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The State of Gujarat Vs. Gujarat Small Industries Corporation Ltd. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSales Tax Reference No. 37 of 1980
Judge
Reported in[1983]53STC187(Guj)
ActsBombay Sales Tax Act, 1959 - Sections 7(1); Gujarat Sales Tax Act, 1969 - Sections 9(4)
AppellantThe State of Gujarat
RespondentGujarat Small Industries Corporation Ltd.
Appellant Advocate R.P. Bhatt, Assistant Government Pleader, i/b.,; Bhaishanker Kanga and Girdharlal
Respondent Advocate S.L. Modi, Adv.
Excerpt:
.....any tax under act of 1959 upon respondent's sale of declared goods on ground that they were local sales of same goods effected at subsequent stage for purpose of section 9 (4) - tax cannot be levied when respondent assessee sell declared goods to various constituents - respondent must get complete statutory protection in regard to its taxation liability under section 9 (4) of act of 1969 - held, department cannot levy tax under act of 1959. - - it may be stated that the respondent-assessee had filed the first appeal before the assistant commissioner of sales tax, ahmedabad, as he had a grievance against the order of assessment passed against the respondent-assessee whereby he was called upon to discharge taxation liability under the bombay sales tax act, 1959, in respect of..........they were purchases in the course of inter-state trade and commerce, on the ground that they were local sales of the same goods effected at the subsequent stage for the purpose of sub-section (4) of section 9 of the gujarat sales tax act, 1969, because the department had already levied tax under the bombay sales tax act, 1959, upon the sales of the same goods which the local branch of m/s. hindustan steel limited had effected at the earlier state (2) whether, on the facts and in the circumstances of this case, the tribunal was right in law in holding that the order of assessment passed by the assessing authority, in order to levy tax on the sales of the above goods as effected by the opponent's vendor - m/s. hindustan steel limited - at the earlier stage, under the bombay sales tax.....
Judgment:

Surti, J.

1. The Sales Tax Tribunal, Ahmedabad, had referred to this Court the following questions of the law for our decision :

'(1) Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that the department had no right to levy any tax under the Bombay Sales Tax Act, 1959, upon the opponent's sales of pig iron worth Rs. 27,66,908 as declared goods on the basis that they were purchases in the course of inter-State trade and commerce, on the ground that they were local sales of the same goods effected at the subsequent stage for the purpose of sub-section (4) of section 9 of the Gujarat Sales Tax Act, 1969, because the department had already levied tax under the Bombay Sales Tax Act, 1959, upon the sales of the same goods which the local branch of M/s. Hindustan Steel Limited had effected at the earlier state

(2) Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that the order of assessment passed by the assessing authority, in order to levy tax on the sales of the above goods as effected by the opponent's vendor - M/s. Hindustan Steel Limited - at the earlier stage, under the Bombay Sales Tax Act, 1959, on the basis that they were local sales, was legally binding upon the department in the present case while assessing the opponent to tax in respect of its sales of the same goods at the subsequent stage

When our pointed attention was invited by Mr. R. P. Bhatt, the learned Advocate for the revenue, we told Mr. Bhatt that the questions which were formulated by the Tribunal were not properly framed, and hence, we requested Mr. R. P. Bhatt, the learned counsel for the revenue, and Mr. S. L. Modi, the learned Advocate for the respondent-assessee, to formulate the questions of law in a proper manner, and accordingly, both the learned counsel agreed that we should concentrate on the following two questions only :

'(1) Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that the department had no right to levy any tax under the Bombay Sales Tax Act, 1959, upon the opponent's sales of pig iron worth Rs. 27,66,908 as declared goods on the ground that they were local sales of the same goods effected at subsequent stage for the purpose of sub-section (4) of section 9 of the Gujarat Sales Tax Act, 1969

(2) Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that the order of assessment in respect of the sales of the same goods in the case of the opponent's vendor at the earlier stage was legally binding upon the department while assessing the opponent in respect of the sale of the same goods at subsequent stage ?'

2. The aforesaid two questions were formulated by the learned Advocates and we have taken these questions on the record of the case with the consent of both the learned Advocates.

3. In order to appreciate the questions which we are supposed to answer, a few relevant facts may be stated.

4. The respondent-assessee, 'M/s. Gujarat Small Industries Corporation Limited', was aggrieved by the order passed by the learned Assistant Commissioner of Sales Tax, Ahmedabad, and had filed the second appeal before the Sales Tax Tribunal. It may be stated that the respondent-assessee had filed the first appeal before the Assistant Commissioner of Sales Tax, Ahmedabad, as he had a grievance against the order of assessment passed against the respondent-assessee whereby he was called upon to discharge taxation liability under the Bombay Sales Tax Act, 1959, in respect of the year of account from 1st January, 1969, to 31st December, 1969.

5. The respondent-assessee is a statutory corporation which was registered as a dealer under the Bombay Sales Tax Act, 1959, at the relevant time, and also under the Central Sales Tax Act, 1956. The business of the assessee is to resell products of iron and steel to small-scale industrialists in Gujarat State in order to help them buy raw materials like iron and steel at a reasonable price for their business. It may be stated that the respondent-assessee purchased iron and steel locally as well as in the course of inter-State trade and commerce from M/s. Hindustan Steel Limited which manufactures such goods in its factory at Bhilai. It may be also stated that M/s. Hindustan Steel Limited, is having its head office at Calcutta and is also having a local sale office in Ahmedabad city. The local office of M/s. Hindustan Steel Limited was itself a registered dealer under the Bombay Sales Tax Act, 1959, as well as the Central Sales Tax Act, 1956.

6. During the year of account, the respondent-assessee had locally sold pig iron worth Rs. 27,66,908/- by giving delivery of the goods to its customers at its warehouse or godown in the city of Ahmedabad. A dispute had arisen in the course of the respondent's assessment proceedings, whether the above sales which the respondent-assessee had effected were liable to tax locally under the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the Bombay Act') or not.

7. On behalf of the respondent-assessee, if was urged, that the respondent-assessee had purchased the aforesaid goods in question from the local branch office of M/s. Hindustan Steel Limited and that pig iron was 'declared goods' as defined under the Bombay Act and the Central Act. It was also urged on behalf of the respondent-assessee that when the assessment of the taxation liability of the local branch of M/s. Hindustan Steel Limited was determined, it was decided by the department that M/s. Hindustan Steel Limited had already collected sales tax at 3 per cent under the Bombay Act from the respondent-assessee on the basis of the aforesaid sales of declared goods as 'local sales' at the earlier stage, and therefore, no further tax could be levied under the Bombay Act upon the said declared goods which the respondent-assessee had sold at the subsequent stage, because subsequent sales were not taxable on account of the provisions contained in sub-section (4) of section 9 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as 'the Gujarat Act'), which was made applicable to sales which were effected under the Bombay Act.

8. In support of the contention that it had purchased the goods locally, it was urged on behalf of the respondent-assessee that the department had itself assessed and levied tax under the provisions of the Bombay Act, in the assessment of the local branch of M/s. Hindustan Steel Limited in respect of the sales of those very goods as 'declared goods' which the local branch had effected earlier to the respondent by treating and accepting them as local sales effected by the local branch. In view of these facts, it was the case of the respondent-assessee that the sales of the same goods at the subsequent stage should be consistently treated as local sales. Therefore, the respondent-assessee had pleaded before the authorities of the department, not to include the respondent's subsequent local sales in its turnover of sales and not to tax them any further in terms of sub-section (4) of section 9 of the Gujarat Act read with relevant provisions of the Bombay Act.

9. It was also submitted that the local branch of M/s. Hindustan Steel Limited was admittedly a dealer registered under the Bombay Act, and that the purchases of the aforesaid goods were made from that registered dealer and the respondent had resold those goods locally, and therefore, the respondent was not entitled to deduct those sales as R.D. resales from its turnover of sales under section 7(1)(ii) of the Bombay Act, and that, therefore, on that account also, no tax should or could be levied on the respondent-assessee's disputed sales.

10. For the disposal of the present reference from the aforesaid narration of relevant facts, the following facts clearly emerge :

(1) That the respondent-assessee did purchase 'declared goods' worth Rs. 27,66,908 from M/s. Hindustan Steel Limited, Hindustan Steel Limited being a dealer under the Bombay Act.

(2) That the local branch of M/s. Hindustan Steel Limited had already collected sales tax at 3 per cent under the Bombay Act from the respondent-assessee on the basis of the aforesaid sales of 'declared goods' as local sales at the earlier stage.

11. It appears that the Sales Tax Officer as well as the Assistant Commissioner of Sales Tax, Ahmedabad, did not accept the case of the respondent-assessee, and hence, the respondent-assessee had preferred Second Appeal No. 454 of 1976 before the Gujarat Sales Tax Tribunal at Ahmedabad, and the Tribunal having considered the grievances of the respondent-assessee came to the conclusion that the subsequent sales of the same goods worth Rs. 27,66,908 as made by the respondent-assessee were local sales, and not in respect of inter-State purchases as erroneously found by the Sales Tax Officer and the Assistant Commissioner of Sales Tax, Ahmedabad.

12. As a result of the aforesaid conclusion, the Sales Tax Tribunal set aside the orders passed by the learned Assistant Commissioner and the Sales Tax Officer, and took the view that the subsequent goods worth Rs. 27,66,908 were local sales, and hence the respondent-assessee cannot be saddled with any taxation liability as held by the Sales Tax Officer and the Assistant Commissioner of Sales Tax, Ahmedabad.

13. Under the aforesaid circumstances, the State of Gujarat had a grievance against the impugned order passed by the Sales Tax Tribunal in the aforesaid appeal, and the aforesaid points of law are referred to us by the Tribunal for our decision.

14. We have carefully heard the submissions of Mr. Bhatt, the learned Assistant government Pleader for the revenue. In this case, as stated above, from the narration of the aforesaid facts, it is clear to us that when the assessment order was passed against M/s. Hindustan Steel Limited, the same was passed on the basis of M/s. Hindustan Steel Limited having collected tax at 3 per cent under the Bombay Act from the respondent-assessee on the basis of the aforesaid sales of the 'declared goods' as 'local sales' at the earlier stage. It also clearly emerges from the aforesaid facts that M/s. Hindustan Steel Limited had paid the amount thus collected from the respondent-assessee under the Bombay Act.

15. It may be once again emphasised at this stage, that the department had in categorical terms accepted the aforesaid sales of 'declared goods' as 'local sales' at an earlier stage.

16. Under the aforesaid circumstances, we requested Mr. Bhatt to satisfy us as to how the said assessment order passed against M/s. Hindustan Steel Limited was a non est order. When such a request was made to Mr. Bhatt, the learned Advocate for the revenue, it was impossible for Mr. Bhatt to show before us that the assessment order passed against M/s. Hindustan Steel Limited was a non est order. He urged that the sales of the aforesaid declared goods were taken and accepted as local sales even by the department at the earlier stage, but Mr. Bhatt urged that it was a wrong finding recorded by the officers of the department. When such a submission was made by Mr. Bhatt to us, we frankly told Mr. Bhatt that it was the duty of the department to see that a proper and legal assessment order was made by the department against M/s. Hindustan Steel Limited within the period of limitation allowed by the Bombay Act. Had the department been vigilant on this count, the department could have recorded a finding that the sales of the aforesaid declared goods were not local sales, but they were transactions in the nature of inter-State trade and commerce transactions. Suffice it to say that the department allowed the period of limitation as provided in the Act to expire, and when this reference was being heard, Mr. Bhatt, the learned Advocate for the revenue, frankly stated having regard to the provisions contained in the Bombay Sales Tax Act, 1959, and the Central Sales Tax Act, 1956, an impossible situation has arisen for the department to pass a reassessment order correcting the assessment order already made by the department against M/s. Hindustan Steel Limited. Once again it may be emphasised that when an assessment order was made against M/s. Hindustan Steel Limited the Sales Tax Officer and the Assistant Sales Tax Commissioner had taken the view that the aforesaid sales were 'local sales' and not transaction of inter-State trade and commerce. It is at this stage that Mr. Bhatt, the learned Advocate for the revenue, had to face an additional difficulty in order to succeed in this reference as mentioned below.

17. Sub-section (4) of section 9 of the Gujarat Sales Tax Act, 1969, is in the following words :

'(4) If under this Act or any earlier law, any tax has been levied or is leviable of the sale or purchase of any declared goods, at any stage, then no further tax shall be levied under this Act at any subsequent stage on the sale or purchase thereof.'

18. In the instant case, having regard to the earlier law, viz., the Bombay Sales Tax Act, 1959, tax was levied on the aforesaid sales of declared goods. M/s. Hindustan Steel Limited did collect the tax from the respondent-assessee in regard to the aforesaid sales of declared goods and the same was paid by M/s. Hindustan Steel Limited in pursuance to the provisions of the Bombay Sales Tax Act on the basis of the said sales being 'local sales'. As observed earlier, the department was not at all at pains for a considerably long time to correct the said error, if any, in regard to the finding of the department that the aforesaid sales between M/s. Hindustan Steel Limited and the respondent-assessee were not local sales, but were transactions of inter-State trade and commerce.

19. Under the aforesaid circumstances, and particularly when M/s. Hindustan Steel Limited was assessed by the officers of the department, it was impossible for Mr. Bhatt even to urge that the order of assessment passed against M/s. Hindustan Steel Limited was a non est order. Under the circumstances, he urged that the assessment order passed by the officers of the department against M/s. Hindustan Steel Limited was a wrong order or an illegal order, but as stated above, it was impossible for Mr. Bhatt even to urge before us that the order passed against M/s. Hindustan Steel Limited suffers from the vice of an order being passed by an authority who has no jurisdiction to pass the order. The said order passed against M/s. Hindustan Steel Limited was an order passed by a competent authority, but the order suffers from the vice of a mistake - a mistake in the sense that the aforesaid transactions of sales were not 'local sales' but transactions of inter-State trade and commerce.

20. In view of the aforesaid submissions of Mr. Bhatt, it is clear to us that in the instant case, under the Bombay Sales Tax Act, 1959, tax was levied on the local sales which were effected by M/s. Hindustan Steel Limited to the respondent-assessee in regard to the 'declared goods', and that being so, it is impossible for us, even to conceive that when the respondent-assessee in turn sells the aforesaid goods to its various constituents, any further tax should be levied on the respondent-assessee. In this behalf, sub-section (4) of section 9 of the Gujarat Sales Tax Act, 1969, which we have set out hereinabove confers absolute exoneration in regard to the taxation liability in regard to the respondent-assessee, when it sells the aforesaid declared goods to its various constituents subsequent to the purchase of the very goods from M/s. Hindustan Steel Limited.

21. But Mr. Bhatt, the learned Advocate for the State, made a valiant and desperate effort to persuade us to take the view that at least we must give an opportunity to the State to prove that the sales of the aforesaid declared goods were not local sales as held by the officers of the department. It is not possible for us even to countenance the said submission of Mr. Bhatt for the simple reason that for the apparent and obvious negligence on the part of the department, the department should not be given any protection or premium, particularly when it allowed the long period of limitation to expire during which the error could have been corrected by the department.

22. Mr. Bhatt did his best to persuade us to take such a view but to no useful purpose.

23. As a result of our aforesaid discussion, we must say that the reasoning of the Tribunal and the ultimate conclusion in favour of the respondent-assessee in the instant case are absolutely correct. This is a clear case where the respondent-assessee must get complete statutory protection in regard to its taxation liability having regard to sub-section (4) of section 9 of the Gujarat Sales Tax Act, 1969.

24. As a result of our aforesaid discussion, we must answer both the questions in favour of the respondent-assessee, and against the State; but having regard to the fact that the respondent-assessee was driven from litigation to litigation by filing a second appeal and even had to resist the reference, we direct the appellant-State to pay to the respondent-assessee the costs of the reference.


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