1984 PLP (Trib (PTD)

MUHAMMAD MAZHAR ALI (CHAIRMAN). These five appeals are directed against the orders of the learned Inspecting Assistant Commissioner, Sales Tax, Range... L..., dated 7‑9‑1982 relating to charge years 1974‑75 and 1975‑76, dated 2‑10‑1982 relating to charge years 1,976‑77, 1977‑78 and 1978‑79 passed under section 26‑A of the Sales Tax Act, 1951. The relevant facts giving rise to these appeals may briefly be stated as under. In response to notice under section 28 of the Sales Tax Act, the assessee appellant filed returns for the assessment years 1974‑75, 1975‑76 and 1976‑77 with a 'Note' that he was not a manufacturer and that the goods, namely, tent poles and salitha, rug‑horse, and other miscellaneous items including nets and grith-horse were purchased from market and supplied to Army. The Sale' Tax Officer, vide his combined order dated 10‑9‑1979, made under section 10 (4) of the Sales Tax Act, disposed of the return for assessment years 1974‑75 and 1975‑76 with these observations: "Proceedings are, therefore, filed subject to any action under section 28 of the Sales Tax Act, consequent upon the receipt of any intimation to the contrary."

2. He disposed of the returns for the assessment year 1976‑77 on 10‑11‑1977 passing an order asunder:‑ "Proceedings are filed subject to any action under section 28/30 con sequent upon completion of regular assessment." Since the assessee had already filed returns for 1976‑77 on 16‑7‑1977, the Sales Tax Officer, therefore cancelled the notices issued under section 28 of the Act in respect of this year. For the assessment year 1977‑78 the assessee appellant filed a return with the remarks: "goods are purchased from market and supplied to Army". The Sales Tax Officer passed the assessment order on 21‑1‑1979 under section 10 (3) of the Act as follows:‑ "No books of accounts in support of the return have been produced as these have been stated to be lying with the accountant who is not available at L .... However, the assessee contended that no manufactur ing whatsoever has been done during the year and the goods were supplied to Army by purchasing them from market. In respect of his contention the assessee has produced trading accounts, profit and loss accounts, for this year that no manufacturing was done during the year. Considering this aspect and also the history of the case, proceedings for this year were filed subject to action under section 28 of the Sales Tax Act."

3. For the assessment year 1978‑79, the assessee filed a return on 31‑12‑1979 which was disposed of the same day by the Sales Tax Officer in the following manner "The return received alongwith list of items supplied to Army, Mr. E.... H... contended that no manufacturing of taxable goods has been under taken as in earlier years. Since the case is to be disposed of as per Central Board of Revenue's decision, no probe is possible at this stage. Proceedings are filed for the present as in earlier year:"

4. The counsel for the appellant further drew our attention to the facts that it was on 30th June, 1980 that the Sales Tax Officer issued notices under section 28 of the Act in respect of assessment years 1969‑70 to 1978‑79 on the basis of audit objection dated 7th May, 1980. Later on the Sales Tax Officer, vide his letter dated 9‑3‑1981 requested the Commissioner of Income tax that action be taken under section 28‑A. It was on receipt of the above letter from the Sales Tax Officer that the Commissioner of Income‑tax, vide his letter dated 25‑3‑1980, directed the Inspecting Assistant Commissioner. Range.. L..., for initiating proceedings under section 28‑A of the Act. The counsel then dealt at length on the premises that the Inspecting Assistant Commissioner Range ... who issued notices under section 28‑A of the Act on 30th March, 1981 did not have jurisdiction over the Income‑tax Officer, Contractors Circle..., who was the Sales Tax Officer also, and hence the entire proceedings are liable to be quashed. The learned Departmental Representative, on the other hand, pleaded that the Inspecting Assistant Commissioner concerned did have jurisdiction and that there be no irregularity or illegality in his adopting the proceedings under section 28‑A and passing the impugned orders.

5. It need not detain us long to dispose of this plea of the learned counsel as the assessee admittedly submitted himself to the jurisdiction of the Inspecting Assistant Commissioner ungrudgingly. Even if the Inspection Assistant Commissioner concerned did not have the territorial jurisdiction urged by the learned counsel then it was open to him to have declined t have appeared before him. Instead of doing so, he did not only fail to rat the objection regarding lack of territorial jurisdiction but even participate in the assessment proceedings all‑through. Having acquiesced to the jurisdiction of the Inspecting Assistant Commissioner who initiated the proceedings, the appellant on well‑established principles of law by authorities, cannot now be allowed to go round and attack the jurisdiction of the Inspecting Assistant Commissioner because he has decided the case against him. . It is admittedly not the case of absolute lack of jurisdiction but only of the alleged territorial defect of jurisdiction. The proceedings cannot on this ground be held to be conducted by an authority quoram non judice. In these circumstances we do not find any force in the contention or the learned counsel for the appellant and repel it accordingly. Beside the contention of the learned counsel is even otherwise misconceive inasmuch as the learned Inspecting Assistant Commissioner who initiated the proceedings and dealt with the case was duly authorised and empowered to do so as rightly pleaded and proved by the learned Departmental Representative.

6. The next contention of the learned counsel was that the Inspecting Assistant Commissioner was not competent to frame assessment and that after cancelling the assessment he should have directed the Sales Tax Officer to frame the assessment inasmuch as section 28‑A of the Act lays down that upon cancelling the assessment the Inspecting Assistant Commissioner is obliged to direct a fresh assessment to be mace, and this could be done only by the Sales Tax Officer. We do not find force in the contention of the learned counsel for the appellant inasmuch as while vesting the powers in the Inspecting Assistant Commissioner to revise the sales tax assessment order upon being satisfied that the order passed by the Sales Tax Officer is erroneous in so far it is prejudicial to the interest of revenue, the Legislature empowered him to make, after giving the assessee an opportunity of being heard, such order as the circumstances of the case justify. If the Inspecting Assistant Commissioner feels justified that the order of the Sales Tax Officer calls for cancellation and that he should himself make the assessment, there is nothing debarring him to do that inasmuch as the words, "may make such order thereon as the circumstances of the case justify," cannot be taken to preclude him from‑ making an order of assessment himself. It is undoubtedly open to him to direct the Sales Tax Officer to make fresh assessment but there is again no specific embargo on him to make the assessment himself if he thinks that the circumstances of the case so demand. The words, "including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment to be made," are of explanatory character) and not of restrictive nature.

7. The leaned counsel then submitted that the right of opportunity of being heard given to an assessee by section 28‑A of the Act is to be judged in the 'context of the show‑cause notice In the instant case, the counsel so urged, in the notice under section 28‑A of the Act issued to the assessee, the learned Inspecting Assistant Commissioner had clearly mentioned that he intended to cancel the sales tax assessment and direct the Sales Tax Officer, who was holding jurisdiction over the assessee's case, to make fresh assessment after making proper enquiries with regard to extent of supply of goods liable to sales tax, manufactured by him indepen dently during the respective periods. The assessee was specifically asked to show‑cause in writing as to why the proposed action should not be taken. The show‑cause notice in question did not say that the fresh assessment would be made by the Inspecting Assistant Commissioner himself. These notices, the counsel continued to urge, put the assessee under the belief that he will be able to submit the details before the Sales Tax Officer, even if the assessments were held to be erroneous and prejudicial to be interest of revenue. Under these circumstances, according to the learned counsel, the impugned assess ments made by the Inspecting Assistant Commissioner are bad in law and liable to be annulled. This contention of the learned counsel of the appellant seemed to have some force but a little probe into the contents of the notices in question dispelled this impression. It was undoubtedly mentioned in the notice that the cases would go to the Sales Tax Officer "to make a fresh assessment after making proper enquiries with regard to the extent of supply of goods liable to sales tax, manufactured by you independently during the period". But since the extent of supply of goods manufactured by the assessee and supplied to the Ordnance Depot; L..., stood conclusively proved through various documents brought on record during the proceedings before the learned Inspecting Assistant Commissioner, it was neither contended no proved by any documents on record that the goods in question supplied by the assessee were manufactured by someone else, besides the assessee. Even at this stage learned counsel was not in a position to plead that all the goods in C question supplied by the assessee were riot manufactured by it and that some of the goods supplied were got manufactured by some one else. Under these circumstances no prejudice has been caused to the assessee consequent to the making of assessment, by the Inspecting Assistant Commissioner himself instead of directing the Sales Tax Officer to make fresh assessments. The notices clearly give the purpose for which the Inspecting Assistant Commissioner wanted to send the cases to the Sales Tax Officer and since that purpose, as already stated, was no more required to he achieved after further enquiries, the learned Inspecting Assistant Commissioner was perfectly justified in finally disposing of the cases himself by framing the assessments instead of directing‑the Sales Tax Officer to do so.

8. The next contention of the learned counsel was that unless the orders of the Sales Tax officer were erroneous with respect to law, the Inspecting Assistant Commissioner could not assume jurisdiction under section 28‑A of the Sales Tax Act. In support of his contention the learned counsel placed reliance on two decisions of the appellate Tribunal reported as (1969) 20 Taxation 51 (Trib.) and (1979) 40 Taxation (Trib.)

1. Upon appreciation of the facts of the cases as stated above, we are clearly of the view that the conditions laid down for the exercise of revisional powers by the Inspecting Assistant Commissioner existed in abundance in the instant case and consequently there is no merit in this contention of the learned counsel for they appellant.

9. Next argument of the learned counsel for the appellant was to the effect that even if the Inspecting Assistant Commissioner held jurisdiction then too it could not be invoked in the instant cases inasmuch as there were no proceedings pending before the Sales fax Officer. This contention of the learned counsel is, ex facie devoid of force inasmuch as a bare reading of section 28‑A makes it absolutely clear that the Inspecting Assistant Commis sioner is fully competent not only to exercise the jurisdiction after the termination of the assessment proceedings, but hag invariably to exercise it upon the termination of the assessment proceedings. The question of enhancing, modifying or cancelling the assessment would not arise unless the assessment has been made and the proceedings for, assessment before the Sales Tax Officer had come to an end. .

10. The next contention of the appellant's counsel that the commence ment of revisional proceedings being at the instance of Commissioner of Income‑tax did not fall under section 28‑A of the Act, is also without substance inasmuch as the notices issued under section 28‑A of the Act, on the face of it, show that it was upon scrutiny of the sales tax records the Inspecting Assistant Commissioner commenced the proceedings. The is nothing in it to indicate that he acted at the instance of Commissioner of income‑tax as alleged by the learned counsel and did not apply his own mind.

11. The learned counsel also argued that no notice tinder section 28‑A in respect of any of these years was initially served on the appellant as contemplated by rule 44 of the Sales Tax Rules, 1951. Upon scrutiny of records it transpires that this objection of the learned counsel is also unsustainable inasmuch as the notices issued under section 78‑A on 2nd April, 1981 for compliance on 12th April, 1981 were duly served upon the appellant. Moreover it is further evident from the record that the proceed ings before the Inspecting Assistant Commissioner were duly attended by the assessee through his authorised representative.

12. Making his submission on the merits of the case, the learned counsel for the appellant submitted that except for tents, all other items are exempt from levy of sales tax. According to the learned counsel for the appellant, poles fall under item 37, rug‑horse under item 22, the girth‑horse under item 63 and Salitha under item 114, all of Notification No. 9, dated 27‑6‑1951. The learned Departmental Representative, on the other hand, submitted that none of the above‑noted items are exempt from tax. Item No. 37 of the said Noti fication relates to timber and bamboo; whereas the appellant manufactures tent poles. Item No. 22 of the Notification pertains to "tailored garments includ ing readymade garments. The rug‑horse, in his submission, can by no process of reasoning, be described as a tailored garment or readymade garment", vide item No. 63, "leather goods other than footwear" have been exempted but girth‑horse manufactured by the appellant does not come within the purview of leather goods. Item No. 114 relates to "cotton bags"; whereas Salitha manufactured by the assessee is not of cotton but of canvas. It, even other‑wise cannot be said to be "cotton bags".

13. We have given our earnest consideration to the submissions made b the parties' representatives and we have not the least hesitation in holding that none of the item vie. : (i) poles, (ii) rug‑horse, (iii) girth‑horse, and (iv) salitha manufactured by the assessee, falls within the purview of Notification No. 9 dated 27th June, 1951. The pole which are used for erection of tents definitely go under a process of manufacturing inasmuch as, firstly, bamboos are cut to a particular size and then a special type of ring and nails made of iron are fitted therein. Tent poles cannot, therefore, described as bamboos, so as to come within the purview of item No. 39 of Notification No. 9, so also rug‑hose, as rightly pleaded by the learned Departmental Representative, cannot be described as 'tailored garments or readymade garments' which are exempt vide item No. 22 of the Notifica tion.

14. Girth‑horse or the leather bend by which a saddle is made fast on horse's back by passing it round his belly, in our opinion, is covered by the term "leather gods" as used in item No. 63 of the Notification. The Inspecting Assistant Commissioner, therefore, in our opinion committed an error in subjecting it to sales tax. The sales of this item at Rs. 8,34,456.30 have been subjected to sales tax only in the charge year 1978‑7y. We, therefore, modify the impugned order so as to exclude these sales from the taxable sales.

15. The salitha manufactured by the assessee are of canvas and not o cotton and hence the assessee has no case in this behalf. This item w produced before us by the appellant for our inspection. After seeing it, we are satisfied that the contention of the learned Departmental Representative recorded above is sound and tenable.

16. The next plea raised by the learned counsel for the appellant, which is common to the charge years 1976‑71; 1977‑78, and 1978‑79, being that the orders passed on 2nd October, 1982 are liable to be set aside as the appellant did not have any notice of the cases to be taken up on that day. The facts relevant to this issue may be mentioned as stated by the learned Inspecting Assistant Commissioner in his orders. Relevant excerpt is as under :‑ "Originally notice under section 28‑A of the Sales tax Act was issued on 30th Mardi, 1981 and served upon the assessee on 2‑4‑1981. On the due date there was no compliance. The case was refixed on 25th August, 1982 for compliance on 2‑9‑1982. The assessee again defaulted. The case was then refixed on 2‑i‑1982 for compliance by 5‑9‑1982. On the due date K...M...A..., Advocate/Authorised representative of the assessee appeared and sought extension which was allowed till 7th September, 1981. However, on this date too there was no compliance. The case was refixed on 16‑9‑1982 through a reminder notice under section 28‑A for compliance by 30‑9‑1982. The final compliance date turned out to be a public holiday on account of 'EidulAzha'. The first working day after the Eid holiday was 2nd October, 1982. The assessee should have complied with the terms of the reminder show‑cause notice under section 28‑A of the Sales Tax Act dated 16‑9‑1982, by this date, that is, 2‑10‑1982. The assessee having not done so and having sought no adjournment 1 have no option but to proceed ex parte and finalise assessment to the best of my judgment and on the basis of such information as available. The said reminder notice dated 16‑9‑1982 has been properly served on assessee personally as is borne out by the full signatures on the office copy." Relying on A I R 1964 Madhya Pradesh 281, wherein it is laid down that, "there is no rule of law or of procedure that if a summon iii issued for appearance on a day which happens to be a holiday, the party summoned should appear on the next following day," the learned counsel submitted that the impugned orders for these three years are liable to be knocked down on this ground. The learned Departmental Representative contended that the assessee was required to produce books of accounts which he failed to produce despite several opportunities and hence the learned Inspecting Assistant Commissioner was justified to frame the assessment on 2nd October, 1982 without issuing any fresh notice to the assessee.

17. We have given due consideration to the submissions made by the parties' representatives and we are of the opinion that, in the first instance, it may be noted, the Civil Procedure Code is not applicable to the proceedings adopted under Sales Tax Act, 1951, and secondly, even if it is judged on general principles then too, it is difficult to hold that the appellant suffered any prejudice or set‑back on account of framing of the assessments in question on 2nd October, 1982. What we find is that the Inspecting Assistant Commissioner vide his letter dated 16th September, 1982 required the assessee to send a detailed reply on the matter by 30th September, 1982. The relevant portion reads : "You are now given a final opportunity to send a detailed written reply on the matter by 30‑9‑1962 positively, failing which it will be assumed that you have nothing to say on the matter and assessment will be finalised, by, me under section 28‑A to the best of my judgment and on the basis of such information as are available." It is thus evident that the assessee was not required to put an appearance on 30th September, 1982 nor were the cases fixed for hearing on that day, he was under an obligation to send a detailed reply on the matter by 30th September, 1952 and if it fell on a holiday,‑ then he should have availed of the benefit thereof by filing it on the next opening day or could have prayed for extension of time. There is nothing on record to show nor did the learned counsel for the appellant state so before us that any effort was made by the assessee to furnish the detailed written reply, as required of him on the 1st opening day, viz. 2nd October, 1982, or to ask for an extension of time. The time for filing the required reply could, at best, be held to have been extended till 2 d October, 1982. Had the officer below declined to accept the reply, if any, submitted on that day then, of course, his order could be held to be defective. But since it did not so happen, we do not find any merit in the contention of the learned counsel for the appellant. It may also be noted here that since the question of taxability of the items manufactured and supplied by the assessee has already been decided in earlier years appeals against the assessee, no prejudice whatsoever was even caused to him inasmuch as the learned Inspecting Assistant Commissioner has adopted the figures of actual amount received by the assessee from the Directorate General Procurement (Army). Minister of Defence R..., as certified by him. The learned counsel for the appellant it may, however, be added, has not disputed the correctness of the sale figures of each item as adopted by the learned Inspecting Assistant Commissioner.

18. The learned counsel for the appellant also assailed the impugned orders for 1976‑77, 1977‑78 and 1978‑79 on the ground that since the orders of the Sales Tax Officer, dated 10‑I1‑1977 (assessment year 1976‑77), 20‑1‑1979 assessment year 1977‑78) and 30th December, 1979 (assessment year 1979‑80 have not been cancelled, they too continue to bold the field. This lapse, on the part of Inspecting Assistant Commissioner, according to Mr. A...,.B..., I A..., Q..., has rendered the impugned orders bad in law and liable to be set aside. It is evident from the perusal of the impugned orders that the learned Inspecting Assistant Commissioner initiated the proceedings as he was of the opinion that the orders of filing the proceeding, passed by the Sale Tax Officer were erroneous in so far as be held the assessee to be engaged only in trading and not manufacturing. The learned Inspecting Assistant Commis sioner has clearly recorded the finding of fact that, "as per material on record the assessee is identified as a manufacturer of tents and allied items", and that, "attempts made to verify the contention of the assessee that purchases have been made from open market and that it was thus only a 'trader" has proved to be fruitless yielding no positive evidence to substantiate assessee's contention." No doubt, the learned Inspecting Assistant Commissioner has not clearly said that the orders of the Sales Tax Officer are cancelled, yet the overall effect and impact of the impugned orders is that the order of the Sales Tax Officer filing the proceedings for these years stood modified by the impugned orders. We do not, therefore, find any substance in the contentions of the learned counsel for the appellant.

19. The next contention raised by the learned counsel for the appellate before us was that the assessee is entitled to claim waiver of sales tax arrears in terms of Central Board of Revenue's Sales Tax Circular No. 1 of 1981, dated 15th March, 1981. This plea is not available to the appellant on the basis of the impugned orders inasmuch as it was neither raised nor disposed of by the learned Inspecting Assistant Commissioner, at any rate, it is still open to the assessee to approach the concerned tax authorities on the administrative side for availing this concession but it cannot for torte AM time be entertained and adjudicated upon at this stage.

20. In the result, all the appeals stand disposed of to ft eland in the manner indicated above. M. Z. M. Order accordingly.