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TMI Blog2000 (10) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... astic containers, then it is not exempted from tax. 2.. By assessment order dated July 5, 1998 for the period October 1, 1986 to September 30, 1987, the Sales Tax Officer treated the turnover of Rs. 15,97,507.34 of the aforesaid goods as tax-free and deducted the said amount from the petitioner's gross turnover under section 7(3)(i) of the Sales Tax Act. But on June 29, 1991 the Sales Tax Officer wrote to the petitioner that in order to satisfy himself about the treating and processing of the aforesaid goods, the petitioner should attend the office of the Sales Tax Officer on June 26, 1991 with the necessary details to convince him about the nontaxability of the goods. The petitioner replied to this letter on June 26, 1991, which is marked in the petition as annexure P2, giving the particulars, which are as follows: "1. Fresh beef-Fresh meat beef is cleaned, put in a polybag and frozen. Has to be cooked before eating. 2.. Goa pork sausages-Fresh meat pork is cleaned, cut into small pieces, salted, mixed with condiments, filled in medium size dried animal casings, dried and put in a polybag. Has to be cooked before eating. 3.. Cocktail sausages-Fresh meat beef is cleaned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mid-section is cleaned, salted and frozen. It is then sliced and put in a polybag. Has to be kept frozen and cooked before eating. 16.. Sorpotel-Fresh meat pork and red edible pork offals are cleaned, cut into small pieces, mixed with condiments and water, cooked, put in a polybag and frozen. Has to be boiled before eating. 17.. Prawn curry-Fresh prawns are peeled and cleaned, mixed with coconut juice and condiments, cooked, put in a polybag and frozen. Has to be boiled before eating." On receipt of this letter the Sales Tax Officer by letter dated September 17, 1991 informed the petitioner that he was satisfied that the goods mentioned therein were taxable since the meat was subjected to some treatment with salt and condiments, cut in different sizes and supplied in polybag and that therefore he intended to assess the said turnover which had escaped assessment. In that circumstances, the Sales Tax Officer issued a show cause notice dated September 17, 1991, as to why it should not be reassessed to tax on turnover of the said goods under section 18(1) of the Sales Tax Act for the sales made during the period from October 1, 1986 to September 30, 1987. The said show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strict I, Calcutta [1961] 41 ITR 191 (SC); AIR 1961 SC 372. Mr. Kakodkar contended that for the year 1986-87 all the primary and material facts have been disclosed and nothing was suppressed by the petitioner. According to him, in the quarterly returns the petitioner did not show the turnover with regard to meat as it is exempted from sales tax. In the balance sheet filed along with the sales tax returns the petitioner has shown those items as sales of "cold storage products" and claimed exemption and the assessing authority had granted exemption and finalised the assessment by its order dated July 5, 1988. Therefore, according to the counsel, there is no "reason to believe" for the Sales Tax Officer to impute the escaping of assessment so as to invoke section 18 of the Sales Tax Act. To fortify his argument he cited paragraph 6 of the aforesaid decision which reads as under: "6. To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression 'reason to believe' does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section." On the basis of the authorities, the learned counsel for the petitioner contended that the reason stated in the notice is not a valid reason as laid down by the Supreme Court and, therefore, the notice lacks jurisdiction. 5.. The learned counsel further submits that a subsequent change of opinion of the authorities about the assessment already made will not also provide a ground to reopen the assessment. He submits that when the assessment is made and completed, without suppressing any material, and subsequently, another officer in his wisdom thought it necessary to reopen the assessment with the already available material, without unearthing any new materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify his submission he cited the decision in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers [1980] 46 STC 63 (SC), where it has been held that when pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans there is no consumption of the original pineapple fruit for the purpose of manufacture and the case does not fall within section 5A(1)(a) of the Kerala General Sales Tax Act, 1963. Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. He further relied upon the decision of the Supreme Court in Delhi Cold Storage P. Ltd. v. Commissioner of Income-tax [1991] 191 ITR 656, where the Supreme Court has held that in common parlance, "processing" is understood as an action which brings forth some change or alteration of the goods or material which is subjected to the act of processing. The dictionary meaning of the term is not very different from this meaning in one sense, while vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petition on technical ground after keeping the matter over a period of time. Of course this matter could be disposed of on that technical plea by the High Court at the time of entertaining the petition; but having entertained the petition, granted stay and kept it dormant for 8 years, it is unfair to say to the party to go to the proper authority under the statute. That will amount to gross miscarriage of justice. Therefore, we are constrained to overrule the objection raised by the learned Advocate-General. 9.. The learned Advocate-General then proceeded to argue that there is no illegality or lack of jurisdiction in issuing notice under section 18 of the Sales Tax Act. He points out that in the balance sheet while the petitioner filed its annual returns it is pointed out that the meat items which were sold were shown as "cold storage products". But then the Sales Tax Officer has ignored it and without further enquiry excluded such sales from tax assessment. Subsequently, when audit party points out, the Sales Tax Officer called for certain clarification by notice dated September 17, 1991 and on receipt of the clarification, the Sales Tax Officer being satisfied issued the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the note of an audit party which mentions the law which escaped the notice of the ITO constitutes 'information' within the meaning of section 147(b); the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the ITO. In every case, the ITO must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO." In this case the audit note contains the following remarks which are shown in exhibit 2 filed along with the reply: "The details of cold storage products of Rs. 16,50,539.20 has not been brought on record. The audit could not verify assessment, whether these were canned food products. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eat, frankfurters, pastrami, croquettes, ham, bacon, sorpotel, etc. In consumer parlance also meat and fish are different from the goods sold by the petitioner. The simple and practical illustration is that if you want to purchase cocktail sausages or pork sausages and you demand "meat" these materials will not be available. Therefore in common parlance meat and sausages are different and its manner and style of usage is also different. We, therefore, cannot agree with the submission made by the counsel for the petitioner that cocktail sausages, pork sausages, frankfurters, luncheon meat, salami, pastrami, croquettes, ham, bacon and other items as shown in the writ petition does not lose the character of meat and therefore, those products are entitled for exemption cannot be accepted. The decisions cited by the learned counsel for the petitioner in the famous case of pineapple, poultry and rice in husk will not be of any use in the context of this case. 12.. It is necessary now to point out that in the decisions of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers [1980] 46 STC 63 (SC) and Alladi Venkateswarlu v. Government of Andhra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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