Gujarat High Court
Jayant Extraction Industries Pvt. Ltd. ... vs Sales Tax Officer And Ors. on 6 February, 1992
Author: G.T. Nanavati
Bench: G.T. Nanavati
JUDGMENT G.T. Nanavati, J.
1. M/S. Jayant Extraction Industries Pvt. Ltd. was a partnership concern till 31th March, 1982. Petitioner No. 1, Jayant Extraction Industries Pvt. Ltd., has now taken over the business of the said firm. The business consists of extracting vegetable oils by solvent extraction process and manufacture of vegetable ghee. The firm was registered as a dealer under the Gujarat Sales Tax Act, 1969. Respondent No. 1, Sales Tax Officer, initiated assessment proceedings for samvat year 2033 (24th October, 1976 to 11th November, 1977), samvat year 2034 (12th November, 1977 to 31st October, 1978) and samvat year 2035 (1st November, 1978 to 20th October, 1979) under the local Act and also under the Central Sales Tax Act, 1956. The said assessment proceedings were required to be finalised on or before Aso Vad Amas of samvat year 2038 (15th November, 1982). It is the petitioners' case that the firm had complied with the requests made in the notice issued to the firm and had produced all the evidence required by the respondent No. 1 so as to enable him to complete the assessment. Even though it was possible for respondent No. 1 to complete the assessments, he did not do so and instigated respondent No. 3 to stay the assessment proceedings for those years. Respondent No. 3, therefore, issued two show cause notices, both dated 6th October, 1982, one for samvat years 2033 and 2034 and the other for samvat year 2035 under section 42(1) of the local Act read with section 9(2) of the Central Act for showing cause why the assessment for those three years under both the Acts should not be stayed up to Aso vad Amas of samvat year 2039, i.e., 4th November, 1983. In the show cause notice for the samvat years 2033 and 2034, the reason for staying proceedings was stated as "transfer of assessment proceedings" and in the other notice for samvat year 2035 the reason was given as "case required to be kept pending in accordance with the decision of the court in the case of Prabhat Solvent Extraction Industries Pvt. Ltd.". Respondent No. 3 thereafter passed an order, dated 31st October, 1982, staying the proceedings till Aso Vad Amas of samvat year 2039, i.e., 4th November, 1983. Even though the assessment proceedings for all the three years were stayed, respondent No. 1 passed draft orders of assessment for samvat year 2034 and served them on 5th May, 1983 and invited objections. The firm filed its objection on 1st June, 1983 and contended that as the period of limitation has expired, the proposed draft orders are illegal. On 3rd May, 1983, respondent No. 1 passed final orders of assessment under the local Act as well as the central Act for samvat year 2033. Against the assessment orders for samvat year 2033, the firm has filed appeals before respondent No. 2.
2. February 10, 1992.
3. On 30th April, 1983, respondent No. 1 passed orders of assessment under the Local Act and also the Central Act against the firm for samvat year 2035. The petitioners have filed appeals against those orders also. Although orders of assessments for samvat year 2035 were already passed on 30th April, 1983, respondent No. 3, on 28th September, 1983, issued a show cause notice, calling upon the firm to show cause as to why assessment proceedings for samvat year 2034, samvat year 2035 and samvat year 2036 should not be stayed up to Aso Vad Amas of samvat year 2040, i.e., 24th October, 1984. On 24th October, 1983, respondent No, 3 passed an order, staying the assessment proceedings for those years till 24th October, 1984. Petitioners are challenging the aforesaid show cause notices, orders of stay, draft orders of assessments and regular orders of assessment as illegal, and ultra vires articles 14, 19(1)(g) and 265 of the Constitution of India.
4. What is contended on behalf of the petitioners is that the reasons given in the notices and the reasons given in the orders are different. The respondents are bound to disclose to the court what were the real reasons and why these variations. It was submitted that these variations clearly disclose non-application of mind on the part of the respondent No. 3 while passing the impugned orders of stay. In the alternative, it was submitted that if the reasons disclosed in the orders are taken as reasons for staying the proceedings, then those reasons are not genuine reasons and in any case, not reasons, as contemplated by the Act. In other words. It was submitted that the reasons given are not such as would justify the action of staying the proceedings.
5. In the shown cause notice for samvat year 2033 and samvat year 2034, the reason given was that the proceeding of assessment was transferred. In the show cause notice for samvat year 2035, the reason given was that the proceedings were required to be kept pending according to the judgment in Prabhat Solvent Extraction Industries pvt. Ltd. Common order was passed for all these years and therein, it was mentioned that the assessment proceedings were required to be stayed as an enquiry was being held by Sales Tax Officer C-2, Unit 2, Jamnagar. When the second show cause notice was given for samvat years 2034, 2035 and 2036 staying the assessment proceedings up to Aso Vad Amas of samvat year 2040, the reason given was that the assessment proceedings under section 46 were pending. But while passing the order, it was stated that the assessment proceedings were required to be stayed as an enquiry was pending with the Sales Tax Officer-2, Division 2, Jamnagar. It cannot, therefore, be disputed that the reasons given in the notices and the reasons mentioned in the two orders are different. But merely because of that discrepancy, it is not possible to say that there was non-application of mind on the part of respondent No. 3 while passing the impugned orders of stay of proceedings. The respondents have produced the relevant files, as was desired by the petitioners, and on perusal of those files, we find that the reasons mentioned in the notices and the reasons mentioned in the impugned orders of stay are genuine. Though the reasons mentioned in the notices were genuine, respondent No. 3 thought it fit to pass orders of stay for a different reason, which was also a genuine one. The variation has occurred because different reasons requiring stay of assessment proceedings, existed. It is also difficult to appreciate how the reason mentioned in the order can be regarded as not genuine, as contended by the learned counsel for the petitioners. It is a fact that an enquiry was going on before the Sales Tax Officer-2, Division 2, Jamnagar, with respect to the dealings of the petitioners. Whether such an enquiry was justified or not is a different question and that cannot make the said reason not genuine. Similarly, the contention of the petitioner that the said enquiry was unnecessarily prolonged and that, it could have been completed early cannot make that reason not genuine. Therefore, we will have to proceed on the basis that the reason given in the two orders was genuine and not an excuse. It is also difficult to appreciate how such a reason cannot be said to be a reason contemplated by the Act. If, in view of the information available to the department, further enquiry regarding dealings of a dealer is required to be made, then it can be regarded as a good reason for staying the assessment proceedings. After all, it is the duty of the Sales Tax Officer to recover proper amount of tax and see that the tax which is really due and payable does not escape. The enquiry which the Sales Tax Officer was making against the petitioners' transactions was not a fishing enquiry, but it was an enquiry, which was being held by the Sales Tax Officer for finding out the true nature of the transaction effected by the firm. As disclosed by the orders of assessments subsequently made, the petitioners' transactions, through commission agents stationed outside Gujarat, by despatching goods were really required to be investigated to find out whether they were really inter-State sales or consignment sales. Thus, the reason given in the two impugned orders of stay is not only genuine, but also sufficient to justify staying of the assessment proceedings.
6. It was next contended that, that part of the assessment order passed by the Sales Tax Officer for samvat year 2033, whereby fine of Rs. 11,110.03 has been imposed upon the firm is illegal, inasmuch as he has no jurisdiction to impose a fine exceeding Rs. 7,500. In support of his contention, he has relied upon a decision of this Court in Kirtikumar Dhanjibhai Mohaya v. V. K. Trivedi, Sales Tax Officer [1985] 58 STC 125. The decision of this Court in that case clearly supports the case of the petitioners. Therefore, following the said decision, it will have to be held that, in view of section 46A, the Sales Tax Officer had no jurisdiction to impose a fine exceeding rs. 7,500 and really he ought to have served the firm with a draft order of penalty and invited its objections in relation to it. As that procedure has not been followed and straightaway the final order of penalty was passed, that part of the assessment order of penalty was passed, that part of the assessment order dated 3rd May, 1983, annexure A/8 to the petition will have to be regarded as illegal.
7. In the result, this petition is partly allowed. That part of the order dated 3rd May, 1983 passed by the Sales Tax Officer, Jamnagar, annexure A/8 to the petition, whereby the Sales Tax Officer has imposed a fine of Rs. 11,110.03 is quashed and set aside and it is declared that it will be open to the authorities to pass an appropriate order of fine in accordance with law. Rule is made absolute to the aforesaid extent, with no order as to costs.
8. Petition partly allowed.