Kundan Lal vs The State of Haryana and Others

D.V. Sehgal, J.—The petitioner states that he is a petty karyana merchant at Faridabad. The Assessing Authority, Faridabad, respondent No. 4, under the Haryana General Sales Tax Act, 1973 (for short "the Act") raided his business premises on 20th December, 1978 and seized 12 exercise books. u/s 36 of the Act respondent No. 4 was required to return these exercise books to the petitioner within a period of 60 days from the date of seizure. However, in spite of repeated requests by the petitioner the same were not returned to him. Instead respondent No. 4 issued him a notice, annexure P/3, dated 21st May, 1979 stating that on scrutiny of the account books (exercise books according to the petitioner) seized from his possession on 20th December, 1978 it transpired that he had effected credit sale of Rs. 3,15,760.00 during the year 1976-77 and sales on credit to the tune of Rs. 3,50,000.00 during the year 1977-78. As per the prevalent practice in commercial circles of the type, credit sales account for 50 per cent of the entire transaction, at the most, and hence the gross turnover for the years 1976-77, 1977-78 and 1978-79 was proposed to be determined as below:

1976-77 Rs. 6,40,000.00 1977-78 Rs. 7,00,000.00 1978-79 . Rs. 5,50,000.00

The petitioner was required to appear for final hearing of the case before respondent No. 4 on 24th May, 1979. The petitioner submitted his replies annexure P/4 and annexure P/5 dated 25th May, 1979 and 29th May, 1979. In the former he explained that since the seized books had not been returned to him he could not understand on what basis the calculation of gross turnover had been made stating further that most of the allegations made in the notice annexure P/3 were fake. In the latter reply he made a specific request once again for return of the exercise books seized on 20th December, 1978.

Respondent No. 4 passed a best judgment assessment order annexure P/6 on 15th June, 1979. It is stated therein that the petitioner had raised objections regarding delay in return of the seized exercise books to him. Non-return of the exercise books was justified on the ground that the assessee was required to attest the entries and to make a statement regarding the same and then only the matter of return of exercise books could be considered. The assessee, however, did not co-operate in the matter. This led to the delay in getting the approval of the Excise and Taxation Commissioner (for short "the Commissioner") for retention of the exercise books till finalisation of the assessment and the appeal as a result of the best judgment assessment. The total amount of sales tax due from the petitioner was worked out to be Rs. 26,478.00 and a demand notice for payment of this amount was issued to him.

The petitioner filed an appeal against the impugned assessment order annexure P/6 before the Deputy Excise and Taxation Commissioner (A), Rohtak Circle, respondent No. 3, but the same was dismissed by him vide order, annexure P/7, dated 24th October, 1979. However, on overall consideration of the matter the turnover worked out by respondent No. 4 was reduced to some extent and the latter was directed to calculate the tax on its basis.

The petitioner then filed a second appeal before the Sales Tax Tribunal, Haryana, respondent No. 2, who, however, dismissed the same vide order, annexure P/9, dated 30th April, 1980. The contention of the petitioner is twofold. His first submission is that respondent No. 4 illegally retained the seized exercise books beyond the prescribed period of 60 days and without the prior sanction of the Commissioner as required under Sub-section (3) of Section 36 of the Act. The best judgment assessment order, annexure P/6, passed by respondent No. 4 on 15th June, 1979, therefore, ipso facto is rendered illegal. The exercise books ought to have been returned to the petitioner within the prescribed period and if at all the same were to be retained there should have been a proper approval for the same which was lacking. Since the seized exercise books were not returned to the petitioner he was not in a position to render any proper and detailed explanation to the notice annexure P/3 dated 21st May, 1979. In reply to this notice in fact he simply made a protest against illegal retention of the seized exercise books vide reply, annexure P/4, and made a demand for their return vide letter annexure P/5.

His second submission is that it was incumbent on respondent No. 4 to determine the date of liability of the petitioner for payment of sales tax u/s 6(2) of the Act. It was only after expiry of 30 days from the date so fixed that the sales effected by him would have become liable to payment of sales tax. This essential legal requirement has not been complied with in the impugned order, annexure P/6. This law point was specifically raised before respondent No. 2 in the appeal before it but the same was outrightly rejected vide order annexure P/9 on a wholly misconceived basis that the petitioner had not raised this law point before respondents Nos. 3 and 4. Through the present writ petition, therefore, the petitioner has made a prayer for quashing of the impugned orders annexures P/6, P/7 and P/9.

A written statement has been filed by respondent No. 4 on behalf of the respondents. The seizure of the exercise books on 20th December, 1978 is admitted. It is, however, stated that approval of the Commissioner for retention of these exercise books was applied for on 27th March, 1979 in accordance with the provisions of Section 36 of the Act and the same was granted on 27th June, 1979 for retention of the books up to 31st July, 1979. It is, therefore, contended that retention of the seized exercise books by respondent No. 4 was quite lawful. It is also stated that in spite of issuance of the show cause notice annexure P/3 the petitioner did not render any proper explanation. Therefore, the best judgment assessment order, annexure P/6, was passed on 15th June, 1979. It is denied that it was necessary for respondent No. 4 to determine the date of liability of the petitioner for payment of sales tax under the Act. It is maintained that the impugned orders are legal and do not suffer from any infirmity.

I have heard the learned counsel for the petitioner. No one has appeared on behalf of the respondents. I am of the considered view that the impugned orders cannot be sustained. Section 36(3) of the Act makes the following provisions for seizure, retention and return of books, account, register or documents which are required for purposes of investigation into the liability of any dealer. It is educative to reproduce here this provision:

If any officer referred to in Sub-section (1) has reasonable grounds for believing that any dealer is trying to evade liability for tax or other dues under this Act, and that anything necessary for the purpose of an investigation into his liability may be found in any book, account, register or document, he may seize such book, account, register or document as may be necessary. The officer seizing the book, account, register or document shall forthwith grant a receipt for the same and shall,--

(a) in the case of book, account, register or document which was being used at the time of seizing, within a period of ten days from the date of seizure; and

(b) in any other case, within a period of sixty days from the date of seizure;

return it to the dealer or the person from whose custody it was seized after examination or after having such copies or extracts taken therefrom as may be considered necessary, provided the dealer or the aforesaid person gives a receipt in writing for the book, account, register or document returned to him. Such officer may, before returning the book, account, register or document, affix his signature and his official seal at one or more places thereon and in such case the dealer or the aforesaid person will be required to mention in the receipt given by him the number of places where the signatures and seal of such officers have been affixed on each book, account, registers or documents:

Provided that the seized book, account, register or document may be retained for a longer period if so required:

Provided further that if the seized book, account, register or document is retained by any authority other than the Commissioner for more than the aforesaid period, the reasons for doing so shall be recorded in writing and the approval of the Commissioner obtained by the authority so retaining them.

A plain reading of the above provision makes it clear that respondent No. 4 had no authority to retain the seized exercise books with it beyond the period of 60 days without the approval of the Commissioner. Instead of returning the seized books to the petitioner, respondent No. 4 illegally rushed through the matter and passed the best judgment assessment order annexure P/6 on 15th June, 1979. The approval of the Commissioner to retain these books as admitted by the respondents was granted only on 27th June, 1979 more than 10 days after the impugned order annexure P/6 was passed. Thus the clamour of the petitioner for return of the seized books was justified. On the other hand, the refusal of respondent No. 4 to return the same and instead his insistence that the petitioner should attest the entries therein and also make a statement with regard to the entries before the same could be returned to him was wholly unjustified. It is clear that when the impugned order annexure P/6 was passed there was no approval of the Commissioner for retention of the seized books. The petitioner is, therefore, right in his contention that he had been denied opportunity to have the seized books to go through the same and submit a detailed explanation in regard to the entries contained therein. On this score alone the order annexure P/6 is rendered unsustainable and as a result the orders annexures P/7 and P/9 in appeals also fall through.

I, however, consider it proper to notice here and to deal with the second contention raised by the petitioner also. Section 6(2) of the Act provides that every dealer under the Act shall, subject to the other provisions of the Act, be liable to pay tax under the Act on the expiry of thirty days after the date on which his gross turnover during any year first exceeds the taxable quantum. This is a mandatory provision of law. It was necessary for respondent No. 4 to determine the date on which the gross turnover of the petitioner first exceeded the taxable quantum. Only 30 days after the said date could he be made liable to pay the tax on the sales effected by him. I have gone through the order annexure P/6. No date within the meaning of Section 6(2) has been determined by respondent No. 4. The petitioner raised this law point before the Tribunal, respondent No. 2. It, however, observed in its order annexure P/9 that the petitioner could not be permitted to raise this new point at the second stage of the appeal. He had never raised this objection before the Assessing Authority, respondent No. 4, or before the first appellate authority, respondent No. 3. It was, therefore, held that the petitioner is estopped from raising this law point. Support was sought to be taken from Easun Engineering Company Ltd. Vs. The Joint Commercial Tax Officer, Esplanade Division I and Another, and The State of Madras Vs. Spencer and Company Limited, . In my view none of these two precedents support the view taken by respondent No. 2. In Easun Engineering Company Ltd. Vs. The Joint Commercial Tax Officer, Esplanade Division I and Another, the petitioner did not canvass the propriety of the order of the Assessing Authority in respect of a portion of its turnover and did not file any ground of appeal to that effect before the appellate authority to challenge the determination of the said portion of its turnover. It was held that the petitioner never felt aggrieved from the determination of the said portion of the turnover and it did not appeal against the same. Therefore, it could not raise a contention questioning the accepted portion of the turnover for the first time before the Tribunal. Almost similar were the facts in The State of Madras Vs. Spencer and Company Limited, .

I am of the considered view that the Tribunal, respondent No. 2, ought to have entertained the law point so raised by the petitioner. The jurisdiction vested in respondent No. 2 in respect of adjudication of the appeal before is adumbrated in Sub-section (6) of Section 39 which lays down that subject to regulations made by the Tribunal under Sub-section (10) of Section 4 and subject to such rules of procedure as may be prescribed in relation to an appellate authority other than the Tribunal, an appellate authority may pass such order on appeal as it deems to be just and proper, including an order enhancing the amount of tax or penalty or interest or all or an order staying the recovery of the tax assessed or penalty imposed or interest charged or all, under this Act. When a law point which went to the root of the jurisdiction of the Assessing Authority, respondent No. 4, to make the assessment had been raised it was just and proper for respondent No. 2 to adjudicate upon the same irrespective of the fact that no such point had been raised either before the Assessing Authority or before the first appellate authority. I find support for this view from the judgment of the Final Court in Commissioner of Income Tax, Madras Vs. Mahalakshmi Textile Mills Ltd., . In that case a corresponding provision in Section 33(4) of the Indian Income Tax Act, 1922 provided that the Appellate Tribunal is competent to pass such order "as it thinks fit". The Final Court observed that there is nothing in the Income Tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions, whether of law or of facts, which relate to the assessment of the assessee may be raised before the Tribunal. If for reasons recorded by the departmental authorities in respect of a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him. Adopting the ratio of the above verdict of the Final Court I hold that the Tribunal, respondent No. 2, acted illegally in the exercise of its jurisdiction when it refused to entertain the contention of the petitioner mentioned above.

Consequently, I allow this petition with costs and quash the orders annexures P/6, P/7 and P/9. It is, however, made clear that respondent No. 4 shall be at liberty to take proceedings in accordance with the provisions of the Act. The costs are assessed at Rs. 500.