2009 NTN 40) [ALLAHABAD HIGH COURT]

Transcription

1 2009 NTN (Vol. 40) [ALLAHABAD HIGH COURT] Hon ble R.K.Agarwal & Hon ble S.K.Gupta, JJ. Civil Misc. Writ Petition No. 943 of 2000 M/s Swati Menthol and Allied Chemicals Pvt. Limited vs. Assistant Commissioner (Assessment)-II Trade Tax Rampur Date of Decision : 15th July, 2009 For the Petitioner : Shri Rakesh Ranjan Agarwal, Advocate For the Respondent : Shri U.K. Pandey, Standing Counsel Re-assessment - On the basis of informations received - Validity of proceedings - U. P. Trade Tax Act, 1948 Section 21 - Petitioner disclosed tax paid purchases of Menthol oil against Form III-C(2) - Purchases of tax paid menthol oil was made from M/s Laxmi Trading Company, Bijnor by means of three invoices - At the time of original assessment the Assessing officer verified the three invoices and also signed the same by putting his signatures on it - The payment of the aforesaid purchases aforesaid three bills were made by the petitioner by means of Account payee cheques and entry regarding such payments were recorded in the ledger of the account of M/s Laxmi Trading Company - Reassessment proceedings initated on the basis of a letter of Trade Tax Officer Bijnor that M/s Laxmi Trading Company neither has disclosed the sale of Menthol oil in its return nor has deposited any tax thereon - In the said letter it was admitted that Form III-C(2) No was issued by the office of Trade Tax Officer, Chandpur to M/s Laxmi Trading Company and the said form has not been either reported to have been used or lost till the date of issuance of letter - Some information was also received by the respondent from the Assistant Commissioner (Assessment) Trade Tax, Khatima which disclosed the issuance of Form 3 Kha by the petitioner against the purchases Polythene bags - Validity of proceedings challanged before High Court - Hon'ble High Court quashed the proceedings and held as under : Held : The only basis for issuance of notice under Section 21 of the Act was the information received from the Trade Tax Officer, Chandpur district Bijnor and Assistant Commissioner (Assessment) Trade Tax Khatima district Udham Singh Nagar. It is not disputed that Form III-C2 bearing serial no was issued by the Trade Tax Officer, Chandpur to M/s Laxmi Trading Company and the sale of menthol oil for Rs.51 lacs by M/s Laxmi Trading Company to the petitioner was accompanied by the said Form III-C2 and at the time of regular assessment of the petitioner, the entire material relating to the purchase of the said menthol oil for Rs.51 lacs was duly verified by the respondent. The said purchase of menthol oil was also duly recorded in the books of account and supported by the invoices and Form III-C2 as well as by the statement of account issued by the Bank of Baroda which clearly indicates that the said commodity was purchased by the

2 petitioner from M/s Laxmi Trading Company in accordance with the Act and Rules made thereunder. It appears that M/s Laxmi Trading Company neither disclosed the sale of menthol oil made to the petitioner nor the issuance of Form III-C2 to its assessing authority. However, this fact was communicated to the respondent and consequently the notices dated and were issued under section 21 of the Act to the petitioner to verify the transaction. The Trade Tax Officer,Chandpur however, has admitted in his letter dated that the said Form III-C2 No was issued to M/s Laxmi Trading Company. It is neither the case of the respondent department that M/s Laxmi Trading Company was a fictitious concern nor does the respondent say that Form III-C2 No was a forged one. The record of the case shows that it was issued by the Trade Tax Officer, Chandpur to M/s Laxmi Trading Company in accordance with the rules. If the selling dealer does not submit account of user of the Form III-C2 issued to him that can never be a valid ground for rejection of the claim of the petitioner since there was no fault of the petitioner if the selling dealer does not disclose the transaction in its books of account and furnish details to its assessing officer. We are fortified in our view by the decision of this Court in M/s Om Trading Company Vs. Commissioner of Trade Tax, 2000 UPTC 227, wherein it has been held that there was no fault of the assessee if other dealer who issued the form did not furnish the details to its assessing officer. This apart, assessment under section 21 of the Act has already been made against M/s Laxmi Trading Company on imposing tax on the purchases of menthol oil after taking into consideration the information sent by the respondent to the Trade Tax Officer, Chandpur. Thus, the tax has already been imposed on the sale of menthol oil to the tune of Rs.51 lacs in the hands of M/s Laxmi Trading Company and the said firm has been held responsible for paying the tax on the sale of menthol oil for Rs.51 lacs to the petitioner, as such the petitioner cannot be held liable for any tax on the purchase of menthol oil for Rs.51 lacs against Form III-C2 issued by M/s Laxmi Trading Company. Form III-B bearing serial No which was used for the purchase of Polythene bags for Rs.46,39,940/- has been annexed as ANNEXURE-SCA2 to the supplementary counter affidavit. A bare perusal of the said form clearly shows that the form was issued by the Trade Tax Officer on (during the assessment year ) to the petitioner and the petitioner had used the said Form on A Division Bench of this Court in Deoki Nandan Vs. M.L.Gupta, Sales Tax Officer, Etawah, (1969) 23 STC 481 has held that existence of reasons on the part of Trade Tax Officer that certain turnover has escaped assessment is a condition precedent for acquiring jurisdiction under section 21 of U.P. Trade Tax Act. The belief of the officer is not purely subjective but has to be based upon relevant material. Therefore it is not open to the officer concern to initiate proceeding under Section 21 of the Act with a view to launch a fishing and roving enquiry on the

3 off chance of finding some escapement of tax. He must have in his possession some material pointing towards the escapement of turn over before he can entertain a belief about the escapement and can assume jurisdiction under section 21 of the Act and it is open to this Court in exercise of jurisdiction under Article 226 of the Constitution to scrutinize the material on record to ascertain the truth or otherwise of the challenge by the assesee of the existence of the belief on the part of officer on the escapement of turnover. It is also notable that while issuing notices under section 21 of the Act on the assessing authority has not recorded any reasons for his satisfaction. The material on which the Assistant Commissioner (Assessment) Trade Tax formed its belief must be on record and those material should be relevant for forming the belief that the turnover had escaped assessment to tax. In view of the foregoing discussions the impugned notices issued under section 21 of the U.P.Trade Tax Act as well as under Central Sales Tax Act cannot be sustained and are accordingly quashed. Cases referred : Om Trading Company vs. C.T.T UPTC 227 Deoki Nandan vs. M.L.Gupta, S.T.O., Etawah 1969 (23) STC 481 (Hon ble Shashi Kant Gupta, J.) JUDGMENT This writ petition has been filed inter- alia for the following reliefs: (a) Issue a writ, order or direction in the nature of Certiorari quashing notice no.710 dated (Annexure-9), Notice nos.844 and 845 dated (Annexure-10 & 11) under Section 21 of the U.P. Trade Tax Act for the assessment year (U.P) and (Central) issued by the Assistant Commissioner (Assessment)- II, Trade Tax, Rampur, respondent. (a1) Issue a writ order or direction in the nature of certiorari quashing the notices dated issued by the respondent no.1 under section 21 of the U.P. Trade Tax act for the assessment year (U.P.) and (Central) (Annexur4e Nos. 12 and 13 respectively to the writ petition). (b) Issue a writ, order or direction in the nature of mandamus directing the respondent not to proceed with the proceeding under Section 21 of U.P. Trade Tax Act for the assessment year (U.P.) and (Central). 2. The background facts of the case in a nutshell essentially are as follows: 3. The petitioner is carrying on the business of manufacture of Menthol and D.M.O. etc. after purchasing Mentha oil. The regular

4 assessment under Rule 41 of U.P. Trade Tax Rules, 1948 (hereinafter referred to as Rules ) was framed by the respondent on for the assessment year ( U.P). The petitioner disclosed tax paid purchases of Menthol oil against Form III-C(2) for Rs.51 lacs. The purchases of tax paid menthol oil was made from M/s Laxmi Trading Company, Noorpur Bijnor by means of three invoices. In each of the invoices issued by M/s Laxmi Trading Company it was mentioned that menthol oil are tax paid and it is against Form III- C(2). At the time of original assessment the assessing officer verified the three invoices and also signed the same by putting his signatures on it. The payment of the aforesaid purchases of Menthol oil covered with the aforesaid three bills was made by the petitioner by means of Account payee cheques and entry regarding such payments were recorded in the ledger of the account of M/s Laxmi Trading Company maintained by the petitioner and the statement of account issued by the Bank of Baroda also recorded the said entries. The assessing officer after verifying the materials available on record, passed the assessment order on under Rule 41(8) of the Rules for the assessment year accepting the tax paid purchases of Menthol oil disclosed by the petitioner for Rs.51 lacs as well as purchases of the packing material against Form III-B 4. It appears that the Trade Tax Officer, Chandpur,district Bijnor vide letter dated wrote to the respondent that M/s Laxmi Trading Company neither has disclosed the sale of Menthol oil in its return nor has deposited any tax thereon. It was also mentioned that assessment for the year against M/s Laxmi Trading Company was framed, however, the proceedings under section 21 of the Act for the said assessment year is still pending. In the said letter it was admitted by the Trade Tax Officer Chandpur that Form III-C(2) no was issued by the office of Trade Tax Officer, Chandpur to M/s Laxmi Trading Company and the said form has not been either reported to have been used or lost till the date of issuance of letter. 5. Some information was also received by the respondent from the Assistant Commissioner (Assessment) Trade Tax, Khatima which disclosed the issuance of Form 3 Kha by the petitioner against the purchases of Rs.46, of Polythene bags from M/s Shyam Plastic Industry, Udham Singh Nagar. As such separate notices under section 21 of the U.P.Trade Tax Act ( in short Act ) dated , and were issued against the petitioner, purported to have been issued on the basis of aforesaid information. The said notices are being sought to be challenged through this writ petition. 6. Learned counsel for the petitioner has submitted that the proceedings under section 21 of the Act initiated by the respondent is wholly illegal and without jurisdiction and is based on his whims and he has no reasons to believe that whole or any part of the turnover of tax paid menthol oil has escaped assessment, specially when the purchases of menthol oil and Form III-C(2) were duly verified and signed by the respondent on 30th March at the time of regular assessment. It has been further submitted that the notices issued

5 under section 21 of the Act is based on the letter dated of the Trade Tax Officer, Chandpur indicating that M/s Laxmi Trading Company has not disclosed the sale of menthol oil in its returns, although the Trade Tax Officer, Chandpur Bijnor has admitted that Form III-C(2) No was issued by him and it was not a forged one. It was further submitted that provisions of Section 21 of the Act cannot be resorted to for the purposes of inquiry or verification which has no direct nexus or live-link between the material coming to the notice of the assessing officer. It was further submitted that before the issuance of notice under Section 21 of the Act dated No reasons for arriving at his satisfaction was recorded ; hence the entire re-assessment proceedings are liable to be quashed. 7. It was also submitted that Form 3-B No was issued on by the respondent. As such, the said form was not shown to have been used in the assessment year Thus the basis of issuance of notice under Section 21 of the Act for not mentioning the use of form in the assessment in question is totally groundless. 8. It was also submitted that the Trade Tax Officer, Chandpur district Bijnor has already passed an order on imposing tax on the purchases of menthol oil in the hand of M/s Laxmi Trading Company under section 21 of the Act after taking into consideration the information sent by the respondent regarding sale of menthol oil for Rs.51 lacs against Form3C Learned Standing counsel Sri U.K. Pandey appearing on behalf of department has supported the issuance of notice under section 21 of the Act and has submitted that the notices have been issued in accordance with law. 10. Heard Sri Rakesh Ranjan Agarwal, learned counsel for the petitioner and Sri U.K. Pandey learned Standing counsel appearing on behalf of respondent. 11. The only basis for issuance of notice under section 21 of the Act was the information received from the Trade Tax Officer, Chandpur district Bijnor and Assistant Commissioner (Assessment) Trade Tax Khatima district Udham Singh Nagar. It is not disputed that Form III-C2 bearing serial no was issued by the Trade Tax Officer, Chandpur to M/s Laxmi Trading Company and the sale of menthol oil for Rs.51 lacs by M/s Laxmi Trading Company to the petitioner was accompanied by the said Form III-C2 and at the time of regular assessment of the petitioner, the entire material relating to the purchase of the said menthol oil for Rs.51 lacs was duly verified by the respondent. The said purchase of menthol oil was also duly recorded in the books of account and supported by the invoices and Form III-C2 as well as by the statement of account issued by the Bank of Baroda which clearly indicates that the said commodity was purchased by the petitioner from M/s Laxmi Trading Company in accordance with the Act and Rules made thereunder. It appears that M/s Laxmi Trading Company neither disclosed the sale of menthol oil made to the petitioner nor the issuance of Form III-C2 to its assessing authority. However, this fact was communicated to the respondent

6 and consequently the notices dated and were issued under section 21 of the Act to the petitioner to verify the transaction. The Trade Tax Officer,Chandpur however, has admitted in his letter dated that the said Form III-C2 No was issued to M/s Laxmi Trading Company. 12. It is neither the case of the respondent department that M/s Laxmi Trading Company was a fictitious concern nor does the respondent say that Form III-C2 No was a forged one. The record of the case shows that it was issued by the Trade Tax Officer, Chandpur to M/s Laxmi Trading Company in accordance with the rules. If the selling dealer does not submit account of user of the Form III-C2 issued to him that can never be a valid ground for rejection of the claim of the petitioner since there was no fault of the petitioner if the selling dealer does not disclose the transaction in its books of account and furnish details to its assessing officer. We are fortified in our view by the decision of this Court in M/s Om Trading Company Vs. Commissioner of Trade Tax, 2000 UPTC 227, wherein it has been held that there was no fault of the assessee if other dealer who issued the form did not furnish the details to its assessing officer. 13. This apart, assessment under section 21 of the Act has already been made against M/s Laxmi Trading Company on imposing tax on the purchases of menthol oil after taking into consideration the information sent by the respondent to the Trade Tax Officer, Chandpur. Thus, the tax has already been imposed on the sale of menthol oil to the tune of Rs.51 lacs in the hands of M/s Laxmi Trading Company and the said firm has been held responsible for paying the tax on the sale of menthol oil for Rs.51 lacs to the petitioner, as such the petitioner cannot be held liable for any tax on the purchase of menthol oil for Rs.51 lacs against Form III-C2 issued by M/s Laxmi Trading Company. 14. The another notice dated under section 21 of the Act was purported to have been issued on the basis of the information received from Assistant Commissioner (Assessment) Trade Tax, Khatima, Udham Singh Nagar, vide letter dated wherein it was stated that the petitioner purchased Plastic Polythene bags from M/s Shyam Plastic Company, Sitarganj for an amount of Rs.46, by issuing Form-B bearing serial No , as to avail the benefit of concessional rate of tax. At the time of original assessment proceeding, purchase of Rs.16,429/- and Rs.29,970/- amounting to Rs.46, from M/s Shyam Plactic Industry, Sitarganj were disclosed in the purchase list. No use of Form IIIB was mentioned in the assessment year for the purchases of Polythene bags for a sum of Rs.46, Form III-B bearing serial No which was used for the purchase of Polythene bags for Rs.46,39,940/- has been annexed as ANNEXURE-SCA2 to the supplementary counter affidavit. A bare perusal of the said form clearly shows that the form was issued by the Trade Tax Officer on (during the assessment year ) to the petitioner and the petitioner had used the said Form

7 on At this stage it will be useful to refer paragraphs 3 & 4 of the Supplementary rejoinder affidavit which is as under: 3- That in reply to the contents of para 3 of the supplementary counter affidavit it is submitted that the dealer had filed the details of Form 3B issued during the assessment year to various parties for the total amount of Rs.32, The purchases relating to the Form 3B No of Rs.12, was related to assessment year and the purchase of relating to Form No of Rs.20,026/- is related to assessment year The purchases of these packing materials has been shown in the assessment proceeding at the time of hearing. 4- That in reply to the contents of para 4 of supplementary counter affidavit it is submitted that the dealer company has issued the Form No.3B No to M/s Shyam Plastic Industry, Sitarganj district Udham Singh Nagar for Rs.46, for the purchases related to A.Y This Form was issued by department on and dealer company had issued said Form on The purchase of bill mentioned in this form has been shown in the purchase of Packing material for the assessment year , the list of purchase was filed along with other details at the time of assessment and was on assessment record. The information received from ACTT Khatima is verifiable from the assessment record itself. The purchase list of packing material for the assessment for is enclosed herewith as annexure- SRA1 to this affidavit." 16. The aforesaid averments clearly shows that two forms No and were used by the petitioner for the purchase of Polythene bags from M/s Jain Plastic Industries and M/s Anurag Plastic Product respectively. One form was used in the assessment year and the other form was used in the assessment year and the said transaction were duly recorded in the books of account of the petitioner and were also duly accepted by the respondents. So far as the dispute of Form III-B No is concerned, that was issued by the respondent itself on i.e. in the assessment year and which in turn was issued on by the petitioner for the purchase of Polythene bags which was made by the petitioner in the assessment year but the form issued later on. Since Form 3B was issued on by the respondent, the use of the said form could not have been shown in the year Therefore the issuance of notice under section 21 of the Act on the information received from the Assistant Commissioner (Assessment) Khatima has no foundation as form 3B itself was issued by the department on which was used for the purchase of packing material for Rs.4,63,994/ A Division Bench of this Court in Deoki Nandan Vs. M.L.Gupta, Sales Tax Officer, Etawah, (1969) 23 STC 481 has held that existence of reasons on the part of Trade Tax Officer that certain turnover has escaped assessment is a condition precedent for acquiring jurisdiction under section 21 of U.P. Trade Tax Act. The belief of the officer is not purely subjective but has to be based upon relevant

8 material. Therefore it is not open to the officer concern to initiate proceeding under Section 21 of the Act with a view to launch a fishing and roving enquiry on the off chance of finding some escapement of tax. He must have in his possession some material pointing towards the escapement of turn over before he can entertain a belief about the escapement and can assume jurisdiction under section 21 of the Act and it is open to this Court in exercise of jurisdiction under Article 226 of the Constitution to scrutinize the material on record to ascertain the truth or otherwise of the challenge by the assesee of the existence of the belief on the part of officer on the escapement of turnover. 18. It is also notable that while issuing notices under section 21 of the Act on the assessing authority has not recorded any reasons for his satisfaction. The material on which the Assistant Commissioner (Assessment) Trade Tax formed its belief must be on record and those material should be relevant for forming the belief that the turnover had escaped assessment to tax. 19. In view of the foregoing discussions the impugned notices issued under section 21 of the U.P.Trade Tax Act as well as under Central Sales Tax Act cannot be sustained and are accordingly quashed. 20. In the result this petition succeeds and is allowed. There shall be no order as to costs