Jharkhand High Court
Mumbai vs The State Of Jharkhand on 9 August, 2023
Author: Rongon Mukhopadhyay
Bench: Rongon Mukhopadhyay, Deepak Roshan
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (T) No. 4073 of 2022
&
W.P.(T) No. 4071 of 2022
......
TML Drivelines Limited (Now, Tata Motors Limited) (Formerly, H. V. Axles
Limited), (a company registered under the Companies Act, 1956 and/or
Companies Act, 2013) having its office at Bombay House, 24, Homi Modi Street,
Mumbai-1, and having its Manufacturing Unit at Jamshedpur, P.O.-G.M. Works,
P.S. Telco Colony, Jamshedpur, District East Singhbhum; through its Authorized
Signatory-cum Deputy General Manager (Finance), Indirect Taxation, namely,
Pankaj Kumar Patwari, aged about 52 years, son of Late Shankar Lal, resident of
K3-28, Telco Colony, P.O. Telco, P.S. Telco, Jamshedpur, District East Singhbum,
PIN-831004. ...... Petitioner
-VERSUS-
1. The State of Jharkhand, through the Secretary, Commercial Taxes
Department, having its office at Project Building, P.O. Dhurwa, P.S. Jagannathpur,
District Ranchi, 834004 (Jharkhand).
2. The Commissioner, Commercial Taxes Department, Government of
Jharkhand, having its office at Near Utpad Bhawan, Kanke Road, P.O. Ranchi
University, P.S. Gonda, District Ranchi, PIN-834008.
3. Additional Commissioner Commercial Taxes, Commercial Taxes
Department, Government of Jharkhand, having its office at Near Utpad Bhawan,
Kanke Road, P.O. Ranchi University, P.S. Gonda, District Ranchi, PIN-834008.
4. Deputy Commissioner Commercial Taxes, Jamshedpur Circle,
Jamshedpur, having its office at Sakchi, P.O. and P.S. Sakchi, Town Jamshedpur,
District East Singhbhum (Jharkhand). .....Respondents
......
CORAM: HON'BLE MR. JUSTICE RONGON MUKHOPADHYAY
HON'BLE MR. JUSTICE DEEPAK ROSHAN
For the Petitioner : Mr. Sumeet Gadodia, Advocate
Mrs. Shilpi Sandil Gadodia, Advocate
Mr. Ranjeet Kushwaha, Advocate
For the Respondent-State: Mr. Rajiv Ranjan, Advocate General,
Mr. Ashok Yadav, Sr. S.C.-1,
CAV On.04.07.2023 Pronounced on. 09.08.2023
JUDGMENT
1. Since both these writ applications pertain to common Assessee raising common question of law and were heard analogous with the consent of the parties and as such both are being disposed of by this common Judgment.
22. The brief facts of the case are that the original company H.V. Transmissions Limited was engaged in the business of manufacturing and processing of axles and its spare parts on job work basis for Tata Motors Limited. The original company, pursuant to amalgamation order passed by Hon'ble High Court of Judicature at Bombay in Company Petition No. 247 of 2001, was merged with one 'H.V. Transmission Limited' and the name of amalgamated company was changed to 'TML Drivelines Limited' vide order dated 29th July, 2004. Thereafter, again, pursuant to the scheme of amalgamation approved by National Company Law Tribunal (for short 'NCLT'), Mumbai, 'TML Drivelines merged with 'Tata Motors Limited' and, at present, the assessee-company is known as 'Tata Motors Limited'.
3. The assessee-company, at the relevant point of time, was manufacturing axles and its spare parts for Tata Motors Limited, for which, entire raw materials were supplied by Tata Motors Limited and, after manufacturing of the goods, the goods were transferred to Tata Motors Limited. The assesse, for carrying out manufacturing activity, required certain goods to be utilized for manufacturing and processing and, accordingly, it applied for grant of Registration Certificate under the provisions of the Central Sales Tax Act, 1956 (for short 'CST Act'). Registration Certificate was granted to the assessee-company under the provisions of the CST Act on 05.04.2020 and in the Certificate, business of the company was described as 'Manufacturing, Designing, Processing and Trading' and the company was entitled to purchase automotive axles parts, components, instruments, appliances, equipment and apparatus at concessional rate. However, at the time of issuance of original Certificate, the aforesaid goods were only reflected against the column 'Re-sale' and in the column 'For use in the manufacturing or processing of goods for sale', the said goods were inadvertently not mentioned and the word "Wahi /"do" was left out in the original Registration Certificate.
The case of the assessee-company is that although original entry in its Registration Certificate itself was wide enough to entitle the assessee-company to purchase goods, namely, tools, spares and consumables at concessional rate and that it was all along purchasing the aforesaid goods i.e. tools, spares and consumables at concessional rate and no dispute was raised by the Department, but the assessee-company, by way of abundant caution got its Registration Certificate amended with effect from 06.10.2009 by including therein the goods namely, 'tools', 'spares' and 'consumables' for use by the company in 're- sale' and/or 'for manufacturing'.
4. The periods in dispute in the two writ petitions pertain to the Assessment Year 2008-09 [in W.P.(T) No. 4073 of 2022] and 2009-10 (in W.P.(T) No. 4071 of 2022] and in respect of both the Assessment Years, original assessment orders were passed by the 3 Assessing Officer, wherein the claim of the assessee-company towards concessional purchase was duly accepted and no dispute was raised by the Assessing Officer.
5. However, after completion of the assessment proceedings, an audit objection was raised by the office of the Accountant General, Jharkhand vide Audit Objection bearing No. IR 60/2014-15 and it was alleged that assessee-company has mis-utilized Form 'C' for purchase of goods at concessional rate as the assessee was carrying out manufacturing activity on job work basis and the goods manufactured by it was not sold by it but was sold by Tata Motors Limited. Thus, it was suggested that penalty under Section 10 A of the CST Act should be imposed upon the Petitioner-company on purchase of goods at concessional rate.
6. It is specific case of the petitioner that at the time of raising audit objection itself, the Assessing Authority did not agree with the audit objection, but despite thereof, issued a Notice to the assessee-company dated 29.04.2015 directing the assessee-company to explain the comments raised in the audit objection. Said Notice was issued under Section 70(1) of the JVAT Act which is a prequel action for initiation of re-assessment proceedings under Section 40(4) read with Section 42(3) of the JVAT Act. The assessee replied to the aforesaid Notice refuting all allegations levelled in the audit objection and, further, specifically raised the point that no re-assessment proceeding can be initiated against the assessee pursuant to audit objection, as in terms of Section 9 of the CST Act read with provisions of the JVAT Act, particularly Section 40(4) thereof, the very initiation of re-assessment proceedings is barred by limitation. It was specifically contended by the assessee that for the Assessment Year 2008-09, re-assessment proceeding could have been initiated and completed within five years from the end of the tax period i.e. latest by 31st March, 2014, and, for the Assessment Year, 2009-10, re- assessment proceeding could have been initiated and completed latest by 31st March, 2015. However notices issued to the assessee, pursuant to audit objection, were even beyond the statutory period of initiation of re-assessment proceedings.
7. Despite the fact that Assessing Officer did not agree with the audit objection, it proceeded to impose penalty under Section 10A of the CST Act. However, while imposing penalty under Section 10A of the CST Act, the Assessing Officer did not impose penalty on the ground that the assessee mis-utilized statutory Form 'C', but penalty was imposed on the ground that assessee, prior to amendment in its Certificate of Registration with effect from 06.10.2009, was not entitled to purchase tools, spares and consumables for carrying out the manufacturing activity, as the said goods were inserted for the first time with effect from 06.10.2009.
4Thus, though proceedings were initiated under Section 10(d) of the Act, but order was passed for violation of Section 10(b) of the Act.
8. The Assessee, being aggrieved by the said orders, filed Revision Petitions before the Commissioner of Commercial Taxes and said Revision Petitions were dismissed vide order dated 12.04.2019, wherein imposition of penalty under Section 10A of the CST Act was upheld, which resulted into filing of Revision applications before Commercial Taxes Tribunal, Jharkhand being Revision Application No. JR 35 of 2019 (for 2009-10) and JR 36 of 2019 (for 2008-09). Before the Commercial Taxes Tribunal, the Assessee primarily raised following grounds:-
(i) No re-assessment proceedings were ever initiated, as only Notice u/s 70(1) of the JVAT Act was issued and no Notice of re-assessment u/s 40(1) and/or 42(3) of the JVAT Act was issued.
(ii) Even if, allegedly, re-assessment proceedings were initiated, then also, re-
assessment proceedings were barred by limitation under Section 40(4) of the JVAT Act.
(iii) Assessing Officer as well as first Revisional Authority have travelled beyond the Show Cause Notice, as Show Cause Notice was issued in terms of Section 10(d) of the CST Act, whereas order was passed for alleged violation of provisions of Section 10(b) of the Act.
(iv) The assesse further contended that levy of penalty u/s 10-A of the CST Act could not have been imposed upon the assessee, as the assesse did not make any false and deliberate mis-representation with wrongful and mala fide intention of guilty mind or mens rea in purchasing goods at concessional rate.
9. The learned Tribunal, by its common impugned Judgment dated 08.03.2022, decided altogether five Revision applications, being two Revision applications pertaining to the assessee originally known as 'H.V. Axles Limited' and three Revision applications pertaining to the assessee, formally known as 'H.V. Transmission Limited'.
10. The Tribunal, in its decision, while interpreting the provisions of Section 40 read with Section 42(3) of the JVAT Act, held that no period of limitation has been prescribed under Section 42(3) of the JVAT Act for initiation of re-assessment proceedings and, hence, the period of limitation under Section 40(4) of the JVAT Act of five years would not be applicable where re-assessment proceedings have been initiated pursuant to audit objection.
Further, the learned Tribunal in respect of Revision applications of H.V. Transmission Ltd., bearing Nos. JR-37, JR-38 and JR-39, formed an opinion that the 5 assesse, prima facie, discharged the burden that it has not mis-represented at the time of purchase of goods at concessional rate and remanded the matters back to the Adjudicating Authority. However, in respect of Revision applications of the present Assessee, the Tribunal held that since in the original Registration Certificate, the assessee was only entitled to purchase goods at concessional rate for 're-sale' are not 'for use in manufacturing and processing of goods for sale', as the word 'Wahi'/'Do' was missing in the original Registration Certificate, the assessee-company cannot be treated as bona fide purchaser of goods at concessional rate. However, the Tribunal, for the Assessment Year 2009-10, with effect from 06.10.2019 i.e. the date on which Certificate was amended, ruled in favour of the assesssee and remanded the matter back to the adjudicating authority to re-consider the issue of Penalty.
11. Aggrieved by the aforesaid orders passed by learned Commercial Taxes Tribunal, writ petitions have been filed for the following reliefs:
W.P.(T) No. 4073 pertaining to the period 2008-09 "(i) For issuance of appropriate writ/order/direction including Writ of Certiorari for quashing/setting aside the order dated 08.03.2022 (Annexure-12) passed by the Commercial Taxes Tribunal, Jharkhand in Revision Application bearing no. JR 36 of 2019 pertaining to the period 2008-09, wherein Revision Application has been dismissed and imposition of penalty under Section 10A of the Central Sales Tax Act, 1956 has been upheld.
(ii) For issuance of further appropriate writ/order/direction including Writ of Declaration, declaring that Petitioner is not liable for imposition of penalty under Section 10A of the Central Sales Tax Act, 1956, especially because the Petitioner had no wrongful or mala fide intention and has not deliberately and knowingly purchased goods allegedly not mentioned in its registration certificate by utilizing Form-C warranting imposition of penalty upon the Petitioner."
W.P.(T) No. 4073 pertaining to the period 2009-10:
"(i) For issuance of appropriate writ/order/direction including Writ of Certiorari for quashing/setting aside the order dated 08.03.2022 (Annexure-12) passed by the Commercial Taxes Tribunal, Jharkhand in Revision Application bearing no. JR 35 of 2019 pertaining to the period 2009-10 to the extent the imposition of penalty under Section 10A of the Central Sales Tax Act, 1956 for the period 01.04.2009 till 05.10.2009 has been upheld.6
(ii) For issuance of further appropriate writ/order/direction including Writ of Declaration, declaring that Petitioner is not liable for imposition of penalty under Section 10A of the Central Sales Tax Act, 1956, especially because the Petitioner had no wrongful or mala fide intention and has not deliberately and knowingly purchased goods allegedly not mentioned in its registration certificate by utilizing Form-C warranting imposition of penalty upon the Petitioner."
12. Mr. Sumeet Gadodia, assisted by Mr. Ranjeet Kushwaha, Advocate, primarily advanced submissions on two issues before us namely; (i) Re-assessment proceedings were barred by limitation; and (ii) No penalty could have been imposed by the Petitioner as there was no deliberate misrepresentation by it with wrongful and mala fide intention of guilty mind or mens rea.
13. Learned counsel for the Petitioner brought to our notice the scheme of the JVAT Act which includes charging section, section pertaining to assessment, audit assessment, scrutiny assessment, re-assessment, etc. including provision of limitation under Section 40(4) of the Act, wherein it has been provided that no order of assessment/re-assessment can be passed after expiry of five years from the end of the tax period for which the proceedings relate. It was submitted that instant proceedings relate to Assessment Year 2008-09 and 2009-10 and five years from the end of tax period for the Financial Year 2008-09 expired on 31st March, 2014 and for the Assessment Year 2009-10 the same expired on 31st March, 2015, but re-assessment orders have been passed on 08.03.2022, which is clearly beyond the period of limitation prescribed under the Act. By placing extensive reliance upon the provisions of Section 42 of the JVAT Act, it was submitted that Section 42(1) and Section 42(2) contained 'non-obstante clause' extending the period of limitation prescribed under the Act for proceeding to assess and/or re-assess the tax payable by the dealer under certain circumstances/grounds. It has been submitted that there is no such non-obstante clause under Section 42(3) of the JVAT Act.
14. It has been brought to our notice that Section 42(1) of the JVAT Act enables the Assessing Authority to proceed to re-assess the tax payable by a dealer if pursuant to the Judgment or order passed by any Court or Tribunal which has become final, the prescribed authority is of the opinion that earlier order passed by it in respect of any dealer is erroneous or prejudicial to the interest of revenue being not in accordance with the ratio of a judgment delivered by any Court or Tribunal in a subsequent proceeding. It was submitted that Section 42(1) provided for an additional ground for initiation of re- assessment proceeding over and above the grounds on which re-assessment proceedings 7 could have been initiated under Section 40(1) of JVAT Act and specifically provided, inter alia, that the period of limitation as contained under the Act i.e., under Section 40(4) would stand extended for passing of the re-assessment order up to a period of three years from the date of Judgment or Order.
Reliance was further placed upon provisions of Section 42(2) and it was contended that Section 42(2) also contains 'non-obstante clause' extending the period of limitation by two years for passing of assessment/ re-assessment order which was required to be passed by the prescribed authority for giving effect to an order passed by a Court or Tribunal in appeal/revision in respect of the Assessee itself.
It has been further submitted that Section 42(3), which was inserted by Act 22 of 2011, lays down additional ground for initiation of reassessment proceeding where an objection or observation relating to either in fact or in law has been made by the Comptroller and Auditor General of India in respect of assessment/re-assessment order of an assessee. It was further been contended that although additional ground for initiation of reassessment proceeding against a dealer was inserted vide Section 42(3), but said Section did not contain any non-obstante clause extending the period of limitation for reassessment as prescribed under Section 40(4) of the JVAT Act.
15. Relying upon the above variance between the sub-sections of Section 42 of the Act, it has been submitted that where the Legislature, while providing for additional ground for initiation of reassessment proceeding, thought it appropriate to extend the period of limitation on availability of such ground, the same was specifically inserted by non-obstante clause, but the Legislature, in its wisdom, had not thought it fit to insert a non-obstante clause under Section 42(3) of the Act. Under the said circumstances, Section 42(3) lays down additional grounds for initiation of re-assessment proceeding, but said re- assessment proceeding has to be completed within the time scheduled in the enabling provision for re-assessment under the Act i.e. Section 40(1) read with Section 40(4), which prescribes the period of limitation of five years.
16. It was submitted that now it is well established law that if two different terminologies are used in the same Section, it intends to convey different meaning and, thus, in absence of 'Notwithstanding' clause contained under Section 42(3) of the JVAT Act, the period of limitation for completion of re-assessment proceeding would be governed by Section 40(4) of the JVAT Act. Reliance in this regard was placed on two decisions of the Hon'ble Supreme Court in the case of Sher Singh vs. State of Haryana reported in (2015) 3 SCC 724, [Para 13(2)]; and G.K. Choksi & Company Vs. Commissioner of Income Tax, reported in (2008) 1 SCC 246 [Para 16]. Reliance was 8 also placed on the principle of noscitur a sociis and it was contended that while interpreting Section 42 of the JVAT Act, said principle is required to be applied. Learned counsel further relied upon a decision of the Hon'ble Supreme Court in the case of Maharashtra University vs. Prakash Mandal, reported in (2010) 3 SCC 786 [paras 27 & 28] in support of the aforesaid proposition.
17. Learned counsel for the petitioner further invited our attention to Article 265 of the Constitution of India and submitted that the constitutional embargo enshrined under Article 265 of the Constitution of India is both on levy and collection of tax without authority of law and the State is not permitted to exact any tax without following procedure laid down by law. It was submitted that JVAT Act contains a complete mechanism and lays down detailed procedure under which re-assessment proceeding can be initiated against an assessee including the period of limitation. It was submitted that not only levy of tax but its collection should be in accordance with law and Section 42(3) of the JVAT Act is to be read with Section 40 of the said Act which is the only enabling provision for initiation of re-assessment proceeding and, thus, the period of limitation of five years from the end of tax period, as prescribed under Section 40(4) of the JVAT Act, would be applicable even in respect of re-assessment proceeding which has been initiated pursuant to audit objection. Reference in this regard was made to the decision of the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. & Ors. Vs. Union of India and ors. reported in (1997) 5 SCC 536 (Para-160).
18. On the question of penalty, Mr. Gadodia placed extensive reliance on the Judgment delivered by Hon'ble Apex Court in the case of Commissioner of Sales Tax, U.P. Vs. Sanjeev Fabrics, reported in (2010) 9 SCC 630, and it was submitted that there was no mis-representation on the part of the assessee-company at the time of purchasing goods at concessional rate. It was submitted that assessee-company is a manufacturing dealer and obtained Certificate of Registration for purchase of goods at concessional rate for use in manufacturing and processing of goods for sale. However, due to typographical error in original Registration Certificate, although the goods which the asssessee was entitled to purchase at concessional rate, was inserted in the column of 'Re-sale', but the word 'Wahi'/'Do' was left out in the original Registration Certificate.
It was further submitted that neither the assessee nor the Department ever noticed the aforesaid error and the said error, for the first time, was noted by Commercial Taxes Tribunal in its impugned order. In fact, the order imposing penalty by the Assessing Authority was on the sole ground that the assessee, prior to amendment of the Registration Certificate i.e. 06.10.2009, was not entitled to purchase tools, spares and consumables at concessional rate and it was never the case of the Department that 9 assessee-company was not entitled to purchase any goods at concessional rate for manufacturing activity prior to amendment of the Registration Certificate on 06.10.2009. It was submitted that the object of Section 10(b) of the CST Act is to prevent misuse of Registration Certificate and the Legislature has deliberately used the expression "falsely represents" in the said Section.
It was further submitted that the term "falsely represents" means doing an act intentionally or knowingly, and, in the present case, the assessee was under the bona fide believe that it was entitled to purchase goods at concessional rate for manufacturing activity and all along purchased goods at concessional rate for manufacturing activity right from the date of grant of Certificate of Registration i.e. 05.04.2000 and no objection was ever raised by the Revenue on the eligibility of the assessee to purchase goods at concessional rate. It was further submitted that it was only due to amendment carried out in the Registration Certificate on 06.10.2009 the dispute cropped up and even the Assessing Officer, while passing the penalty order, only stated that prior to 06.10.2009 the assessee-company was not entitled to purchase tools, spares and consumables at concessional rate and never questioned the eligibility of the assessee to purchase goods at concessional rate for manufacturing activity. Accordingly, by placing reliance in the case of 'Sanjeev Fabrics' (supra) it was submitted that the ratio of the said Judgment of Hon'ble Apex Court is squarely applicable in the case of the Petitioner as there was no intentional and/or false representation by the Petitioner-assessee, who was under the bona fide believe that it was entitled to purchase goods at concessional rate.
19. Per contra, Mr. Rajiv Ranjan learned Advocate General, appearing for the State of Jharkhand, assisted by Mr. Ashok Kumar Yadav, Sr. S.C.-1, submitted that on a plain reading of Section 42(3), it would be evident that said Section is an independent Section enabling initiation of re-assessment proceeding pursuant to an objection or observation raised by Comptroller and Auditor General of India either in facts or in law. It was fervidly submitted that said Section uses the word 'shall' which mandates the prescribed authority to proceed to re-assess the dealer pursuant to objection or observation being made by the Comptroller and Auditor General of India. While placing reliance upon Section 40(1) of JVAT Act, it was submitted that under the said provision, the prescribed authority 'upon information or otherwise' has to form 'reason to believe' for proceeding for re-assessment of a dealer, whereas, under Section 42(3), requirement of recording 'reason to believe' has been dispensed with and it is mandatory for the Assessing Authority to proceed to re-assess a dealer.
It was further submitted that in view of such mandatory provision inserted by the Legislature, deliberately, no period of limitation has been prescribed under Section 42(3) 10 which is an independent enabling provision of re-assessment inserted under the Act. It was submitted that the Comptroller and Auditor General of India is a Constitutional authority recognized under Articles 148 and 149 of the Constitution of India and under Article 149, the Comptroller and Auditor General of India is required to perform such duties and exercise such power in relation to the account of the Union and of the State or any other Authority, or Body as may be prescribed, by any law made by the Parliament. It was further submitted that the Comptroller and Auditor General of India (Duties, Power and Conditions of Services) Act, 1971 gives wide power upon the said authority to audit the account of State Government and while auditing the account of the State Government, if it finds that any tax has been short levied and/or not levied, or incorrectly levied upon an assessee, it is its duty to indicate the same by raising observation/objection. It was submitted that keeping in view the aforesaid fact, the Legislature, in its wisdom, inserted Section 42(3) under the JVAT Act providing, inter alia, that if an objection/observation is received by the Comptroller and Auditor General of India, the Assessing Authority shall proceed for re-assessment of the dealer and there would be no requirement of recording the satisfaction of 'reason to believe'. At the cost of repetition, it was submitted that it is in the aforesaid background, no limitation was prescribed under Section 42(3).
20. Learned Advocate General further submitted that under Section 42(3) of JVAT Act, re-assessment proceeding can be initiated in respect of a dealer whose assessment or re-assessment or scrutiny assessment has already been completed. Thus, it was contended that said Section even provides for re-assessment to be undertaken of an order of re- assessment already passed in respect of an assessee and, thus, Section 40(4) cannot be applied interpolating the period of limitation prescribed under the said Section. While referring to Section 42(1) and 42(2), it was submitted that said Section also provides for initiation of re-assessment proceeding where, pursuant to an order passed by a Court or Tribunal, an earlier order passed in respect of a dealer is found to be erroneous or prejudicial to the interest of revenue or where an order is required to be passed for giving effect to an order in appeal or revision passed by any Court or Tribunal.
He contended that it is true that under the said Section, 'non-obstante clause' has been inserted extending the period of limitation for carrying out assessment or re- assessment proceeding on happening of the events prescribed under the said Section, but, merely because 'non-obstante clause' has been provided in sub-section (1) or (2) of Section 42 extending the period of limitation, would not lead to an inference that non providing of such non-obstante clause under Section 42(3) would mean that Section 42(3) is to be read with Section 40(4). It was submitted that there is no intendment in a taxing statute and if the language of the statute is plain and clear, there is no scope of intendment 11 and the Court would not supply any casus omissus to the said provision. By placing reliance upon the decision of the Hon'ble Supreme Court in the case of State of Jharkhand vs. Shivam Coke, reported in (2011) 8 SCC 656, it was contended that where the Statute does not provide period of limitation, provisions of Limitation Act cannot be read into it and proceedings are required to be conducted in a reasonable period of time which would depend upon the facts and circumstances of each case.
21. Learned Advocate General further justified the levy of penalty by submitting, inter alia, that in the original Registration Certificate of the Petitioner, Petitioner was although entitled to purchase certain goods at concessional rate, but, it was entitled to purchase goods at concessional rate only for 'Re-sale' and not for 'manufacturing activity' and the Tribunal rightly passed order upholding the imposition of penalty.
22. Learned Advocate General further submitted that from 06.10.2009, Registration Certificate was amended and Petitioner was entitled to purchase goods for 'manufacturing activity' also and, accordingly, the Tribunal has quashed the order of penalty with effect from 06.10.2009 and remanded the matter back to the Assessing Officer and, hence, the impugned order does not require interference by this Hon'ble Court.
23. We have considered the rival contentions of the parties and have given our considerate consideration to the arguments advanced. Following issues arise for determination in the instant case, namely;-
(i) Whether Section 42(3) of the JVAT Act merely enumerates additional circumstances/grounds on which an assessee can be subjected to re-assessment, and, re- assessment proceeding is to be guided by substantive provision of re-assessment contained under Section 40 of the JVAT Act ?
(ii) Whether if Section 42(3) is held as not prescribing any period of limitation for carrying out re-assessment proceedings, said re-assessment proceeding is required to be carried out within the reasonable time and what should be the reasonable time under the scheme of the JVAT Act ?
(iii) Whether imposition of penalty under Section 10A of the CST Act against the Petitioner- assessee for alleged violation of provisions of Section 10(b) of the CST Act is sustainable in the eye of law ?
24. So far as Issue No. (i) and (ii) is concerned; the broad issue to be adjudicated in these writ applications is "Whether Section 42(3) is in itself the substantive provision provided under the JVAT Act for initiation of re-assessment proceeding or it merely enumerates additional circumstances/grounds under which re-assessment proceeding 12 can be initiated under the substantive provision of re-assessment contained under Section 40 of the JVAT Act."
25. Article 265 of the Constitution of India provides, inter alia, that there shall be no levy and collection of tax without any authority of law. Like, any taxing statute, the scheme of JVAT Act also contains provisions pertaining to charge of tax; secondly, provisions relating to computation of tax resulting into demand of tax; and, thirdly, provisions for recovery of tax so computed. The Hon'ble Apex Court, in the case of Mafatlal Industries (supra), vide Para 160, has held as under:-
"160. The constitutional embargo is on both the levy and collection of tax without authority of law. It has been repeatedly asserted by the Courts that every taxing law has three parts. First is charge, the second is computation which results in a demand of tax and the third is recovery of the tax so computed. The Constitution has enjoined that there must be a valid levy. The word 'levy' has also been understood in a broad sense in various cases to include not only the imposition of the charge but also the whole process upto raising of the demand. The Constitution guarantees that not only the levy should be lawful but also collection of tax must also be done with the authority of law. The State is not permitted to exact any tax from a citizen without the authority of law and without following the procedure laid down by law. This guarantee has to be strictly enforced not only in the matter of levy but also in the matter of collection. It was pointed out by this Court in the case of Municipal Council, Khurai and Another v. Kamal Kumar & Anr. Others, [1965] 2 SCR 653 that Article 265 of the Constitution clearly implies that the procedure to impose a liability upon the taxpayer has to be strictly complied with. Where it is not complied with, the liability to pay a tax cannot be said to be according to law. In that case, a validly passed municipal law was sought to be enforced, but the objections of the taxpayer were not dealt with by the Municipal Council as a whole but by a sub-committee. The Court held that this was erroneous. The phrase 'levy and collection' indicates that all the steps in making a man liable to pay a tax and exaction of tax from him must be in accordance with law. There must be a valid statute which will be properly followed. All steps must be taken according to statutory provisions. Recovery of tax must also be according to law. No one can be subjected to levy or tax or deprived of his money by the State without authority of law." (Emphasis supplied).
26. The Hon'ble Supreme Court, in the said Judgment, has clearly laid down that the phrase "levy and collection" indicates that all the steps in making a man liable to pay a tax and exaction of tax from him must be in accordance with law. All steps must be taken according to statutory provisions and no one can be subjected to levy and collection of tax without authority of law.
It is a settled law that completion of assessment of an assessee confers valuable right upon the said assessee and the said assessment proceeding can be subjected to re- assessment strictly in accordance with the statutory provisions contained under the Act.
27. It is in the aforesaid backdrop of enunciation of law, we have examined various provisions of JVAT Act, 2005 and like any other taxing statute, JVAT Act also contains 13 provisions for computation and demand of tax. Section 33 of the Act provides for 'Scrutiny of Returns', which enables the Assessing Authority to verify the correctness of calculation etc. in respect of the return filed by the assessee. Section 35 contains therein provisions for 'Assessment and Self-assessment'; and Section 35(8) of the said provisions provides, inter alia, that no assessment would be made after expiry of three years from the end of tax period for which tax is assessable. Section 37 deals with 'Audit Assessment' and Section 38 deals with 'Assessment of Dealer who fails to get himself Registered'. Section 39 provides, inter alia, that 'No Assessment after five years' shall be made under Sections 37 and 38 of the Act. Section 40 of JVAT Act, deals with the provision of 'Turnover escaping assessment' and, admittedly, Section 40(4) provides, inter alia, that no assessment or re-assessment shall be made after expiry of five years of the tax period for which tax is assessable. Section 41 of the Act provides for 'Exclusion of period for Assessment' where assessment or re-assessment proceedings have been stayed under the orders of competent court. Section 42 gives power of 're-assessment in certain cases'.
29. Thus, under the scheme of the Act, there is specific provision for assessment, self- assessment, audit assessment, assessment of dealers not registered, and, specific provisions have also been incorporated for carrying out re-assessment proceedings under Section 40(1) of the JVAT Act.
30. Section 40(1) of JVAT Act, which contains provision for re-assessment, lays down following conditions/circumstances under which a dealer can be subjected to re- assessment proceeding namely;--
(i) Dealer is already assessed under Section 35 or 36 of the Act;
(ii) The prescribed authority has received information or otherwise; and
(iii) The prescribed authority has reasons to believe that whole or part of the turnover of a dealer has--
(a) escaped assessment; or
(b) been under-assessed; or
(c) been assessed at lower rate;
(d) been wrongly allowed deduction therefrom; or
(e) been wrongly allowed credit therein.
31. Thus, under Section 40(1), the prescribed authority, upon information or otherwise received has to record his reasons to believe for initiating re-assessment proceeding if turnover of a dealer for any period has--
(a) escaped assessment;
14
(b) been under-assessed;
(c) been assessed at lower rate;
(d) been wrongly allowed deduction therefrom; or
(e) been wrongly allowed credit therein.
32. Thus, under Section 40(1), Assessing Authority can initiate re-assessment proceeding only after recording 'reasons to believe' of the circumstances enumerated therein for carrying out re-assessment proceeding.
33. Section 40(1) read with Section 42 of JVAT Act would reveal that Section 42 prescribes additional grounds/circumstances in which re-assessment proceeding can be initiated by the prescribed authority.
34. Section 42(1) specifically provides that the prescribed authority may initiate re- assessment proceeding if in the light of any Judgment or order passed by any Court or Tribunal, which has become final, the authority is of opinion that the assessment order passed in respect of a dealer for any period is erroneous or prejudicial to the interest of revenue. This enabling provision, which has been inserted under Section 42(1), contains a non-obstante clause which extends the period of limitation up to three years from the date of Judgment and order of any Court or Tribunal. Analysis of the said provision would clearly reveal the intention of the Legislature wherein the Legislature enabled the prescribed authority to correct an erroneous or prejudicial assessment order passed by it in the light of any Judgment or order of any Court or Tribunal rendered subsequently. Since this specific enabling provision was inserted as an additional ground for initiation of re-assessment proceeding, the Legislature, deliberately in its wisdom, inserted a non- obstante clause in Section 42(1) of the Act extending the period of limitation of five years prescribed under Section 40(4) for re-assessment by a further period of three years from the date of Judgment or order.
Thus, even if in a case where the period of limitation has already expired for initiation of re-assessment proceeding under Section 40(4) of the Act and thereafter Judgment is delivered by any Court or Tribunal, which pronounces any law; and if the prescribed authority is of the opinion that it has made any assessment earlier which is contrary to the said law declared by the Judgment and order by any Court or Tribunal, the prescribed authority, de hors the period of limitation prescribed, can initiate re- assessment proceeding under Section 40(1) read with Section 42(1) of the Act within three years from the date of Judgment or order.
36. Similarly, Section 42(2) of the Act also contains a non-obstante clause which extends the period of limitation up to two years from the date of the order passed by a 15 Court or Tribunal in an appeal or revision when a remand assessment or re-assessment proceeding is required to be undertaken to give effect to the finding or direction of the order of the Court or Tribunal. Thus, Section 42(2) specifically contemplates that if an order of assessment or re-assessment is required to be passed to give effect to the order of higher Court of Tribunal in appeal or revision in respect of the assessee itself, the said order can be passed within two years from the date of the order irrespective of the fact that period of limitation for passing assessment or re-assessment order has expired.
37. Thus, Section 42(1) and 42(2) of the Act contains non-obstante clause and the said clause appears to have been deliberately inserted by the Legislature wherein additional ground for opening of assessment has been laid down which is contingent upon happening of an event, as laid down in the aforesaid Section.
However, interestingly, while inserting provisions of Section 42(3), the Legislature, in its wisdom, has not prescribed any non-obstante clause extending the period of limitation for carrying out re-assessment proceeding. A careful reading of Section 42(3) would reveal that Section 42(3) provides, inter alia, that where an objection or observation relating either in facts or in law is raised by the Comptroller and Auditor General of India, the prescribed authority shall proceed to re-assess the dealer. In order to appreciate the contours of Section 42(3), reference may be made to Section 40(1) which contained provisions for initiation of re-assessment proceeding by the prescribed authority upon 'receiving information or otherwise' after recording 'reasons to believe'.
38. The Hon'ble Supreme Court, in its Judgment rendered in the case of Larsen and Toubro Limited, reported in (2017) 12 SCC 780, while interpreting similar provisions under Section 19 of the Bihar Finance Act, 1981, has held as under:-
"31. The contention whether finding the information from the very facts that were already available on record amounts to information for the purpose of Section 19 of the State Act, it would be sufficient to refer to a judgment of this Court in Anandji Haridas & Co. (P) Ltd. v. S.P. Kasture wherein it was held that a fact which was already there in records does not by its mere availability that a fact which was already there in records does not by its mere availability become an item of "information" till the time it has been brought to the notice of assessing authority. Hence, the audit objections were well within the parameters of being construed as "information" for the purpose of Section 19 of the State Act.
32. The expression "information" means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment. We are of the clear view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to reopening of 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 and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor 16 assessing authority proceeded, were same. The question still is as to whether in the present case, the assessing authority was satisfied or not."
39. Thus, even earlier, prior to insertion of Section 42(3), the Assessing Authority, could have treated audit objection as an information and could have initiated re- assessment proceeding. However, Section 42(3) provides that when information is received by way of observation/objection from the Comptroller and Auditor General of India, the Assessing Authority has to proceed to re-assess the dealer. Thus, what is dispensed with under Section 42(3) is recording of reasons to believe by the Assessing Authority for initiation of re-assessment proceeding.
40. Learned Advocate General vehemently argued that Section 42(3) mandates the Assessing Authority to proceed with re-assessment pursuant to receipt of audit objection and the Assessing Authority is not required to be satisfied with the audit objection and it is compulsory upon the said authority to proceed for re-assessment. It is in that background, it has been submitted by learned Advocate General that the Legislature, deliberately, has not provided any period of limitation under Section 42(3) and said Section is an independent Section enabling the Assessing Authority for proceeding with the re-assessment proceedings pursuant to audit objection.
41. Learned Advocate General, by placing reliance upon Articles 148 and 149 of the Constitution of India, submitted that since the Comptroller and Auditor General of India is a constitutional authority and is entitled to audit the accounts of State Government, an objection/ observation made by the said authority has to be given due weightage and, it is for the said reason that by law it has been made mandatory by the Legislature to proceed for re-assessment and it is in the said background, the Legislature, in its wisdom, inserted Section 42(3).
42. We have carefully examined the submissions of learned Advocate General and we have also examined the provision of the Comptroller and Auditor General of India (Duties, Powers and Conditions of Services) Act, 1971. We are not in agreement with the proposition of law advanced by learned Advocate General, as the Comptroller and Auditor General of India, under the Act of 1971, essentially performs administrative or executive functions and it cannot be attributed with power of judicial supervision over the quasi-judicial authority. The Hon'ble Apex Court, in the case of Indian Eastern Newspaper Society, New Dehi Vs. Commissioner, reported in (1979) 4 SCC 248, has held as under:-
"11. Whether it is the internal audit party of the Income Tax Department or an audit party of the Comptroller and Auditor- General, they perform essentially administrative or executive functions and cannot be attributed the powers of judicial supervision over the quasi-judicial acts of income tax authorities. Nor does section 16 of the Comptroller and 17 Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 envisage such a power for the attainment of the objectives incorporated therein."(Emphasis supplied).
"12. But although an audit party does not possess the power to so pronounce on the law, it nevertheless may draw the attention of the Income Tax officer to it. Law is one thing, and its communication another. If the distinction between the source of the law and the communicator of the law is carefully maintained, the confusion which often results in applying section 147(b) may be avoided. While the law may be enacted or laid down only by a person or body with authority in that behalf, the knowledge or awareness of the law may be communicated by anyone. No authority is required for the purpose."
43. Further, in the Judgment rendered by Hon'ble Apex Court, in the case of Larsen and Toubro (supra), Hon'ble Apex Court, after examining almost all earlier Judgments, although held that an audit objection would be well within the parameters of being construed as information, but at the same time, it has been held that merely because audit objection has been raised, the same would not authorize the Assessing Authority to proceed with re-assessment and the Assessing Authority has to record his satisfaction on the audit objection. In the said Judgment, Hon'ble Supreme Court noticed that the Assessing Authority was not agreeing with the audit observation, but, despite the same, proceeded to issue Notice on the ground of direction issued by Audit Party and not on its personal satisfaction and it was clearly held by Hon'ble Apex Court that same was not permissible under law; and the very initiation of re-assessment proceeding was declared as without jurisdiction. Relevant extract of the Judgment is quoted herein-under:-
"34. From a perusal of the last paragraph of the aforementioned report of the audit party, it is clear that the assessing officer was of the opinion that as the goods had not been transferred to the appellant Company but had been consumed, so it does not come under the purview of taxation. In other words, the assessing officer was not satisfied on the basis of information given by the audit party that any of the turnover of the appellant Company had escaped assessment so as to invoke Section 19 of the State Act. From the above, it also appears that the assessing officer had to issue notice on the ground of direction issued by the audit party and not on his personal satisfaction which is not permissible under law.
35. In view of the above discussion, we are of the considered view that the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur is without jurisdiction and the High Court was not right in dismissing the petition filed by the appellant Company." (Emphasis supplied).
44. The law is no more res integra that a quasi-judicial authority cannot abdicate its jurisdiction on the dictate of an external authority and proceed to pass order on such external dictate. In the present case, it has been argued by learned Advocate General, Section 42(3) mandates the assessing authority to initiate re-assessment proceeding on the dictate of the Audit Party which, on the face of discussions held above, would amount to abdication of jurisdiction of the assessing authority being a quasi-judicial body to external dictates, which would be contrary to the ratio laid down by the Judgment of Hon'ble Apex Court in the case of Indian Eastern Newspaper Society, New Dehi (supra) and in the case of Larsen and Toubro (supra).
1845. It is in the aforesaid backdrop; we are required to examine as to whether Section 42(3) is an independent provision conferring power of re-assessment or is merely as additional ground conferred under the Act upon the assessing authority for carrying out re-assessment proceedings.
46. It is trite law that a statutory term is recognized by its associated word and its colour and content are to be derived from their context. The Hon'ble Supreme Court in the case of Maharashtra University (supra), vide Para 27 and 28, has held as under:-
"27. The Latin expression "ejusdem generis" which means "of the same kind or nature" is a principle of construction, meaning thereby when general words in a statutory text are flanked by restricted words, the meaning of the general words are taken to be restricted by implication with the meaning of the restricted words. This is a principle which arises "from the linguistic implication by which words having literally a wide meaning (when taken in isolation) are treated as reduced in scope by the verbal context". It may be regarded as an instance of ellipsis, or reliance on implication. This principle is presumed to apply unless there is some contrary indication.
28. This ejusdem generis principle is a facet of the principle of noscitur a `sociis. The Latin maxim noscitur a sociis contemplates that a statutory term is recognised by its associated words. The Latin word "sociis" means "society". Therefore, when general words are juxtaposed with specific words, general words cannot be read in isolation. Their colour and their contents are to be derived from their context."
47. A holistic reading of Section 42 would reveal that said provision contains three different situations/circumstances under which re-assessment proceeding can be initiated. So far as Section 42(1) and 42(2) is concerned, the Legislature has deliberately inserted the non-obstante clause extending the period of limitation but the Legislature has not extended the period of limitation pursuant to audit objection under Section 42(3). This, in our opinion, has been deliberately omitted by the Legislature as it was conscious that re- assessment proceeding would have been otherwise initiated under Section 40(1) on 'information being received by the Audit Party', but the only further requirement was to record 'reasons to believe'. What has been dispensed with in Section 42(3) is the requirement of recording 'reasons to believe' only. It is under the said circumstances, non-obstante clause was not inserted in Section 42(3) extending the period of limitation from the date of receipt of audit objection, and, thus, the period of limitation would be governed by Section 40(1) read with 40(4) of the JVAT Act.
At the cost of repetition, if two different terminologies are used in same Section, it intends to convey different meaning and, thus, in absence of 'non-obstante clause' contained under Section 42(3) of JVAT Act, the period of limitation for completion of re- assessment proceeding would be governed by Section 40(4) of the JVAT Act.
49. We are further not consciously deliberating on the issue of Section 42(3), which mandates the assessing authority to initiate re-assessment proceeding pursuant to receipt 19 of audit objection being contrary to the very basic structure of exercise of power of quasi- judicial authority, as vires of Section 42(3) is not under challenge before us.
50. At this stage, we may further record the arguments advanced by learned Advocate General by referring to Section 42(3) of the Act wherein it was argued that Section 42(3) enables initiation of re-assessment proceeding not only of completed assessment proceeding, but also of completed re-assessment proceeding. It has been argued that Section 42(3) even enables the assessing authority to initiate fresh re-assessment proceeding pursuant to audit objection in case of an assessee against which earlier re- assessment order has already been passed. In our opinion, said argument of learned Advocate General is again in the teeth of the scheme of JVAT Act, as, under the JVAT Act, there is no provision for initiation of re-assessment proceeding against a re- assessment order and only remedy, thereafter, is to prefer appeal or revision. If the assessing authority is allowed to initiate repeated re-assessment proceeding against an assessee merely on the dictate of Audit Party, there would be no finality of assessment and the assessee would be having domical sword hanging over in it in perpetuity, which is not the scheme of the Act.
51. Learned Advocate General has further argued that since Section 42(3) does not prescribe any period of limitation, re-assessment proceeding can be initiated at any time. It was also submitted that in view of the Judgment in the case of Shivam Coke (supra), re-assessment proceeding has to be initiated within a reasonable period of time and what would be reasonable period of time would depend upon the facts and circumstances of the case. Since we have already declared that Section 42(3) is to be read with Section 40(4) of JVAT Act and limitation period for carrying out re-assessment proceeding is five years, we are not deliberating further over the said issue. However, it would be apt to also refer to the Judgment rendered by Hon'ble Supreme Court in the case of State of Punjab & Ors. Vs. Bhatinda District Cooperative Milk Producers Union Ltd. (supra), wherein Hon'ble Apex Court, while examining the provisions contained under the Punjab General Sales Tax Act conferring power of suo-motu revision upon the Commissioner, held that although said Section prescribed no period of limitation but the same would not mean that suo-motu power can be exercised at any time. The Hon'ble, in the said Judgment, held that if no period of limitation is prescribed, statutory authority must exercise jurisdiction within reasonable time and the reasonable period would depend upon the nature of the statute, liabilities and other relevant factors. In the said Judgment, Hon'ble Supreme Court, while examining the scheme of Punjab General Sales Tax Act, held that revisional power should ordinarily be exercised within a period of three years and, in any event, the same should not exceed the period of five years. Said finding was given by the Hon'ble Apex Court by considering various provisions of the Punjab Act 20 which contains provision of limitation varying from three years to five years from the end of the tax period.
Similarly, under the scheme of JVAT Act also, provisions of limitation for carrying out assessment, audit assessment, scrutiny assessment, re-assessment proceedings, etc. have been prescribed to be three years to five years. It is for the said reason also, in our opinion, while incorporating provision of Section 42(3), the Legislature, in its wisdom, had not sought to extend the period of limitation by inserting non-obstante clause.
52. In order to appreciate Issue No. (iii), we deem it appropriate to quote provisions of Section 10 and 10A of the CST Act, 1956, which is quoted as under:-
"10. Penalties.--If any person--
(a) furnishes a declaration under sub-section (2) of section 6 or sub-section (1) of Section 6-A or sub-section (4) or sub-section (8) of section 8, which he knows, or has reason to believe, to be false; or (aa) fails to get himself registered as required by section 7 or fails to comply with an order under sub-section (3-A) or with the requirements of sub-section (3-C) or sub-section (3-E) of that section;
(b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his certificate or registration; or
(c) not being a registered dealer, falsely represents when purchasing goods in the court of inter-State trade or commerce that he is a registered dealer; or
(d) after purchasing any goods for any of the purposes specified in clause (b) or clause (c) or clause (d) of sub-section (3) or sub-section (6) of section 8 fails, without reasonable excuse, to make use of the goods for any such purposes;
(e) has in his possession any form prescribed for the purposes of sub-section (4) or sub-section (8) of section 8 which has not been obtained by him or by his principal or by his agent in accordance with the provisions of this Act or any rules made thereunder;
(f) collects any amount by way of tax in contravention of the provisions contained in section 9-A;
he shall be punishable with simple imprisonment which may extend to six months, or with fine or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues. 10-A Imposition of penalty in lieu of prosecution.--(1) If any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one and a half times the tax which would have been levied under sub-section (2) of section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section:
Provided that no prosecution for an offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section. (2) The penalty imposed upon any dealer under sub-section (1) shall be collected by the Government of India in the manner provided in sub-section (2) of section 9--21
(a) in the case of an offence falling under clause (b) or clause (d) of section 10, in the State in which the person purchasing the goods obtained the form prescribed for the purposes of sub-section (4) of section 8 in connection with the purchase of such goods;
(b) in the case of an offence falling under clause (c) of section 10, in the State in which the person purchasing the goods should have registered himself if the offence had not been committed."
53. The provisions of Section 10 and 10-A of the CST Act were subject matter of interpretation by Hon'ble Apex Court in the case of 'Sanjeev Fabrics' (supra). The Hon'ble Court in the said case was considering the issue as to whether requirement of mens rea is an essential ingredient for levy of penalty under Section 10(b) read with Section 10-A of the Act. After examining the provisions of Section 10 of the CST Act, it noted that Section 10 enunciates seven types of violation of provisions of the Act which constitute an offence and is punishable by prosecution with simple imprisonment which may extend to six months, or with fine or with both; and in case of continuing offence, said Section provides for daily fine. The Hon'ble Apex Court, while noting Section 10-A, noticed that said Section provides for penalty in lieu of prosecution and it is in that background, Hon'ble Apex Court interpreted the term 'falsely represents' as contained under Section 10(b). The Hon'ble Court, after considering various Judgments noted that object of Section 10(b) of the Act was to prevent any misuse of Registration Certificate, but still the Legislature, in the said Section, has used the expression "falsely represents"
in contravention to "wrongly represent" and, thus, noted that what was required to be construed is whether the words "falsely represents" would cover mere incorrect representation or would embrace only such representations which are knowingly, willfully and intentionally false. In the backdrop of the aforesaid, Hon'ble Supreme Court, in the case of 'Sanjeev Fabrics' has held as under:-
"36. In view of the above, we are of the considered opinion that the use of the expression "falsely represents" is indicative of the fact that the offence under Section 10(b) of the Act comes into existence only where a dealer acts deliberately in defiance of law or is guilty of contumacious or dishonest conduct. Therefore, in proceedings for levy of penalty under Section 10-A of the Act, burden would be on the Revenue to prove the existence of circumstances constituting the said offence."
"37. Furthermore, it is evident from, the heading of Section 10-A of the Act that for breach of any provision of the Act, constituting an offence under Section 10 of the Act, ordinary remedy is prosecution which may entail a sentence of imprisonment and the penalty under Section 10-A of the Act is only lieu of prosecution. In light of the language employed in the section and the nature of penalty contemplated therein, we find it difficult to hold that all types of omissions or commissions in the use of Form C will be embraced in the expression "false representation". In our opinion, therefore, a finding of mens rea is a condition precedent for levying penalty under Section 10(b) read with Section 10-A of the Act."
54. In the backdrop of aforesaid enunciation of law, we are required to examine the case of the Petitioner and to determine as to whether requirement of Section 10(b) has been satisfied while passing the impugned order of penalty against the Petitioner. The 22 case of the Petitioner is that the Petitioner is a manufacturing dealer which undertakes the activity of manufacturing and processing of goods for Tata Motors Limited and it, accordingly, applied for registration and was granted CST Registration with effect from 05.04.2000. Said Registration Certificate, all along, was treated by the Petitioner as well as Respondent-Department to permit the Petitioner to purchase the goods mentioned therein at concessional rate for manufacturing and processing activity and no dispute whatsoever was raised. The further case of the Petitioner is that it got its Certificate of Registration amended with effect from 06.10.2009 by way of abundant caution and added certain goods which, though, were covered under the generic entry in the original Registration Certificate, itself, but were added separately vide aforesaid amendment to dispel any doubt of entitlement of the Petitioner to purchase goods at concessional rate.
In fact, this amendment triggered the dispute in question and an audit objection was raised by the office of the Accountant General, Jharkhand. The Accountant General raised the audit objection not under Section 10(b) of the CST Act, but under Section 10(d) of the Act. Thus, even as per the Accountant General, the goods, which were purchased by the Petitioner at concessional rate, were mentioned in its Registration Certificate for being utilized for manufacturing and processing of goods for sale, but the Auditor raised objection stating, inter alia, that Petitioner has violated Section 10(d) of the Act as it is purchasing goods at concessional rate and utilizing the said goods for manufacturing and processing of goods at job work for Tata Motors Limited and, hence, it is not entitled for the benefit of concessional purchase.
55. The Assessing Officer did not agree with the said audit objection and, in our opinion, rightly so in view of the Judgment of the Hon'ble Apex Court in the case of 'Assessing Authority-cum-Excise and Taxation Officer, Gurgaon vs. East India Cotton Manufacturing Company Ltd., Faridabad, reported in (1981) 3 SCC 53.
56. Although the Assessing Authority did not agree with the audit objection, but, interestingly, it proceeded to pass the re-assessment orders imposing penalty under Section 10A upon the Petitioner on alleged ground of violation of Section 10(b) of the Act by declaring that Petitioner, prior to 06.10.2009, was not entitled to purchase tools, spares and consumables at concessional rate for manufacturing and processing of goods for sale. The plea taken by the Petitioner that the original entry contained generic terms of the goods and what was added was merely the species thereof, was not examined by the Assessing Authority and no finding whatsoever was given regarding deliberate defiance in law of dishonest conduct of the Petitioner.
Thus, the Assessing Authority failed to discharge its burden to prove the existence of circumstances constituting the said offence under Section 10(b). It may also be noted here that Show Cause Notice, pursuant to audit objection, was issued for alleged violation 23 of Section 10(d) of the Act, but orders were passed for alleged violation of Section 10(b) of the Act. The first Revisional Authority i.e. Additional Commissioner of Commercial Taxes also held that the audit objection is not valid in view of the Judgment of 'East India Mfg. Company Ltd.' (supra), but still upheld the order of the Assessing Authority imposing penalty, which compelled the Petitioner to move before the second Revisional Authority i.e. Commercial Taxes Tribunal.
57. The Commercial Taxes Tribunal, interestingly, upheld levy of penalty on a completely new ground by recording, inter alia, that in the original Registration Certificate of the Petitioner, although Petitioner was entitled to purchase goods at concessional rate for re-sale, but the word 'Wahi'/'Do' was missing in the Registration Certificate and Petitioner was not entitled to purchase goods for manufacturing and processing of the goods for sale. This finding rendered by Commercial Taxes Tribunal is clearly travelling beyond the impugned orders and has been raised for the first time before the Tribunal.
58. At the cost of repetition, the Respondent-Department, all along since inception i.e. 05.04.2000, never questioned the entitlement of the Petitioner-assessee to purchase goods at concessional rate for manufacturing and processing of goods for sale. All along, assessee-company was purchasing goods for manufacturing and processing of goods for sale and nobody noticed the inadvertent typographical error which occurred in the original Registration Certificate where the word 'Wahi'/'Do' was missing.
In fact, the Auditor also never raised the said objection and the Assessing Authority as well as the first Revisional Authority also never raised such objection. This fact itself is demonstrative of the conduct of the assesse and it cannot be said that the assesse has falsely represented in deliberate defiance of law with mens rea being guilty of contumacious or dishonest conduct in purchase of goods at concessional rate for manufacturing and processing of goods for sale.
59. Accordingly, by following the ratio laid down by Hon'ble Apex Court in 'Sanjeev Fabrics' (supra), we declare that imposition of penalty against the Petitioner under Section 10A of the Act is not sustainable in the eye of law, and, the assesse was under
the bona fide belief that its Registration Certificate entitled it to purchase goods at concessional rate for manufacturing and processing of goods for sale and the said bona fide belief of the assesse is fortified by the stand taken by the Revenue itself, wherein at no stage it was disputed that assesse was not entitled to purchase goods at concessional rate for manufacturing and processing activity. The assesse-Petitioner, therefore, cannot be said to have falsely represented knowingly and willfully with guilty mind and, thus, we are of the opinion that the order of penalty levied against the assesse is not sustainable.24
60. Accordingly, the questions framed by us are answered as under:-
(i) Issue Nos. (i) and (ii) :- Section 42(3) is to be read with Section 40(4) of the JVAT Act and the limitation prescribed for carrying out re-assessment proceedings would be five years. Since we have already held that Section 42(3) is to be read with provisions of Section 40(4), Issue No. (ii) does not warrant any further adjudication.
However, in view of deliberations made above in preceding paragraphs and following the principles laid down by Hon'ble Apex Court in the case of 'Bhatinda District Cooperative Milk Producers Union Ltd.' (supra), we declare that in cases where no period of limitation has been prescribed under the JVAT Act, proceedings should be carried out within a reasonable period of limitation; and reasonable period of time is to be decided depending upon the scheme of the Act.
62. Issue No. (iii) :- The order imposing penalty under Section 10-A does not withstand the test laid down by Hon'ble Apex Court in the case of 'Sanjeev Fabrices' (supra) and it is held that levy of penalty under Section 10-A of the Act against the Petitioner-assessee is not sustainable in law.
63. Accordingly, we allow both these writ applications filed by the Petitioner and quash and set aside the common impugned order dated 08.03.2022 passed by Commercial Taxes Tribunal in JR 35 of 2019 and JR 36 of 2019. Pending, I.As., if any, stand disposed of.
(Rongon Mukhopadhyay, J) (Deepak Roshan, J) Jharkhand High Court Dated/9 /08 /2023 Amardeep/AFR