Andhra HC (Pre-Telangana)
State Of Andhra Pradesh vs Ampro Food Products Limited on 18 July, 1994
Equivalent citations: [1995]96STC617(AP)
Author: Syed Shah Mohammed Quadri
Bench: B.S. Raikote, S.S. Mohammed Quadri
JUDGMENT Syed Shah Mohammed Quadri, J.
1. These three tax revision cases arise out of the orders of assessment of the turnover relating to the assessment years 1979-80 and 1980-81. The assessee in the three T.R.Cs., is the same. They arose out of a common order of the Sales Tax Appellate Tribunal in T.A. No. 24 of 1982 and T. A. No. 25 of 1982 which were disposed of on August 29, 1984. The State preferred T.R.C. No. 151 of 1985 against the common order relating to the assessment year 1979-80 and T.R.C. No. 154 of 1985 against the said common order relating to the assessment year 1980-81. The assessee also filed T.R.C. No. 195 of 1985 against the said order relating to the assessment year 1980-81.
2. As these cases are connected, they are heard together and they are being disposed of by a common order.
3. At the outset, we may note that the assessee does not press T.R.C. No. 195 of 1985. Now we are left with T.R.C. Nos. 151 and 154 of 1985 only filed by the State.
4. We may notice the facts giving rise to these tax revision. The assessee is a biscuits manufacturing company. The turnover of the assessee for the assessment year 1979-80 was determined by the assessing authority at about rupees six crores after granting exemptions of rupees six crores on November 20, 1980. It appears that the successor Commercial Tax Officer inspected the business premises of the assessee on December 7, 1980, April 3, 1981 and on April 8, 1981. On the basis of the material collected during the inspection, the assessing authority issued a show cause notice as to why the assessment should not be reopened to in regard to the exempted turnover relating to the assessment year 1979-80. He also proposed not to allow those exemptions for the assessment year 1980-81 as by that time the assessment for that year was not completed. The assessee filed its objections. The assessing authority rejected the objections and assessed the disputed turnover to tax. That order of the assessing authority was upheld by the appellate authority. The assessee carried the matter in second appeal to the Sales Tax Appellate Tribunal. On August 29, 1984, the Tribunal held that the assessment for the year 1979-80 could not have been reopened by the assessing authority and therefore, set aside the orders of the assessing authority as well as the appellate authority by allowing the appeal. In regard to the assessment for the year 1980-81, the Tribunal found that some factual aspects were not determined by the authorities. So, the Tribunal remanded the matter by allowing the appeal. Thus, these tax revision cases have come up before us.
5. Shri Ramaiah, the learned Government Pleader for Commercial Taxes, contends that rule 14-A(8) of the Central Sales Tax (Andhra Pradesh) Rules, 1957 [hereinafter referred to as "the CST (AP) Rules"], read with section 14(4)(cc) of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as "the APGST Act") and section 9(2) of the Central Sales Tax Act, 1956 (hereinafter referred to as "the CST Act"), vest jurisdiction in the authority to reopen the assessment. Therefore, the Tribunal had erred in law in coming to the conclusion that the assessing authority had no power or jurisdiction to reopen the assessment. He further contends that there was no reason for the Tribunal to remand the case to the assessing authority as all the material was before the Tribunal and therefore, the remand was wholly unjustified in law.
6. We shall first take up the first contention of the learned Government Pleader. It has already been noted that for the assessment year 1979-80, the exemption was granted to the tune of six crore rupees and the balance of turnover was assessed on November 20, 1980. The assessment thus done has become final. However, the successor Commercial Tax Officer, on the basis of the material collected by him on inspection of the business premises of the assessee, issued a show cause notice as to why the exemption granted for the assessment year 1979-80 should not be cancelled and the escaped/under-assessed turnover should not be assessed to tax. The show cause notice issued by the assessing authority was under rule 14-A(8) of the CST (AP) Rules read with section 9(2) of the CST Act.
7. We shall refer to these provisions here.
Section 9(2) of the CST Act is in the following terms :
"9. Levy and collection of tax and penalties. - (1) .............
(2) Subject to the other provisions of the Act and the Rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, collect and enforce payment of tax, including any penalty, payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State; and for the purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly :
Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, by rules made in this behalf make necessary provision for all or any of the matters specified in this sub-section."
8. From a perusal of the above provisions, it is clear that the authority for the time being empowered to assess, reassess, collect and enforce payment of the tax under the APGST Act is vested with the power on behalf of the Government of India to assess or reassess, collect and enforce payment of the tax including any payment payable by the dealer under the CST Act as if the tax or penalty payable by the said dealer under the CST Act is a tax or penalty payable under the general sales tax law of the State and for that purpose, the authority can exercise all the powers it has under the sales tax law of the State enumerated therein. But the sweep of this power is subject to the provisions of the CST Act and the Rules framed thereunder. It would be apt to refer to the rules framed by the Government of Andhra Pradesh under the CST Act. As the notice to reopen the assessment was given under rule 14-A(8) of the CST (AP) Rules, it would be useful to extract it here :
"If, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax or has been under-assessed in any year, the assessing authority may after issuing a notice to the dealer and after making such enquiry as he considers necessary determine to the best of his judgment the correct turnover and assess the tax payable on such turnover -
(a) in cases where an order of assessment or levy, had been passed earlier, within a period of four years from the date on which such order was served on the dealer;
(b) within a period of four years from the expiry of the year to which the turnover relates, in other cases."
9. A plain reading of this sub-rule makes it evident that if the whole or any part of the turnover of the business of a dealer has escaped assessment to tax or has been under-assessed in any year for any reason, the assessing authority has discretion, after issuing notice to the dealer and after making such enquiry as he considers necessary, to determine to the best of his judgment the correct turnover and assess the tax payable on such turnover. Clauses (a) and (b) deal with the period of limitation within which the power can be exercised. We are not concerned with the question of limitation here. From the above provision, two things are very clear, i.e., the assessing authority has power to re-determine the correct turnover to the best of his judgment and to assess the tax payable on the turnover so determined.
10. We may incidentally note the provisions of section 14(4)(cc) of the APGST Act here :
"(cc) assess the correct amount of tax payable, in a case where any deduction or exemption has been wrongly allowed."
11. The above extracted provision specifies one of the events in which the whole or any part of the turnover of the business of a dealer which has escaped assessment to tax or has been under assessed or assessed at lower rate, among other things, can be correctly assessed and the tax can be collected thereof. Where the assessing authority has wrongly exempted whole or part of the turnover or made any deduction not permissible, clause (cc) of sub-section (4) of section 14 specifically empowers the assessing authority to assess the correct amount of tax payable.
12. What is contended before us by the learned counsel for the assessee is that such a specific power is lacking either under the CST Act or under the CST (AP) Rules. Therefore, this power cannot exercised by the assessing authority.
13. It is also contended that the power to reassess the correct tax on the escaped turnover or under-assessed turnover under the CST Act and the rules made thereunder, cannot be exercised by invoking the provisions of the State Sales Tax Act, where there is no specific power under the CST Act and the rules thereunder.
14. In so far as the alternative argument is concerned, it is not seriously pressed. We are, therefore, left with only one contention, i.e., the Central Sales Tax Act and the rules thereunder do not empower the assessing authority to withdraw the exemptions wrongly granted by the assessing authority and reopen the assessment, levy tax on the escaped/under-assessed turnover determined after withdrawing the exemptions wrongly granted. We may point out here that clause (cc) of sub-section (4) of section 14 of the APGST Act, was inserted with effect from January 17, 1978.
15. In R. S. Narayana Shenoi v. State of Kerala [1961] 12 STC 665 the Chief Justice Sri M. A. Ansari speaking for the Division Bench of the Kerala High Court, explained the ambit of rule 33 of the Travancore-Cochin General Sales Tax Rules, 1950, which empowered the officer to make reassessment in the case of escaped turnover. The learned Chief Justice, having considered the meaning of escaped turnover and the opening words "any reason", observed :
"The jurisdiction of an officer to make a reassessment under rule 33(1) of the Travancore-Cochin General Sales Tax Rules, 1950, is not confined to cases where the turnover has escaped assessment, because it is not before the officer by reason of inadvertence, omission, or deliberate concealment on the part of the assessee or because of want of care on the part of the officer. That rule also authorises the officer to reopen an assessment if a legal error has been committed in the original assessment."
16. In K. K. Ismail v. State of Kerala [1979] 43 STC 123 (Ker) proceedings were initiated by the assessing authority under section 19 of the Kerala General Sales Tax Act, 1963. The provisions of section 19 of the said Act are almost identical with the phraseology of rule 14-A(8) of the CST (AP) Rules. The Division Bench of the Kerala High Court took the view that the power of the assessing authority extends to reopening the assessment if, for any reason, the whole or any part of the turnover of the business of the dealer has escaped assessment or has been under-assessed or has been assessed at lower rate, observed :
"........ The reason being immaterial, it is of no consequence whether what happened was a mere change of opinion on the part of the succeeding officer from that formed by his predecessor. The reassessment in such a case would be valid even if the materials, on the basis of which the earlier officer and the successor officer proceeded, were practically the same."
17. In Deputy Commissioner of Sales Tax v. T.P. Elias [1993] 90 STC 25 opinion to the same effect is expressed by another Division Bench of the Kerala High Court.
18. In State of Andhra Pradesh v. Sreenivas Trading Co. [1989] 75 STC 206, the question before the Division Bench of our High Court was whether the power of the authority to reopen the assessments in cases where turnover has escaped assessment or in cases where turnover has been under-assessed includes the case of deduction of turnover due to the fact that exemptions were wrongly allowed. In that case, certain turnover was under-assessed due to granting of exemptions which were impermissible in law. It was contended that clause (cc) of section 14(4) was introduced on January 17, 1978, the assessment related to the assessment year 1975-76 and the order of the assessment was passed in September, 1976, as such the power to reassess the escaped turnover on incorrect granting of exemptions, was not available for reopening the assessment. The Division Bench held that clause (cc) of section 14(4) is merely clarificatory and that the power to correctly determine the turnover where there has been either wrong deduction or granting of impermissible exemptions, can be exercised under clauses (a) and (b) of section 14(4) of the Andhra Pradesh General Sales Tax Act. On close reading of clauses (a) and (b) of section 14(4) of the APGST Act we find that analogous provisions are contained in rule 14-A(8) of the CST (AP) Rules. Therefore, even without invoking the provisions of section 14(4)(cc) of the APGST Act, in our view, the assessing authority can exercise the same power under rule 14-A(8) of the CST (AP) Rules. In this view of the matter, we are unable to uphold the view of the Tribunal that the assessing authority has no power to reassess the escaped assessment/under-assessed turnover for the year 1979-80 and granting of the exemptions. In our view, the assessing authority has such a power under rule 14-A (8) of the CST (AP) Rules.
19. But the controversy does not end by recording this finding. It is now well-settled that no exercise power under section 14(4) of the APGST Act, the assessing authority has to invoke the power to reopen the assessment only when there is fresh material and not merely when there is change of opinion. This is the view taken by our High Court in State of Andhra Pradesh v. Ratna Sree Box Makers [1989] 75 STC 82. The Division Bench, in that case held that the power of the concerned authority to reopen the assessment and to bring to tax the escaped/under-assessed turnover, under section 14(4) of the State Act can be exercised only on material de hors the assessment record and not on material already considered at the time of the assessment.
20. In our view, the same principle should govern while exercising the power under rule 14-A(8) of the CST (AP) Rules. Having held that the assessing authority has power to reopen the assessment in case where the turnover has escaped assessment due to granting of exemptions wrongly and to correctly determine the turnover and assess the turnover escaped, we have to see whether there has been any fresh material before the assessing authority to reopen the assessment and assess the escaped turnover to tax.
21. The learned Government Pleader vehemently contends that the successor assessing authority had collected material on inspection which shows that the sales do not relate to mere consignment of the goods to the branch offices at different places, but they relate to inter-State sales. We are not concerned here with the nature of the sales. The short question which we may have to determine here is whether there was any fresh material before the assessing authority to reopen the assessment, for it is well-settled that mere change of opinion is no ground to reopen the assessment.
22. As pointed out earlier, the learned Government Pleader invited our attention to the fact that the successor assessing authority had made inspection of the branches and head office of the assessee and collected material which shows that there has been a fresh material which necessitated change of opinion. We are unable to accept this contention in view of the finding of fact recorded by the Tribunal. In paragraph 22 of the order of the Tribunal, it is stated :
"Assuming that the power to reopen can validly be exercised under sub-rule (8) of rule 14-A of the CST Rules, we do not find on facts that the exercise of such powers is justified in this case. There is no fresh material which was not available at the time of the original assessment, but came into being subsequently enabling the successor officer to reopen the assessment. The relevant information enabling the competent authority to reopen an assessment must come into his possession subsequent to the assessment and this is the view taken by the Supreme Court while interpreting the scope of section 34 of the Income-tax Act under which the Income-tax Officer has the power to bring to tax any escaped assessment ( [Maharaj Kumar Kamal Singh v. Commissioner of Income-tax])."
23. In view of this finding of fact, we have no option but to hold that the reopening of the assessment by the assessing authority was wholly illegal and unjustified. Thus, though we uphold the jurisdiction of the assessing authority to reopen the assessment, yet we find that the circumstances in which the reopening of assessment is permissible, are lacking in this case, viz., there is no fresh material de hors the assessment record in that behalf, therefore, we are unable to accept the contention of the learned Government Pleader. Accordingly, T.R.C. No. 151 of 1985 fails.
24. The next contention which is only confined to T.R.C. No. 154 of 1985 is whether there are circumstances to remand matter to the assessing authority. The learned Government Pleader submits that all the material was before the Tribunal and that it ought to have determined the issues before it instead of remanding the case. Shri Natarajan, the learned counsel appearing for the assessee contends that remanding of the case was justified having regard to the finding of fact recorded by the Tribunal. We may note here that in a case section 6-A read with sections 2(dd) and section 3 of the CST Act, sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce in two circumstances, viz., (a) where the sale or purchase occasions the movement of goods from one State to another; or (b) where it is effected by a transfer of documents of title to the goods during their movement from one State to another. There is no dispute that there has been movement of goods from one State to another. Prima facie, it is an inter-State sale within the meaning of section 3. Section 6-A provides that where any dealer claims that he is not liable to pay tax under the Act (CST Act), in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and he is entitled to furnish to the assessing authority a declaration duly filled in and signed by the principal officer of the other place of business or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form which has to be obtained from the prescribed authority and that should be accompanied by the evidence of despatch of such goods. The assessing authority is given power to make an order to the effect that the particulars containing in the declaration furnished by the dealer are true. The consequence of such an order would be that the movement of the goods to which the declaration relates shall be deemed for the purposes of the CST Act to have been occasioned otherwise than as a result of sale. But such an order has to be made at any time before the assessment or at the time of the assessment. Rule 12(5) of the Central Sales Tax (Registration and Turnover) Rules, 1957, provides that the declaration referred to in sub-section (1) of section 6-A of the CST Act, shall be in form F. A reading of these provisions shows that where form F has been filed under rule 12(5) which has been duly received under section 6-A(2) of the CST Act, the presumption arising under section 3, in case of the movement of the goods from one State to another could be revoked and the sale will not be treated as inter-State sale. The assessee has filed those "F" forms duly certified. It appears that there are bout 5,000 transactions, but the Tribunal found in para 47 of the order that number of such transactions could even be more for the reason that the assessing authority has not given a specific finding in both the assessment orders that those were the only such instances and that the record of assessment did not disclose any further instances and in the absence of such a specific finding, the Tribunal was inclined to believe that the instances could be more having regard to the fact that the transactions aggregated in number about 5,000 for the two years. It pointed out that the failure on the part of the assessing authority to categorise the transactions and scrutinise each of the transactions in order to decide whether each transaction is exigible to tax under section 3(a) in view of the judgment of the Supreme Court in Tata Engineering and Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes, Jamshedpur [1970] 26 STC 354, the order of the assessment becomes vitiated. With regard to the assessment year in question, the Tribunal pointed out in paragraph 67 thus :
"...... from an examination of the factual position and legal position set out supra, we are of the view in respect of both the years of assessment 1979-80 and 1980-81 barring the two kinds of transactions, viz., where there was direct receipt of orders by the head office from the non-resident dealers and where such orders were transmitted by the branch office to the head office as a consequence of which in both the cases the goods were despatched directly by the dealers to the branch office without the intervention of the branch, the other transactions do not answer the description of inter-State sales falling within the purview of section 3(a) of the CST Act."
25. and remanded the case to the assessing authority to examine de novo after giving notice to the assessee and affording opportunity to produce evidence, each of the transactions in the light of the observations contained in the judgment. The assessee was also directed to file the "C" forms after de novo enquiry decides in the light of the observations contained in the judgment, to be inter-State transactions.
26. From the findings recorded by the Tribunal it is clear that the remand of the case for de novo enquiry is justified and we, therefore, dismiss the tax revision cases for the aforementioned reasons. No costs.
27. Petitions dismissed.