Jammu & Kashmir High Court
Indian Oil Corporation Ltd vs J&K Sales Tax Appellate Tribunal on 9 June, 2023
Bench: Chief Justice, Wasim Sadiq Nargal
Sr. No. 22
IN THE HIGH C0URT 0F JAMMU & KASHMIR AND LADAKH
AT JAMMU
CJ Court
STR No. 4/2009 c/w
STR No. 1/2009
STR No. 2/2009
STR No. 3/2009
Reserved on: 27.04.2023
Pronounced on: 09.06.2023
Indian Oil Corporation Ltd. ...Applicant(s)
Hindustan Petroleum Corporation Ltd.
Indian Oil Corp. Ltd.
Hindustan Petroleum Corp. Ltd.
Through: Mr. Subash Dutt, Advocate
Mr. Sachin Sharma, Advocate
Vs.
J&K Sales Tax Appellate Tribunal ...Respondent(s)
Appellant Authority and Anr.
Appellant Authority and Anr.
J&K Sales Tax Appellate Tribunal Through: Mr. K.D.S.Kotwal, Dy. AG.
CORAM:
HON'BLE THE CHIEF JUSTICE HON'BLE MR JUSTICE WASIM SADIQ NARGAL, JUDGE JUDG MENT Per Wasim Sadiq Nargal-J
01. The above reference applications arise out of orders of learned J&K Tax (Appellate) Tribunal, Jammu, [„the Tribunal‟ for short], whereby the appeals filed by the applicants herein and 2 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 appellants before the Tribunal i.e., Indian Oil Corporation Ltd and Hindustan Petroleum Corporation Ltd. [Government of India Enterprises], dealing in refining of crude petroleum and sale of petroleum products, were partially allowed by the Tribunal.
Factual Matrix.
02. A brief factual matrix leading to the filing of present applications is that the appeals were filed against the orders passed by the Petrol Taxation Officer, Jammu, [hereinafter after referred to as „ the PTO‟], whereby the PTO had not accepted the returns filed under the Jammu and Kashmir Motors Spirit & Diesel Oil (Taxation of Sales) Act, 2005, [„ the Act of 2005‟ for short] and had imposed additional tax, interest and penalty. The appeals filed by the applicants/appellants against the assessment orders were rejected by the appellate Authority. Both these orders were challenged by way of appeals before the Tribunal.
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03. The PTO vide Order dated 25 July, 2001, disallowed the shortages shown by the applicants in Form P-4 regarding evaporation loss, selling of downgraded HSD as LDO and use of the self-consumption and levied tax as also imposed penalty in terms of Section 5 of the Act of 2005. The applicants assailed the order of PTO before the appellate Authority (Deputy Commissioner, Sales Tax, Appeals), Jammu, and the applicants 3 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 remained unsuccessful before the appellate Authority. An appeal was filed against the Order dated 31st July, 2003, challenging the order of the appellate Authority in second appeal and the Tribunal vide its Order dated 18th March, 2008, accepted the appeal partially, inasmuch as, it quashed the imposition of penalty imposed by the PTO and confirmed by the appellate Authority.
04. Feeling aggrieved of aforesaid orders of the Tribunal, the applicants have filed the applications before the Tribunal seeking to make a reference to this Court in terms of Section 12- D of the J&K Sales Tax Act, 1962, [„the Act of 1962‟].
05. Through these reference applications, filed by the applicants under Section 12-D of the Act of 1962, the argument of learned counsel appearing for the applicants that though the definition of "sale" under the Act of 2005 includes the consumption of petrol, no tax can be imposed on self consumption in view of the Judgment passed by the Hon‟ble Supreme Court in case titled Bhopal Sugar Industries Ltd, MP and Anr v. D.P. Dube, Sales Tax Officer, reported in AIR 1964 SC 1037, was also rejected.
06. It is a matter of fact that in STR No. 2/2009 titled Indian Oil Corporation vs. Appellate Authority and Anr and STR No. 3/2009 titled Hindustan Petroleum Corp. Ltd. vs. J&K Sales Tax 4 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 Appellate Tribunal and Anr, the Tribunal, vide its Judgment dated 25th September, 2008, referred a question of law for determination by this Court, which is reiterated as below;
"As to whether personal consumption of motor spirit and diesel oil by the petrol dealer to himself for his own consumption falls within the definition of "sale" and that the second part of definition of „sale‟ in S.2(h), as above, said, is not ultra-virus?
07. These matters i.e., STR No. 2/2009 and STR No. 3/2009 came up for consideration before this Court on 16 th November, 2018, and, accordingly, this Court vide Order dated 16th November, 2018, framed the following question of law, which is reproduced herein below;
"Whether personal consumption of motor spirit and diesel oil by the petrol dealer to himself for his own consumption fall within the definition of "sale" as enumerated in Section 2(h) of the J&K Motor Spirit and Diesel Oil (Taxation of Sales) Act, 2005?
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08. In the Order dated 16 November, 2018, passed by this Court, an error has crept in and it has been mentioned that the aforesaid order has been passed in STR No. 1/2009 and STR No. 3/2009, but the fact remains that the Tribunal vide Judgment dated 25th September, 2008, referred a question of law mentioned supra for determination by this Court in STR No. 2/2009 and STR No. 3/2009, and as such, the order dated
5 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 16th November, 2018 is required to be read to have been passed in STR No. 2/2009 and STR No. 3/2009.
09. From the bare perusal of record, it appears that simultaneously the applicants have filed two separate applications bearing STR No. 1/2009 titled Hindustan Petroleum Corporation Ltd. vs. J&K Sales Tax Appellate Tribunal and Anr. and STR No. 4/2009, titled Indian Oil Corporation Ltd, vs. J&K Sales Tax Appellate Authority and Anr. before this Court under Section 12 (D) (1) 2nd Proviso of the Jammu and Kashmir Sales Tax Act, as the Tribunal, according to the applicants, has neither referred to nor considered the other questions of law which finds mention in the reference applications filed before the Tribunal. These questions of law by implication shall be deemed to have been refused.
09. The applicants through the medium of STR No. 1/2009 and STR No. 4/2009, have sought consideration of following questions of law by this Court.
i. Whether on the facts and circumstances of the case, the Tribunal is justified in law in holding that the assessment completed by the Petrol Taxation Officer on yearly basis in facts assessment made on monthly basis and not liable to be quashed?
ii. Whether on the fact and circumstances of the case the Tribunal is justified in law in holding that interpretation of Section 2 (h) relating to 6 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 definition of sale as suggested by the appellant (herein applicant) shall not effect the results of appeal when as per law only on transfer of property in goods there could be a sale and if this submission of the appellant (herein applicant) had been accepted, value of diesel oil and petrol evaporated would not have been added as sale and held as liable to tax?
iii. Whether on facts and circumstances of the case the Tribunal is justified in law in holding that if losses on account of evaporation of Motor Spirit and Diesel are more than those prescribed by Rule 18-A of Motor Spirit and Diesel Oil Rules 2005, [„Rules of 2005‟ for short], it will be presumed that the assesssee has consumed this quantity for his own consumption and such shortage shall also be presumed to be deemed sales and chargeable to tax, when on correct interpretation of definition of sale as contained in Section 2 (h) of the Act of 2005 would have been no sale as there was neither transfer of property in goods nor transfer of property against consideration?
iv. Whether evaporation can be considered as deemed sale when there is no transfer of property in goods for cash or deferred payment or other valuable consideration?
v. Whether Rule 18-A of the Rules of 2005 being beyond the Rule making power granted by the Act of 2005 no cognizance of said rule can be taken for assessment of the appellant under the Act of 2005?
7 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 vi. Whether the Tribunal has been justified in upholding the order of the Assessing Authority in enhancing the sale value of the appellant on the basis of the rates of other companies and down grading of HSD to LDO?
vii. Whether the Tribunal has been justified in upholding the order of the Assessing Authority of demanding additional tax on the sale of downgraded of HSD to LDO at price disclosed lesser then the rate disclosed by other companies, when no such tax has been collected by the appellant?
viii. Whether the Tribunal could in law confirm the order demanding interest without passing a speaking order?
10. The case set up by the applicants is that the questions of law referred to by the Tribunal in STR No. 2/2009 and STR No. 3/2009 have already been decided and settled by the Hon‟ble Apex Court in case titled Bhopal Sugar Industries Ltd M.P. and Anr. Vs. O.P. Dube, Sales Tax Officer, Bhopal reported in AIR 1964 SC 1037 and regarding STR No. 4/2009 and STR No. 1/2009. The specific stand of the applicants before this Court is that the orders passed by the Tribunal in the aforesaid STRs clearly show that except referring to and discussing the definition of sale to the effect whether self-consumption is sale, the Tribunal is silent regarding other questions of law raised in the reference 8 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 applications filed by the applicants, the details of which have already been reflected in the preceding paragraphs.
11. The further case set up by the applicants in these applications is that the Tribunal has neither referred to, nor decided the other questions of law and in fact has ignored all the questions raised in the applications, which, according to the applicants, are important questions of law.
Arguments on behalf of applicants.
12. Mr. Subash C.Dutta, learned counsel appearing for the applicants, submits that the orders of the Tribunal clearly transpire non- application of mind with respect to the questions which have been raised in the reference applications. Learned counsel has further argued that the Tribunal has not given any reason or finding with respect to the questions of law in the reference applications, other than one question, which has been referred to this Court. Arguments on behalf of respondents.
13. Mr.K.D.S. Kotwal, learned Dy. AG, appearing for the respondents, submits that he is not averse in remanding these STRs back to the Tribunal for their consideration afresh. Learned Dy.AG, could not justify his argument with regard to the questions of law raised by the applicants in the reference 9 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 applications and not referred by the Tribunal by ignoring the other questions of law.
Legal Analysis and discussion.
14. Since the common questions of law and facts are involved in the aforesaid STRs, we deem it proper to decide all these STRs by a common Judgment. It is settled proposition of law that failure to give reasons amounts to denial of justice. The reasons are live links between the minds of the decision maker to the controversy in question and the decision or the conclusion arrived at by the Tribunal or the Court. It goes without saying that the reasons substitute subjectivity by objectivity.
15. Right to reason is an indispensable part of sound judicial system, which indicates the application of mind to the matter before the Court. Another rationale could be that the affected party can know why the decision has gone against him. One of the salutary requirement of natural justice is spelling out reasons for the orders made, in other words, a speaking order, but in the present case, the orders passed by the Tribunal are silent as no reasons have been spelled out with respect to all the questions of law raised in the applications. Reasons are the soul of orders. The non-recording of reasons could lead to dual infirmities. Firstly, it may cause grave prejudice to the affected party and secondly it hampers the proper administration of justice. These two cardinal principles are not 10 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 only applicable to the administrative or executive actions, but they apply with equal force and in face with great degree of precision to judicial pronouncements.
16. The orders passed by the Tribunal are silent with respect to the questions of law raised in the applications filed by the applicants nor there is any whisper with respect to the fact that what weighed with the Court in formulating only one question out of eight raised in the reference applications. It goes without saying that reasoning alone, can enable a higher or an appellate court to appreciate the controversy in question in its correct perspective and to hold whether the reasoning recorded by the court whose order is under question is sustainable in the eyes of law and whether it has adopted the correct legal approach.
17. Reliance is being placed on the Judgment passed in case titled Asst. Commissioner v. M/S. Shukla and Brothers reported in (2010) 30 VST 114 (SC), wherein the Hon‟ble Apex Court in similar facts and circumstances has remanded the matter back to the High Court with a request to hear the case de-novo and pass appropriate order in accordance with law. The relevant paragraphs of the Judgment, for facility of reference, are reproduced as under:-
"20... We are not venturing to comment upon the correctness or otherwise of the contentions of law raised before the High Court in the present petition, 11 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 but it was certainly expected of the High Court to record some kind of reasons for rejecting the revision petition filed by the Department at the very threshold. A litigant has a legitimate expectation of knowing reasons for rejection of his claim/prayer. It is then alone, that a party would be in a position to challenge the order on appropriate grounds. Besides, this would be for the benefit of the higher or the appellate court. As arguments bring things hidden and obscure to the light of reasons, reasoned judgment where the law and factual matrix of the case is discussed, provides lucidity and foundation for conclusions or exercise of judicial discretion by the courts. Reason is the very life of law. When the reason of a law once ceases, the law itself generally ceases (Wharton's Law Lexicon). Such is the significance of reasoning in any rule of law. Giving reasons furthers the cause of justice as well as avoids uncertainty. As a matter of fact it helps in the observance of law of precedent. Absence of reasons on the contrary essentially introduces an element of uncertainty, dis- satisfaction and give entirely different dimensions to the questions of law raised before the higher/appellate courts. In our view, the court should provide its own grounds and reasons for rejecting claim/prayer of a party whether at the very threshold i.e. at admission stage or after regular hearing, howsoever precise they may be.
21. We would reiterate the principle that when reasons are announced and can be weighed, the public can have assurance that process of correction is in place and working. It is the requirement of law that correction process of judgments should not only appear to be implemented but also seem to have been properly implemented. Reasons for an order would ensure and enhance public confidence and would provide due satisfaction to the consumer of justice 12 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 under our justice dispensation system. It may not be very correct in law to say, that there is a qualified duty imposed upon the Courts to record reasons. Our procedural law and the established practice, in fact, imposes unqualified obligation upon the Courts to record reasons. There is hardly any statutory provision under the Income Tax Act or under the Constitution itself requiring recording of reasons in the judgments but it is no more res integral and stands unequivocally settled by different judgments of this Court holding that, the courts and tribunals are required to pass reasoned judgments/orders. In fact, Order XIV Rule 2 read with Order XX Rule 1 of the Code of Civil Procedure requires that, the Court should record findings on each issue and such findings which obviously should be reasoned would form part of the judgment, which in turn would be the basis for writing a decree of the Court.
22. By practice adopted in all Courts and by virtue of judge made law, the concept of reasoned judgment has become an indispensable part of basic rule of law and, in fact, is a mandatory requirement of the procedural law. Clarity of thoughts leads to clarity of vision and proper reasoning is the foundation of a just and fair decision. In the case of Alexander Machinery (Dudley) Ltd. (supra), there are apt observations in this regard to say "failure to give reasons amounts to denial of justice". Reasons are the real live links to the administration of justice. With respect we will contribute to this view. There is a rationale, logic and purpose behind a reasoned judgment. A reasoned judgment is primarily written to clarify own thoughts; communicate the reasons for the decision to the concerned and to provide and ensure that such reasons can be appropriately considered by the appellate/higher Court. Absence of reasons thus would lead to frustrate the very object stated 13 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 hereinabove. The order in the present case is as cryptic as it was in the case of Sunil Kumar Singh Negi (supra). Being a cryptic order and for the reasons recorded in that case by this Court which we also adopt, the impugned order in the present appeal should meet the same fate.
23. In light of the above principles, now we will revert back to the facts of the present appeal. It cannot be doubted that challenge was raised to the order of the Board before the High Court on alleged questions of law as well as mixed question of law and fact. The contention that the respondent had not manufactured the shutters from the tax paid raw material and also that the contract in question was not impartible but a consequential item for completion of the contract required examination by the High Court. In light of the judgments referred to and relied upon by the parties including the judgment of this Court, it is true that requirement of stating reasons for judicial orders necessarily does not mean a very detailed or lengthy order, but there should be some reasoning recorded by the Court for declining or granting relief to the petitioner. The purpose, as already noticed, is to make the litigant aware of the reasons for which the relief is declined as well as to help the higher Court in assessing the correctness of the view taken by the High Court while disposing off a matter. May be, while dealing with the matter at the admission stage even recording of short listening dealing with the merit of the contentions raised before the High Court may suffice, in contrast, a detailed judgment while matter is being disposed off after final hearing, but in both events, in our view, it is imperative for the High Court to record its own reasoning however short it might be.
14 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009
24. We are unable to find any infirmity in the arguments advanced on behalf of the Department, that no reasons have been recorded for rejecting the contentions raised, this legal infirmity has, in fact, prejudicially affected the case of the appellant before us. The judgment of the High Court must speak for itself to enable the higher Court to do complete and effective justice between the parties.
25. For the reasons afore-recorded we set aside the order dated 29th February, 2008 and remit the case to the High Court with a request to hear the case de novo and pass appropriate order in accordance with law. To that extent the appeal is allowed...".
18. In another case titled M/S Steel Authority of India Ltd vs. Sales Tax Officer, Rourkela-I reported in (2008), 16 VST 181 (SC), the Hon‟ble Supreme in paragraphs 9,10 and 11 has held as under:-
"9.... A bare reading of the order shows complete non- application of mind. As rightly pointed out by learned counsel for the appellant, this is not the way a statutory appeal is to be disposed of. Various important questions of law were raised. Unfortunately, even they were not dealt by the first appellate authority.
10. Reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same it becomes lifeless. (See Raj Kishore Jha v. State of Bihar 2003 (11) SCC 519)
11. Even in respect of administrative orders Lord Denning, M.R. in Breen v. Amalgamated Engg. Union (1971) 1 All ER 1148, observed: "The giving of reasons is one of the fundamentals of good administration." In Alexander Machinery (Dudley) Ltd. v. Crabtree 1974 ICR 120 (NIRC) it was observed: "Failure to give reasons amounts to denial of justice." "Reasons are live links between the mind of the decision-taker to the controversy in question and the decision or conclusion 15 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 arrived at." Reasons substitute subjectivity by objectivity.
The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking-out. The "inscrutable face of the sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance...."
19. In the case of Principal Commissioner of Income Tax-1 vs. M/S. Bajaj Herbals Pvt. Ltd, reported in AIR 2022 SC 1715, the Hon‟ble Supreme Court has held that unreasoned order should be remanded back to decide and dispose of the same afresh in accordance with law and on its own merits as held in Paragraphs 3.1 and 3.2. For facility of reference, the paragraphs 3.1 and 3.2 of the aforesaid judgment are reproduced as under:-
"3.1. As the impugned order passed by the High Court is a non-speaking and non-reasoned order and even the submissions on behalf of the revenue are not recorded, the impugned order passed by the High Court dismissing the appeal is unsustainable.
3.2. Under the circumstances, the impugned order is hereby quashed and set aside. The matter is remanded to the High Court to decide and dispose of the appeal afresh in accordance with law and on its own merits. If the High Court is of the opinion that the proposed questions of law are not substantial questions of law and they are on factual aspects, it will be open for the High Court to consider the same in 16 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 accordance with law, however, the High Court to pass a speaking and reasoned order after recording the submissions made on behalf of the respective parties.."
20. Thus, in the light of observations made hereinabove, the Tribunal has failed to record any reasons with respect to seven out of eight questions raised in the reference applications. It is well settled law laid down by the Hon‟ble Supreme Court in various and authoritative pronouncements mentioned supra that reasons must be recorded in a judicial order even when it relates to the non- reference of certain questions raised in the reference applications. The applicants had the right to know that what weighed with the Tribunal in not referring or even discussing the questions raised by the applicants in the applications.
21. The approach adopted by the Hon‟ble Supreme Court has been uniform in case of orders passed without any reason, which is, to remand the matter back to the appropriate court and determine whether the questions raised in the reference applications are in fact substantial questions of law or otherwise. Conclusion
22. In the light of peculiar facts and circumstances of the present case coupled with settled legal position, we deem it appropriate to dispose of all the STR‟s and remand back to the Tribunal to decide and dispose of the reference applications afresh in accordance with law and on its own merits. If the Tribunal is of the opinion that proposed questions of law raised in the reference 17 CASE: STR No. 4/2009 c/w STR Nos'. 1,2,3 of 2009 applications are not substantial questions of law and they are on factual aspects, it will be open for the Tribunal to consider the same in accordance with law. However, the Tribunal is directed to pass a speaking and reasoned order after recording the submissions to be made on behalf of the respective parties. It is made clear that this Court is not venturing to comment upon the correctness or otherwise of the contentions of law raised before the Tribunal, but it is certainly expected of the Tribunal to record reasons for accepting or rejecting the questions raised in the reference applications filed by the applicants.
23. With the aforesaid observations all the STRs are disposed of by this common judgment and as a corollary thereof, the orders impugned in the reference applications passed by the Tribunal are set-aside.
(WASIM SADIQ NARGAL) (N.KOTISWAR SINGH)
JUDGE CHIEF JUSTICE
SRINAGAR
09.06.2023
"Shamim Dar"
Whether the Judgment is speaking? Yes/No. Whether the Judgment is reportable? Yes/No