M/S. Padam Kumar Jain vs The State Of Jharkhand
2023 Latest Caselaw 1680 Jhar

                                       1




IN THE HIGH COURT OF JHARKHAND AT RANCHI
                 W.P.(T) No. 3279 of 2022

    M/s. Padam Kumar Jain, (A proprietorship concern), having its office at
    Chaibasa, West Singhbhum, through its Proprietor, namely, Padam
    Kumar Jain                        ..... Petitioner
                                     Versus
    1. The State of Jharkhand, through the Commissioner, Commercial Taxes
    Department, having its office at Ranchi.
    2. Deputy Commissioner of Commercial Taxes, Chaibasa Circle, District
    West Singhbhum (Jharkhand).
    3. Assistant Commissioner of Commercial Taxes (Incharge), Chaibasa
    Circle, Chaibasa, West Singhbhum (Jharkhand)        ...... Respondents

With W.P.(T) No. 3282 of 2022 M/s. Padam Kumar Jain, (A proprietorship concern),having its office at Chaibasa, West Singhbhum, through its Proprietor, namely, Padam Kumar Jain ...... Petitioner Versus

1. The State of Jharkhand, through the Commissioner, Commercial Taxes Department, having its office at Ranchi.

2. Deputy Commissioner of Commercial Taxes, Chaibasa Circle, District West Singhbhum (Jharkhand)

3. Assistant Commissioner of Commercial Taxes (Incharge), Chaibasa Circle, Chaibasa, West Singhbhum (Jharkhand) ...... Respondents With W.P.(T) No. 3285 of 2022 M/s. Padam Kumar Jain, (A proprietorship concern), having its office at Chaibasa, West Singhbhum, through its Proprietor, namely, Padam Kumar Jain ...... Petitioner Versus

1. The State of Jharkhand, through the Commissioner, Commercial Taxes Department, having its office at Ranchi

2. Deputy Commissioner of Commercial Taxes, Chaibasa Circle, District West Singhbhum (Jharkhand)

3. Assistant Commissioner of Commercial Taxes (Incharge), Chaibasa Circle, Chaibasa, West Singhbhum (Jharkhand)...... Respondents

CORAM : HON'BLE MR.JUSTICE RONGON MUKHOPADHYAY HON'BLE MR. JUSTICE DEEPAK ROSHAN For the Petitioner : Mr. Sumeet Gadodia, Advocate Mr. Ranjeet Kushwaha, Advocate

Ms. Akansha Mittal, Advocate Ms. Prakash Narayan, Advocate For the Respondents : Mr. Rajiv Ranjan, A.G.

Mr. P.A.S. Pati, G.A.-II 14/ 20.04.2023 W.P.(T) Nos. 3279, 3282 and 3285 of 2022

These three writ petitions concerning the same petitioner arise out of the common order dated 25th January, 2020 & 20th, January 2022 passed by the learned Commercial Taxes Tribunal, Jharkhand, Ranchi in Revision Case No. JR 70 (A) of 2017, JR 70 (B) of 2017 and JR 70 (C) of 2017, as well as Review Case No. JR05-07 of 2022, respectively; whereby the revision petitions and review petitions of the petitioner have been rejected and the determination of sale price of Iron Ore sold by the petitioner on the basis of average I.B.M. rate in exercise of the powers under Section 35 (7) read with Section 40 (1) of the JVAT Act has been upheld.

Since the issue is common in all these writ applications, as such the relevant facts of W.P.(T) No. 3282 of 2022 are referred which will suffice to dispose of the issue involved in these cases.

2. The brief facts of the case as pleaded by the petitioner are that the petitioner is having merchant mines of iron ore, located at Thakurpari, Noamundi Block and Manoharpur Block. Iron ore extracted from mines is known as "Run of Mines (ROM)" which requires further processing and screening. Petitioner's premise does not have processing and screening facility and thus, only ROM was being sold by the petitioner. ROM includes Fines & Lumps and the grade of minerals found in petitioner's premises was between 52-65% Fe content, which would be evident from survey report as contained in Annexure-1.

Before assessment proceeding of the petitioner was completed wherein, in alleged exercise of power u/s 35(7) r/w Section 40(2) of the JVAT Act, tax and interest imposed upon the petitioner on the alleged ground that petitioner has concealed its Gross Turn Over (for short GTO). The assessing officer despite taking actual figure of sale price, has taken the value of goods sold on the basis of average IBM rate prevalent for the said month as well as average sale price of three nearby mines-M/s. Orissa Manganese & Minerals Ltd., M/s. Rungta Mines Ltd., & M/s. Misri Lal Jain and Sons Co. Ltd. The assessing

officer while determining alleged concealed sale price, has even taken into consideration Rs.22,76,45,615/- sold against Form-H as alleged concealed turnover on 16.02.2013, assessment order was passed by Respondent No.3, wherein turnover determined and/or before assessment proceeding was excluded from total turnover. Thereafter a writ application was filed challenging the assessment order; however, in writ petition, petitioner was directed to file appeal.

3. Being aggrieved, petitioner filed an appeal before the JCCT (Appeal), Jamshedpur being Appeal Case No. CB-VAT-A-14/2013-14. The learned appellate court set aside the assessment order and remanded the matter back to the assessing officer, wherein it was specifically recorded that:-

• GTO of the petitioner cannot be enhanced by comparing sale price of neighboring mines.

• Assessing officer has not found that petitioner has sold its goods lesser than the price shown in sale invoices of the petitioner.

Thereafter, revised assessment order was passed by the assessing officer by stating inter-alia that petitioner has not sold goods at a price higher than the price reflected in its sale invoice; rather the dispute pertains to "under-pricing" by the petitioner which has come to the knowledge of the assessing officer after enquiring from businessmen. However, at the time of passing of revised order, the assessing officer has compared the sale price of the petitioner with IBM Rate only and has proceeded to levy penalty two times of alleged concealment of tax u/s 40(1) of the JVAT Act, 2005.

4. Being aggrieved, petitioner again filed appeal before the JCCT (Appeal) being Appeal Case No. CB-VAT-A-09/2015-16. However, contrary to its earlier finding, the learned appellate court rejected the appeal of the petitioner. Thereafter, the petitioner filed a revision petition being JR 70 (A) of 2017 before the Commercial Taxes Tribunal, Jharkhand at Ranchi which was dismissed on 25th January, 2020 and thereafter, petitioner filed Review Case No. JR 05 of 2020 before the learned Tribunal.

The learned Tribunal rejected the revision application of the petitioner. Thereafter, review petition of petitioner has also been rejected by learned Tribunal.

5. Learned counsel for the petitioner has taken us through the relevant provisions of JVAT Act, 2005, Section 2 (xlvii) Sale and 2 (xlviii) sale price definition, in particular Section 35(7) and Section 40 relating to turn over escaping assessment. Learned counsel for the petitioner has, inter alia, questioned the impugned findings on two-fold legal issues:

• Whether sale price of the petitioner company can be determined on the basis of average sale price of I.B.M. as the average sale price of I.B.M. is only for the purpose of determining royalty payable on minerals and the same cannot be the basis of determination of sale price?

• Whether imposition of penalty under Section 40 (1) of the JVAT Act, 2005 is sustainable in the eye of law, especially when the original proceedings were initiated under Section 40 (2) of the JVAT Act, 2005?

In support of the legal issues, the following submissions have been made:

(a) Average sale price determined by the IBM is the sole basis on which GTO of the petitioner has been enhanced and consequently tax and penalty have been imposed upon the petitioner, despite the fact that price notified by the IBM was only for the purpose of determining royalty payable on the minerals and the same cannot be taken as basis for determining the sale price for levy of VAT/Sales Tax which would be itself evident from the Notification dated 10.12.2009 issued by the Government of India, Ministry of Mines (Annexure-9).

(b) Assessing officer himself, in the revised order has categorically recorded its finding that petitioner has not sold goods at a price higher than the price shown in its invoice and thus, no tax could have been levied to the petitioner under section 35(7) of the JVAT Act, 2005.

From bare perusal of Section 35(7) of the JVAT Act it would reveal that assessing authority is entitled to determine the market value of the goods sold

by the petitioner only and only if the assessing officer comes to a definite finding that the goods have been sold at the rate higher than the rate shown by the petitioner and admittedly in the instant case the assessing officer has himself admitted that petitioner has not sold its goods at higher price than the price shown by the petitioner in its invoices.

Thus, section 35(7) of the JVAT Act which permits the assessing officer to determine the market value of goods is not applicable to the facts of the present case.

(c) The State Tax authorities as well as the learned Tribunal has failed to take into consideration the definition of "Sale" and "Sale Price" occurring in Section 2 (xlvii) & 2(xlviii) respectively of the JVAT Act which in substance provides that the VAT would be levied on the sale of goods and on the consideration received for such sale of goods and not on the basis of market value of the goods in question. Thus, they have failed to consider the aforesaid provisions of the JVAT Act at the time of deciding the issue ofdetermination of goods sold by the petitioner.

(d) Further finding with respect to "under-pricing" of the goods sold by the petitioner recorded by the assessing officer is totally misconceived and not tenable in the eye of law. It is really un-understandable that why purchaser of petitioner would purchase minerals at a lesser price just in order to evade payment of tax especially when the said purchaser is entitled to avail ITC under the JVAT Act, 2005.

(e) Further, assessing officer in its revised order has stated that "under- pricing" of the petitioner has been derived from the enquiry made from other businessmen, but no details of such enquiry has been mentioned in the revised order. The lower court records itself demonstrates that no such enquiry whatsoever was conducted by the assessing officer to conclude under-pricing done by the petitioner.

(f) The quantity of goods sold has not been disputed either by the assessing officer or the learned appellate court or by the Tribunal. Further, nowhere the returns of the petitioner have been disputed by the Tax authorities or by the learned Tribunal. In fact, the remand order passed by the learned appellate court was limited remand order and the revised order should have only

confined to the facts that whether petitioner has sold its goods at a higher price than shown in invoice. But the assessing officer has exceeded its jurisdiction and has held that the instant case relates to under-pricing of goods sold by the petitioner.

(g) Apart from the aforesaid contentions; learned counsel further contended that prior to amendment carried out in Section 40(2) vide notification bearing no. LG18/2013-08/LJ dated 02.07.2014, only interest was leviable on the alleged concealed turnover. In fact, at the time of original assessment order, the learned assessing officer has imposed interest upon the petitioner under Section 40(2) of the JVAT Act but, just in order to artificially enhance the alleged amount due against the petitioner, penalty under Section 40(1) has been imposed upon the petitioner while passing the revised order which is wholly illegal, untenable in the eye of law.

Further, initiation of proceeding under Section 40(1) of the JVAT Act is in thenature of re-assessment proceeding and could not have been initiated by converting original proceeding initiated under Section 40(2) which is a before assessment proceeding to a proceeding under Section 40(1) being a re- assessment proceeding.

6. In order to buttress his contention, learned counsel for the petitioner relied upon the judgment of Hon'ble Apex Court rendered in Morriroku U.T. Indians Pvt. Ltd. Vs. State of U.P. reported in (2008) 15 VST 559 (SC) wherein it has been held that "Sales Tax is a tax on the price received or receivable by the dealer in respect of sale and the dealer is entitled to frame the price structure which is best suited for the type of business with a view to stand the competition".

Petitioner also relied upon the following judgments: - • State of Rajasthan Vs. Rajasthan Chemists Assn. reported in (2006) 6 SCC 773 wherein the Hon'ble Supreme Court has reiterated the principle of levy of "tax on sale of goods" and held that State Legislature does not have legislative competence to give the expression "sale of goods" extended meaning and to enlarge its legislative fields to cover those transaction for taxing which do not properly confirm the element of sale of goods within the Sales Tax.

• M/s. Girdharilal Nanhelal Vs. The Sales Tax Commissioner, M.P. reported in (1976) 3 SCC 701 wherein it has been held that in order to impose liability, onus of proving the ingredients of sale squarely lies upon the department.

• M/s. Devkavai Velji Vs. State of Jharkhand & Ors. reported in 2013(2) JLJR456, the Hon'ble Jharkhand High Court has observed that tax cannot be levied on differential rate, merely because the petitioner has sold goods at a rate lower than themarket rate.

Apart from the above, petitioner is placing reliance upon the judgment of Hon'ble Apex Court passed in the of Commissioner of Income Tax Vs. Calcutta Discount Co. Ltd. reported in (1974) 3 SCC 260 (Para-11) wherein it has been held that a dealer cannot be assessed on the basis of market price of goods sold by the said dealer.

7. Learned AAG-II has argued on behalf of the State. A counter affidavit has been filed in the matter contending that ROM consists of less ferrous content of iron, while Iron Ore consists of higher quantity of Ferrous content. This is the reason that there is nomention of ROM in the rate of IBM. Based on the records showing the sale of iron ore filed by the petitioner, it is argued that the petitioner had been producing/raising iron ore as lumps which are more valuable than ROM and fines. It is also pointed out from these invoices that the rate of iron ore lump (ROM) and fines, ferrous wise mentioned in Tax invoices is lower rate than the ferrous wise, grade wise mentioned rate of IBM.

The basis for initiation of the proceedings by the assessing officer was this satisfaction that the petitioner has sold the iron ore at a higher price than shown by him in these invoices. Thus, the ingredients of Section 35 (7) of the JVAT Act were satisfied for proceeding against him in terms of Section 40 (1) of the JVAT Act.

Pursuant thereto; notices were issued under Section 40 (1) and 40 (2) upon the petitioner for the relevant assessment years by order dated 15.02.2012, 25.02.2012, 13.06.2012, 27.06.2012, 28.12.2012 and 31.01.2013. Since the Assessing officer found a case of underpricing, the orders dated 31 st January, 2013 was passed imposing tax and penalty upon the petitioner. The same were taken in appeal before the Joint Commissioner (Appeals), who set

aside the order and remanded the matter to the assessing officer to take a fresh decision in accordance with law. Thereafter, the revised assessment order was passed by the assessing officer, inter-alia holding that the petitioner has indulged in underpricingof the goods sold at a higher price after enquiries from the businessmen. Since the IBM rates of royalty are determined on average of 10 such mines operating in the area, revised every month for the purposes of payment of royalty, the said yardstick was adopted by the assessing officer to arrive at a best judgment /assessment since the books of accounts of the petitioner were disbelieved. The appellate authority considered the matter once again but rejected the appeals vide orders dated 31.03.2017 in all the cases.

It is further argued by the State counsel that sale of lumps and fines have been made. The dealer was guilty of misrepresenting before the appellate authority that he did not have any screening or processing unit. It is submitted that for the relevant years though the petitioner did not have a screening or processing unit but the petitioner did have such units for the previous years.

The learned tribunal has also addressed the issue relating to price variation of iron ore of same grade giving different uses by holding that the I.B.M rate are determined on the basis of average sale price and I.B.M. is a standard government organization. Rates published are reliable and also proper. According to the learned tribunal also there cannot be any evidence of underpricing to the effect that the goods are sold at a price higher than what is reflected in the sale invoices, as such, such sale transactions are generally colourable transaction between the buyer and the seller. The documents available showed that the goods were sold at a higher price and there was no requirement to take recourse to the provision of 35 (7), rather the assessment order could have been passed in terms of Section 35 (5) and 35 (6) of the JVAT Act. Only when such evidence is not there and on the basis of enquiry conducted by the assessing officer, he was satisfied that the goods have been underpriced, then a case under Section 35 (7) is made out.

8. Learned counsel for the State has placed reliance on the decisions of the Hon'ble Apex Court in the case of M/s VEENA THEATRE, PATNA versus THE STATE OF BIHAR reported in 1970 (3) SCC 79, Para 9 and THE COMMISSIONER OF SALES TAX, MADHYA PRADESH versus M/S

H.M.ESUFALI, H.M. ABDULALI, SIYAGANJ, MAIN ROAD, INDORE reported in (1973) 2 SCC 137, Para 8 and 11 in support of his submission that in a case where the invoices and books of accounts of the petitioner were not believable the assessing officer had no other option than to make a best judgment/assessment by making an estimate of the sale price relying upon the I.B.M. rates.

He lastly submits that the revised assessment order does not suffer from any illegality or error. The impugned orders passed by the learned tribunal upholding the same, therefore, needs no interference.

Learned counsel for the petitioner in reply has sought to distinguish these decisions on facts and they relate to case of best judgment assessment when the Books of Account were either rejected or were not produced.

9. Having gone through the rival contentions of learned counsel for the parties and after going through the impugned order and other relevant documents placed before us it appears that revised assessment proceeding of the petitioner was completed and an order has been passed whereby, in exercise of power u/s 35(7) r/w section 40(2) of the JVAT Act, tax and interest has been imposed upon the petitioner on the ground that petitioner has concealed its GTO.

The assessing officer at the first instance despite taking actual figure of sale price, had taken the value of goods sold on the basis of average IBM rate prevalent for the said month as well as average sale price of three mines-M/s. Orissa Manganese & Minerals Ltd., M/s. Rungta Mines Ltd., & M/s. Misri Lal Jain and Sons Co. Ltd.

Aggrieved by the assessment order, the petitioner assailed the same in appeal before the JCCT (Appeal), Jamshedpur being Appeal Case No. CB- VAT-A- 14/2013-14. The learned appellate court set aside the assessment order and remanded the matter back to the assessing officer by recording that the GTO of the petitioner cannot be enhanced by comparing sale price of neighboring mines and the AO has not found that petitioner has sold its goods lesser than the price shown insale invoices of the petitioner.

Thereafter, a revised assessment order was passed. In the revised assessment order though the assessing officer held that the petitioner has

not sold goods at a price higher than the price reflected in its sale invoice; however, he observed that the dispute relates to "underpricing" by the petitioner which has come to the knowledge of the assessing officer after enquiring from businessmen. However, this time at the time of passing of revised assessment order, the AO has compared the sale price of the petitioner with IBM Rate only and has proceeded to levy penalty two times of alleged concealment of tax u/s 40(1) of the JVAT Act, 2005.

10. After going through the aforesaid facts and the history of the case it appears that to decide the lis involved in these cases, section-35 of JVAT Act play an important role as it deals with assessment and self-assessment.

For brevity, Section 35 is quoted herein below:

"35. Assessment and Self-Assessment --

• Subject to provisions of sub-Section (2), the amount of tax due from a registered dealer or a dealer liable to be registered under this Act shall be assessed in the manner hereinafter provided, for the Tax Period during which the dealer is so liable as prescribed.

• Notwithstanding anything contained in this Section, if a registered dealer has failed to furnish return or returns under sub-Section (1) of Section 29 in respect of any tax period or periods, the prescribed authority shall proceed to make provisionalassessment under Section 36.

• Where a registered dealer having turnover upto 1 (one) crore per annum other than the registered dealer referred to under sub-section 5 has furnished:-

              •       All the returns for any tax period.
              •       Revised returns and annual returns in respect of any tax period

within the prescribed time and in the prescribed manner. • Has paid the tax payable according to such returns or revised returns as also interest payable if any.

• Has furnished the Audit report within the prescribed time if required andin the prescribed manner.

The returns so filed are found to be in order shall be accepted as self - assessment in the prescribed manner subject to adjustment of any arithmetical errors apparent on the face of the said return(s) and his assessment shall be deemed to be havebeen made for the purpose of subsection (1) of Section 35, provided this provision shall not applicable to dealers covered under section 19 of the Act.

• The amount of input tax credit, exemptions and other credits or concessions claimed by the dealer in the return(s) for which no supporting declarations, certificates or evidence required under this Act or Central Sales Tax Act is furnished, self assessment shall be made accordingly without such input tax credit, exemption and other claims, treating such sales as taxable by levying appropriate rate of tax, notwithstanding the fact that the dealer may have been prevented by sufficient cause to produce such declarations, certificates or evidence in support of his claim.

• If a dealer has furnished all the returns and the revised returns, if any, within the prescribed period and in the prescribed manner or within next fifteen days thereafter and -

The prescribed authority is satisfied that the returns or the revised returns as the case may be, and self assessment claim are prima-facie correct, consistent and complete, he shall accept the self assessment as filed by the dealer and shall assess the amount of tax and interest due from the dealer on the basis of such returns, after makingprima-facie adjustment in the nature of arithmetical errors, if any, in the returns and theself assessment;

• In the circumstances, if the self-assessment under sub-section (1), (2), (3), (4) and (5) has not been filed within the prescribed time, the prescribed authority shall serve on such dealer a notice in the prescribed manner requiring him on a date and at atime and place to be specified therein either to attend in person or through an authorised representative or to produce or to cause to be produced any accounts and other evidences on which such dealer may rely in support of such returns and claims thereof and assess the dealer, the amount of tax and interest due from the dealer on the basis of such returns which have come on records and after making such adjustments asmay be necessary including - • disallowance of claim of input tax credit, exemptions, discounts and deductions and any other concessions or rebates not supported by requisite evidence as required under the Act or the rules made thereunder; and • disallowance of claims of tax payments and refund adjustment not verified orotherwise not admissible; and • withdrawal of claim of tax credit including carry forward of tax credit not admissible under the Act; and • levying of interest applicable under this Act.

Provided, notwithstanding anything contained in Section 36 if registered dealer fails to comply with the terms of the notice under this sub-section or accounts and other evidence produced by him are, in the opinion of the prescribed authority incorrect, incomplete or unreliable either wholly or partly the said authority shall assess, to the best of its judgment, the amount of tax and interest due from the dealer which have come on records and after making such adjustments as may be necessary".

(7). If the prescribed authority is satisfied that goods have been sold a price higher than that shown by the dealer, he may determine value of goods at the time of the saleand proceed to assess the tax on such price.

Provided before initiating such proceedings, the prescribed authority shall record his reasons for doing so and no orders shall be passed under this sub-section without giving the dealer an opportunity of being heard."

Section 40(1) and (2) are also quoted herein below:

• Turnover escaping Assessment --(1) Where after a dealer is assessed under Section 35 or Section 36 for any year or part thereof, and the Prescribed Authority, uponinformation or otherwise has reason to believe that the whole or any part of the turnover of the dealer in respect of any period has -

• escaped assessment; or • been under assessed; or • been assessed at a rate lower than the rate on which it is assessable • been wrongly allowed any deduction therefrom; or • been wrongly allowed any credit therein;

the prescribed authority may, serve or cause to serve a notice on the dealer and after giving the dealer reasonable opportunity of being heard and making such inquiries as he considers necessary, proceed to assess to the best of his judgement, the amount of tax due from the dealer in respect of such turnover, and the provisions of this Act shall so far as may be, apply accordingly.

Provided, for clause (a), where the prescribed authority has reasons to believe that the dealer has concealed, omitted or failed to disclose willfully, the

particulars of such turnover or has furnished incorrect particulars of his such turnover and thereby return figures are below the real amount, the prescribed authority shall proceed to assessor reassess the amount of tax due from the dealer in respect of such turnover and the provisions of this Act, shall so far as may apply accordingly and for this purpose,'the dealer shall pay by way of penalty, a sum equal to thrice the amount of additional taxassessed. " (2) If the prescribed authority in the course of any proceeding or upon any information,which has come into his possession before assessment or otherwise, under this Act, and issatisfied that any registered dealer or a dealer to whom the registration certificate has been suspended under sub-section (7) of Section 25 -

• has concealed any sales or purchases or any particulars thereof, with a view to reduce the amount of tax payable by him under this Act, or • has furnished incorrect statement of his turnover or incorrect particulars of his sales or purchases in the return furnished under sub-section (1) of Section 29; or otherwise, the prescribed authority shall, after giving such a dealer an opportunity of being heard, by an order in writing direct that he shall, in addition to any tax payable which is or may be assessed under Section 35 or 36 or 38, pay by way of penalty a sum equal to thrice theamount of tax on the concealed turnover or on concealed or incorrect particulars* for each month of such suppression or concealment or for furnishing incorrect particulars; on the amount of tax payable under the Act or on the suppressed turnover or on concealed turnover or for furnishing incorrect particulars.

The interest shall be payable before the completion of the assessment and for determining the amount of penalty payable, the prescribed authority shall quantify the amount of tax payable provisionally under this Act."

11. After going through the proviso to Section 35 (7) of the Act it appears that the statute specifically postulates that prescribed authority shall record his reason before initiating the proceedings and no order shall be passed under this sub section without giving the dealer an opportunity to be heard. Section 40(1) provides for Assessment in cases where turnover has escaped assessment on account of reasons indicated under Clause (a) to (e). In cases of concealment or failure to disclose willfully etc. the penal provisions under proviso to 40(1) provide imposition of three times the amount of additional tax assessed. Section 35(7) contemplates of such a proceeding against an assessee regarding whom the Assessing Officer is satisfied that he has resorted to selling of goods at a higher price than shown in his invoices.

Therefore, the proviso to Section 35 (7) of the JVAT Act firstly stipulates that the reasons must be recorded by the prescribed authority for initiating the proceeding and secondly, the principles of natural justice should be followed.

Though in the instant case the second ingredient of the proviso has been fulfilled; however, there is no document to suggest that the assessing officer has recorded his reason before initiating the proceeding.

At the cost of repetition, after passing the assessment order pursuant to such notice under Section 40(2) of the Act, the matter was remanded by the Appellate Authority.Thereafter by invoking provisions of Section 35(7) read with Section 40(1) of the JVAT Act, the revised assessment order was passed which has been affirmed up to the learned Tribunal and is impugned herein.

12. At this stage on going through the materials on record, it is noteworthy that even after remand by the appellate authority in the revised assessment order the assessing officer has not correctly applied its mind to the requirement of law under Section 35(7) of the Act and rather observed that it is not a case where the assessee has sold the goods at a price higher than what is shown by him.

13. The principles regarding concept of 'Sales Tax' as compared to Income Tax or Excise Duty have been explained in the case of Morriroku U.T. Indians Pvt. Ltd. (supra) at paragraphs 19 and 23 quoted hereunder :-

"19. Before analysing Section 3 of the 1948 Act, it is important to keep in mind that in income tax cases, tax is exigible on "real income" which means the actual income received by or which accrues to the assesses. In case of sales tax, tax is exigible on real price received or receivable by the dealer in respect of a sale. A dealer is entitled to frame his price structure in a manner conducive to the type of his business or with a view to withstand the competition. In a given case, cost may be more than the price. The dealermay base his price structure to give an incentive to his clients, agents,distributors, etc., particularly if he is a manufacturer. In such cases, his price structure has to be scrutinized by the Department under the sales tax law to find out the real sale price receivable by him. There may be cases where heis required to give a discount on account of defect in quality or delay. The important thing to be noted is that "price" is the amount of consideration which a seller charges the buyer for parting with the title to the goods. It comprises of the amount which the dealer himself has to pay for the purchaseof the goods, the expenditure, which he is to incur for transporting the goods from the place of purchase to the place of sale, the duties, if any, levied on the particular goods bought by him, the octroi duty, which he may have had to pay and his own margin of profit after meeting handling charges includinginterest on the capital invested. The cost price of the goods actually paid by him under various heads of accounts would no doubt constitute the consideration for which he would part with his title to the goods. The entire amount of consideration, including the sales tax component,

which the purchaser pays, would constitute the price of goods. To this extent, there is no difficulty. The difficulty comes in when by law or by legal fiction the Department seeks to introduce a notional concept as an element of the "real price". This is particularly important when there is no rule to that effect in the sales tax law. Even under the definition of turnover in Section 2(i) onehas to take into account only the aggregate amount for which goods are bought or sold. It is this aggregate amount which is taxable under Section 3 read with Section 2(i) of the 1948 Act."

xxx xxx xxx "23. On the other hand, excise duty is a levy on a taxable event of "manufacture" and it is calculated on the "value" of manufactured goods. Excise duty is not concerned with ownership or sale. The liability under the excise law is event based and irrespective of whether the goods are sold or captively consumed. Under the excise law, the liability is there even when themanufacturer is not the owner of law material or finished goods (as in the case of job-workers). Excise duty, therefore, is independent of ownership[see Ujagar Prints (II) v. Union of India]. Therefore, for sales tax purposes, what has to be taken into account is the consideration for transfer of property in goods from the seller to the buyer. For this purpose, tax is to be levied on the agreed consideration for transfer of property in the goods and in such a case cost of manufacture is irrelevant. As compared to the sales tax law, the scheme of levy of excise duty is totally different. For excise duty purposes, transfer of property in goods or ownership is irrelevant. As stated, excise duty is a duty of manufacture. The provisions relating to measure (Section 4 of the 1944 Act read with the Excise Valuation Rules, 2000) aim at taking into consideration all items of costs of manufacture and all expenses which lead to value addition to be taken into account and for that purpose Rule 6 makes a deeming provision by providing for national additions. Such deeming fictions and notional additions in excise law are totally irrelevantfor sales tax purposes. Therefore, in any event, these notional additionscannot be read into Clause 5.1 and Clause t.2 of the General Agreement for Purchase of Parts dated 31.7.1997."

In the case of M/s. Girdharilal Nanhelal (supra) cited by the petitioner, the Apex Court has at para-7 held that for the purpose of levy of Sales Tax it would be necessary not only to show that the source of money has not been explained but also to show existence of some material that such acquisition of money has resulted from transactions liable to Sales Tax and not from other sources.

14. At this stage it is relevant to refer the relevant part of the revised assessment order which is quoted herein below:

ßv/kksgLrk{kjh }kjk ;gkWa Li'V djuk U;k;ksfpr gksxk fd vkyksP; ekeyk laO;ogkj Nqik;s tkus ls lacf/kr ugha gSA oLrqr% vkyksP; ekeyk eky dk voewY;u (Under Pricing)djds fcdzh n"kkZus ,oa dj vioapuk djus dk gSA bl ekeysa esa Under Pricing ls

dzsrk dks Hkh dj vioapuk dk vk/kkj izkIr gks jgk gSA bl ekeysa esa fcdzsrk vkSj dzsrk ds fefyHkxr ls de nj ij dz;&fcdz; fn[kk;k tk jgk gS ,oa nksuks ds }kjk dj vioapuk fd;k tk jgk gSA ;g ,d Colourful Transaction gSaA vkyksP; ekeys esa v/kksgLrk{kjh larq'V gS fd O;kikjh }kjk Under Pricing djds dj vioapuk dh x;h gSAÞ

From the above extracts of the revised assessment order, it clearly transpires that the Assessing Officer has come to the finding that it is a case of 'underpricing'. The finding with respect to "underpricing" of the goods sold by the petitioner recorded by the assessing officer is not tenable in the eye of law. Further, assessing officer in its revised order has stated that "underpricing" of the petitioner has been occasioned due to connivance of the seller and the purchaser, but no details of such enquiry has been mentioned in the revised order. The lower court records do not show that any such enquiry was conducted by the assessing officer to conclude underpricing done by the petitioner before proceeding to impose tax and penalty under Section 40(1) based on the IBM rates. Even the appellate authority on the second occasion in its order dated 31.03.2017 accepted the above finding of the Assessing Officer in the revised assessment order that it is not case of the assessee having sold goods at a higher price than shown by him in the invoices but a case of 'underpricing'.

In the absence of tangible materials to support such a finding, it is difficult to assume that a purchaser of petitioner would purchase minerals at a lesser price under an invoice in order to evade payment of tax especially when the said purchaser is entitled to avail ITC under the JVAT Act, 2005. It is only after recording of reasons for initiation of proceedings under Section 35(7) the exercise for determination of value of goods at the time of sale and assessment of tax on such price is to be done by giving the dealer an opportunity of being heard.

15. At this stage it is further appropriate to observe that the condition of recording satisfaction under proviso to Section 35 (7) is a prerequisite before initiation of proceedings and cannot be dispensed with by the Assessing Officer. In other words, the assessing officer is duty bound to record his reasons before initiating any proceeding. It appears that the petitioner had also specifically raised this plea before the Assessing Officer before passing of

the revised assessment order and also before the appellate authority thereafter at the second instance.

It is reiterated that recording of satisfaction is sine qua non before proceeding to impose tax and penalty upon the assessee under Section 35(7) read with Section 40(1) of the JVAT Act. Any such satisfaction is to be based on tangible materials as are found by the assessing officer as the provisions are penal in nature where an assessee is found to be indulging in tax evasion by suppression or concealment of actual sales or turnover by selling goods at a higher price than shown by him. The matter is therefore required to be remanded to the assessing officer to comply the provisions of Section 35(7) of the Act for initiating the proceeding, if he finds any evidence that the goods have been sold at higher price than shown by the dealers.

16. Though several contentions have been raised by the parties on the merits ofthe matter regarding the levy of tax and penalty but since the matter is being remanded for the assessing officer on the point of recording of satisfaction under Section 35 (7) of the JVAT Act before initiation of the proceedings, we consciously refrain from making any observation on the merits of the case regarding the levy of tax and penalty upon the petitioner under Section 35 (7) r/w Section 40 (1) of the JVAT Act. The judgment relied upon by the learned Advocate General i.e. M/s VEENA THEATRE, PATNA and THE COMMISSIONER OF SALES TAX, MADHYA PRADESH (supra) relate to cases of best judgment assessment after the rejection of Books of Account of the Assessee. Since in the present case the requirement of law for initiation of the proceedings have not been fulfilled, these decisions are not of assistance to the present cases.

17. As such, on remand, the AO shall proceed strictly in accordance with law. The petitioner shall be at liberty to raise all the grounds available to him before the AO which shall be considered accordingly.

18. Learned Tribunal has completely failed to consider that the requirement of law for initiating a proceeding under Section 35(7) by recording reasons has not been fulfilled by the Assessing Officer even after remand by the Appellate Authority on the first instance. Consequently, the common impugned order

dated 25th January, 2020, passed by the learned Commercial Taxes Tribunal, Jharkhand, Ranchi in Revision Case No. JR 70 (A) of 2017, JR 70 (B) of 2017 and JR 70 (C) of 2017, as well as common order dated 20th January, 2022 passed in Review Case No. JR 05 of 2022, JR 06 of 2022 and JR 07 of 2022 are quashed.

19. As a result, W.P.(T) No. 3279 of 2022, W.P.(T) No. 3282 of 2022 and W.P.(T) No. 3285 of 2022 are, hereby, allowed in the manner and to the extent indicated above on contest. Pending I.A., if any, is also disposed of.

(Rongon Mukhopadhyay, J.

(Deepak Roshan, J.)

Amardeep/