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Jyothi Chemicals Vs. Commercial Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petitions Nos. 5353, 5365 and 5366 of 1973, 1898, 1992, 5555 of 1974 and 622 of 1975
Judge
Reported in[1976]38STC52(AP)
AppellantJyothi Chemicals
RespondentCommercial Tax Officer
Appellant AdvocateS. Dasaratharama Reddi and ;S.R. Ashok, Advs.
Respondent AdvocateMahadev, Government Pleader for Commercial Taxes
DispositionPetition allwoed
Excerpt:
- all india services act, 1951. sections 32(c) (as amended by section 3 of amendment act, 2005] & 10 & general clauses act, 1897, section 6: [g.s. singhvi, cj, dr.g. yethirajulu, ramesh ranganathan, g.bhavani prasad, c.v. nagarjuna reddy, jj] exemption of building from applicability of provisions of act held, (per majority) section 32(c) of the act provides that the provisions of the act shall not apply to any building the rent of which as on the date of the commencement of the a.p. buildings ( lease, rent and eviction) control (amendment) act 2005 exceeds rs.3,500/- per month in the areas covered by the municipal corporations in the state and rs.2,000/- per month in other areas. there is nothing in the provisions of the amendment act which either expressly or by necessary implication.....madhava reddy, j.1. these writ petitions raise a common question of law as to what is the stage of recovery of the tax under the central sales tax act, where the monthly return filed is not accompanied by a challan or a cheque for the admitted tax. for appreciating the contentions raised, it is enough to state the facts in w. p. no. 5353 of 1973.2. for the month of september, 1972, the petitioner filed the central sales tax return as required under rule 14-a(1) before 25th october, 1972, showing a turnover of rs. 3,62,378 and the tax payable thereon as rs. 10,871. the return, however, was not accompanied by a receipt from a government treasury or a crossed cheque in favour of the assessing authority for the full amount of the tax payable for the month to which the return related as.....
Judgment:

Madhava Reddy, J.

1. These writ petitions raise a common question of law as to what is the stage of recovery of the tax under the Central Sales Tax Act, where the monthly return filed is not accompanied by a challan or a cheque for the admitted tax. For appreciating the contentions raised, it is enough to state the facts in W. P. No. 5353 of 1973.

2. For the month of September, 1972, the petitioner filed the Central sales tax return as required under Rule 14-A(1) before 25th October, 1972, showing a turnover of Rs. 3,62,378 and the tax payable thereon as Rs. 10,871. The return, however, was not accompanied by a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of the tax payable for the month to which the return related as required by Rule 14-A(1) of the Central Sales Tax (Andhra Pradesh) Rules (hereinafter referred to as the Central Sales Tax Rules). The Commercial Tax Officer, the first respondent herein, issued a demand notice in form C. S. T. VII, referable to Rule 14-A(4) of the said Rules, on 21st July, 1973, for the payment of Rs. 10,871 within 21 days of the receipt of the said notice. It is this action of the respondent that is challenged in this writ petition and similar action of the respondents in the other writ petitions.

3. The main contention of Sri Dasaratharama Reddi, the learned counsel for the petitioner, is that while the Andhra Pradesh General Sales Tax Rules make provision for the recovery of the admitted tax, when the return filed is not accompanied by proof of payment of tax, even before the final assessment is made, the Central Rules do not make any provision for making a best of judgment assessment and for the recovery of the tax in such circumstances. According to him, under the Central Sales Tax Rules, the best of judgment assessment can be made provisionally only where a return is not filed or the return filed is incorrect, but not where the turnover disclosed in the return is not disputed or the return is not accompanied by proof of payment of tax. Under the A.P. General Sales Tax Rules every dealer is under an obligation to submit a return of the turnover under Rule 8 or 9 within 30 days of the close of the year to the assessing authority of the area in which the principal place of business is situate, showing the total turnover and net turnover at all places of his business in the preceding year. A final assessment on acceptance of the return is made under Sub-rule (4) of Rule 15. Where any dealer fails to submit the return before the date prescribed or if the return submitted appears to the assessing authority to be incorrect or incomplete, the assessing authority is empowered to assess according to the best of his judgment, after following the procedure prescribed in Rule 12, which, among others, provides for giving notice to the dealer. However, dealers whose turnover exceeds Rs. 50,000 a year, are given the option of adopting the method of assessment prescribed in Sub-rules (2) to (7) of Rule 17 for being assessed on the basis of monthly returns to be filed before the 25th of the succeeding month. Along with such monthly return, the dealer is bound to submit a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of tax or taxes payable for the month to which the return relates. Sub-rule (3) of Rule 17 lays down that the return so filed, subject to the provisions of Sub-rule (4), be provisionally accepted. Sub-rule (4) of Rule 17 lays down :

(4) Where any dealer fails to submit a return in respect of any month before the date prescribed in that behalf or produces the accounts, registers and other documents after inspection or submits a return subsequent to the date of inspection or if the return is submitted without a receipt or a crossed cheque for the full amount of the tax payable or if the return submitted appears to be incorrect or incomplete, the assessing authority shall after following the procedure prescribed in Rule 12, determine the turnover to the best of his judgment and provisionally assess the tax or taxes payable for the month and shall serve upon the dealer a notice in form B-2 and the dealer shall pay the sum demanded within the time and in the manner specified in the notice :

Provided that if for any reason the determination of provisional assessment of tax or taxes payable for any month is not completed on or before the receipt of the return for the succeeding month or months the assessing authority may in his discretion provisionally assess in a single order the tax or taxes payable for all such months and serve upon the dealer a notice in form B-2 and the dealer shall pay the sum demanded within the time and in the manner specified in the notice :

Provided that where the returns submitted by a dealer include the turnover or any of the particulars thereof which would not have been disclosed but for an inspection of accounts, registers or other documents of the dealer made by an officer under the Act before the submission of such returns, the assessing authority may after giving an opportunity to the dealer for making a representation in this behalf, treat such returns to be incorrect or incomplete returns and proceed to take action on that basis.

4. At the close of the year, the assessing authority may finally assess in a single order on the basis of the returns filed. He is also empowered to make an assessment to the best of his judgment finally at the end of the year and proceed to recover the tax.

5. Under the Central Sales Tax Rules, however, an obligation is imposed by Rule 14-A(1) upon the dealer to submit monthly returns of the turnover and, in certain cases, at the end of each quarter, on or before the 25th of the month following the preceding quarter. Such returns are required to be accompanied by a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of the tax payable for the month to which the return relates. It is useful to read Rule 14-A, in so far as it is relevant for our purpose :

Rule 14-A. (l)(a) Every dealer registered under Section 7 of the Act and every dealer liable to pay tax under the Act shall submit so as to reach the assessing authority on or before the 25th of every month a return in form C. S. T. VI showing the total and net turnovers of his transactions including those in the course of inter-State trade or commerce and in the course of export of the goods out of the territory of India during the preceding month and the amount or amounts collected by way of tax. The return shall be accompanied by a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of the tax payable for the month to which the return relates :

Provided that a dealer who is not liable to pay tax under the Andhra Pradesh General Sales Tax Act, 1957, shall submit returns for each quarter as shown below instead of each month : --

Quarter ending Due date for submission of the return30th June On or before the 25th July.30th September On or before the 25th October.31st December On or before the 25th January.31st March On or before the 16th April.(b) Along with the return mentioned in Clause (a) of Sub-rule (1) the dealer shall also submit to the assessing authority : --

(i) the originals of the declarations in form C received by him from the dealers to whom he sold goods ;

(ii) the originals of the certificates in form D, if any, received by him in the case of sales to Government of India or to the Government of any State; and

(iii) the originals of the certificates in form E-I or E-II, if any, received by him from the dealers from whom he purchased the goods:

(i) Provided that in case the dealer has not obtained the declarations in form C from the dealers to whom he sold goods or the certificates in form D in respect of sales made to the Government, the declarations in form C or the certificates in form D shall be obtained and submitted to the assessing authority concerned not later than four months from the due date of submission of the return or the date of final assessment of accounts for the year to which the transactions relate, whichever is earlier ;

(ii) Provided further that where the declarations in form C or the certificates in form D are not submitted within the time specified in proviso (i), the Commercial Tax Officer of the area may, in deserving cases, condone the delay in filing of the declarations in form C or the certificates in form D ;

(iii) Provided also that in case the originals of certificates in form E-I or E-II are not available by the date of submission of the return, the dealer shall submit them to the assessing authority concerned not later than four months from the due date of submission of the return or the date of final assessment of accounts for the year to which the transactions relate, whichever is earlier.

(2) If at any time a dealer discontinues or sells or otherwise disposes of the whole of the business carried on by him during the course of the year, he shall submit to the assessing authority concerned within thirty days of such discontinuance a return in form C. S. T. VI in the manner prescribed in Sub-rule (1) for the month in which his business was discontinued.

(3) The return in form C. S. T. VI so filed shall subject to the provisions of Sub-rule (4) be provisionally accepted.

(4) If no return is submitted in respect of any month or quarter, as the case may be, before the due date or if the return submitted appears to be incorrect or incomplete, the assessing authority shall after making such enquiry as he considers necessary and after giving the dealer an opportunity of proving the correctness and completeness of the return where one has been submitted, determine the turnover to the best of his judgment, and provisionally assess the tax or taxes payable for the month or the quarter, as the case may be, and shall serve upon the dealer a notice in form C. S. T. VII and the dealer shall pay the sum demanded at the time in the manner specified in the notice :

Provided that if for any reason the determination of provisional assessment of tax or taxes payable for any month or quarter is not completed on or before the receipt of the return for the succeeding month or quarter, as the case may be, the assessing authority may in his discretion provisionally assess in a single order the tax or taxes payable for all such months or quarters, as the case may be, and serve upon the dealer a notice in form C.S.T. VII and the dealer shall pay the sum demanded within the time and in the manner specified in the notice.

(5) After the close of the year for which the returns have been submitted under Sub-rule (1) or in the course of the year where a dealer has discontinued business, the assessing authority shall, if he is satisfied after such scrutiny of the accounts and after such enquiry as he considers necessary, that the return or returns filed are correct and complete, finally assess in a single order on the basis of the returns the tax or taxes payable under the Act.

(6) If no return or returns have been submitted by the dealer as required by Sub-rules (1) and (2) or if any return or returns submitted by him appear to the assessing authority to be incorrect or incomplete the assessing authority shall after making such enquiry as he considers necessary and after giving the dealer an opportunity of proving the correctness and completeness of the return or returns submitted by him determine the turnover to the best of his judgment and finally assess in a single order the tax or taxes payable under the Act.

6. A comparison of the provisions of Rule 17(1), (2) and (4) of the A. P. Sales Tax Rules and Rule 14-A(1), (3) and (4) of the Central Sales Tax Rules would disclose that while under both the Rules, the monthly return has to be accompanied by a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of tax payable for the month to which the return relates and the return so filed shall be provisionally accepted, subject to the provisions of Sub-rule (4) thereof, under the A. P. Rules, express provision has been made for making the best of judgment assessment where the return is not accompanied by the said receipt and no specific provision is made under Sub-rule (4) of the Central Sales Tax Rules. According to Mr. Dasaratharama Reddi, this makes all the difference and the assessing authority is precluded from making a best of judgment assessment under the Central Sales Tax Rules, while, according to the learned Government Pleader, such a return is an incomplete return and no return at all in the eye of law and, consequently, the assessing authority is within his powers in making an assessment to the best of his judgment.

7. A close reading of Rule 14-A would make it clear that the dealer is under an obligation to pay the full amount of tax payable for the month to which the return relates as per the turnover disclosed by him in the return. That obligation has been imposed by Rule 14-A(l)(a) itself read with Section 9 of the Central Sales Tax Act. Unlike under the A. P. General Sales Tax Rules, under the Central Sales Tax Rules, a dealer has no option but to file the monthly return. He cannot wait till the end of the year and file a return of his annual turnover and seek a final assessment at the end of the year. The intendment of Rule 14-A(1) is that whatever is the admitted tax as per the turnover disclosed by the dealer himself in the return for the month concerned, must be paid along with the return. Such a return is required to be accompanied by evidence of payment. Rule 14-A(l)(b) further lays down that along with the return the dealer shall also submit to the assessing authority the originals of the declarations in form C received by him, the originals of the certificates in form D, if any, received by him and also the originals of the certificates in forms E-I and E-II, if any, unless he comes within the ambit of any of the two provisos thereto. The object of requiring the dealer to submit the return along with the originals of certificates and declarations is obviously to enable the assessing authority to make a provisional assessment, by either accepting or rejecting the turnover disclosed in the returns. If the return is not accompanied by the declarations and certificates mentioned in Clause (b) of Rule 14-A(1), such a return cannot obviously be one filed in compliance with the said Rule. The return is to be submitted in form C. S. T. VI. Under item 3 of the said form the dealer has to state that certificates in forms E-I and E-II are attached to the return and under item 6, he will have to further state that the declarations in form C are attached. In other words, these forms and certificates are part and parcel of the return and a return, which is not accompanied by these forms and certificates, cannot be said to be a complete return. Likewise, the monthly return is required to be accompanied by a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of the tax payable for the month to which the return relates. One of the facts to be stated in the return is the total tax paid, if any, by means of a treasury challan, crossed cheque, M. O. and the balance due or excess paid, if any. The dealer is required to verify the return that the information furnished therein is true to the best of his knowledge and belief. Thus, the evidence of payment of tax payable as per the turnover disclosed in the said monthly return is not a document unconnected with, or independent of, the return but is part and parcel of the return itself. Just as a return unaccompanied by declarations in form C and certificates in forms D and E-I and E-II would be an incomplete return, a return unaccompanied by a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of the tax payable for the month would also be an incomplete return, though not an incorrect return. Sub-rule (3) of Rule 14-A empowers the assessing authority to provisionally accept a return so filed, subject to the provisions of Sub-rule (4) thereof. Sub-rule (4) itself authorises the assessing authority to make an assessment to the best of his judgment where the return submitted by the dealer appears to be incorrect or incomplete. If, as already held by me, a return disclosing the turnover correctly, but not accompanied by a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of the tax is an incomplete return, the assessing authority is entitled to make an assessment to the best of his judgment under Sub-rule (4).

8. In Khas Kajora Coal Co. Ltd. v. Member, Board of Revenue [1966] 18 S.T.C. 79, Sinha, J., speaking for the Bench of the Calcutta High Court, in dealing with the Bengal Finance (Sales Tax) Act (6 of 1941), held that prepayment of admitted amount of tax mentioned in Section 10(3) of the said Act is a precondition to the furnishing of a return and unless such payment has been made, the return filed cannot be considered as a valid return and it is no return in the eye of law. The commercial tax authorities would be justified in treating a return filed without payment of the admitted amount of tax as if no return has been filed and issuing notice according to form No. VI(a) of the Rules framed under the Act. Even assuming that such a case is not a case of 'no return' but an incomplete return and the notice should, therefore, have proceeded under Clause (b) of form VI instead of under Clause (a), the jurisdiction of the Commercial Tax Officer to deal with the matter under Section 11 is not affected.

9. In so far as Sub-rule (4) of Rule 14-A is concerned, it makes no distinction between a case where no return is filed and a case where the retun filed is incomplete or incorrect. In both these contingencies the assessing authority is empowered to make an assessment to the best of his judgment provisionally.

10. Mr. Dasaratharama Reddi, the learned counsel for the petitioner, urged that the principle of that decision cannot apply to the present case, inasmuch as the provisions of Section 10(3) of the Bengal Finance (Sales Tax) Act (6 of 1941) are not in pari materia with Rule 14-A of the Central Sales Tax Rules. He points out that under Sub-section (3) of Section 10 of the Bengal Act, it is laid down that:

Before any registered or certified dealer furnishes the returns required by Sub-section (2), he shall, in the prescribed manner, pay into a Government treasury or the Reserve Bank of India the full amount of tax due from him under this Act according to such returns, and shall furnish along with the returns a receipt from such treasury or bank showing the payment of such amount.

11. Of course, Rule 14-A does not in so many terms prescribe that the amount of admitted tax shall be paid by the dealer before furnishing the return, but it does state that the return shall be accompanied by a receipt from a Government treasury or a crossed cheque in favour of the assessing authority for the full amount of the tax. Such a receipt would be issued or crossed cheque may be issued only after the necessary amount is deposited in the concerned treasury or the bank and when such receipt or cheque is required to be submitted along with the return, it naturally follows that the amount should have already been paid towards the admitted tax payable by the dealer. The difference in the language of the two provisions is of no consequence. The failure to submit the receipt or the cheque as required by Rule 14-A also therefore renders the return an incomplete one.

12. Mr. Dasaratharama Reddi, however, contends that a specific provision in this behalf is made under Sub-rule (4) of Rule 17 of the A.P. General Sales Tax Rules, which are framed by the Andhra Pradesh Government in exercise of the statutory powers vested in it under the A.P. General Sales Tax Act, but no such specific provision is made in Sub-rule (4) of Rule 14-A of the Central Sales Tax Rules, which Rules also are framed by the Andhra Pradesh Government and, hence, it must be construed that the rule-making authority deliberately made a distinction and did not intend to empower the assessing authority to make a provisional assessment to the best of his judgment where the turnover disclosed in the monthly return is not disputed or held to be incorrect. Though the Rules are made by the same rule-making authority, they are not made under the same enactment. The Central Sales Tax Rules are framed in the exercise of the powers conferred upon the Governor of Andhra Pradesh under Sub-sections (3), (4) and (5) of Section 13 of the Central Sales Tax Act, 1956, while the A.P. General Sales Tax Rules are framed in exercise of the powers conferred under Section 39 of the A. P. General Sales Tax Act (Act 6 of 1957). There is no reason why the Rules framed under these two enactments should be construed with reference to each other. The ambiguity, if any, is arising by construing Rule 14-A(4) in the context of Rule 17 of the A. P. G. S. T. Rules. Rule 14-A, read as it is, is very clear as regards the power of the assessing authority to make an assessment to the best of his judgment where the return is incomplete. In my opinion, the same result will, in fact, follow even under Rule 17 of the A. P. G. S. T. Rules even if no specific provision was made in Sub-rule (4) thereof, as regards the power of the assessing authority to make a best of judgment assessment, where the turnover disclosed in the return is not disputed but such return is not accompanied by proof of payment of the tax. Therefore, the contention that under the Central Sales Tax Rules, where the monthly return filed by the dealer is not accompanied by a receipt or a crossed cheque as required by Rule 14-A(l)(a), the assessing authority is not empowered to make an assessment to the best of his judgment, must be rejected.

13.The next contention of the learned counsel for the petitioner that the assessing authority, before making a demand and proceeding to recover the tax, must make an assessment to the best of his judgment only after giving an opportunity to the petitioner must, in my opinion, be upheld.

14. Sub-rule (4) of Rule 14-A, which empowers the assessing authority to make a provisional assessment to the best of his judgment in the event of the dealer not submitting a return or submitting an incorrect or incomplete return itself enjoins upon the assessing authority to give a dealer an opportunity to prove the correctness and completeness of the return where one has been submitted and only then determine the turnover to the best of his judgment and provisionally assess the tax payable. Failure to give such an opportunity would render the assessment not only contrary to the express provision contained in Sub-rule (4) of Rule 14-A but also violates the principles of natural justice. It was, however, contended by the learned Government Pleader that where the dealer voluntarily submits a return disclosing a certain turnover, in demanding the admitted tax payable as per the turnover, the dealer cannot complain of any prejudice and any notice issued to him in this behalf would be an empty formality. It is not for this court to determine whether, in a particular set of circumstances, notice should or should not be given. Where the statute required notice to be given, failure to give notice would render the assessment of tax and the collection thereof illegal. The rule-making authority has enjoined on the assessing authority to give an opportunity to the dealer before making an assessment to the best of his judgment, where the return is either incomplete or no return is filed. Whether the return filed by the petitioner is deemed to be no return at all or incomplete return for the reason that it is not accompanied by a receipt or a cheque as required by Rule 14-A(1), as the very foundation of the authority for making the best of judgment assessment requires notice to be given, that procedure must necessarily be followed. The notice in this case is a notice of provisional monthly assessment and demand in form C. S. T. VII. Of course, notice in that form has to be issued where the dealer fails to furnish the return or where the return furnished is incorrect or incomplete. In such cases, when the assessing authority performs a quasi-judicial function in proceeding to make an assessment to the best of his judgment, the prerequisite for exercising that power is a determination of the fact whether the dealer has furnished a return at all or not, or whether the return furnished is either incomplete or incorrect. Without a finding on the facts of each particular case, whether the dealer has failed to furnish a return or the return furnished by him is incomplete or incorrect, the assessing authority cannot proceed to make a best of judgment assessment. The rule-making authority evidently thought it advisable to make it obligatory upon the assessing authorities to give an opportunity to the dealer to show cause against the proposed best of judgment assessment. Issuing such a notice is not a matter of empty formality. In some cases, it may afford a real protection to the dealer and he may satisfy the authority that the return filed by him is complete in which event the question of proceeding to make the assessment to the best of his judgment does not arise. In making a best of judgment assessment, it is not obligatory upon the assessing authority to accept the turnover shown by the dealer though it is not precluded from doing so. That is why the rule-making authority advisedly imposed the obligation upon the assessing authority to give an opportunity to the dealer before he proceeds to make a best of judgment assessment. If such an opportunity is given the dealer may satisfy the assessing authority that the return is neither incorrect nor incomplete. The dealer may also show that the turnover arrived at by the assessing authority is not correct and that a lesser tax will be payable by him. Failure to give notice is not merely a matter of causing prejudice to the dealer but also affecting the jurisdiction of the assessing authority to proceed to make best of judgment assessment provisionally under Sub-rule (4) of Rule 14-A. No notice has admittedly been given to the dealer in any of these cases before issuing the impugned notice in form C. S. T. VII. The turnover has thus been provisionally determined to the best of his judgment by the respondent in contravention of Sub-rule (4) of Rule 14-A.

15. In this view of mine, it is not necessary for me to go into the question whether the assessing authority is competent to accept the figures of turnover mentioned in the return while rejecting the return or treating the return as incomplete and proceed to make the best of judgment assessment.

16. Inasmuch as no opportunity was given to the petitioner the impugned notice is quashed and the writ petitions are allowed accordingly, but in the circumstances of the case, without costs. Advocate's fee Rs. 100 in each case.

17. This will, however, not preclude the respondent from issuing a notice and giving an opportunity to the dealer before making an assessment to the best of his judgment, if such assessment is not otherwise barred by law.


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