Ganesh Brick Supply Co. vs The Commissioner of Sales Tax

R.K. Agrawal, J.—A learned Single Judge while hearing the present revision found that there is conflict of opinion expressed by the coordinate Benches in Bhoopal Singh and Brothers v. Commissioner of Sales Tax 1990 UPTC 103 and Autar Singh Delip Singh Saluja v. Commissioner of Sales Tax 1990 UPTC 454 on the one hand and in Smt. Birmesh Agrawal v. Commissioner of Sales Tax, U.P. 1987 ATJ 28 and Satish Chandra Manoj Kumar v. The Commissioner of Sales Tax, U.P. 1987 A TJ 29, on the other hand and, therefore, had referred the case to be decided by a larger Bench.

Facts of the Case

The applicant is a registered dealer under the U.P. Sales Tax Act, 1948, hereinafter referred to as ''the Act'', and was carrying on the business of manufacture and sale of bricks. For the Assessment Year 1977-78, it disclosed its total taxable turnover at Rs. 37,542.99. The Sales Tax Officer, Saharanpur vide order dated 14.1.1983 rejected the account-books of the applicant and estimated the turnover at Rs. 79,255/-. The applicant preferred an appeal before the Assistant Commissioner (Judicial) Sales Tax, Saharanpur. The appeal was allowed in part vide order dated 19.6.1985. The Assistant Commissioner (Judicial) confirmed the rejection of account-books and estimated the turnover of bricks at Rs. 59,050/-. Aggrieved thereby the applicant filed a second appeal before the Sales Tax Tribunal, Saharanpur. The Tribunal vide order dated 5"'' August, 1988 has rejected the appeal and confirmed the order of the Assistant Commissioner (Judicial), Saharanpur.

As the applicant was unrepresented we had requested Sri Krishna Agrawal, learned Counsel, to assist the Court as amicus curie.

Rival Submissions:

Sri Krishna Agrawal, learned Counsel submitted that in the process of manufacturing of bricks breakage is a normal incidence and, therefore, it ought to be allowed while calculating the number of bricks manufactured and sold. The Sales Tax Department(Now Trade Tax Department) as a matter of rule had been allowing 5% breakage while determining the turnover. According to him, even if the claim has not been specifically raised by the assessee, the Department ought to have allowed the said claim of breakage of 5% while determining the turnover. Therefore, the view taken by the Court in the case of Smt. Birmesh Agrawal (surpa) and Satish Chandra Manoj Kumar (supra) is correct. In support of his aforesaid plea, he has relied upon the following decisions:

Nasiruddin v. Commissioner of Sales Tax 1986 UPTC 496

Agarwal Brick Works, Bijnor v. Commissioner of Sales Tax, U.P. 1987 UPTC 382

Gopal Das Bhagwan Das, B.K.O. Fatehpur v. Commissioner of Sales Tax 1988 UPTC 1059.

Commissioner of Sales Tax, U.P. v. Dariayana Mal Bal Chandra 1991 UPTC 821

Brick Works v. Commissioner of Sales Tax, U.P. 1991 UPTC 1031

Duggal Brick Supply Co., Saharanpur v. Commissioner of Sales Tax 1992 UPTC 994

Sri S.P. Kesarwani, learned Standing Counsel, however, submitted that under Sub-section (4) of Section 11 of the U.P. Trade tax Act, 1948, hereinafter referred to as ''the Act'', the applicant has to precisely state the question of law involved in the case. This Court even though has been given the power to formulate any other question of law or to allow any other question of law to be raised yet the question of law should arise out of the order of the Tribunal. As no such claim of breakage of 5% was made by the applicant before the authorities including the Tribunal, this Court in exercise of powers u/s 11 of the Act while deciding the revision cannot allow the breakage of 5% or any other percentage. According to him, the view taken by this Court in the cases of Bhoopal Singh and Brothers (supra) and Autar Singh Delip Singh Saluja (supra) lays down the correct law.

Law laid down in the cases referred by the learned Single Judge:

Smt. Birmesh Agrawal (supra)

In this case this Court has held as follows:

As regards the first question learned Counsel for the assessee contended that the breakage of bricks in the bricks-kiln is allowed to every brick-kiln owner by the authorities while determining the annual turnover but no breakage has been given to the applicant. Learned Standing Counsel appearing on behalf of revenue on the contrary has urged that since breakage was hot claimed by the applicant-assessee it has rightly not been allowed. Learned Standing Counsel has not disputed the fact that the Sales Tax Authorities are allowing breakage to every brick-kiln owner manufacturing bricks every year. More so, if the assessee has been given breakage in the previous year, I am of the opinion that even if the assessee did not claim any breakage in the year in question it should have been granted to him and as such the question is answered in favour of the assessee and against the Revenue.

Satish Chandra Manoj Kumar (supra)

In this case the Court has held as follows:

3 ...Learned Counsel for the assessee then urged that the authorities have not allowed the breakage to the assessee in the total production of the bricks which according to him is generally given at the rate of 5%. The said fact has not been denied by the learned Counsel appearing on behalf of the Commissioner, Sales Tax and as such I am of the opinion that the asessee is entitled to the breakage allowance at the rate of 5% in the total production of both the years....

Bhoopal Singh and Brothers (supra)

In this case the Court has held as follows:

The second submission made by the learned Counsel for the assessee is that the breakage has not been allowed by the Sales Tax Tribunal. From a perusal of the impugned order passed by the Sales Tax Tribunal it is clear that such a claim was not raised before the Sales Tax Tribunal. In these circumstances, it is not possible for this Court sitting in revision against the said order of the Tribunal to go into this question.

Autar Singh Delip Singh Saluja (Supra)

In this case this Court has held as follows:

The only question before the Tribunal was as to what was the correct production of bricks by the assessee. The assessee showed a particular figure of production which was estimated by the Assessing Authority and the Assistant Commissioner (Judicial), as the book version was rejected. On these facts there does not appear to be any serious error in the order of the Tribunal in not having given any allowance for the breakage.

PROVISIONS OF LAW

Section 7. Determination of turnover and assessment of tax.

(1) � �

(2) If the assessing authority, after such enquiry as he considers necessary is satisfied that any returns submitted under Sub-section (1) are correct and complete, he shall assess the tax on the basis thereof.

(3) If no return is submitted by the dealer under Sub-section (1) within the periods prescribed in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such enquiry as he considers necessary, determine the turnover of the dealer to the best of his judgment and assess the tax on the basis thereof:

Provided that before taking action under this section the dealer shall be given a reasonable opportunity of proving the correctness and completeness of any return submitted by him. Explanation-In this section and in Sections 7-A, 7-B, 7-C, 7-D, 7-E, 8-A, 14, 15-A, 18, 21 and 24 the expression, ''turnover'' means the turnover of sales or of purchases or both, as the case may be.

Section 9. Appeal (1) Any dealer or other person aggrieved by an order made by the Assessing Authority, other than an order mentioned in Section 10-A or Sub-section (6) of Section 13-A, may, within thirty days from the date of service of the copy of the order, appeal to such authority as may be prescribed:

Provided that where the disputed amount of tax, fee or penalty does not exceed one thousand rupees, the appellant may, at his option, request the Appellate Authority may decide the appeal accordingly.

(2) ...

(3) The Appellate Authority may, after calling for and examining the relevant records and after giving the appellant and the Commissioner a reasonable opportunity of being heard or, as the case may be, after following the procedure prescribed under Sub-section (1-A)-

(a) in the case of an order of assessment and penalty,-

(i) confirm or annul such order; or

(ii) vary such order by reducing or enhancing the amount of assessment or penalty, as the case may be, whether such reduction or enhancement arises from a point raised in the grounds of appeal or otherwise; or

(iii) set aside the order and direct the Assessing Authority to pass a fresh order after such inquiry as may be specified; or (iv)direct the Assessing Authority to make such inquiry and to submit its report within such time as may be specified in the direction or within such extended time as it may allow from time to time, and on the expiration of such time the Appellate Authority may, whether the report has been submitted or not, decide the appeal in accordance with the provisions of the preceding sub-clause; or (b) In the case of any other order confirm, cancel or vary such order:

Provided that nothing in this sub-section shall preclude the Appellate Authority from dismissing the appeal at any stage with such observations as it deems fit where the appellant applied for withdrawal of the same and no request for enhancement of the assessment or penalty has been made.

Section 10. Tribunal.

(1) ... ...

(2) any person aggrieved by an order passed u/s 9(other than an order referred to in Sub-section (4-A) of that section) Section 10-B, Sub-section (2-B) or Sub-section (3) of Section 4-A, a decision u/s 35, a direction under the proviso to Sub-section (6) of Section 13-A or an order granting or refusing to grant an eligibility certificate within the meaning of Clause (d) of Sub-section (2) of Section 4-A, within ninety days from the date of service of the copy of such order, decision or direction on him, prefer an appeal to the Tribunal;

Provided that where the disputed amount of tax, fee or penalty does not exceed two thousand rupees and no question of law is involved, the appellant may, at his option, request the Tribunal in writing for summary disposal of his appeal, whereupon the Tribunal may decide the appeal accordingly.

Explanation-For the purposes of this sub-section, the expression ''any person'' in relation to any order passed by an authority other than the Commissioner includes the Commissioner and, in relation to any order passed by the Commissioner includes the State Government;

(3) ... ... ...

(4) ... ... ...

(5) The Tribunal may, if it has not already dismissed the appeal under sub-section reasonable opportunity of being heard or, as the case may be, after following the procedure prescribed under Sub-section (2-A):

(a) confirm, cancel or vary such order, or

(b) set aside the order and indirect the assessing or appellate or revising authority or the Commissioner or the officer granting the eligibility certificate as the case may be, to pass a fresh order after such further enquiry, if any, as may be specified, or

(c) order such amount of tax, fee or penalty or other money as may have been realised in excess of the due amount to be refunded according to the provisions of this Act.

Explanation-

The power to very an order referred to in Clause (a) includes the power to vary the order by reducing or enhancing the amount of assessment of penalty.

Section 11. Revision by High Court in Special cases.

(1) Any person aggrieved by an order made under Sub-section (4) or Sub-section (5) of Section 10 other than order under Sub-section (2) of that section summarily disposing of the appeal or by an order passed u/s 22 by the Tribunal may, within ninety days from the date of service of such order, apply to the High Court for revision of such order on the ground that the case involves any question of law.

(2) �

(3) �

(4)The application for revision under Sub-section (1) shall precisely state the question of law involved in the case, and it shall be competent for the High Court to formulate the question of law or to allow any other question of law to be raised.

(5) �

(6) �

(7) �

(8)The High Court shall, after hearing the parties to revision, decide the question, of law involved therein, and where as a result of such decision, the amount of tax, fee or penalty is required to be determined afresh, the High Court may send a copy of the decision to the Tribunal for fresh determination of the amount, and the Tribunal shall thereupon pass such orders as are necessary to dispose of the case in conformity with the said decision.

Rule 41. Submission of returns and assessment of tax.

(1) �

(2) �

(3) �

(4) �

(5) If in respect of any one or more quarter or month, as the case may be,-

the return is not submitted within the prescribed time, or

the return submitted is, in the opinion of the Assessing Authority, incorrect or incomplete or contains wrong particulars, or

the return is submitted without payment of tax in the manner laid down in these rules,

the Assessing Authority shall, after making such enquiries as it considers necessary, determine the turnover of sales or of purchases or both as the case may be, and provisionally assess the tax payable thereon.

(6) �

(7) �

(8) Upon the expiry of the assessment year, the assessing authority shall, after such enquiry, as he may deem necessary determine the turnover of sales or of purchases, or both, as the case may be, of the dealer in respect of the Assessment year and shall assess the tax payable thereon:

Provided that in the case of a dealer to whom Sub-section (1) of Section 18 applies or owner or incharge of the vehicle to whom Sub-section (1) of Section 28-B applies, the assessing authority may make an assessment order and assess the tax payable thereon before the expiry of the assessment year:

Provided further that, before determining the turnover of the dealer to the best of his judgment, the assessing authority shall cause a notice to be served on the dealer, stating the reasons, for non-acceptance of the turnover of sales or purchases or both, as disclosed in the returns, if any, submitted by him and shall give him a reasonable opportunity of furnishing his reply thereto.

From a perusal of the aforesaid provisions, we find that u/s 7 of the Act read with Rule 41 of the Rules, the Assessing Authority has been empowered to determine the turn over of a dealer and make assessment of tax. Under Sub-section (3) of Section 7 the Assessing Authority has been empowered to determine the turnover of the dealer to the best of his judgment in the event it appears to him that the return submitted by the dealer is incorrect or incomplete. However, before making a best judgment assessment the Assessing Authority is required to give a reasonable opportunity of proving the correctness and completeness of the return submitted by the dealer. However, under Sub-rule (8) of Rule 41 before determining the turnover of the dealer to the best of his judgment, the Assessing Authority is enjoined to serve a show cause notice on the dealer stating the reasons for non-acceptance of the declared turnover and for giving a reasonable opportunity to furnish the reply. If the dealer is aggrieved by the order of best judgment assessment so made by the Assessing Authority, it has been given a right to appeal u/s 9 of the Act. Under Sub-section (3) of Section 9 the Appellate Authority has been given very wide power. He has been empowered not only to confirm or annul the order appealed against but also to vary by reducing or enhancing the amount of assessment or penalty, whether such reduction or enhancement arises from a point raised in the grounds of appeal or not. He has further been empowered to set aside the order passed by the Appellate Authority and to direct the Assessing Authority to pass a fresh order after such inquiry as may be specified by him or may call for a report from the Assessing Authority and whether the report has been submitted or not, decide the appeal by exercising all the powers conferred upon him under any other clauses of Sub-section (3) of Section 9. If the dealer or any other person is aggrieved by the order passed u/s 9 of the Act such person can file an appeal u/s 10 of the Act before the Trade Tax Tribunal. The Explanation to Sub-section (2) of Section 10 provides that the expression "any person" would include Commissioner if the order has been passed by an authority other than the Commissioner and if the order has been passed by the Commissioner then it would include the State Government. Under Sub-section (5) of Section 10 of the Act the Tribunal has been empowered to confirm, cancel or vary such order or set aside the order and direct the Assessing Authority or Appellate Authority or the Commissioner or any other authority as the case may be. to pass a fresh order after such further inquiry as may be specified and also to make for the refund of the excess amount of tax, fee or penalty or other money as may have been realised. The explanation to Sub-section (5) provides that the power to vary an order includes the order by reducing or enhancing the amount of assessment or penalty. This power of reducing or enhancing the amount of assessment or penalty unlike the power of enhancement/reduction conferred upon the appellate authority constituted u/s 9 of the Act where he enjoys unlimited power over the entire assessment, would be restricted to the points raised in the grounds of appeal only. The appellate authority both under Sections 9 and 10 of the Act can decide the appeal both on questions of fact and law. Any person aggrieved by the order passed by the Tribunal u/s 10 of the Act has been given a right to file a revision before this Court u/s 11 of the Act. However, the revision lies only on a question of law. Under Sub-section (8) of Section 11 of the Act. the High Court has been empowered to decide the questions of law involved in the revision and after the result of the decision of the amount of tax, fee or penalty is required to be determined afresh, a copy of the decision is required to be sent to the Tribunal for a fresh determination of amount and the Tribunal has been empowered to pass such order as is necessary to dispose of the case in conformity of the said decision.

Jurisdiction of this Court u/s 11 of the Act

The Apex Court in the case of Commissioner of Sales Tax, U.P. v. Kumaon Tractors and Motors, (2002) 9 SCC 379 has held that Section 11 of the Trade Tax Act confers limited jurisdiction to interfere with the order of the Tribunal only on the question of law and that too the said question of law is required to be precisely stated and formulated.

In the case of Commissioner of Sales Tax, U.P. v. Mohan Brickfield, Agra (2006) 12 SCC 203, the Apex Court has dealt with the powers of the High Court in dealing with the revision filed u/s 11 of the Act and has held as follows:

The parameters of exercising power under the said provision were considered by this Court in Commissioner of Sales Tax, U.P. v. Kumaon Tractors and Motors, (2002) 9 SCC 379 it was inter alia noted as follows:

8...

It appears that the High Court ignored the provisions of Section 11 of the Trade Tax Act which confers limited jurisdiction in interfere with the order of the Tribunal only on the question of law, that too the said question of law is required to be precisely stated and formulated. Instead of deciding the question of law, the High court simpliciter re-appreciated the evidence any ignored the material documents maintained and produced by the assessee, that, is books of accounts bills and Form ''C" submitted by it. In this view of the matter the impugned order cannot be sustained.

It may be mentioned here that a revision u/s 11 of the Act can be filed before this Court only if the case involves a question of law. The question of law should, therefore, arise out of the order of the Tribunal against which the revision is filed. The Constitution Bench of the Apex Court in the case of Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., in paragraph 31 of the reports has summed up the various situations in which a question of law may or may not arise from the order of the Tribunal as follows:

The result of the above discussion may thus be summed up:

When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.

When a question of law is raised before the Tribunal but the Tribunal fails to deal with it. it must be deemed to have been dealt with by it, and is therefore one arising out of its order.

When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.

When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it.

Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order.

The Apex Court has again reiterated the same principles in the case of Commissioner of Gift Tax, Bombay Vs. Smt. Kusumben D. Mahadevia, .

This Court in the case of Commissioner of Sales Tax LLP. v. Narang Ram Chiranji Lal 1970 UPTC 663 has held that a question which has neither been raised nor canvassed at the hearing before the revisional authority cannot be referred for opinion of the High Court u/s 11 of the Act. The same view has again been taken by this Court in Footer Mal Megh Raj, Firozabad, Agra v. The Commissioner, Sales Tax, Uttar Pradesh (1971) 28 STC 361. The Apex Court in the case of Commissioner of Sales Tax, U.P. v. Bishamber Singh Layaq Ram (1981) 47 STC 80 has held that when a question of law was neither raised before the Additional Judge(Revisional) nor considered by him nor did it arise on the findings given by him, it will not be a question arising out of his order.

Applying the principles laid down in the aforesaid cases we are of the view that in a revision filed u/s 11 of the Act before this Court, the question of law should arise out of the order of the Tribunal and if a question of law has neither been raised in the memo of appeal, nor argued before the Tribunal at the time of hearing of the appeal, nor the Tribunal has given any finding on it, the same cannot be said to arise out of the order of the Tribunal and consequently this Court while deciding the revision cannot go into that question.

Having examined the scheme of the statutory provisions relating to making of the assessment, determination of tax and the appeal, and second appeal and the revision, we are of the considered opinion that this Court in exercise of powers u/s 11 of the Act is empowered only to decide the question of law involved in the revision and which should arise from the order of the Tribunal.

We have perused the assessment order as also the order passed by the Assistant Commissioner (Judicial) II, Trade Tax, Saharanpur and the order of the Tribunal, we do not find that the issue of breakage as claimed by the revisionist before this Court had ever been raised before any of the authorities including the Tribunal. Thus the question of allowing breakage does not arise out of the Tribunal''s order.

Cases cited at the Bar

In the case of Dariayana Mal Bal Chandra (supra) there is no discussion as to whether this Court should allow breakage of 5% even if the same has not been claimed before any of the authorities below. From a reading of the judgment we find that this Court had noticed that the Tribunal had allowed breakage of 5%. This case, therefore, has no relevance. In the case of Brick Works (supra) similar is the position.

In the case of Duggal Brick Supply Co. Saharanpur (supra) this Court has followed the earlier practice of allowing breakage @ 5% of the production by observing the consistent view of this Court to that effect. No other reason has been given for allowing the breakage of 5%.

In the case of Nasiruddin (supra) this Court has allowed 5% breakage on the ground that the contention of the learned Counsel for the assessee regarding breakage, which is normally given to the brick kiln owner, has not been repelled by the learned Standing Counsel appearing for the Department. This Court had not given any reason for allowing the breakage of 5% and it appears to have been given on the ground of undisputed position.

In the case of Agarwal Brick Works, Bijnor (supra) this Court had allowed the breakage on the ground that it is inevitable in the brick kiln business even though no breakage was claimed.

In the case of Gopal Das Bhagwan Das (supra) this Court has allowed the breakage on the ground that the Sales-tax Authorities are themselves allowing breakage allowance to almost every brick kiln owner manufacturing bricks every year. The matter was remanded to the Tribunal.

Discussion

None of the cases referred to above regarding breakage has dealt with the scope of the powers of this Court u/s 11 of the Act. It had allowed the breakage either on the undisputed facts or on the prevailing practice in the trade. As already mentioned hereinbefore, this Court in exercise of powers u/s 11 of the Act while deciding the revision has to decide the question of law involved therein which question of law should arise out of the order of the Tribunal. If the claim of breakage has not been made before any of the authorities either before the Assessing Authority or Appellate Authority or before the Tribunal the question of allowing the breakage in the revision filed u/s 11 of the Act does not arise.

Conclusion

In view of the foregoing discussions, we are of the considered opinion that the applicant is not entitled for claiming benefit of allowance of breakage. The other questions of law which have been raised in the revision regarding checking of books of account and determining the turn over by best judgment assessment are essentially questions of facts which cannot be interfered with by this Court in exercise of powers u/s 11 of the Act as held by the Apex Court in the cases of Kumaon Tractors and Motors (supra) and Mohan Brickfield (supra).

Before parting with the case, we would like to place on record our appreciation to the valuable assistance rendered by Sri Krishna Agrawal in resolving the issue involved herein.

In the result the revision fails and is dismissed.