CTR/38/2010
2023 Latest Caselaw 968 UK

     IN THE HIGH COURT OF UTTARAKHAND
                AT NAINITAL
          HON'BLE THE CHIEF JUSTICE SRI VIPIN SANGHI
                             AND
            HON'BLE SRI JUSTICE ALOK KUMAR VERMA

                           11TH APRIL, 2023

     COMMERCIAL TAX REVISION No. 38 OF 2010

Between:

M/s Bharat Electronics Ltd.
                                                         ...Revisionist
and

The Commissioner Commercial
Tax and another.                                      ...Respondents

Counsel for the revisionist. : Mr. B.R. Garg and Mr. Jitendra Chaudhary, learned counsels.

Counsel for the respondents. : Mr. M.C. Pande, learned Additional Advocate General assisted by Mr. Mohit Maulekhi, learned Brief Holder for the State of Uttarakhand.

JUDGMENT : (per Sri Vipin Sanghi, C.J.)

The following question of law was framed in

this Revision, preferred by the revisionist/ assessee

under Section 11 of the U.P. Trade Tax Act, 1948 :-

"Whether the assessee was required to be given a notice and an opportunity of hearing by the Competent Authority before granting permission to the Assessing Officer for initiating proceedings under Section 21(2) of the Trade Tax Act."

2. The assessee placed reliance on Circular dated

17.07.1992, issued by the Trade Tax Department, to

claim that the assessee was entitled to a prior notice

before the decision was taken to carry out reassessment, under Section 21 of the U.P. Trade Tax

Act, 1948, as applicable to the State of Uttarakhand.

The Circular dated 17.07.1992 reads as follows :-

"Letter number-Legal-Three (1)-4-Section- 21 (2)-92-93/611/Sales Tax, dated 17-7-1992

All Assistant Commissioner (Assessment) Sales Tax All Sales Officer/Sales Officer, Division -2

Subject: Permission for assessment under Section 21 (2) in cases based on change of opinion

On amending Section 21(2) after the approval of the Commissioner of Sales Tax assessment is possible in case of change of opinion. .........

Representatives requested that in such cases the dealers do not get the opportunity to present their case. The Government vide - S.Tax-2-2873 (1)-Eleven-92-9(96)/90, dated 7- 7-1992 informed that the cases lying with the Commissioner Sales Tax for approval for re- assessment on the basis of change of opinion, in that cases before granting approval dealer should also be given the opportunity to present his case.

Thus requested that in such cases at the time of sending proposal the concerned dealer should be informed to present their case."

3. The respondents sought to reopen assessment

proceedings in respect of the Assessment Year 2001-02

(Central) on 26.03.2007. The Original Assessment

Order was framed by the Assessing Officer on

24.06.2004. Since the reassessment was sought to be

reopened after expiry of more than two years of the end

of the Assessment Year 2001-02, in terms of Section

21(2) of the U.P. Trade Tax Act, the authorization was

required to be obtained from the Commissioner, which

was granted to the Assessing Officer on 20.03.2007, on

the basis of which the Assessing Officer issued notice to

the revisionist on 26.03.2007.

4. The admitted position is that the assessee was

not issued any prior notice before deciding to carry out

the reassessment under Section 21(2) of the U.P. Trade

Tax Act, in respect of the Assessment Year 2001-02.

The revisionist has placed reliance on several judgments

of the Allahabad High Court, which have interpreted the

aforesaid Circular dated 17.07.1992, and concluded that

the grant of a prior notice, as stipulated by the said

Circular, is mandatory, as the said Circular is binding on

the department. In this regard, we may refer to the

judgments of the Allahabad High Court in the cases of

Indian Oil Corporation Ltd. v. Commissioner of

Trade Tax, 1999 U.P.T.C. - 365; M/s Manaktala

Chemicals Pvt. Ltd. v. State of U.P. and others,

2006 U.P.T.C. - 1128; and M/s S.K. Traders v.

Additional Commissioner of Trade Tax, Ghaziabad

& Another, 2007 NTN (Vol. 34) - 345.

5. In M/s Manaktala Chemicals Pvt. Ltd.

(supra), the Division Bench of the Allahabad High Court,

while interpreting Section 21(2) of the U.P. Trade Tax

Act, in the light of the aforesaid Circular, held as

follows:-

"9. Section 21(2) though specifically does not say that opportunity is to be afforded to the dealer before granting the sanction by the Commissioner but the principle is well recognized, that even if there is no specific provision in the Statute, such opportunity need be given, to make the action taken or order passed in consonance with the principles of natural justice; unless, of course, the statute specifically excludes the applicability of principle of natural justice, such an opportunity is deemed to be inbuilt in the provision, in case any action taken or order passed would affect the rights of any person adversely. In the case of Indian Oil Corporation Ltd., Agra v. Commissioner, Trade Tax, reported in 1999 UPTC 365, a division Bench of this Court after holding the circular issued on July 7, 1992 binding on the assessing authority held that the dealer should have been given a hearing in the matter before any reassessment order could have been passed, and since such an opportunity was not given, the order of approval granted by the higher authority was quashed.

10. There is one more reason for holding that the opportunity has to be given to the assessee or the dealer by the Commissioner before he grants/ approval for initiating proceedings under Section 21 in the extended period of limitation which stands spelt out from the language used in the first proviso attached to Sub-section (2).

11. The proviso confers power and gives jurisdiction/authority to the Commissioner if he is 'satisfied' either on his own or on the basis of the reasons recorded by the assessing authority that it is just and expedient to either assess or reassess the dealer, only then, he would authorize the assessing authority to make such assessment or reassessment within the extended period of limitation. The plain and simple meaning of the aforesaid proviso is that the permission/ approval for such reassessment of alleged escaped turnover is to be granted by the Commissioner only on being satisfied either on his own or on the basis of the reasons recorded by the

assessing authority that it is just and expedient to reopen the assessment.

12. Once the proviso postulates recording of reasons by the assessing authority, it necessarily obligates the Commissioner or the Additional Commissioner to consider such reasons and make them known to the assessee, before he finally forms his satisfaction and even if the Commissioner or the higher authority on his own reasons feels satisfied that it is just and expedient to reopen the assessment, it would still require that such reason must be made known to the dealer also so that before the assessment is reopened he may have an opportunity to satisfy the higher authority that the reasons assigned by the assessing authority are not relevant or they are incorrect or they do not make out a legal ground for reopening of the assessment and likewise if the Commissioner or the higher authority proposes to authorize the assessing authority for reopening the assessment on his own, then also reasons for such satisfaction have to be supplied to the dealer, so that he may have a say to convince the higher authority for not authorizing the assessing officer for reopening the assessment."

6. As aforesaid, no notice was given to the

revisionist by the Commissioner, disclosing reasons to

believe that the whole, or any part of the turnover of

the revisionist-dealer had escaped assessment of tax, or

had been under-assessed, or had been assessed to tax

at a rate lower than that at which it is assessable under

the said Act, or that any deductions or exemptions have

been wrongly allowed.

7. The submission of the learned counsel for the

revisionist is that the case of the revisionist was

squarely covered by the aforesaid Circular dated

17.07.1992, which has been held to be mandatory by

the Allahabad High Court in the aforesaid cases, and

that the said Circular is attracted, since it was a case of

change of opinion. In this regard, the original order of

assessment dated 24.06.2004 has been adverted to by

learned counsel for the revisionist, wherein the

Assessing Officer had observed in respect of the

exemption granted to the revisionist, under the Central

Sales Tax Act, as follows :-"

"O;kikjh }kjk 3227315=00 dh fu;kZr fcØh ,oa :Ik;s 227077191=00 dh izkar dh ckgj fcØh QkeZ&bZ&1 ds fo:} dh xbZ gSA O;kikjh }kjk foLr`r lwph ,oa QkeZ&bZ&1 nkf[ky fd;s x, gSa] tks izFke n`"V;k tkWp dj lgh ik;s x,A fu;kZr fcØh ds laca/k esa fcy vkWQ ysfMax nkf[ky fd, x, gSa 15 QkeZ bZ&1 nkf[ky fd, x, gSA mDr izi=ksa dh tkWp ij dksbZ =qfV ,lh ugha ik;h xbZ gSa ftlls budh fcØh vLohdkj dh tk ldsA vr% QkeZ bZ&1 ls vkPNkfnr fcØh ,oa ,DliksVZ lsy mDr foospu ds vk/kkj ij O;kikjh ds gkFkksa djeqDr jgsxhA O;kikjh }kjk tks [email protected]Øsi izkar ds ckgj cspk x;k gS] mlds fy, ,d QkeZ&lh nkf[ky gSA tks izFke n`'V;k tkWp ij lgh ik;k x;k] vr% bl fcØh ij 4% dh nj ls djns;rk fu/kkZfjr dh tk;sxhA"

8. The further submission of learned counsel for

the revisionist is that the order granting permission to

the Assessing Officer to reopen the assessment - passed

by the Commissioner is also silent, and does not record

any reasons for the belief that the assessment in

question should be reopened for one of the reasons

enumerated in Section 21(1) of the U.P. Trade Tax Act.

The order passed by the Commissioner on 20.03.2007

reads as follows :-

"dk;kZy; vfrfjDr vk;qDr] okf.kT; dj x<+oky tksu nsgjknwuA nsgjknwu% fnukad% 20 ekpZ] 2007

vkns"k

loZJh Hkkjr bysDVªkWfuDl fy0 cyHknziqj dksV}kj ds o'kZ 2001&02 dsUnzh; okn esa fMIVh dfe"uj okf.kT; dj dksV}kj }kjk vfHkfyf[kr dkj.kksa ds vk/kkj ij ;g lek/kku gks tkrk gS fd mDr djnkrk dk o'kZ 2001&02 dks dj fu/kkZj.k ;k iqu% dj fu/kkZj.k fnukad 13&03&07 ds ckn djuk U;k;ksfpr ,oa laehphu gSA

vr% mRrj izns"k O;kikj dj vf/kfu;e ¼;Fkk mRrjkapy esa izHkkoh½ dh /kkjk&21¼2½ ds ijUrqd ¼lifBr ewY; of/kZr dj vf/kfu;e 2005½ esa fn, x, vf/kdkjksa dk iz;ksx djrs gq, eSa vfrfjDr vk;qDr okf.kT; dj x<+oky tksu nsgjknwu mDr lanfHkZr okn esa mivk;qDr okf.kT; dj dksV}kj dks o'kZ 2001&02 ds dsUnzh; okn dk dj fu/kkZj.k ;k iqu% dj fu/kkZj.k djus ds fy, vf/kd`r djrk gwWA

¼lqjs"k izdk"k½ vfrfjDr vk;qDr okf.kT; dj x<+oky tksu nsgjknwu"

9. Learned counsel for the revisionist, therefore,

submits that the question of law framed by this Court

should be answered in the affirmative, and,

consequently, the reassessment drawn by the Assessing

Officer, which was upheld by the Joint Commissioner

(Appeals) and by the Trade Tax Tribunal, should be set-

aside to the extent the reassessment order framed by

the Assessing Officer has been upheld.

10. On the other hand, the submission of learned

counsel for the respondents, primarily, is that, in the

circumstances of the case, the Circular dated

17.07.1992, above referred to, was not attracted. It is

argued that the present was not a case of change of

opinion. It was a case where the Assessing Officer failed

to correctly apply the provisions of the Central Sales Tax

Act. It is only in the case of change of opinion that the

said Circular is attracted. Consequently, the decisions of

the Allahabad High Court relied upon by the revisionist,

holding that the said Circular is mandatory, are of no

avail to the revisionist. It is submitted that the

Assessing Officer had proceeded on the basis that mere

production of Form-E-1 by the assessee was sufficient

for grant of exemption from payment of Central Sales

Tax under Section 6(2) of the Central Sales Tax Act,

whereas, it was essential for the assessee to produce

Form-C or Form-D, as the case may be, to avail of the

said exemption. Since the Assessing Officer, while

passing the Original Assessment Order dated

24.06.2004 had not appreciated the requirements of

Section 6 of the Central Sales Tax Act, the assessment

was liable to be reopened.

11. It is further submitted that during the

reassessment proceedings, the revisionist had not raised

the issue of non-compliance of the Circular dated

17.07.1992. The revisionist had repeatedly sought time

to produce Form-C in respect of the transactions, in

relation to which exemption had been granted by the

Assessing Officer while passing the Original Assessment

Order dated 24.06.2004. However, the same was never

produced by the assessee. It is further argued that, in

any event of the matter, even if this Court were to

answer the question of law in favour of the

assessee/revisionist, the matter should be remanded

back to the Assessing Officer to proceed in compliance of

Section 21 of the U.P. Trade Tax Act, read with Circular

dated 17.07.1992.

12. We have heard learned counsels, and

considered their respective submissions. We have also

perused the entire record, and the legal provisions, as

well as the Circular dated 17.071992 relied upon by the

revisionist. We have also considered the decisions relied

upon by learned counsel for the revisionist.

13. The core issue that we need to address - to

answer the question of law framed as aforesaid, is

whether the present is a case of change of opinion, as

contended by the assessee/ revisionist, and disputed by

the respondents. We have set out hereinabove the

relevant extract from the Original Assessment Order

dated 24.06.2004 framed by the Assessing Officer. The

Assessing Officer has observed that the turnover of Rs.

22,00,77,190/- was tax free, while framing the

assessment under Section 9(2) of the Central Sales Tax

Act. In respect of the same, the Assessing Officer has

observed as follows :-

"/kkjk&9 ¼2½ ds vUrxZr%

1- LofufeZr bys0 xqM~l dh fcØh izkkar ckgj 1439257373=00 2% 28785147=00

2- LofufeZr bys0 xqM~l ds QkeZ ,Q ls vkPNkfnr 40057909=54 djeqDr

3- LofufeZr bys0 xqM~l QkeZ&bZ&1 ls vkPNkfnr 220077190=00 djeqDr

4- LofufeZr bysDVªkfuDl xqM~l fu;kZr fcØh 3227315=00 djeqDr

5- izkar ckgj LØSi dh fcØh QkeZ lh ls vkPNkfnr 230247=00 4% 9210=00

;ksx dj;ksX; fcØh 1439487620=00 28794357=00

bl izdkj O;kikjh ij [email protected]& dj vkjksfir fn;k tkrk gSa iwoZ gh :Ik;s [email protected]& tek gS ,oa izkar ls :I;s [email protected]& dk lek;kstu fd;k x;k gSA bl izdkj dqy tek :Ik;s [email protected]& vkrk gSA vf/kd tek :Ik;s [email protected]& vkrk gS] ftlesa ls :Ik;s [email protected]& vkns"k esa fd;s x;s foospu tek ds vuqlkj /kkjk&29¼2½ esa tCr fd;k tkrk gS rc vo"ks'k :Ik;s [email protected]& lR;kiu mijkUr fu;ekuqlkj O;kikjh dks [email protected];ksftr fd;k tk;sA

vkns"k dh izfr O;kikjh dks lwpukFkZ izsf'kr dh tk,xhA"

(emphasis supplied)

14. The only dispute is in relation to the

hereinabove.

15. A perusal of the Original Assessment Order

dated 24.06.2004 shows that the Assessing Officer

consciously applied his mind to the issue, whether the

assessee was entitled to the exemption claimed on the

basis of the submission of Form-E-1. Thus, it is clear to

us that there was an opinion formed by the Assessing

Officer, while passing the Original Assessment Order

dated 24.06.2004, to the effect that the assessee was

entitled to the said exemption on the basis of Form-E-1

produced by the assessee. Thus, it cannot be said that

the exemption was granted without application of mind,

or without forming an opinion on its admissibility.

16. We are, therefore, of the view that the

aforesaid Circular dated 17.07.1992 was squarely

attracted in the facts of the present case.

17. That being the position, in the light of the

aforesaid judgments of the Allahabad High Court, it was

mandatory for the Department to issue notice, and grant

opportunity to the revisionist/ assessee in terms of the

said Circular, which admittedly was not done. Even the

order passed by the Commissioner on 20.03.2007,

reproduced hereinabove, is completely bereft of any

"reasons to believe". Once the assessment is

completed, and it is sought to be reopened, the civil

rights of the assessee are jeopardized. Therefore, to the

extent issuance of notice has been made mandatory in

cases of change of opinion, the said procedure has to be

complied with, and it cannot be considered as an empty

formality.

18. In the aforesaid light, we answer the aforesaid

question of law in the affirmative. Consequently, the

reassessment proceedings cannot be sustained and they

are, accordingly, set aside. The matter is remanded

back to the Assessing Officer to proceed in accordance

with Section 21 of the U.P. Trade Tax Act, read with the

Circular dated 17.07.1992. The Commissioner shall

issue notice to the revisionist/ assessee, providing the

reasons to believe, and after grant of opportunity, he

shall take a decision on the issue, whether the

assessment, which was framed on 24.06.2004, deserves

to be reopened.

19. However, we make it clear that we have not

gone into the merits of the case, and the Assessing

Officer, or any other authority, shall not be influenced by

our judgment, in case it is decided to reopen the

assessment proceedings and thereafter assessment is

framed.

20. The present Revision stands disposed of in the

aforesaid terms.

21. Consequently, pending applications, if any,

also stand disposed of.

________________ VIPIN SANGHI, C.J.

___________________ ALOK KUMAR VERMA, J.

Dt: 11th April, 2023 Rahul