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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH
WRIT PETITION NO. 1531 OF 2014
1. M/s. Shiom Enterprises,
Telephone Exchange Square,
Nagpur through its Proprietor,
Umesh s/o Govindsingh Banaffar,
aged about 38 years, occupation -
Service, r/o Plot No. 50, Sonbaji
Nagar, Bhandara Road, Nagpur.
2. M/s. P.G. Sales Corporation,
126, Ashirvad Apartments,
Lakadganj Layout, Nagpur through
its Proprietor - Govindsingh s/o
Dalganjansingh Banaffar, (dead
through legal representatives)
2(i) Mr. Umesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
2(ii)Mr. Dinesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
3. M/s. Sweta Traders and Fabricators
Nehru Putala, Ward No. 34, Nagpur
through its Proprietor, Govindsingh
s/o Dalganjansingh Banaffar (since
dead through legal representatives)
3(i) Mr. Umesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
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3(ii)Mr. Dinesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
4. M/s. Pooja Sales, Zade Building,
Telephone Exchange Square,
Nagpur, through its Proprietor
Govindsingh s/o Dalganjansingh
Banaffar (since dead through
legal representatives)
4(i) Mr. Umesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
4(ii)Mr. Dinesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
5. M/s. Lalit Steel Traders, Pote
Building, Itwari Anaz Bazar,
Nagpur through its Proprietor
Govindsingh s/o Dalganjansingh
Banaffar (since dead through
legal representatives)
5(i) Mr. Umesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
5(ii)Mr. Dinesh s/o Govindsingh
Banaffar, aged about 40 years,
occupation - Service, r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
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6. M/s. Deep Sales Corporation,
126, Sibbal Niwas, Quetta Colony,
Nagpur, through its Proprietor,
Dinesh s/o Govindsingh Banaffar,
aged about 36 years, occupation -
business (xerox shop), r/o Plot No.
50, Sonbaji Nagar, Bhandara
Road, Nagpur.
7. M/s. Varun Screens, Telephone
Exchange Square, Nagpur through
its Proprietor, Dinesh s/o
Govindsingh Banaffar, aged about
36 years, occupation - Business
(xerox shop) r/o Plot No. 50,
Sonbaji Nagar, Bhandara Road,
Nagpur. ... PETITIONERS
Versus
1. The State of Maharashtra through
Secretary, Ministry of Finance,
Mantralaya, Mumbai 400 032.
2. The Assistant Commissioner of
Sales Tax (Investigation)
NAG-INV-D-002, Nagpur. ... RESPONDENTS
Shri M.G. Bhangde, Senior Advocate with Shri S.N. Tapadia,
Advocate for the petitioners.
Mrs. K.S. Joshi, Additional GP for the respondents.
.....
CORAM : B.P. DHARMADHIKARI &
ARUN D. UPADHYE, JJ.
DATE OF RESERVING : SEPTEMBER 08, 2017.
DATE OF PRONOUNCEMENT : SEPTEMBER 21, 2017.
::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 4 JUDGMENT : (PER B.P. DHARMADHIKARI, J.) Considering the nature of controversy and developments mentioned in this judgment, we have heard the matter finally by issuing Rule with consent of all and making it returnable forthwith at the stage of admission itself. Accordingly, we have heard the learned Shri M.G. Bhangde, Senior Advocate with Shri S.N. Tapadia for the petitioners and Mrs. K.S. Joshi, learned Additional GP for the respondents.
2. The members of Banaffar family are the petitioners before this Court through their proprietory concerns. The proprietor of petitioner No. 2, petitioner No. 3, petitioner No. 4 and petitioner No. 5 concerns Govindsingh, expired after filing of petition and on 15.12.2016, his two sons are brought on record as his heirs by the petitioners. Those two sons independently are also parties before this Court as proprietor of petitioner No. 1 concern and proprietors of Respondent Nos. 6 & 7 concerns.
3. The challenge in this writ petition is to omission by ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 5 respondent No. 2 to look into the requests made by the petitioners respectively on 24.08.2012, 21.02.2013, 18.09.2013, 18.03.2014 and one application dated 07.02.2015. They pray that before proceeding further with the proceedings for assessment in terms of notice dated 06.06.2012, these applications moved by them must be decided.
4. Notice dated 06.06.2012 is issued by respondent No. 2 under sub-section (2), (3) or (4) of Section 23 of the Maharashtra Value Added Tax Act, 2002, (hereinafter referred to as 2002 Act) calling upon the petitioners to show cause as to why they should not be assessed under sub-section (4) of Section 23 of the 2002 Act. The petitioners have replied to these notices and contended that subject Bank Accounts have been opened by them at the instance of mediators to earn commission and there was no movement of goods. As no buying or selling of goods is involved, the provisions of Bombay Sales Tax Act, 1959, or above mentioned 2002 Act, are not attracted. They also pointed out that information was ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 6 demanded from Sales Tax department regarding set off allowed to beneficiaries related to noticee firm and Sales Tax office informed that the required information was not available with it. They have maintained that in their case, there are no sale/ purchase and sale invoices are not genuine. They have requested respondent No. 2 to inquire whether invoices in question are genuine, before acting upon them. The application under Section 14 of 2002 Act has been moved to summon Bank officials and to compel bank to produce the documents and to examine bank officers on oath. In application, they have stated that their bank namely Wardhman Urban Co-operative Bank Limited, did not provide information sought for from them. The application dated 18.03.2014 is on same lines with same grievance. They have claimed certain informations in para 6 and to pass appropriate orders on interim application/ prayers made by them. Vide application moved on 18.09.2013, they have sought issuance of notice to vendees who gave statement that they have purchased goods from the petitioners and sought opportunity to cross examine them. On the very same date, by moving ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 7 another application, they have pointed out that their bank did not reply and provide details of unidentified persons/ firms, depositing amount in the firms.
5. Notice issued on 14.03.2014 pointing out that non cooperation of the petitioners will result in completion of assessment proceedings is also assailed on the ground that the petitioners' claim that they are not liable to tax as unregistered dealers, has not been substantiated.
6. When this challenge came before this Court on 24.03.2014, after briefly taking note of contentions, this Court issued notice, returnable on 05.04.2014 and restrained the respondents from passing final orders in respect of assessment till then. On 07.04.2014, the matter was adjourned at the request of the learned AGP and interim orders were continued. The matter was then being listed and adjourned at the request of the respondents. On 04.08.2015, civil application for amendment was allowed. On 02.12.2016, legal heirs were permitted to be brought on record. On 17.01.2016, when the ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 8 matter was called out, the learned AGP sought time. On 27.06.2017, this Court recorded its prima facie finding that the matter was being unnecessarily delayed by the respondents. The matter was directed to be listed on 04.07.2017. Again, there were two adjournments and on 01.08.2017, both parties sought adjournment. It appears that thereafter reply was filed by the respondents and the matter was taken up for hearing on 01.09.2017. It needs to be noted that the respondents were given liberty to take suitable decision on pending applications by very first order of this Court, however, that decision has not been taken till date.
7. Inviting attention to these dates and events, Shri Bhangde, learned Senior Advocate, submits that under Section 23(4), the petitioners can be subjected to assessment, if they are found to be dealers. Inviting attention to definition of "dealer" contained in Section 2(8), it is urged that the respondents have to demonstrate that the petitioners are in business of buying or selling goods. According to him, there is no such material and mere entries in the statement of accounts ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 9 do not show the status of the petitioners as dealers. The proceedings can be taken up only if the respondents have got some material in their possession and hence the burden is upon them to show that the petitioners are dealers. Inviting attention to various applications/ communications submitted by the petitioners, he states that such material is lacking and the petitioners have sufficiently brought on record its absence. Hence, their insistence on first deciding preliminary objection/ applications, is just and proper. Our attention is also invited to one order in the case of M/s. Ravi Steel Industries for assessment period 2005-06 to urge that as seen therefrom, input credit is not given or allowed to be enjoyed blindly. This is sought to be substantiated by inviting attention to similar orders passed in the matter of M/s. Anuj Steel.
8. The learned Senior Advocate submits that in this situation, to bring on record correct facts, the request was made to summon Bank as the authorities which possess those powers, are with oblique motive, refusing to decide it. He claims that various such requests made by the petitioners, if ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 10 granted, would show harassment of the petitioners by respondent No. 2. Respondent No. 2, therefore, must decide though applications and thereafter only can proceed further.
9. He contends that without deciding it, respondent No. 2 has found it proper to treat the petitioners as unregistered dealers and has served upon them notice for assessment on 14.03.2014. The contention is, without taking decision on pending applications/ requests, such notice could not have been issued. The communication sent in reply by the petitioners, requesting the authorities to take decision on pending applications, is pressed into service by them to urge that despite these repeated requests or orders of this Court, no decision has been taken and harassment of the petitioners continues.
10. Our attention is invited to course of action followed in the case of another industry on 12.02.2014. The Joint Commissioner of Sales Tax, has on 12.02.2014, sent a communication regarding investigation in the case of one M/s. ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 11 Karma Ispat Limited. It is mentioned therein that Sales Tax Tribunal directed to proceed against other units on same lines. Shri Bhangde, learned Senior Advocate, submits that thus, when a dealer is found to be non genuine, he should not be assessed. If he is found to be partly genuine, only genuine part can be assessed. In this communication, it is pointed out that if the Assessment Officer has assessed non genuine purchases, it does not entitle the beneficiaries to claim set off. As in notice dated 14.03.2014, the petitioners are treated as unregistered dealers, submission is, they are not genuine dealers and, therefore, cannot be assessed. It is pointed out that on 01.03.2014 itself Sale Tax Deputy Commissioner (Vigilance) has asked all his subordinates to follow said guidelines. Even on 07.02.2015, the application was moved inviting attention to pending request/ application and sale tax authorities were requested to decide the same.
11. For the Assessment year 2008-09, receipt of intimation dated 15.10.2013 from the Sales Tax department, is relied upon to urge that even Income-tax Department has ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 12 found that assessee - petitioner has not shown any sales or turnover as against the total credits appearing in the Bank accounts worth Rs.3,27,61,780/-. He contends that this order of assessment, therefore, supports the contention of the petitioners that they are not dealers and assessment proceedings against them need to be dropped.
12. Mrs. Joshi, learned Additional GP, on the other hand, has relied upon the provisions of Section 23 (3) of the 2002 Act, to urge that on 14.03.2014, only a show cause notice has been given to the petitioners and all their contentions are still open. The amount mentioned therein is probable/ provisional and if during inquiry, the petitioners succeed in showing that they are not dealers, no order of assessment can be passed. She relies upon Section 2(4) defining "business", Section 2(8) defining "dealer". She also points out that as per Section 3, if the turnover is above Rs. Five lakh, scrutiny becomes necessary. The words "reason to believe" employed in Section 23(4) are relied upon by her to urge that a composite inquiry to find out status of the petitioners and thereafter to levy taxes, ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 13 if necessary, is legal and is going on. As the Bank accounts are opened by the petitioners or operated by them, their demand of details or particulars is unwarranted and an adverse inference must be drawn against the petitioners.
13. In brief reply, Shri Bhangde, learned Senior Advocate, reiterates his submissions and contends that the joint inquiry is not possible as the petitioners are not shown to be "dealers" at all. He claims that after appropriate decision is taken on show cause notice issued on 06.06.2012 to the petitioners, action under Section 23(4) can begin. He, however, argues that the language of notice dated 14.03.2014 shows that the respondents are only making a farce and showing compliance with empty formalities and they have already decided to decide against the petitioners.
14. Section 2(4) of 2002 Act contains inclusive definition of "business". It includes any service or any trade, commerce or manufacture. Section 2(8) defines "dealer" to mean any person who, for the purposes of or consequential to his ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 14 engagement in or, in connection with or incidental to or in the course of, his business buys or sells, goods in the State whether for commission, remuneration or otherwise. Section 2(27) defines "service" to mean any service as may be notified by the State Government, from time to time, in the Official Gazette. Section 3 is on incidence and levy of tax and if turnover of sales or purchase in the year exceeds Rs. Five lakh, the liability to pay tax, prima facie, arises. Section 23(4) permits the Commissioner of Sales Tax to give the "dealer" a reasonable opportunity of being heard and proceed to assess him where the Commissioner has reason to believe that said dealer is liable to pay tax and has failed to do so or has failed to apply for registration.
15. It is in the backdrop of these provisions that this controversy needs to be looked into.
16. Vide notice dated 06.06.2012, inquiry under Section 23(4) of the 2002 Act was taken up against the petitioners. In reply to this notice, the petitioners have on 28.06.2012 claimed that they cannot be treated as a dealers. The other reply given ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 15 on 24.08.2012 shows that burden of proving prejudice or sale of goods by the petitioners is upon the department. It is contended that mere statement in Bank account opening forms, registration under Shops and Establishment Act and entries in Bank accounts, cannot prove that the petitioners bought or purchased goods. The specific defence raised is, the petitioners opened bank account at the instance of mediators, who promised to pay commission. They used to bring cheques payable in the name of their account and withdrew the amount thereof in cash immediately within an hour or so after receiving credit. It is claimed that there was no actual movement of goods and it was only on paper. It is also claimed that the petitioners have not taken advantage of any provision of Bombay Sales Tax Act or 2002 Act. The petitioners also claim that to prove such sales or purchase of goods, the department should summon those persons whose names appear in the books of accounts or in Bank accounts, record their statements and give the petitioners an opportunity to cross examine them. In last para, it is submitted that sale invoices are not genuine.
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17. The petitioners have also produced on record one communication dated 24.10.2011 sent by them to the Deputy Commissioner of Sales Tax in reply to a letter of department dated 15.10.2011. Their in first line, the petitioners stated that they have not opened any of the firm and as such there was no occasion for them to effect any transaction in relation to that firm. It is to be noted that even in reply dated 24.03.2012 while affirming that they are not dealers, the petitioners have unequivocally stated that they have not maintained any books of accounts and, therefore, question of its production does not arise. Petitioners have earned commission and hence, in these circumstances, exact nature of deal is to be explained by them and burden to substantiate is on them.
18. In application under Section 14, the petitioners state that they have written to their Bank viz., Wardhman Urban Co- operative Bank Limited on 21.06.2012, 26.07.2012 and 20.12.2012 and sought details of deposits in their accounts. The Bank did not provide those details. Hence, Sales Tax Department has been requested on 21.02.2013 to exercise ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 17 powers available to it under Section 14(b) and (c) of 2002 Act and to summon bank officials and to examine them on oath.
19. These petitioners accept that at the instance of some persons, they have opened bank accounts and permitted it to be used to deposit cheques drawn in their names and to withdraw cash after amount of cheque was received in that account. Adverse circumstance is that they have not disclosed names of these persons.
20. Considering the number of transactions and large amounts received in the accounts, the situation becomes difficult for them. Their contention that they have not maintained accounts or then their bankers are not giving necessary details, cannot be accepted.
21. The petitioners have produced an Income Tax assessment order for the Assessment Year 2008-09 and in that year total credits during the financial year 2007-08 in proprietory concerns viz. Kunal Steel Enterprises, M/s. Shiom ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 18 Enterprises, M/s. Shree Sai Traders, M/s. Vishal Trading and Umesh Singh G. Banaffar, are shown to be Rs.3,27,61,780/-. Different bank account numbers are also given. The assessment order shows that case was reopened under Section 148 of the Income Tax Act, 1961. This assessment order also takes note of contention of the assessee that he was doing job of book writing and indulged in giving accommodation entries to mediators. In this order, information obtained from the Shop and Establishment authorities in relation to nature of business of these concerns reveals that it was as retail traders in iron and steel, trading for hardware etc. The office of the Labour Commissioner informed that no information regarding these proprietory concerns was available in his office and on further inquiries no such establishment was found. In this backdrop, the Income-tax authorities have accepted that the assessee indulged in giving accommodation entries and then determined the income at Rs.2,46,423/-. Further action under Section 274 read with Section 271(1)(c) of Income-tax Act, 1961, has also been ordered. It is apparent that the petitioners have accepted this assessment order.
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22. The facts noted by us above, the stance of the petitioners in their letters to the respondents and this state of affairs, therefore, clearly show that the burden is upon the petitioners to demonstrate that they are not dealers and, therefore, action under Section 23(4) of the 2002 Act cannot be taken against them. They have to demonstrate that sales invoices are not genuine. The guidelines issued by the department in the matter of Karma Ispat are not attracted and they are not meant to allow the petitioners to go without verification or assessment.
23. The Income-tax authorities have, while recording the reasons for reopening, arrived at finding that the assessee did not show sales/ turnover against total credit appearing in his bank accounts worth Rs.3,27,61,780/- and thus it suppressed sales.
24. The material on record, therefore, is sufficient to empower the respondents to proceed against the petitioners. They have given sufficient opportunity to the petitioners and ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 20 the petitioners have continued to claim that their bankers were not giving details or then burden was upon the respondents to establish that the petitioners were dealers.
25. In this situation, only to proceed further, notice was issued on 14.03.2014. Though it is on subject of imposing tax, interest under Section 30(3) and penalty under Section 29(3) of 2002 Act, defences available to the petitioners are not eclipsed. But then the learned AGP has pointed out that it is open to the petitioners to establish that they are not dealers.
26. When this Court issued notice on 24.03.2014 and stayed passing of final order of assessment, liberty was given to the respondents to pass suitable orders on pending applications. Those orders have not been passed till date. The Authorities also did not bother to file any reply till 03.08.2017 and the matter dragged on unnecessarily for more than three years to the prejudice of public revenue and in favour of the petitioners. In fact, the respondents ought to have shown their interest and keeping in mind seriousness of the matter, filed ::: Uploaded on - 21/09/2017 ::: Downloaded on - 22/09/2017 01:54:19 ::: wp1531.14 21 reply immediately. We, therefore, direct the respondents to expedite the proceedings in public interest and respondents shall complete the proceedings initiated under Section 23(4) of 2002 Act within next three months. We also hold t he Assistant Commissioner of Sales Tax (Investigation) NAG-INV-D-002, Nagpur, solely responsible for compliance of this direction.
27. In this situation, taking overall view of the matter, we find that the grievance made in the present writ petition is misconceived and erroneous. No case is made out warranting intervention. Writ Petition is accordingly dismissed. Rule discharged. However, in the facts and circumstances of the case, there shall be no order as to costs.
JUDGE JUDGE
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*GS.
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