Bombay High Court
The Commissioner Of Sales Tax, ... vs M/S Kilp Nail Care on 15 March, 2016
Bench: S.C. Dharmadhikari
8-STR.4.2009+.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SALES TAX REFERENCE NO. 4 OF 2009
IN
REFERENCE APPLICATION NO. 114 OF 2005
WITH
SALES TAX REFERENCE NO. 66 OF 2009
IN
REFERENCE APPLICATION NO. 111-112 OF 2005
WITH
SALES TAX REFERENCE NO. 88 OF 2009
IN
REFERENCE APPLICATION NO. 121 OF 2005
WITH
SALES TAX REFERENCE NO. 91 OF 2009
IN
REFERENCE APPLICATION NO. 118 OF 2005
WITH
SALES TAX REFERENCE NO. 97 OF 2009
IN
REFERENCE APPLICATION NO. 111 OF 2005
WITH
SALES TAX REFERENCE NO. 109 OF 2009
IN
REFERENCE APPLICATION NO. 117 OF 2005
WITH
SALES TAX REFERENCE NO. 110 OF 2009
IN
REFERENCE APPLICATION NO. 111-121 OF 2005
WITH
SALES TAX REFERENCE NO. 112 OF 2009
IN
REFERENCE APPLICATION NO. 113 OF 2005
Page 1 of 26
J.V.Salunke,PA
::: Uploaded on - 23/03/2016 ::: Downloaded on - 31/07/2016 09:02:16 :::
8-STR.4.2009+.doc
WITH
SALES TAX REFERENCE NO. 4 OF 2010
IN
REFERENCE APPLICATION NO. 112 OF 2005
WITH
SALES TAX REFERENCE NO. 14 OF 2010
IN
REFERENCE APPLICATION NO. 119 OF 2005
WITH
SALES TAX REFERENCE NO. 15 OF 2010
IN
REFERENCE APPLICATION NO. 120 OF 2005
Commissioner of Sales Taxig } Applicant
versus
M/s. Klip Nail Care } Respondent
Ms. Uma Palsuledesai - AGP for the
applicant.
None for the Respondents, though served.
CORAM :- S. C. DHARMADHIKARI &
A. A. SAYED, JJ.
DATED :- MARCH 15, 2016
ORAL JUDGMENT :- (Per S.C.Dharmadhikari, J.)
1) In all these applications, the Tribunal has referred the
following question of law for opinion and answer of this court:-
"Whether on facts and circumstances of the case, the
Tribunal was justified in law in holding that the
assessment orders were non-est orders even though
the person Mrs. Janaki Soman, proprietress of the
business has accepted the notices, attended the
J.V.Salunke,PA
8-STR.4.2009+.doc
assessment proceedings as well as the first appeal
proceedings and has not challenged the legality of
notice on the ground of issuing it in the trade name
before the assessing authority, revisional authority as
well as the first appellate authority only on the
ground that the notices were issued in the 'trade
name'?"
2) We take the facts, as they are stated to be common to
all the references, from Sales Tax Reference No. 4 of 2009. The
applicant sought a reference of the above question because the
respondent in this case, though duly served and absent, was a
dealer. The respondent was carrying on business in the trade
name and style as M/s. Klip Nail Care and manufacturing nail
cutters under this name and style. The respondent was
registered as a dealer and holding a registration certificate under
both, the Bombay Sales Tax Act, 1959 (for short "the BST") and
the Central Sales Tax Act, 1956 (for short "the CST"). The
registrations were ultimately cancelled with effect from 1 st April,
2000 owing to losses in the business. The assessment period from
14th January, 1992 to 31 st March, 1992, 1992-93, 1993-94,
1994-95 and 1995-96 under the BST and for the period 1992-93,
1993-94 and 1994-95 under the CST was the period involved.
3) The assessing authority held that the nail cutters
manufactured by the dealer are covered by Entry C-II-152 and
J.V.Salunke,PA
8-STR.4.2009+.doc
liable to tax at the rate of 10%. However, the Commissioner of
Sales Tax, Pune Division, Pune took a view that the goods are
used for personal grooming and, therefore, they are nothing but
toilet articles within the meaning of Entry 86 of Schedule C part II
and attract sales tax at the rate of 15%. He, therefore, initiated
revisional proceedings taking recourse to section 57 by issuing a
notice in form 40. As the dealer failed to respond to the notice,
the matter proceeded ex-parte and that is how original
assessment came to be revised. Being aggrieved and dissatisfied
by this revisional order, the dealer preferred First Appeal before
the Deputy Commissioner of Sales Tax (Appeals), Pune. The
Deputy Commissioner also confirmed the finding of the revisional
authority that the impugned product, namely, nail cutter falls
under Entry 86 of Schedule C Part II and attracts sales tax at the
rate of 15%. However, he refused the interest under section
36(3)(b) of the BST. Not satisfied with these orders, the dealer
preferred Second Appeals before the Tribunal. The Second
Appeals were allowed on 9th September, 2005 and the first
appellate order dated 5th December, 2002 as also the revisional
order dated 31st March, 1999 came to be set aside.
4) The Revenue sought reference of the above question to
this court and by the order passed on 19 th January, 2007, the
J.V.Salunke,PA
8-STR.4.2009+.doc
Tribunal referred the above question and common to all the
applications, for answer and opinion of this court.
5) The Second Appeals of the dealer came to be allowed
not on consideration of merits thereof, but on a singular ground
stated to be of law, namely, the assessment proceedings were
vitiated for, notice has been issued in the trade name and not in
the name of the sole proprietress. It was stated that M/s. Klip
Nail Care is a proprietary concern and Ms. Janaki Soman is the
sole proprietress thereof. The notice could not have been issued
in the trade name M/s. Klip Nail Care, but should have been
issued in the name of the proprietress. Such a invalid notice,
according to the Tribunal, could not be a foundation of the
proceedings. The proceedings, therefore, are not only invalid and
illegal, but non-est. That part of the reasoning of the Tribunal
reads as under:-
"6. We have heard both the counsels. Perused the
record. In view of the rival submission, it is felt
necessary instead of looking to the merits of the case
first to consider the additional plea taken on behalf of the
appellant. It is needless to say that there is no
impediment to take the new ground in the appeal on the
point of law. A perusal of the registration certificate
record certainly reveals that the appellant firm M/s. Klip
Nail Care is a proprietary concern and Mrs. Janak
Soman is a proprietor of the said concern. It may be
noted that before proceeding to assess the "dealer" to tax
J.V.Salunke,PA
8-STR.4.2009+.doc
under sub-section (5) and/or (6) of section 33, the
Commissioner is required to call upon him by a notice in
form 27 to show cause as to why he(dealer) should not
be assessed. A combined reading of section 33(1), 33(6)
and rule 33 makes it clear that the proceedings are to be
initiated against the "dealer" and the order of
assessment is to be passed against the "dealer". Issuing
assessment notice in form 27 under rule 33 for initiation
of assessment under section 33 of the Bombay Act is
mandatory. The dealer has been defined in section 2(11)
of the Bombay Act. Accordingly, the dealer means any
person, who carries business of buying and selling goods
for commission, remuneration or otherwise. In the case
in hand, the proprietor namely Mrs. Janaki Soman is a
person carrying on business under the trade name "Klip
Nail Care". It was therefore, to initiate the assessment
proceeding in the name of proprietor and not in the trade
name. The proceeding initiated in the trade name
instead in the name of dealer is bad in law. This point
had came for consideration before the Hon'ble Bombay
High Court in the case of Shankar Dhawan (supra). It is
observed therein that under the C. P. and Bearer Sales
Tax Act, 1947, a dealer must be a person. The trade
name of an individual (Laxmi Stores) is not by any
means a person within the meaning of the law and
therefore a notice used in the trade name is not either to
person to a dealer and the entire proceedings founded
upon such a notice are invalid. Following the said
decision, this Tribunal in the case of M/s. Kiran Oil Mills
(supra) held that notices issued and the assessment
order passed in the trade name are bad in law and the
orders passed by the lower authorities were set aside on
that ground.
J.V.Salunke,PA
8-STR.4.2009+.doc
7. Smt. Deshpande has further rightly pointed out that
as the impugned assessment order is a non-est order
response to such notice by the assessee does not cure the
defect and, therefore, the revisional authority has not
jurisdiction to revise the non-est order. Her contention
has been fortified by earlier decision of this Tribunal in
the case of M/s. Parwani Builders (supra). In the said
case, the assessing authority had issued notices after
period of limitation and the assessing authority lacked
jurisdiction to pass any assessment order section 33(5)
of the Bombay Act. The revision orders passed against
such assessment orders which were passed after expiry
of the limitation period are held to be without
jurisdiction. In this context, the Tribunal has observed
that even though the appellant has not challenged either
the assessment notices, or the assessment orders, the
facts remains that the assessment orders having been
passed without valid jurisdiction were non-est or nullify
and therefore, they were certainly assailable even in the
collateral proceedings like revision. That being the
position, the Administrative Assistant Commissioner of
Sales Tax had no jurisdiction to revise a non-est order.
There is therefore, no other alternative but to annual the
impugned revision orders for want of jurisdiction.
Accordingly, the Tribunal has set aside the revision
orders and the first appeal orders in those revision
proceedings. Shri Akhade, learned Assistant
Commissioner of Sales Tax was not able to convince us to
take the different view than the view already taken by
this Tribunal in the case of M/s. Parwani Builders
(supra)."
J.V.Salunke,PA
8-STR.4.2009+.doc
6) Ms. Palsuledesai appearing for the Revenue/applicant
in this case would submit that the Tribunal's order proceeds on a
complete misconception of law. She would submit that the
Tribunal has misread the definitions and the substantive
provisions of the BST to arrive at the above conclusion. She
would submit that if the Tribunal's view is accepted, that would
mean that a dealer and who is defined to mean a person cannot be
a sole proprietor. However, the definition of the word "dealer"
appearing in section 2(11), the definition of the word "person"
appearing in section 2(19) and the definition of the word
"registered dealer" appearing in section 2(25) would take within
their import a sole proprietor. That is an inclusive definition.
Once the word other than the natural person is defined in an
inclusive manner, then, the sole proprietor is also included
therein. If the Tribunal's view is accepted, according to Ms.
Palsuledesai, then, none of the transactions of sale and purchase
and undertaken by the sole proprietor can be brought to tax.
That could never the intent of the legislature for, everybody who
is answering the definition of the term "dealer" as also the word
"person" can be registered under section 22. After being so
registered, the liability to pay tax in terms of the law would arise.
Once that arises, then, the law enables the Department/Revenue
to proceed by issuing notice even against a sole proprietor. The
J.V.Salunke,PA
8-STR.4.2009+.doc
sole proprietary concern, in any event, has no existence
independent of the sole proprietor or sole proprietress.
Therefore, notice being issued in the trade name cannot be said to
be fatal. Such proceedings can never be termed as non-est. If the
law does not require strict adherence to procedural rules, then,
there is no question of any prejudice much less miscarriage of
justice. Therefore, the Tribunal's order deserves to be quashed
and set aside.
7)
We find much substance in the contentions of Ms.
Palsuledesai. The Tribunal, though seized and possessed of
Second Appeals, choses not to go into any other grounds and
questions raised for its consideration, but disposes of the appeals
simply on the above ground. It takes up the ground as if it goes to
the root of the case or matter and would enable it to dispose of the
appeals themselves. In the facts and circumstances of the case,
that was an incorrect approach.
8) Section 22 falling in Chapter IV of the BST provides
for registration. Sub-section (1) thereof states that no dealer
shall, while being liable to pay tax under section 3 or under sub-
section (6) of section 19, carry on business as a dealer, unless he
possesses a valid certificate of registration as provided by this
Act. Provided that the provisions of this sub-section shall not be
J.V.Salunke,PA
8-STR.4.2009+.doc
deemed to have been contravened if the dealer having applied for
such registration as in this section provided within the prescribed
time or, as the case may be, within the period specified in sub-
section (6) of section 19, carries on such business. Now, this
provision enables registration and of a dealer. The word "dealer"
is defined in section 2(11) in the following manner:-
"2(11) "dealer" means any person who whether for
commission, remuneration or otherwise carries on
business of buying or selling goods in the State, and
includes the
ig Central Government, or any State
Government which carries on such business, and also
any society, club or other association of persons which
buys goods from or sells goods to its members;
Exception - (I) - An agriculturist who sells
exclusively agricultural produce grown on land
cultivated by him personally, shall not be deemed to be a
dealer within the meaning of this clause;
Exception - (II) - An educational institution
carrying on the activity of manufacturing, buying,
selling or supplying goods, in the performance of its
functions for achieving its objects shall not deemed to be
a dealer within the meaning of this clause;
Exception - (III) - A transporter holding permit for
transport vehicles (including cranes) granted under the
Motor Vehicles Act, 1988, which are used or adopted to
be used for hire shall not be deemed to be a dealer within
the meaning of this clause in respect of sale or purchase
of such transport vehicles or parts, components or
accessories thereof.
J.V.Salunke,PA
8-STR.4.2009+.doc
Explanation - For the purposes of this clause -
(i) each of the following persons and bodies who
dispose of any goods including goods as unclaimed
or confiscated or as unserviceable or as scrap,
surplus, old, obsolete or discarded material or
waste products whether by auction or otherwise,
directly or through an agent for cash, or for
deferred payment, or for any other valuable
consideration, shall, notwithstanding anything
contained in clause (5A) or any other provision of
this Act, be deemed to be a dealer, to the extent of
such disposals, namely:-
(a)
(b)
Port trust;
Municipal Corporations, and Municipal
Councils, and other local authorities;
(c) Railway administration as defined
under the Indian Railway Act, 1890;
(d) Shipping and construction companies;
(e) Air transport Companies and Airlines;
(f) *****
(g) Maharashtra State Road Transport
Corporation constituted under the Road
Transport corporation Act, 1950;
(h) Customs Department of the
Government of India administering the
Customs Act, 1962;
(i) Insurance and financial corporations
or Companies and Banks included in the
Second Schedule to the Reserve Bank of India
Act, 1934 (2 of 1934);
(j ) Advertising agencies;
(k) Any other corporation, company, body
or authority owned or set-up by, or subject to
J.V.Salunke,PA
8-STR.4.2009+.doc
administrative control of, the Central
Government or any State Government.
(l) Incorporated or unincorporated
society, club or other association of persons.
(ii) an auctioneer, who sells or auctions goods
belonging to any principal whether disclosed or not
and whether the offer of the intending purchaser is
accepted by him or by the principal or nominee of
the principal, shall, notwithstanding anything
contained in clause (5A) or any other provisions of
this Act, be deemed to be a dealer;
(iii)
a factor, broker, commission agent, del
credere agent or any other mercantile agent, by
whatever name called, who carries on business of
buying, selling, supplying or distributing goods
belonging to any principal or principals whether
disclosed or not, shall, notwithstanding anything
contained in clause (5A) or any other provisions of
this Act, be deemed to be a dealer."
9) There is, thus, a definition of this word to mean any
person, who whether for commission, remuneration or otherwise
carries on business of buying or selling goods in the State, and
includes the Central Government, or any State Government
which carries on such business, and also any society, club or
other association of persons which buys goods from or sells goods
to its members. The Explanation, which is an Explanation to the
entire clause specifies the persons and bodies as capable of
disposing any goods and to be deemed as a dealer for the purpose
J.V.Salunke,PA
8-STR.4.2009+.doc
of such disposal. That again specifies incorporated or
unincorporated society, club or other association of persons.
10) If any clarity was necessary in the view of the
Tribunal, then, it should have referred to other definitions. The
other definitions are of the term "person" appearing in section
2(19). The word "person" is an inclusive definition, including any
company or association or body of individuals whether
incorporated or not, and also a Hindu undivided family, a firm
and a local authority.
ig In the broadest and widest sense,
therefore, this would include a sole proprietor. The term
"registered dealer" is defined in section 2(25) to mean a dealer
registered under section 22. Thus, a dealer means a person and a
person includes a firm and thus a sole proprietor.
11) Now, the substantive sections and which enable,
according to the Tribunal, a revision of the assessment need to be
referred. Section 33 has been referred in the Tribunal's order and
that reads as under:-
"S. 33. Assessment of taxes. - (1) The amount of
tax due from a dealer liable to pay tax shall be assessed
separately for each year during which he so liable:
Provided that, the Commissioner may, subject to
such conditions as may be prescribed and for reasons to
be recorded in writing, assess the tax due from any
dealer during a part of a year:
J.V.Salunke,PA
8-STR.4.2009+.doc
Provided further that, when a Registered dealer
fails to furnish any return relating to any period of any
year, by the prescribed date, the Commissioner may, if
he thinks fit, assess the tax due from such dealer
separately for different parts of such year.
(2) If the Commissioner is satisfied that the returns
furnished by a Registered dealer in respect of any
period are correct and complete, he shall assess the
amount of tax due from the dealer on the basis of such
returns.
Provided that where a notice under sub-section (5)
has been issued or served on the dealer on the ground
that returns in respect of any period ending on or
before the 31st March, 1995 have not been filed by him
and if the dealer proves to the satisfaction of the
Commissioner that he has filed such returns on or
before the 30th June 1995 and furnishes copies thereof,
then, notwithstanding anything contained in the said
notice, the Commissioner may, if he is satisfied that
such returns are correct and complete, assess the
amount of tax due from the dealer on the basis of such
returns.
(3) If the Commissioner is not satisfied that the returns
furnished by a Registered dealer in respect of any
period are correct and complete, and he thinks it,
necessary to require the presence of the dealer or the
production of further evidence, he shall serve on such
dealer in the prescribed manner a notice requiring him
on a date and at a place specified therein, either to
attend and produce or cause to be produced all evidence
on which such dealer relies in support of his returns, or
to produce such evidence as is specified in the notice.
J.V.Salunke,PA
8-STR.4.2009+.doc
On the date specified in the notice, or as soon as
maybe thereafter the Commissioner shall, after
considering all the evidence which may be produced,
assess the amount of tax due from the dealer.
(4) If a Registered dealer fails to comply with the terms
of any notice issued under sub-section (3), the
Commissioner shall assess, to the best of his judgment,
the amount of tax due from him.
(4A) Where all the returns are filed by a Registered
dealer for any year ending on or after the notified day
within six months from the end of the year to which
such returns relate,no order of assessment under sub-
section (3) of (4) in respect of that year shall be made
after the expiry of three years from the end of the said
year; and if for any reason such order is not made
within the period aforesaid, then, the returns so filed
shall be deemed to have been accepted as correct and
complete for assessing the tax due from such dealer.
Explanation I. - In the case of returns pertaining to
the years ending prior to the notified day and filed on or
before the notified day or on or before any such other
date thereafter as the State Government may by
notification in the Official Gazette specify in that behalf,
the period of three years shall be computed from the
notified day.
Explanation II. - In the case of returns filed by a
registered dealer referred to in sub-clause (b) of clause
(37) of section 2 and who has not opted for the financial
year, the period of three years shall be computed from
the end of the financial year in which the year, by
reference to which the accounts of that dealer are
maintained in his books, ends:
J.V.Salunke,PA
8-STR.4.2009+.doc
Provided that, where a fresh assessment has to be
made to give effect to any finding or direction contained
in any order made under this Act or any earlier law, or
to any order of the Tribunal or the High Court or the
Supreme Court, such assessment shall be made within
thirty-six months from the date of communication to
the commissioner of such finding, direction or order, as
the case may be:
Provided further that , in computing any period of
limitation laid down in this section, the time during
which the assessment remained stayed under the order
of the Tribunal or of the High Court or of the Supreme
Court shall stand excluded:
Provided also that, the Commissioner may, in the
interest of the revenue or at the instance of the dealer,
issue directions not to proceed with the assessment of
any particular dealers or class of dealers or any
particular period, if such assessment involves a
decision on a point which is concluded against the State
by a judgment of the tribunal or the High Court and the
State Government, or the Commissioner has initiated
any proceedings against such judgment before an
appropriated forum. As soon as may be after the final
conclusion of such proceedings or, as the case may be,
after recording the reasons therefor in writing, the
Commissioner may, at any time, revoke such directions.
(4B) Notwithstanding anything contained in this
section, the assessment shall be completed within a
period of eighteen months from the date of such order of
revocation as referred to in the third proviso to sub-
section (4A) and the period of limitation laid down in
this section shall be deemed tobe modified accordingly.
J.V.Salunke,PA
8-STR.4.2009+.doc
(4C) Notwithstanding anything contained in this
section or any other provisions of this Act, where the
assessment involves a decision on the point which is
concluded against the State by a judgment of the
Tribunal and the State Government or the
Commissioner has initiated any proceedings against
such judgment before an appropriate forum, then the
Commissioner may complete the assessment as if the
point was not so decided against the State, but shall
stay the recovery of such of the dues including interest
and penalty, if any, in so far as they relate to such point,
until the decision by the appropriate forum and after
such decision modify the assessment order, if found
necessary.
(5) If a Registered dealer does not furnish returns in
respect of any period by the prescribed date, the
Commissioner shall, at any time, within eight years
from the end of the year in which such period occurs,
after giving the dealer a reasonable opportunity of being
heard, proceed to assess to the best of his judgment, the
amount of tax (if any) due from him.
(6) If the Commissioner has reason to believe that a
dealer is liable to pay tax in respect of any period, but
has failed to apply for registration or failed to apply for
registration within time as required by section 22, the
Commissioner shall at any time within eight years from
the end of the year in which such period occurs, after
giving the dealer a reasonable opportunity of being
heard, proceed to assess, to the best of his judgment, the
amount of tax (if any) due from the dealer in respect of
that period, and any period or periods subsequent
thereto.
J.V.Salunke,PA
8-STR.4.2009+.doc
(6A) Notwithstanding the foregoing provisions of this
section, where the Commissioner is not safisfied about
the correctness or the completeness of the accounts of a
dealer, or where no method of accounting has been
regularly employed by a dealer, the Commissioner may,
after giving the dealer a reasonable opportunity of being
heard, assess to the best of his judgment, the amount of
tax (if any) due from him.
(6B) If, during the course of any proceedings under
section 49, in case of any dealer or person, the
Commissioner, on the basis of evidence available to him,
is of the opinion that tax is sought to be evaded in
respect of any period by not recording or recording in
an incorrect manner, any transaction of sale or
transaction of purchase, or that any deduction has been
incorrectly claimed on any transaction, then,
notwithstanding that any notice for assessment has
been issued under other provisions of this section, the
Commissioner may, after giving the dealer or the
person a reasonable opportunity of being heard,
proceed to assess, without prejudice to any assessment
which may be made in respect of the said period under
other provisions of this section, to the best of his
judgment, the amount of tax, if any, due from him on
such transaction:
Provided that tax on such transaction and penalty
and interest, if any, consequent upon such tax, will not
be levied or demanded when the dealer or person is
assessed to tax under the other provisions of this
section in respect of the same period.
J.V.Salunke,PA
8-STR.4.2009+.doc
(7) Any assessment made under this section shall be
without prejudice to any penalty or liability to pay
interest, or prosecution for an offence, under this Act."
12) Section 33 enables assessment of taxes and that is due
from a dealer liable to pay tax. We are concerned in this case
with sub-section (6). A bare perusal of sub-section (6) would
indicate as to how if the Commissioner has reason to believe that
a dealer is liable to pay tax in respect of any period, but has failed
to apply for registration or failed to apply for registration within
time as required by section 22, the Commissioner shall at any
time within eight years from the end of the year in which such
period occurs, after giving the dealer a reasonable opportunity of
being heard, proceed to assess, to the best of his judgment, the
amount of tax (if any) due from the dealer in respect of that
period, and any period or periods subsequent thereto.
13) We do not see how within the meaning of sub-section
(1) of section 33 and in the light of the above clear legal
provisions, a sole proprietor/dealer cannot be brought to tax. If
he can be brought to tax and his income assessed on the basis of
the transactions of sale and purchase of goods undertaken by
him/her and that section also enables the Commissioner to carry
on best judgment assessment, then, merely because the notice
under sub-section (6) addressed and sent to the dealer is in the
J.V.Salunke,PA
8-STR.4.2009+.doc
trade name and not the sole proprietress that would not be fatal.
The Tribunal has referred, in this case, to the definitions and
which, according to it, are relevant. We have reproduced that
paragraph of the Tribunal's order and which requires a registered
dealer to furnish returns and if non filing of returns and non
registration of a dealer enable the Commissioner to carry out best
judgment assessment, that any notice being addressed and sent
in the above manner would be an illegality and of such nature as
to be termed as incurable. The Tribunal's opinion is that this is an
incurable defect and not a mere irregularity. The Tribunal has
declared the assessment to be non-est. Pertinently, the Tribunal
notes that the dealer has not challenged the assessment notice
and the assessment orders. Yet, the Tribunal declares them as
above.
14) We are unable to agree with the Tribunal, for, both
sub-sections contemplate giving the dealer reasonable
opportunity of being heard. That, according to the Tribunal, upon
a notice under Rules 32 and 33 being served. Rules 32 and 33 of
the Bombay Sales Tax Rules, 1959 read as under:-
"R. 32. Assessment of tax. - The notice required by
sub-section (3) of section 33 shall be in form 27 and the
date fixed for compliance therewith shall not be earlier
than fifteen days from the date of service thereof.
J.V.Salunke,PA
8-STR.4.2009+.doc
R. 33. Notice under sub-section (5) and (6) of
section 33. - The Commissioner shall before
proceeding to assess the dealer to tax under sub-section
(5) or (6) of section 33 call upon him by a notice in
Form 27 to show cause as to why he should not be
assessed. The date for compliance with the notice shall
not be earlier than fifteen days from the date of service
thereof."
15) Both these Rules contemplate a notice required by
section 33(3) and that ought to be in Form 27. Rule 33 says that
the Commissioner shall, before proceeding to assess the dealer to
tax under sub-section (5) or (6) of section 33 call upon him by a
notice in Form 27 to show cause as to why he should not be
assessed. The date for compliance with the notice shall not be
earlier than 15 days from the date of service thereof. Form 27 is
referable to Rules 32 and 33 and sets out the format of the notice.
We have carefully perused the Rules and the Form so also the
contents thereof. We do not think that description by the trade
name is a contravention of these Rules or the Form. Eventually,
procedural rules and matters of Form cannot be elevated to such
a status and position as would make every part or prescription
thereof mandatory and incapable of substantial compliance. Such
provisions do not mandate strict compliance and are capable of
substantial compliance. It cannot be that the trade name is
mentioned and not that of the sole proprietor or proprietress that
J.V.Salunke,PA
8-STR.4.2009+.doc
the proceedings can be flawed to such an extent as to term them
as incurable. This is not a fundamental flaw or defect going to the
root of the case. It will have to be established and proved that
there is a prejudice or miscarriage of justice. Merely because the
trade name been incorporated or inserted in the notice does not
mean that the dealer was prevented from contesting the
proceedings or the exercise carried out by the commissioner
under sub-sections (5) or (6) of section 33. Eventually, the
dealer must be put to notice. The form is not mandatory and the
requirement of notice may be such. Therefore, absence of notice
by such mis-description would have to be established and proved
by the dealer, else it cannot be said that the proceedings suffer
from a fundamental or incurable defect and therefore non-est.
The proceedings and the orders therein cannot be termed as void
ab initio or null from inception. The orders also cannot be termed
as null and void given the nature of the defect alleged. In such
circumstances, the Tribunal was in error in allowing the Second
Appeals on this ground alone. The Tribunal's order overlooks the
fact that a sole proprietorship is a business in which one person
owns all the assets, owns all the liabilities and operates in his or
her personal capacity. In a sense it is a non-company business
owned by one person. Therefore, a notice addressed to the sole
proprietary firm can be in a trade name or in the name of the sole
J.V.Salunke,PA
8-STR.4.2009+.doc
proprietor but merely because it is addressed in the former name
does not mean that no notice was issued. The Tribunal has gone
by the form and missed the substance. In the case Bhagabandas
Agarwalla vs. Bhagwandas Kanu and Ors. 1 in the context of a
notice to quit under section 106 of the Transfer of property Act,
1882, the Hon'ble Supreme Court explained the rule of
construction thus:-
"3. Now, it is settled law that a notice to quit must be
construed not with a desire to find faults in it, which
would render it defective, but it must be construed ut
res magis valeat quam pereat. "The validity of a notice
to quit" as pointed out by Lord Justice Lindley, L. J. in
Side-botham v. Holland, (1895) 1 QB 378 "ought not to
turn on the splitting of a straw". It must not be read in
a hyper-critical manner, nor must its interpretation be
affected by pedagogic pendantism or over refined
subtlety, but it must be construed in a common sense
way. See Harihar Banerji v. Ramsashi Roy, 45 Ind
App 222 = (AIR 1918 PC 102). The notice to quit in
the present case must be judged for its validity in the
light of this well recognised principle of
interpretation."
16) In reaching the conclusion as above, the Tribunal
referred a Division Bench judgment of this Court in the case of
Shankar Dhawan and Ors. vs. Sales Tax Officer, Circle II, Nagpur
and Anr.2. Certain persons, against whom recovery of arrears of
1 AIR 1977 SC 1120
2 XV STC 292
J.V.Salunke,PA
8-STR.4.2009+.doc
sales tax was sought to be made under the C. P. Bearer Sales Tax
Act, 1947, filed a writ petition alleging that late Basantlal
Ramsaran Dhawan was doing business at Nagpur under the name
and style "Laxmi Stores, Residency road, Sadar, Nagpur". He was
registered dealer for the purpose of sales tax. He passed away on
28th January, 1959. Yet, without any notice being issued, an
assessment was made for the period 1 st January, 1958 to 31st
December, 1958 and Laxmi Stores was made liable to pay sales
tax and penalty. Yet, for further period from 1 st January, 1959 to
14th May, 1959 this business was assessed to tax and even a
penalty was levied. The Division Bench noticed that part of the
later period is after the death of Basantlal on 28 th January, 1959.
The most salient feature of the case was that the entire process
commenced and concluded after the death of Basantlal and
orders assessing the business to tax were passed on 5th December,
1960. That is much after the death of Basantlal. It is in these
circumstances that the Division Bench concluded that not only
the notice is illegal but the entire proceedings have to be quashed
and set aside for, what the Commissioner sought to do was to
proceed by issuing a notice only in the trade name. It is in this
context that the Division Bench held that Laxmi Stores was
merely a trade name of an individual and it was not by any means
a person within the meaning of the law. The person involved was
J.V.Salunke,PA
8-STR.4.2009+.doc
late Basantlal. M/s. Laxmi Stores cannot be said to be a person.
It is that fundamental fact which had not been properly grasped
and that is why the Division Bench concluded that the notice in
the name of Laxmi Stores cannot be the basis for initiation of the
proceedings and therefore, the entire proceedings deserve to be
quashed.
17) The Tribunal should have noted the basic facts in this
case the context and the backdrop in which the Division Bench
concluded that the notice issued under the trade name would not
suffice. Pertinently, the Division Bench does not hold that the
sole proprietor or the business carried out by sole proprietor is
incapable of being brought to tax nor does it hold that the sole
proprietor cannot be termed as a dealer though carrying on
business of buying and selling of goods. The Division Bench does
not hold, as in the instant case, that th definition of the term
"person" will not include or take within its import a sole
proprietor or a sole proprietary business. The notice ought to be
and is to the sole proprietor. Its contents or any alleged
misdescription or absence of particulars therein was not an issue
in the case of Shankar Dhawan (supra) at all. That was a case of
no notice and not a defective notice. The reliance by the Tribunal
on the Division Bench was thus entirely misplaced. It could not
J.V.Salunke,PA
8-STR.4.2009+.doc
have reached the conclusion that it reached on the basis of the
Division Bench judgment.
18) As a result of the above discussion, we answer the
question referred for opinion of this court in favour of the
Revenue and against the dealer. However, the appeals of the
dealer have not been decided by taking into consideration his
other grounds raised therein. The Tribunal has allowed the
appeals only on one ground and by holding that the orders of the
Commissioner are without jurisdiction.
19) It would be, therefore, in the interest of justice that
the Second Appeals are restored to the file of the Tribunal for
decision on other points and in accordance with law. We clarify
that we have expressed no opinion on the other contentions.
Reference is answered accordingly.
(A.A.SAYED, J.) (S.C.DHARMADHIKARI, J.)
J.V.Salunke,PA
