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Delhi Motor Co. Vs. Sales Tax Officer (Xi), Enforcement Branch, Bombay, and Another - Court Judgment

LegalCrystal Citation
Subject Sales Tax
CourtDelhi High Court
Decided On
Case NumberC.W.P. No. 1206 of 1971
Judge
Reported in[1986]61STC71(Delhi)
ActsBombay Sales Tax Act, 1959 - Sections 2(11), 2(16), 35 and 35(1)
AppellantDelhi Motor Co.
RespondentSales Tax Officer (Xi), Enforcement Branch, Bombay, and Another
Cases ReferredV. Ponnammal v. Sales Tax Officer
Excerpt:
.....the constitution of india, challenging the order of assessment passed by sales tax officer under bombay sales tax act, 1959 - the petitioner belonged to delhi and used to import goods from abroad, got it cleared from bombay port and then transported the goods to delhi - the petitioner had received notices and assessment orders at delhi - in view of the facts, it was ruled that the sales tax officer, had acted without jurisdiction - accordingly, the delhi high court, had the jurisdiction to entertain the petition - - as no reply was received to this letter a reminder was sent to the petitioner asking it to furnish the required statements on or before 2nd december, 1970, without fail. we also fail to understand under what law you can raise a presumption against us of having sold at..........facts disclosed that the respondent was justified in raising a presumption that the petitioner had sold goods in the state of maharashtra. in the present case, it was not open to the sales tax officer to raise such a presumption. on their own showing the sales tax authorities initiated proceedings on the ground that the customs record at the bombay dock showed that the petitioner had been importing goods like motor vehicle parts from abroad and had been getting those cleared at bombay. there was not an iota of evidence that those goods had been sold in the state of maharashtra or that the petitioner was a dealer carrying on business in that state. 13. the preliminary objection raised in the counter-affidavit that this court has no jurisdiction to entertain this writ petition is also.....
Judgment:

Charanjit Talwar, J.

1. The petitioner, Delhi Motor Company, a registered partnership firm of Delhi, has challenged the jurisdiction of the Sales Tax Officer (Enforcement Branch), Greater Bombay, to pass the three impugned assessment orders. To appreciate the contentions it is relevant to notice certain facts. By letter dated 21st October, 1969, copy annexure B to the writ petition, the Sales Tax Officer at Bombay served a notice on the petitioner herein asking it to furnish on or before 12th November, 1969, with complete information of all its imports by land, air or sea and the disposal of such import made by it during the period from 1st April, 1959, to 31st March, 1961. The petitioner was asked to furnish the details as per the statements attached in forms A, B and C. As no reply was received to this letter a reminder was sent to the petitioner asking it to furnish the required statements on or before 2nd December, 1970, without fail. The petitioner was put on notice that if those statements were not furnished within the stipulated period, the authorities would be constrained to start assessment proceedings on the bass of the information regarding the imports made by it, 'treating that all goods have been sold in this State'

2. In reply to this letter the petition informed the Sales Tax Officer that it had not received the earlier letter and as such it was unable to reply in detail. However, in paragraph 2 of that letter dated 4th December, 1970, copy annexure D to the petition it was submitted, 'Meanwhile we categorically declare that we never sold at Bombay or in Maharashtra any goods imported by us through the Bombay Port. We, thereforee, dispute your jurisdiction to start any assessment proceedings against us. We are not dealers of Bombay or Maharashtra at all. We also fail to understand under what law you can raise a presumption against us of having sold at Bombay any, let alone all, goods imported by us through Bombay port when only transhipment of goods might have taken place at Bombay from a ship to a railway train bound for us at Delhi.'

3. The petitioner further stated that if any threatened assessments were made against it those would be without any jurisdiction.

4. It appears that thereafter the sales tax authorities issued three notices under section 35 of the Bombay Sales Tax Act to the petitioner directing it to attend their office at 11 A.M. on 11th June, 1971, to show cause as to why the amount of tax payable by it in respect of the sales in the years 1st April, 1967, to 31st March, 1968, 1st April, 1968, to 31st March, 1969, and 1st April, 1969, to 31st March, 1970, should not be 'assessed/reassessed' and to produce or cause to be produced their books of account and other relevant documents. In reply the petitioner vide its letter dated 24th June, 1971, again pointed out that the contemplated proceedings were not warranted in law. It was stated, 'We received the goods through our bankers at Delhi, where after we came into possession of the said goods for the first time at Delhi. The clearance of these goods at Bombay and their dispatch to us at Delhi was part of one continuous recognised process in their journey from abroad to us at Delhi. Please let us know what evidence you have been able to gather about their sale within Bombay.'.

5. While pointing out the legal position the petitioner, however, sought adjournment of the proceedings by two months to enable it to produce the relevant records. This request for adjournment was not allowed by the sales tax authorities although the plea has been noticed in the impugned assessment orders, copies annexures G, I and K to the writ petition. It has been held that the petitioner has not furnished the information called for and that as the onus of proving that there were no sales in the State of Maharashtra was on the petitioner, thereforee, the sales tax authorities at Bombay had jurisdiction to proceed against them. However, the following observation is made regarding the petitioner's contention in the impugned order for the year 1st April, 1967, to 31st March, 1968 : 'In this letter he has once again raised the objection to my presumption that goods imported having not proved to have been removed outside my jurisdiction without making a sale have been sold in the State. He has merely averred that the goods were removed to his own place of business without furnishing the information in forms A, B and C in support of the fact which he wants me to accept. As stated earlier, the onus of proving that the goods imported at Bombay port were not sold within the State of Maharashtra is on the assessed and in the absence of such proof, I am entitled to presume that the goods were sold in the State of Maharashtra. This view is supported by the madras High Court decision in the case of Shri. V. Ponnammal [1971] 27 STC 123.' The objection to the jurisdiction was thus held not to be valid and disallowed. Similar reasoning and findings are contained in the other two assessment orders for the years 1st April, 1968, to 31st March, 1969, and 1st April, 1969, to 31st March, 1970, annexures I and K respectively. It is unnecessary to notice the tax and penalty imposed for these three years as the assessment has been challenged on the ground that the very initiation of those proceedings by service of notice under section 35 of the Act is invalid.

6. It is useful at this stage to notice the definition of a 'dealer' as defined in the Bombay Sales Tax Act, 1959. As per section 2(11)' 'dealer' means any person who whether for commission, remuneration or otherwise carries on the business of buying or selling goods in the State, and includes a State Government which carries on such business, and also any society, club or other association of persons which buys goods from, or sells goods to, its members :

Exception. - An agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally, shall not be deemed to be a dealer within the meaning of this clause.'

7. Sub-section (16) of section 2 defies 'licensed dealer' to mean a registered dealer holding a license.

8. The jurisdiction of the sales tax authorities to initiate proceedings is provided under section 35 of the Act. It is the common case of the learned counsel for the parties that sub-section (1)(b) of this section is applicable in the present case. Section 35 gives power of reassessment of turnover escaping assessment on any turnover of sales or turnover of purchases of any goods chargeable to tax under the Act, to the Commissioner. Section 35(1)(b), which is relevant to the present proceedings, reads :

'(b) where he has reason to believe that the dealer has concealed such sales or purchases or any material particular relating thereto, or has knowingly furnished incorrect returns, at any time within eight years.'

9. A bare reading of the definition of 'dealer' shows that a dealer must be a dealer in the State of Maharashtra. He must be a person who carries on business of buying of selling goods in that State. Only such a dealer would be within the jurisdiction of the sales tax authorities of Maharashtra. A dealer who has not been assessed to tax or had not submitted any returns can be proceeded under section 35(1)(b) but the Commissioner or the officer who has been delegated that authority must have 'reason to believe' that the dealer has concealed such sales or purchases or any material particular relating thereto.

10. In the present case, the impugned notices admittedly have been issued under section 35 of the Act and the very first sentence in those notices reads 'Whereas I have reason to believe that your turnover in respect of the following sales and purchases, namely, ........'. The words 'has reason to believe' in section 35 connote that the Commissioner's belief must not be arbitrary or irrational. The belief must be based on reasons which are relevant and material. This proposition is well-settled : See Ganga Saran and Sons P. Ltd. v. Income-tax Officer [1981] ITR 130 . As noticed earlier in the present case the petitioner had informed the sales tax authorities that the imported goods were never sold by it in the State of Maharashtra and the goods were only in transhipment at that place. It was stated so in so many words that the goods were received by them at Delhi. The Sales Tax Officer in the impugned assessment orders has considered the reply to be insufficient. He proceeded to exercise jurisdiction on the ground that it was permissible for him to presume that the goods were sold at Bombay as the books of account had not been produced before him. This very stand has been reiterated by the respondents in their counter-affidavit.

11. The respondents have not placed any record to show even prima facie that the goods were sold in Maharashtra or that the petitioner herein is covered by the definition of 'dealer' as per the Act.

12. Reliance by the respondents on a decision of the Madras High Court reported as V. Ponnammal v. Sales Tax Officer [1971] 27 STC 123 is entirely misconceived. In the facts and circumstances of the said case, it was held that the revenue was not acting on mere surmises and bare assumptions. It was observed that the facts disclosed that the respondent was justified in raising a presumption that the petitioner had sold goods in the State of Maharashtra. In the present case, it was not open to the Sales Tax Officer to raise such a presumption. On their own showing the sales tax authorities initiated proceedings on the ground that the customs record at the Bombay dock showed that the petitioner had been importing goods like motor vehicle parts from abroad and had been getting those cleared at Bombay. There was not an iota of evidence that those goods had been sold in the State of Maharashtra or that the petitioner was a dealer carrying on business in that State.

13. The preliminary objection raised in the counter-affidavit that this Court has no jurisdiction to entertain this writ petition is also misconceived. The petitioner received the impugned notices and assessment orders at Delhi. In view of the fact that the sales tax authorities at Bombay had no jurisdiction to proceed against the petitioner, this Court has the jurisdiction to entertain the petition.

14. The result is that the impugned assessment orders are quashed and the petition is allowed. No order as to costs.


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