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TMI Blog2015 (5) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the Anti-Evasion Wing of the Commercial Taxes Department is investigation and the alleged incriminating materials collected during investigation against the petitioner-assessee. There remains no quarrel that petitioner-assessee has received dish antenna, digital decoder and other accessories from Essel Agro on payment of advance security deposit and there is an agreement between Essel Agro and the petitioner-assessee. Customers clearly know the price they will have to pay for the beer. They are required to pay an additional amount by way of deposit for taking away the bottle which is refunded if the bottle is returned. If the bottle is not returned the deposit is retained as liquidated damages for the loss of the bottle. There is a clear intention not to sell the bottle. Hence, we are of the view that the deposit cannot be considered as price of the bottles. - Tax Board has not exercised its jurisdiction appropriately in reversing the findings and conclusions of the first appellate authority and restoring the original assessment order. - entire matter requires re-examination by the original assessing authority, which has initiated the assessment proceedings pursuant to inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-assessee entered into an agreement dated 20th April 2005with M/s. Essel Agro and in terms of the agreement petitioner firm is provided goods by M/s. Essel Agro. As per the terms of the agreement, .goods are provided to the petitioner only for utilization on right to use basis for which the petitioner is in receipt of commission. As per the version of the petitioner, goods are received under challans from M/s. Essel Agro with clear stipulation that goods are supplied against refundable security deposit for installation at customer premises on rental and not for sale. The petitioner, in turn, supplies these goods to various third parties by collecting refundable advance security deposit as also collecting applicable value added tax on lease rentals. The respondent revenue conducted investigation and recorded statements of certain dealers. On the strength of the materials collected during investigation and statements of dealers recorded, the respondent alleged that the petitioner had actually sold the goods to third parties. By taking into account the said transactions as sale, the respondent made attribution against petitioner of indulging in tax evasion and accordingly proposed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 agreed to argue the matter finally at admission stage. Subsequently, an application (IA No. 5829/2014) was laid by the petitioner for taking additional documents on record. The prayer made in the application not opposed by the learned counsel for the respondent-Revenue, and therefore, same was allowed on 13th January, 2015 and additional documents were taken on record. When the matter is finally taken up for final hearing, after bipartite hearing, following questions of law emerged out for determination: (i) Whether in construing the impugned transaction as sale and not lease, the learned Tax Board has exercised its jurisdiction appropriately for reversing the findings and conclusions of the first appellate authority and restoring the assessment order? (ii) Whether the learned Tax Board is forthright in reversing the findings and conclusions of the first appellate authority on contentious issue of violation of principles of natural justice in passing the assessment order? (iii) Whether in the facts and circumstances of the instant case, avoidance or evasion of tax is made out against the petitioner-assessee for fastening penalty under Section 65 of the Rajasthan Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the imposition of penalty under Section 65 of the Act is unsustainable. In support of his contentions, learned counsel for the petitioner has placed reliance on following legal precedents:- (i) United Breweries Ltd. V/s. State of Andhra Pradesh [(1997) 3 SCC 530] (ii) State of Kerala V/s. K.T. Shaduli Grocery Dealere [(1977) 2 SCC 777] (iii) Rasid Ahmed Ors. V/s. State of Rajasthan [AIR 1999 (Raj.) 314] (iv) Commissioner of Income-tax, Bikaner V/s. Pawan Sharma (D.B. Income-Tax Appeal No.3/2012 - decided on 13.07.2012] [(2012) SCC OnLine Raj 2015] (v) Indian Gum Industries Ltd. V/s. Assistant Commissioner (SBCSTR No. 196/2003, decided on 29.08.2013) [(2013) SCC OnLine Raj 2418]. (vi) Commissioner of Sales Tax V/s. Sanjiv Fabrics [(2010) 9 SCC 630] (vii) Uniworth Textiles Ltd. V/s. Commissioner of Central Excise [(2013) 9 SCC 753] (viii) Akbar Badrudin Giwani V/s. Collector of Customs [(1990) 2 SCC 203] Per contra, Mr. D.K. Godara, learned counsel appearing for the respondent-Revenue, submits that the learned Tax Board in the factual background of the case has rightly concluded that supply of dish antenna and digital decoder by the petitioner-asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. The first and foremost question of law is of great significance. The petitioner-assessee and the respondent-Revenue have locked horns to prove supply of dish antenna and digital decoders to respective dealers as lease, or a sale transaction. Respondent-Revenue has proceeded against petitioner on the premise that the said transaction falls within the ambit of sale whereas petitioner-assessee has asserted that it is only a lease and dish antenna and digital decoders are being supplied to the respective dealers after taking security deposit which is refundable. The Assessing Authority, at the threshold proceeded against the petitioner-assessee for the Assessment Year 2005-06 pursuant to investigation conducted. It appears that during investigation the taxing authorities have allegedly unearthed evasion of tax by the assessee inasmuch as it has not paid tax on sale of dish antenna and digital decoders. The assessing authority, taking note of the investigation, issued a show cause notice castigating the assessee for evasion of tax. Show cause notice was acknowledged by the assessee by submitting reply but the same was not found to be satisfactory. In these situations, the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other accessories from Essel Agro on payment of advance security deposit and there is an agreement between Essel Agro and the petitioner-assessee. The goods in question were supplied to the assessee with a clear stipulation not for sale . In these circumstances, whether the petitioner-assessee has violated the terms of agreement, which it has entered into with the Essel Agro, and has made an attempt, to sell dish antenna, digital decoder and other goods to the respective dealers is a contentious issue. Although the first appellate authority has made an attempt to ascertain the true nature of the transaction, but, I am afraid, the approach of the first appellate authority in this regard is also not convincing. I am aghast that the second appellate authority has acted all the more casually in reversing the findings and conclusions of the first appellate authority on this vital issue so as to restore the original assessment order. In United Breweries Ltd. (supra), Hon'ble Apex Court, while dealing with the issue, has dilated on this vital issue and held that for ascertaining the true nature of the transaction, intention of the parties, their conduct and the terms of the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pear from these terms and conditions that UB intended to sell crates and bottles to the customers. On the contrary it was very anxious to get back these crates and bottles in order to use them again for further supplies. The fact that UB advised their customers to charge similar deposits from their consumers and get back the bottles from them goes to show that an out and out sale of the bottles had not taken place. By taking the deposits UB merely ensured the return of the bottles and the crates. A deposit of forty paise per bottle was taken to ensure return of the bottles. In our view, the deposit amount which was liable to be forfeited on failure of the return of bottle was in the nature of liquidated damages recoverable by the supplier under Section 74 of the Contract Act. An overall view has to be taken of the dealings and transactions between the manufacturer of the beer, its customers and the consumers. The intention of UB does not appear to have been to sell the beer bottles. Nor was there any intention of the retailers to sell the bottles to the consumers. On the contrary, by the terms and conditions of the agreement UB was trying to ensure that the bottles in which the bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as violated the principles of natural justice. Principles of natural justice are great humanizing principles, and if any decision is to be taken against an individual, which visits him with evil and civil consequences, a reasonable opportunity of hearing is required to be afforded to him. Moreover, if any material is sought to be used against an individual, then it is the requirement of natural justice that the individual may be allowed to have access to such material for preparing his defence effectively. The contention of the learned counsel for the Revenue that in taxing statutes natural justice cannot be over-stretched is quite alluring but I am not persuaded to hold that there is no room for natural justice in the matter of imposition of tax and penalty against an erring assessee. In the matter of fiscal and taxing statutes also an assessee has got every right to claim access to adverse and incriminating material available to prepare his defence, and if that access is not allowed, it can vitiate the assessment proceedings. The learned first appellate authority has appreciated the concern of the assessee and has rightly pressed into service principles of natural justice for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missible under law. The usual mode recognised by law for proving a fact is by production of evidence and evidence includes oral evidence of witnesses. The opportunity to prove the correctness or completeness of the return would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross-examine witnesses examined by the Sales Tax Officer. Here, in the present case, the return filed by the assessee appeared to the Sales Tax Officer to be incorrect or incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in the book's of account of the assessee. The Sales Tax Officer relied on the evidence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete. Placed in these circumstances, the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other wholesale dealers were false, bogus or manipulated and that the return submitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the proviso itself confers this specific right on the assessee. It is difficult to conceive as to how the assessee would be able to disprove the correctness of the accounts of Haji P.K. Usmankutty or the other wholesale dealers, unless he is given a chance to cross-examine them with respect to the credibility of the accounts maintained by them. It is quite possible that the wholesale dealers may have mentioned certain transactions in their books of account either to embarrass the assessee or due to animus or business rivalry or such other reasons which can only be established when the persons who are responsible for keeping the account are brought before the authorities and allowed to be cross-examined by the assessee. This does not mean that the assessing authority is bound to examine the wholesale dealers as witnesses in presence of the assessees it is sufficient if such wholesale dealers are merely tendered by the sales-tax authorities for cross-examination by the assessees for whatever worth it is. In view of the express provision of the second part of the proviso, we are fully satisfied that the respondents had the undoubted right to cross-examine the wholesale dealers on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company and Commissioner v. Suresh (supra). By not addressing these crucial issues in the order impugned, the learned Tax Board has alienated the basic tenets of law rendering the order vulnerable. Thus, in totality, the considered opinion of this Court is that the Tax Board has committed a manifest error of law in concluding that the alleged sale transactions were intra-State and not inter-State, and that being so the question of law framed by this Court in all these petitions is decided in favour of the assessee and against the Revenue. In this view of the matter, the impugned order dated 20th of September 2002, rendered by the learned Tax Board declaring the transactions as intra-State transactions, cannot be sustained and consequently the orders passed by the appellate authority and the assessing authority are also required to be set at naught for deciding the matter afresh in the light of observations made by this Court hereinabove. In this view of the matter, the second question is also answered in favour of assessee and against the Revenue, and the impugned order to the extent it has reversed the finding of the first appellate authority on the question of violation of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same is hereby set aside. Taking into account the facts in entirety, the order passed by the first appellate authority to the extent it has concluded that the impugned transaction is lease and not sale, is also not sustainable. However, other part of the order of the first appellate authority regarding affirmative finding on violation of principles of natural justice is sustained with the modification of remanding matter back to the Assessing Authority for taking a decision afresh after observance of principles of natural justice. Thus, the said conclusion of this Court obviously entails setting aside of the original assessment order also. The upshot of the above discussion is that this revision petition is allowed and the impugned orders passed by the learned Tax Board and Assessing authority are quashed and set aside. The order passed by the first appellate authority is also partially set aside to the extent indicated hereinabove and the matter is remanded back to the assessing authority for passing assessment order afresh after giving reasonable opportunity of being heard to the petitioner-assessee and permitting it to cross-examine the witnesses who deposed against it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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