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Commissioner of Sales Tax Vs. Adarsh Paper and Board Manufacturing Company - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberSales Tax Revision Nos. 449 and 450 to 452 of 1983
Judge
Reported in[1987]65STC243(All)
AppellantCommissioner of Sales Tax
RespondentAdarsh Paper and Board Manufacturing Company
Appellant AdvocateStanding Counsel
Respondent AdvocateR.R. Agarwal and ;R.K. Agarwal, Advs.
DispositionPetition dismissed
Excerpt:
.....on the part of the income-tax officer to tax a part of the assessable income was considered as sufficient for action under section 34(1)(b) and there is no reason for not extending this principle to an action under section 21 of the act. , are all descriptions of the paper and they would cover the mill board as well. ' 18. the learned standing counsel has contended that it would not be safe to adopt the definition of the word 'paper' given in other statutes. 20. in the result the revisions fail and are dismissed......corrugated board, duplex and triplex boards and other sorts.(4) all other kinds of paper and paper board not otherwise specified.'18. the learned standing counsel has contended that it would not be safe to adopt the definition of the word 'paper' given in other statutes. it is not possible for me to agree with the aforesaid contention of the standing counsel that while interpreting the notification in question the definition of 'paper' given in other statutes cannot be looked into. the central excise tariff is a central legislation. the commodities taxable under the central excise act are mentioned under various tariff items for the purpose of levying central excise duty at different rates. since the mill board has also been included in the definition of 'paper' by the central.....
Judgment:

Anshuman Singh, J.

1.These are four revisions filed by the Commissioner of Sales Tax, U.P., under Section 11(1) of the U.P. Sales Tax Act (hereinafter referred to as the Act) challenging the judgment passed by the Sales Tax Tribunal, Muzaffarnagar Bench, Muzaffarnagar, dated 28th May, 1983, allowing the appeals of the respondent-assessee for the assessment years 1975-76, 1976-77 and 1977-78 arising out of proceedings under Section 21 of the Act and for the assessment year 1978-79 arising out of original assessment proceedings under Ruleule 41(7) of the U.P. Sales Tax Rules (hereinafter referred to as the Rules).

2. The respondent-assessee deals in manufacture and sale of mill board. In the assessment year 1978-79 mill board sold by the respondent-assessee has been treated as a kind of paper and covered under Notification No. ST-II-332/X-1012-1971 dated 15th November, 1971 and reassessment proceedings for the assessment years 1975-76, 1976-77 and 1977-78 started under Section 21 of the Act have been held to be without jurisdiction by the Tribunal; The Revenue has come to this Court for quashing the aforesaid order passed by the Tribunal and raised the following two questions of law :

(i) whether on the facts and under the circumstances of the case perusing the original assessment order the case was not of non-application of mind rather than change of opinion Is the assessing authority not competent to exercise his jurisdiction to reopen it under Section 21 of the Act ?

(ii) Whether on the facts and in the circumstances of the case the Member, Sales Tax Tribunal, was justified in taxing the 'mill board' as paper under Notification No. 332 dated 15th November, 1971 and not as an unclassified item ?

3. As regards the first question the learned standing counsel appearing for the Revenue has urged that the Sales Tax Officer did not apply his mind to the question whether the mill board was covered by the term 'paper' at the time of original assessment for the years 1975-76, 1976-77 and 1977-78 and in fact it was a case of non-application of mind by him at the time of original assessment and not a case of change of opinion by the Sales Tax Officer and he was fully justified in invoking the provisions of Section 21 of the Act for reassessment and the Tribunal committed an error in holding otherwise. The learned counsel appearing for the respondent-assessee has, on the other hand, contended that the facts of the cases clearly establish that it was not a case of non-application of mind but the initiation of reassessment proceedings were based on mere change of opinion by the taxing authority at a subsequent stage. There is consensus of opinion that reassessment proceedings cannot be initiated on a mere change of opinion. The said proposition has also not been refuted by the learned standing counsel. It is not necessary to refer to the various decisions on that point. However, a reference may be made to the decision in the case of Commissioner of Sales Tax v. Jagdish Prasad Satish Prasad 1979 UPTC 820 wherein the principle laid down is as follows:

In view of the pronouncement of the Supreme Court in the case of Commissioner of Sales Tax, U.P. v. Bhagwan Industries (P.) Lid. [1973] 31 STC 293 at 300, it is, however, not necessary to do so, for, it has been held that the import of the words 'reason to believe' as used in Section 21 of the U.P. Sales Tax Act, 1948, is the same as in Section 34 of the Income-tax Act and the decisions given under Section 34 of the Income-tax Act are appropriate for cases arising under Section 21. This being so, the words 'reason to believe' used in Section 21 of the Act cannot be interpreted to encompass within its fold a mere change of opinion. It may be added that the phrase 'reason to believe' means a reasonable belief on the part of the Sales Tax Officer that the turnover has escaped assessment. A belief cannot be reasonable in case it is purely subjective formed without reference to any other objective fact. Change of opinion by the Sales Tax Officer without reference to any other objective material would be a subjective belief and not an objective one.

4. The learned standing counsel in support of his contention has relied on the case of Commissioner of Sales Tax, U.P. v. Steel Engineering Corporation 1981 UPTC 70 which following the case of Jagdish Prasad Satish Prasad 1979 UPTC 820 held:

Thus, oversight or inadvertence or failure on the part of the Income-tax Officer to tax a part of the assessable income was considered as sufficient for action under Section 34(1)(b) and there is no reason for not extending this principle to an action under Section 21 of the Act. It is of course correct that if action has been taken under Section 21 merely on change of opinion, it will not be upheld (see Commissioner of Sales Tax v. jagdish Prasad Satish Prasad 1979 UPTC 820 and Commissioner of Sales Tax v. Dwarika Das Varun Kumar 1979 UPTC 1152).

5. In my opinion even in that case no contrary view has been taken.

6. Coming to the facts of the instant cases the same assessing authority considered the entire matter in great detail for the assessment year 1974-75 and held mill board as paper and covered by the entry in question. The same Sales Tax Officer passed the assessment orders for the years 1975-76, 1976-77 and 1977-78 under Rule 41(7) of the Rules and the mill board was taxed by him as paper; In these circumstances it cannot be said that the Sales Tax Officer had not applied his mind in taxing the commodity 'mill board' as paper but since he took a different view in the assessment proceedings for the year 1978-79 and taxed mill board as unclassified commodity, proceedings for reassessment for the years 1975-76, 1976-77 and 1977-78 were initiated under Section 21 of the Act. In view of the aforesaid facts it is abundantly clear that the proceedings under Section 21 of the Act were initiated because of the change of opinion by the Sales Tax Officer and not because of non-application of mind. The learned standing counsel has also invited attention to the case of Sarjoo Prasad Pitam Lal v. Commissioner of Sales Tax 1982 UPTC 1177 in support of his contention. The facts of the aforesaid case are distinguishable from the facts of the instant cases inasmuch as in that case this Court held that there was non-application of mind by the assessing authority to the taxable heads of the items and as such the initiation of proceedings under Section 21 of the Act was held to be valid. In the instant cases there is a positive finding recorded by the Tribunal that the assessing authority had applied his mind to the taxability of the mill board as paper. In view of the aforesaid fact the principle laid down in the case of Sarjoo Prasad Pitam Lal 1982 UPTC 1177 cannot be applied in the instant cases.

7. From the foregoing discussions and facts I am of the opinion that the assessing authority was not justified in initiating proceedings under Section 21 of the Act for reassessment for the years 1975-76, 1976-77 and 1977-78 and the aforesaid question is answered against the Revenue and in favour of the assessee.

8. As regards question No. (ii) the standing counsel has contended that the Tribunal was not justified in holding that mill board was one of the varieties of paper and was covered under Notification No. 332 dated 15th November, 1971, on the ground that in common parlance the words 'mill board' could not be treated as 'paper' occurring in the aforesaid notification. According to him mill board was a different commodity than paper and in support of his contention he has placed reliance on the cases of Kilburn and Company Ltd. v. Commissioner of Sales Tax [1973] 31 STC 625 (All.) and Sree Rama Trading Company v. State of Kerala [1971] 28 STC 469 (Ker). In the earlier case it was held that ammonia paper and ferro paper used for obtaining prints and sketches of site plans were not paper as understood generally and in the latter case it was held that cellophane sheets which though of course were used as packing material, but it was not possible to consider cellophane as paper. The learned counsel appearing for the respondent-assessee has, on the other hand, argued that the case of Kilburn and Company Ltd. [1973] 31 STC 625 (All.) is not applicable in the instant cases inasmuch as the entry which was considered by the court was 'paper other than hand-made paper' under Notification No. ST-3124/X-1012 (4)-1965 dated 1st July, 1966 and it was on the basis of the entry of 1966 notification that ammonia paper and ferro paper were held to be not paper whereas the entry under Notification No. 332 dated 15th November, 1971, is quite different from that of 1966 notification. The facts of Sree Rama Trading Company [1971] 28 STC 469 (Ker) are also distinguishable from the facts of the instant cases inasmuch as in the aforesaid case the entry was 'paper (other than newsprint), cardboards, straw-board and their products'. The standing counsel also placed reliance on a case of the Orissa High Court in State of Orissa v. Gestetner Duplicators (P.) Ltd. [1974] 33 STC 333. In the aforesaid case the entry, which was subject-matter of interpretation, runs as under :

Paper including all kinds of pasteboard, millboard, straw-board, cardboard, blotting-papers, newsprint, cartridge paper, packing paper, paper registers, notebooks, exercise books, envelopes, labels, letter pads, writing tables and flat files made out of paper.

9. The counsel for the respondent-assessee has placed reliance in support of his contention on a case of this Court in Commissioner of Sales Tax v. Poney Brothers 1983 UPTC 1065 where it was held that 'the restoration of the words 'all kinds' with any other purpose, makes the entry very wide. Every paper appears to be covered in it except those for which specific notification has been used' (the word 'used' should be 'issued' and seems to be a printing mistake) and on a decision of the Supreme Court in Maharaja Book Depot v. State of Gujarat AIR 1979 SC 180 where it held the exercise books as covered by the expression 'paper'. The principle laid down by the Supreme Court in the aforesaid case was also followed in Mahesh Prasad Agarwal v. Commissioner of Sales Tax 1980 STD 252.

10. Before elucidating the interpretation of Notification No. 332 dated 15th November, 1971, it would be necessary to refer to the various notifications issued from time to time on the subject. By Notification No. ST-119/X-928-1948 dated 7th June, 1948, 'paper and newsprint' were exempted from sales tax. This exemption was amended Joy another Notification No. ST-3707/X-902(65)-51 dated 22nd November, 1954 and for the words 'paper and newsprint' occurring in the Notification dated 7th June, 1948, the words 'paper meant for writing and printing purposes' were substituted. The Commissioner of Sales Tax, U.P., issued circular No. 13 of 1955 dated 20th September, 1955, giving a list of different kinds of paper which would be included in the category of 'paper meant for writing and printing purposes' and those exempt from tax and also other kinds of paper which would be taxable. A perusal of the aforesaid circular shows that the duplex board, inflex board, file board, grey board, building board, etc., are all descriptions of the paper and they would cover the mill board as well. By Notification No. ST-905/X dated 31st March, 1956, in supersession of all previous notifications on the subject, tax was imposed at single point under item No. 28 of the said notification, which ran as follows :

Paper of all kinds other than hand made paper.

11. Thus the exemption which was granted earlier was withdrawn and all kinds of paper other than hand made were made taxable. The building board, file board, grey board, mill board; cardboard, straw-board and every variety of paper became taxable if not made by hand. By Notification Order ST-3124/X-1012 (4)-1965 dated 1st July, 1966, the wide entry of 1956 as mentioned above was narrowed down by omitting the words 'of all kinds'. By Notification No. ST-II-332/X-1012-1971 dated 15th November, 1971, item No. 68 relating to paper, the entry of 1966 was changed in the following words:

Paper of all kinds including hand-made paper, whether meant for writing, printing, copying, packing or for any other purpose.

12. It is evident that by notification dated 15th Novemberj 1971, significant and material changes were brought about. The hand made paper, which were specifically excluded in 1956 and again in 1966 were made taxable. The present entry contained in the notification dated 15th November, 1971 is wide enough, which introduced two significant changes, inasmuch as it has used the words (1) 'paper of all kinds' and thereafter the words (2) 'for any other purpose'. Notification No. 332 dated 15th November, 1971, was amended by Notification No. ST-II-6627/X-1012-1972 dated 1st December, 1973 and 'cardboard, straw-board' were separately specified at item No. 16 and made taxable at the rate of 7 per cent. The aforesaid notification dated 15th November, 1971, was further amended by Notification No. ST-II-1233/X-10(1)-1974 dated 14th April, 1974 and item No. 70 'photographic and Anr. cameras and enlargers, lenses, films and plates, paper and cloth and other parts and accessories required for use therewith' was specifically mentioned and made taxable at the rate of 12 per cent. This legislative history shows that whenever it was intended to tax a particular variety of paper at a higher rate, a specific notification was issued taxing it at a higher rate. Before issuance of the notifications of 1973 and 1974 cardboard and straw-board and photographic paper were taxable under item No. 68 of the notification dated 15th November, 1971, under the category of 'paper ...for any other purpose'.

13. It is true that the word 'paper' has not been defined either in the Act or the Rules but for deciding the controversy guidance may be taken from the various notifications issued from time to time and apart from the meaning underlying in the aforesaid notifications, common parlance meaning has also to be applied. The learned standing counsel has vehemently contended that the Tribunal was not justified in applying the dictionary meaning in the instant cases but should have applied the meaning of 'paper' which is commonly understood in common parlance or in commercial sense in which the persons dealing in and using the article understand it. The aforesaid contention does not appear to be correct. Samples of mill board manufactured by the respondent-assessee were produced before the Tribunal which formed part of the assessment record. It was not disputed that the mill board was used for printing, drawing, packing, for file covers and various other purposes. On a perusal of the sample and considering the materials before it the Tribunal has recorded a categorical finding of fact in the following words :

The word 'paper' in common parlance or in commercial sense is understood as meaning a substance which is used for writing, printing, for packing purposes, for drawing, decorating or covering the walls, for file covers and for various other purposes. It is made in various varieties and depending on different uses. The 'mill board' which the appellant manufactures is of various thicknesses, samples whereof form part of the assessment record. It is used for printing; drawing, packing, for file covers and various other purposes.

14. After recording the aforesaid finding the Tribunal, which is a final finding of fact authority, held that mill board is to be taxed under Notification No. 332 dated 15th November, 1971 and not as unclassified item.

15. The counsel for the respondent-assessee has also referred in his argument that in the assessment years 1969-70 and 1970-71 a question arose whether the mill board was paper or cardboard or straw-board and the Additional Judge (Revisions), Sales Tax, Saharanpur Range, Saharanpur, by his order dated 28th May, 1977, held as follows :

The question still remains whether mill board has, under the circumstances, to be treated as paper or as an unclassified item. The Honourable Supreme Court while considering 'carbon paper' defined paper to mean in popular parlance a substance which is used for boarding, writing, or printing, or for packing, or for drawing, or for decorating or for covering the walls.

There can be no doubt that mill board manufactured by the assessee is generally used for packing though it can also be used for drawing and writing. I am therefore of the view that mill board was rightly treated as 'paper' and both these revisions have to be dismissed.

16. A copy of this order is on the record of the cases. The department accepted the correctness of the aforesaid decision as it was not challenged either in this Court or in the Supreme Court. The learned standing counsel has urged that the principle of res judicata cannot be applied to taxing statute and each assessment proceeding is an independent proceeding. There can be no doubt to the proposition that principle of res judicata is not applicable to the taxing statute but the fact that the Revenue itself treated the mill board as a paper in the years 1969-70 and 1970-71 can be a circumstance in favour of the assessee.

17. Counsel for the respondent has also drawn attention to the fact that in the Central Excise Tariff under which Central excise is being levied by the Central Government under tariff item No. 17, as it were earlier, in the description of ''paper' the mill board was specifically included. Relevant portion of the tariff item is reproduced below :

Paper, all sorts (including paste board, mill board, straw-board and cardboard) in or in relation to the manufacture of which any process is ordinarily carried on with the aid of

(1) ...

(2) ...

(3) Printing and writing paper, packing and wrapping paper, straw-board and pulp board including grey board, corrugated board, duplex and triplex boards and other sorts.

(4) All other kinds of paper and paper board not otherwise specified.'

18. The learned standing counsel has contended that it would not be safe to adopt the definition of the word 'paper' given in other statutes. It is not possible for me to agree with the aforesaid contention of the standing counsel that while interpreting the notification in question the definition of 'paper' given in other statutes cannot be looked into. The Central Excise Tariff is a Central legislation. The commodities taxable under the Central Excise Act are mentioned under various tariff items for the purpose of levying Central excise duty at different rates. Since the mill board has also been included in the definition of 'paper' by the Central Government, it may lend support for holding that mill board would also be covered under the entry of 'paper of all kinds including hand made paper, whether meant for writing, printing, copying, packing or for any other purpose'. The stand of the respondent-assessee, in my opinion, finds support from the decision of this Court in the case of Poney Brothers 1983 UPTC 1065.

19. In view of the aforesaid facts the second question is answered in the affirmative, against the Revenue and in favour of the respondent-assessee.

20. In the result the revisions fail and are dismissed. However, the parties shall bear their own costs.


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