and licences. No material particulars relating to such sales have been concealed. The petitioners submitted that they have knowingly or otherwise not furnished incorrect declarations or return. The petitioners submitted that during the period April 1, 1989 to March 31, 1990 they have effected sales of Rs. 2,00,51,381 against form 17A to dealers in Gujarat holding valid registration certificates and licences. The petitioners submitted that the sales tax authorities had conducted a search on their premises on February 9, 1993 and seized their books of accounts, and thereafter, verified the seized books, issued a notice to show cause and examined the written explanation and reply by the petitioners. All the forms were produced before the assessing officer who passed the order of assessment on February 25, 1994 accepting the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion that the respondentassessee concealed the aforesaid sales or purchases or any material particulars relating to the sales effected by the respondent-assessee, or that the respondent-assessee knowingly furnished incorrect returns. In the absence of any such evidence or even title thereof (sic), it is impossible for us to take the view that in the instant case the respondent-assessee had concealed the aforesaid sales, or had concealed any material particulars relating to the aforesaid sales, or had knowingly furnished incorrect details. On the contrary, this is a clear case where the respondent-assessee did act in the ordinary course of his customary usual business, and that being so, the department was obviously in error in foisting the additional liability by way of imposing general sales tax liability on the respondent-assessee. This is a case of no evidence for concealment of any sales by the respondentassessee to M/s. Shah Trading Company, and hence we are in entire agreement with the reasoning and the ultimate conclusion arrived at by the Tribunal." 14.. The learned advocate for the petitioner submitted that the notice of reassessment dated July 20, 1996 under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners. In fact not a single transaction by way of example has been pointed out. It was stated that when sales were effected, the registrations/licences of the petitioners' customers were valid. It was submitted that the cancellations of registrations with retrospective effect cannot be to the prejudice of the petitioners. It was submitted that in the instant case the assessment relates to the assessment year 1989-90. The period of five years ends on March 31, 1995. The impugned notice was issued on July 20, 1996 and is, therefore, beyond the period of five years. It was submitted that the larger period of eight years is not applicable to the instant case. The petitioners have disclosed all the material facts when earlier order of assessment was passed. In fact order of assessment was passed on February 25, 1994 under section 41(3) for the assessment year 1989-90 wherein the petitioner's claim of sales against form 17A was allowed. It was submitted that the petitioners in their return have claimed sales against form 17A and hence there is no concealment and/or incorrect declaration. 17.. The learned counsel for the petitioners has relied on the judgment in the case of Suresh Tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were holding licences and on production of form 17A by dealers benefit was extended. It is admitted position that subsequent to the assessment order, that is to say much after the sale, the licences were cancelled with retrospective effect. In the instant case, the Sales Tax Department after cancellation of licence of the dealers, has tried to recover the amount from the petitioner. From the facts of the present case, it is very clear that the petitioner relied upon the certificate in form 17A issued by the dealer and the petitioner acted upon such certificates. It was not the bounden duty of the petitioner when it was dealing with the licensed dealer to find out whether the State has in fact issued licence in accordance with law or not. In the light of the aforesaid decisions, retrospective cancellation of the licence could have no effect on the petitioner who had acted upon the strength of the certificate in form 17A when the licence was operative. 20.. During the course of arguments it was urged on behalf of the State that bogus certificates were produced or the licensed dealers were not in existence. Under the scheme the dealer has to apply for a licence for purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction in respect of its resale on the basis of declaration in form 16 to the Bombay Sales Tax Rules, 1959 from its purchaser (now form 17A). Subsequently, notice for reassessment under section 35 of the Act came to be issued after lapse of five years but within eight years from the end of the accounting year, to tax such resale on the ground that the purchaser was not a licensed dealer. The Division Bench observed that there was no evidence on the record to show that the assessee knew that the certificate issued by the purchaser was forged or false or fictitious and was used by the assessee knowing it to be false, forged or fictitious. The court held that the reassessment proceedings against the assessee was barred by limitation. The court further held that the reassessment proceedings initiated against the assessee was barred by limitation in terms of section 35(1)(c) of the Bombay Sales Tax Act, 1959 and the longer period of limitation of eight years under section 35(1)(b) of the Bombay Sales Tax Act, 1959 was not available to the department inasmuch as it could not be said that the assessee had concealed the sales or any material particulars relating thereto, or had knowingly f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l facts necessary for his assessment for the relevant year. In the instant case, after the raid, the assessing officer, on consideration of material, passed an assessment order, and thus, there is no justification in the instant case for issuance of notice for reassessment. There is nothing on the record to show that the assessing officer had reason to believe that the turnover escaped and further that he had reason to believe that such an escapement was by reason of the omission or failure on the part of the assessee to make a return or to disclose fully and timely all material facts necessary for the assessment. 27.. In view of this, in our opinion, in the instant case, after examining the material on record, grounds stated, the show cause notice for reopening the assessment must be held to be bad, illegal and must be quashed and set aside. In our opinion condition precedent for issuing show cause notices for reopening the assessment did not exist and, therefore, it must be held to be illegal. Even grounds for the longer period of limitation which has been invoked, such as the ground that there was concealment of sales or material particulars or furnishing of incorrect declarati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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