Allahabad High Court
M/S Kumar Rice Mill Pvt. Ltd. Thru' ... vs State Of U.P. Thru' Principal ... on 25 November, 2013
Bench: Sunil Ambwani, Surya Prakash Kesarwani
HIGH COURT OF JUDICATURE AT ALLAHABAD ?AFR Court No. - 32 Case :- WRIT TAX No. - 387 of 2008 Petitioner :- M/S Kumar Rice Mill Pvt. Ltd. Thru' Director V.K. Mishra Respondent :- State Of U.P. Thru' Principal Secretary, Inst. Fin. & Others Counsel for Petitioner :- Praveen Kumar,Ashok Kumar Case :- WRIT TAX No. - 461 of 2008 Petitioner :- Bhagwan Rice Mill & Others Respondent :- State Of U.P. Thru' Principal Secretayr Instt. Finance & Ors Counsel for Petitioner :- Ashok Kumar,Praveen Kumar Counsel for Respondent :- C.S.C. Counsel for Respondent :- C.S.C. Case :- WRIT TAX No. - 491 of 2008 Petitioner :- M/S Jai Bajrang Rice Mills Thru' Prop. Govind Kant Diwedi Respondent :- State Of U.P. Thru' Principal Secretary Inst. Finance & Ors. Counsel for Petitioner :- Ashok Kumar,Praveen Kumar Counsel for Respondent :- C.S.C. Hon'ble Sunil Ambwani,J.
Hon'ble Surya Prakash Kesarwani,J.
1. We have heard Shri Ashok Kumar for the petitioners. Shri C.B. Tripathi, Special Counsel appears for the State respondents.
2. All the petitioners are engaged in the business of purchase of paddy within the State of UP and manufacturer of rice. They sell the manufactured rice both within and outside the State of UP. In these writ petitions the petitioners have challenged the notices issued under Section 21 (2) of the UP Trade Tax Act by the Additional Commissioner (Grade-1), Commercial Tax to show cause as to why permission be not given to re-open the assessments of trade tax on the ground that while assessing the petitioners to Central Sales Tax, a set off/adjustment has been given of the amount of State tax paid on the purchase of paddy. The notices proceed on the basis that there is no provision under the UP Trade Tax Act for giving benefit of Section 8 (2A) of the Central Sales Tax to the manufacturers of rice for giving adjustment of the State tax paid on paddy in the Central Sales Tax, referring to the clarification in the Circular letter no.2313 of the Commissioner, Trade Tax, U.P. dated 29.3.2007.
3. The petitioner has also challenged the Circular dated 29.3.2007 on the ground that the Commissioner of Trade Tax has no jurisdiction to issue such circular influencing the assessing authorities to exercise their powers of assessment in one way or other.
4. It is submitted by Shri Ashok Kumar that the questions raised in these writ petitions were considered and decided in favour of assessee in M/s Aryaverth Chawal Udyog and others vs. State of UP and others 2008 UPTC 881 and in which a Division Bench of this Court by its judgment dated 22.5.2008 held in paragraphs-72 to 76 as follows:-
"72. In view of the above discussions, we are of the view that though we have upheld the view taken by the Commissioner of Trade Tax in the impugned circular, but we express that the Commissioner of Trade Tax had no authority to issue such circular giving own interpretation in respect of particular provision though no such question in any of the proceeding before him was involved and issuing a direction to the subordinate authority to proceed on the basis of such view amount to interference in the judicial function of subordinate officers. In this view of the matter, we direct that the Commissioner of Trade Tax should refrain himself in issuing such direction in future, which amounts to interference in the judicial function of subordinate officers. In any view of the matter, the view express in the circular may amount to his own view and does not constitute material on the basis of which a believe could be formed to reopen the case.
73. Further, perusal of the notice issued by the Assessing Authority reveals that no material has been referred on the basis of which believe was formed to reopen the case under section 21 (1) of the Act. In the original assessment order under section 9 of the Central Act, the tax levied on the turnover of rice under the Central Act has been reduced by the tax levied on the paddy out of which such rice was procured. Some of the assessment orders passed under section 9 of the Central Act have been filed along with counter and rejoinder affidavits. The reduction of tax could only be possible under section 15 (c )of the Central Act. Several writ petitions have been filed at Lucknow Bench and at Allahabad reveal that the Assessing Authority has understood section 15 (c) of the Central Act that reduction of tax under the Central Act on the turnover of rice with the tax levied on paddy was permissible. The notice under section 21 of the Act has been issued without any fresh material and only on account of change of opinion. Initial opinion while passing the original assessment order under section 9 of the Central Act may be incorrect, but once the view has been taken and the reduction has been allowed on the same existing fact, the proceeding under section 21 of the Act cannot be taken on account of change of opinion. The Assessing Authority in the notice under section 21 of the Act has neither referred any decision of any High Court or of the Apex Court interpreting Section 15 (c ) of the Act in the manner in which it has now been considered. Therefore, apart from his own change of view and may be on the basis of instructions of the Commissioner of Trade Tax by the impugned circular, proceedings under section 21 of the Act have been initiated. Thus, on the facts and circumstances of the case, we are of the view that at the time of initiation of the proceeding under section 21 of the Act, there was no material on the basis of which a believe could be formed that there was escaped assessment, namely, that the tax levied on the inter-State Sales of rice has been wrongly reduced by the tax levied on the paddy out of which such rice was procured except on account of his own change of opinion in this regard.
74. It may be mentioned here that in view of language used in the proviso to section 21 (2) of the Act, the approval of extension of time may be granted even in case of change of opinion, but in absence of any such words in Section 21 (1) of the Act the assessing authority can not initiate and reopen the proceeding under section 21 (1) of the Act on account of change of opinion.
75. Thus, we held as follows:
(i) Section 15 (c) of the Central Act provides reduction of tax leviable on the turnover of rice under the U.P. Trade Tax Act with the tax levied on the paddy out of which such rice was procured. It does not provide any reduction of tax under the Central Act by the tax paid on paddy under the State Law out of which such rice was procured.
(ii) The proceeding under section 21 of the Act have been initiated without any material on the basis of which believe could be formed that there was escaped assessment, namely, that the tax levied on the inter-State sales of rice under the Central Act has been wrongly reduced by the tax levied on paddy under the U.P. Trade Tax Act out of which such rice was procured except on account of change of opinion."
76. The initiation of proceeding under section 21 (1) of the Act on account of change of opinion is not permissible and, therefore, the initiation of proceeding under section 21 of the Act in the cases of the petitioners are bad in law."
5. It is submitted by Shri Ashok Kumar that the judgment in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) has been challenged by the State of UP in Civil Appeal No.6714 of 2009 but no interim relief has been allowed. According to him the ratio of the judgment still holds good to be followed by the High Court.
6. Shri C.B. Tripathi, Special Counsel appearing for State of UP, on the other hand, submits that the question as to whether the Circular dated 29.3.2007 could be issued by the Commissioner, Trade Tax and whether reduction of central sales tax by the amount of State tax paid on purchase of paddy can be allowed, was subject matter of consideration in a subsequent judgment of this Court in S/s Gaya Deen Kailash Chand vs. State of UP & others Writ Tax No.642 of 2008 decided on 6.3.2013. In this judgment the Court distinguished the judgment in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) and held that the circular is merely clarificatory in nature. The State authorities in the State of UP were proceeding to grant reduction of State tax paid on paddy in the Central Sales Tax on the basis of judgment rendered by Andhra Pradesh High Court in the case of Aitha Narasaiah & Co. and another vs. State of Andhra Pradesh 43 STC 183. The Circular clarified that the judgment of Andhra Pradesh High Court is not applicable due to different statutory set up in U.P. Trade Tax Act. This position of law was found legally correct in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) and thus it cannot be said that the Commissioner wanted to and had interfered in quasi judicial functioning of the authorities of the Trade Tax. It was held in S/s Gaya Deen Kailash Chand vs. State of UP & others (supra) as follows:-
"A bare perusal of the circular would show that it has only invited the attention of the Assessing Authorities to the fact that the decision given by the Andhra Pradesh High Court in the case of Aitha Narasaiah & Co. (supra) is not applicable due to different statutory set up in U.P. Trade Tax Act. The said view has been found legally correct by the Division Bench of this Court in the case of M/s Aryaverth Chawal Udyog (supra). Thus, it cannot be said by any stretch of imagination that it amount to interference in the quasi judicial function of the authorities of trade tax. Drawing the attention of the authorities discharging quasi judicial function, to a correct exposition of law, does not amount interference in quasi judicial function of the authority. All statutory authorities are bound by law and we see nothing objectionable if the attention of such authorities is draw to the correct proposition of law. It is bounden duty of every trade tax authorities to assess, levy and realize correct trade tax. The circular only facilitates such authorities to discharge quasi judicial function in conformity with law, smoothly and harmoniously. As a matter of fact, the said circular can be taken as if it is providing assistance to quasi judicial authority in discharge of its duties. It is interesting to note that the judgment of Aryaverth Chawal Udyog (supra) holding the circular as valid is based on the decision given by the Apex Court in the case of Satnam Overceas (Export), etc. versus State of Haryana, 2002 UPTC 1211, wherein the Apex Court had an occasion to interpret Section 15(c) of the Central Tax Act. Although, in the circular, the CTT has independently took the view but is being in conformity with the ratio of M/s Satnam Overceas (supra) is in a sense reminds the trade tax authorities the correct exposition of law".
7. Shri C.B. Tripathi submits that this Court clearly distinguished the notices issued under Section 21 (2) in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) and the notices issued in S/s Gaya Deen Kailash Chand vs. State of UP & others (supra) and found that the notice in S/s Gaya Deen Kailash Chand is based on the circular dated 29.3.2007 issued by the Commissioner, Trade Tax informing that where central sales of rice has been made, the tax paid in the State law on paddy cannot be adjusted against the tax liability on the inter-state sale of rice. Such adjustment is impermissible and if such adjustment has been made, proceeding for refund under Section 21 (2) is desired. The circular, even in view of in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra), contains the correct exposition of law. In the facts and circumstances the initiation of re-assessment cannot be held to be invalid. In S/s Gaya Deen Kailash Chand vs. State of UP & others (supra) this Court referred to the provisions of Section 21 (1) of the Act, which provides:-
"Sub-section (1) of Section 21 of the Act confers power on the Assessing Authority to reopen the assessment order if the Assessing Authority has reason to believe that --
(i)whole or part of any turnover of a dealer in any assessment order or part thereof;
(ii)has escaped assessment to tax or
(iii)has been under assessed or
(iv)has been assessed to tax at a rate lower than at which it is assessable under this Act, or
(v)any deductions or exemptions have been wrongly allowed in respect thereof.
(vi)the Assessing Authority may issue notice ......................"
8. Section 21 (2) is by way of enlargement of jurisdiction with the permission of the Additional Commissioner.
9. In the present three writ petitions the notices under Section 21 (2) are by way of show cause notices as to why limitation be not enlarged for proceeding of re-assessment to tax to deny the adjustment of state tax given on the purchase of paddy in the central sales tax on inter-state sales.
10. In S/s Gaya Deen Kailash Chand vs. State of UP & others (supra) this Court referred to the judgments in Commissioner of Sales Tax vs. Bhagwan Industries (P) Ltd (1973) 31 STC 293 (SC); Sales Tax Officer Ganjnam & another v. Uttareswari Rice Mills (1972) 30 STC 567; Rawalpindi Flour Mills versus State of UP & others 1998 UPTC 192; M/s S.K. Traders, Modi Nagar, Ghaziabad vs. Additional Commissioner Grade-I, Trade Tax, Zone Ghaziabad and another 2008 UPTC 392. In all these cases the Supreme Court and this Court have held that if the grounds are relevant and have a nexus with the formation of opinion regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under the section. Whether the grounds are adequate or not is not a matter which would be gone into by the High Court or Supreme Court, for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue. What can be challenged is the existence of the belief but not the sufficiency or reasons for the belief. At the same time, the belief must be held in good faith and should not be a mere pretence.
11. It cannot be disputed that in S/s Gaya Deen Kailash Chand vs. State of UP & others (supra) a Division Bench of this Coure merely explained the judgment in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) which had also accepted the same principle of law that under Section 15 (c) of Central Act the reduction of tax leviable on the turn over of rice under the U.P. Trade Tax and with the tax levied on paddy out of which such rice was produced, cannot be allowed. The Central Act does not provide any reduction or tax by the tax paid on paddy under the State law out of which such rice was produced.
12. We do not find any substance in the argument of Shri Ashok Kumar that in S/s Gaya Deen Kailash Chand vs. State of UP & others (supra) the Court had differed with the opinion expressed in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) on the questions raised and thus the matter should have been referred to a larger bench. We also do not find substance in his contention that since Hon'ble Supreme Court has issued notice and granted relief to the State of UP to challenge the judgment in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) this Court should wait until the Civil Appeal No.6714 of 2009 is decided by the Apex Court. This Court taking the earliest opportunity in in S/s Gaya Deen Kailash Chand vs. State of UP & others (supra) clarified the judgment in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) upholding the provisions of Section 15 (c) of Central Tax upheld the notices, which were issued under Section 21 (2) for re-assessment to tax the escaped turnover due to deductions which were wrongly allowed under Section 21 (1) (v) of the U.P. Trade Tax Act.
13. Where the principle of law has been correctly laid down by the Division Bench, it is not necessary for the subsequent Division Bench hearing the matter of granting relief to refer the matter to a larger bench.
14. So far as directions issued in para-72 of the judgment in in M/s Aryaverth Chawal Udyog and others vs. State of UP and others (supra) is concerned, we find that the directions are merely by way of guidance and do not amount to quashing the Circular nor there was any valid ground on which the Circular letter dated 29.3.2007, could be quashed. In the present case also we do not find any good ground to entertain the challenge inasmuch as the circular is only by way of clarification and does not take away the jurisdiction of assessing authority of re-assessment.
15. We have taken the same view in M/s Balaji Foods & others vs. State of UP & another Writ Tax No.1466 of 2008 decided on 10.7.2013.
16. Before parting the matter we may quote with benefit the conclusions drawn in S/s Gaya Deen Kailash Chand vs. State of UP & others (supra) as follows:-
"Having regard to what has been said above, we are of the opinion that the Additional Commissioner Grade-I/respondent no. 2 has committed no error in exercise of power under Section 21(2) of the Act in granting the impugned permission permitting the Assessing Officer to initiate the proceeding for reassessment by the order dated 22.02.2008 as contained in annexure-4 of the writ petition. The consequent notice for reassessment under Section 21(2) given by the Assessing Authority dated 11th March, 2008, annexure-6 to the writ petition is also valid.
There is one more aspect of the case yet. The purchase tax paid in the State of U.P. by the petitioner, as held in the case of Satnam Overceas (supra) and M/s Aryaverth Chawal Udyog (supra) cannot be adjusted against the central sales tax. The Assessing Officer has, thus, wrongly given adjustment of Rs.1,22,245.00. Realizing the mistake, the Assessing Officer wants to correct it. Whether a writ court can prevent the Assessing Officer to correct the mistake when law envisages such correction under Section 21 of the Act. The answer is obviously 'No'. No writ can be issued to prohibit a person to correct a legal mistake. A writ jurisdiction is meant for doing justice and not to perpetuate injustice or technicalities."
17. For the reasons given as above, the show cause notices proposing re-assessment of the escaped turnover issued under Section 21 (2) of the U.P. Trade Tax Act are held to be valid.
18. All the writ petitions are consequently dismissed.
Order Date :- 25.11.2013 RKP