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Judgment
Birendra Kumar, J
This Civil Tax Revision under Section 86 of the Rajasthan Sales Tax Act, 1994 is against the order dated 31.01.2005 passed by the Tax Board, Ajmer in Appeal No.75/2000/Barmer, whereby the Tax Board has set aside order of Appellate Authority dated 19.8.1999 passed in Appeal No.4/RST/Barmer/1999-2000 and affirmed the order of Assessing Authority imposing tax, interest and penalty against the petitioner on 23.9.1999 in exercise of the power under Section 29(7) (f) of the Act.
Section 29 of the Rajasthan Sales Tax Act, 1994 relates to assessment and sub-section (7) whereof reads as follows :-
"(7)The assessing authority after affording an opportunity of being heard, shall assess a dealer to the best of its judgement and determine the tax payable by him, if such dealer- (a)has not filed all or any of the returns due for a year; or
(b)has filed any return or returns which appear to the assessing authority incomplete or incorrect; or
(c)has failed to comply with all the terms of a notice issued under sub-section (5); or
(d)has not regularly employed any method of accounting, or if the method employed is such that in the opinion of the assessing authority, assessment cannot properly be made on the basis thereof; or
(e)has with a view to avoid or evade tax, shown in his accounts, registers or documents, sale or purchase of any goods at a price which is lower than the prevailing market price of such goods; or
(f)has concealed any transaction of purchase or sale from his accounts, registers or documents or has avoided or evaded tax in any other manner.”
The petitioner is a duly registered dealer under the Rajasthan Sales Act Act and Central Sales Act Act and is engaged in the business of manufacturing and trading of Guar Gum in local market as well as international market through its export house. The respondent Authority on 16.10.1997 conducted a survey and inspected the business premises of the petitioner and relied upon “Sauda Noon Register” for coming to the conclusion that the petitioner has concealed transaction of purchase/sale to avoid/evade taxation.
On notice, the petitioner filed a detailed reply explaining everything in detail. The petitioner asserted that the survey report/ inspection report is not signed by anyone, hence, the sanctity of the same is doubtful. The petitioner asserted that the “Sauda Noon Register” contains statement of ‘Sauda’ (deal) but this is not a register showing sale or purchase. Sometimes ‘Sauda’ is returned if quality of goods is not upto the mark and the deal is cancelled. Sometimes before supply of goods due to recession of price the deal is cancelled and on many occasion due to unprecedented escalation of price deal does not materalise. Once deal is materialised, such deals are entered into sale/ purchase registers. The C.T.O. has noted the name of Dealers with whom ‘sauda’ was made but none of the Dealers were verified as to whether any actual sale had taken place and in absence of direct evidence of ‘sale’, there is no liability for tax. The petitioner stated that he is a manufacturer and consumption of electricity since last three years would show no major variation, which goes to show that no more production was made than mentioned, therefore, there was no question of excess manufacturing of goods and sale of the same.
The question of law for consideration is whether the Commercial Taxes Officer erred in affording reasonable opportunity of being heard to the petitioner-assessee and as such the initial order is vitiated in law and its affirmation by the Tax Board is also against the mandate of law ?
Learned counsel for the petitioner contends that Sub-Section (7) of Section 29 of the Act of 1994 provides for affording opportunity of being heard to the assessee before any order is passed under this Sub-Section. The assessee was noticed and filed a detailed reply aforesaid. The Commercial Taxes Officer should have conducted an inquiry to come to the conclusion of genuineness or otherwise of the defence of the petitioner. If proper enquiry would have been conducted, the truth would have surfaced, however, the Authority probably on conjunctures and surmises based on strong suspicion and grave doubt imposed fine, which is not sustainable in law.
In State of Kerala Vs. M.M. Mathew & Anr., reported in (1978) 42 STC 348, Hon’ble Apex Court observed that
“…….it is now well settled that strong suspicion, strange coincidences and grave doubts cannot take place of legal proof. To establish the charges against the respondents, it was, in our judgment, essential for the prosecution to establish that the secret books of account related to the business transactions carried on by the respondents and none else. This it could have established in a variety of ways viz. (1) by adducing satisfactory proof to the effect that the place from which the secret books of account were seized formed part of the place of business of the respondents or was in their exclusive possession and control, (2) that the secret books of account were maintained by or Under the orders of the respondents, (3) that the said books of account were in the handwriting of either of the respondents or their accountant, or clerk or some other person employed by them.”
In the case on hand, it was not verified from the businessmen named in the “Sauda Noon Register” as to whether actually any transaction of sale has taken place nor any other satisfactory report/ evidence was there to substantiate case of tax evasion. Evidently the order of Assessing Officer suffers from arbitrariness and non-compliance of mandates of law in the matter of just opportunity of hearing.
In Kerala Glue Factory Vs. Sales Tax Tribunal & Ors., reported in (1987) 66 STC 292, Hon’ble Apex Court upset the conclusion of Assessing Authority which was based on statement of a witness, who was not cross-examined.
In Tata Engineering and Locomotive Co. Ltd. Vs. Assistant Commissioner of Commercial Taxes Department & Anr., reported in AIR 1970 SC 1281, Hon’ble Apex Court while interpreting the term "sale" within the meaning of Section 2(g) and Section 3 of the Central Sales Tax Act 1956, held in clear term in Para-12 as follows :-
“12. Another serious infirmity in the order of the Assistant Commissioner was (a matter which even the Advocate-General quite fairly had to concede) that instead of looking into each transaction in order to find out whether a completed contract of sale had taken place which could be brought to tax only if the movement of vehicles from Jamshedpur had been occasioned under a covenant or incident of that contract the Assistant Commissioner based his order on mere generalities. It has been suggested that all the transactions were of similar nature and the appellant's representative had himself submitted that a specimen transaction alone need be examined. In our judgment this was a wholly wrong procedure to follow and the Assistant Commissioner, on whom the duty lay of assessing the tax in accordance with law, was bound to examine each individual transaction and then decide whether it constituted an inter-State sale exigible to tax under the provisions of the Act.”
Coming to the facts of this case, it is evident that the Assessing Authority did not enquire about correctness of averments made in reply to the notice by the petitioner. In other words it was not verified that the entries in the Saudanoon Register were genuinely a sale transaction. A due enquiry might have given a different result and in absence of enquiry, correctness of the conclusion is not sustainable.
The learned Tax Board has not considered this legal infirmity committed by the Assessing Authority while upsetting the reasoned order of the appellate court, therefore, the impugned order of Tax Board is fit to be set aside on this ground alone.
The second question of law is whether the judgment and order of Tax Board is sustainable in law for non-consideration of the reasons of the Appellate Authority, whose order was under challenge before the Tax Board ?
It is evident that the Tax Board has not met with the reasons assigned by the Appellate Authority. Law is well settled that when the appellate court (Tax Board in this case) decides to interfere with the order of the Lower Authority, it must met with the reasons assigned by such Authority. The Tax Board could have relied on other materials in support of its order but assignment of reason for interference with the order under challenge before the Tax Board was a must. Since, the Tax Board has not met with the reasons of the Appellate Authority, the impugned order and judgment of the Tax Board is not sustainable in law.
The Tax Board for the first time interpreted the abbreviation “WB” as without bills. This aspect was not touched by any of the Lower Authority including the Commercial Taxes Officer. The petitioner had interpreted the said abbreviation as delivery without bardan. The Tax Board has assumed without any precedent or supporting document or other reliable evidence that the abbreviation “WB” would be interpreted as without bill only and no other interpretation is acceptable. The finding of the Tax Board aforesaid suffers from arbitrariness, not supported by any evidence on record, therefore, is not acceptable and fit to be quashed. The initial order imposing tax, penalty etc., dated 23.03.1999 reveals that the Commercial Taxes Officer had asked the petitioner to deposit Rs.5 Lacs for compounding. Later on the compounding failed. The Tax Board assumed that since the petitioner had deposited Rs.5 Lacs, the petitioner admitted evasion of tax.
Learned counsel for the petitioner rightly submits that if the petitioner deposited Rs.5 Lacs on being asked by the Department, just to purchase peace, it cannot be said in absence of proof that the act of the petitioner amounted to admission of evasion of tax. This Court finds substance in the submission for the simple reason that even the Commercial Taxes Officer in his order dated 23.03.1999 has stated that on being asked the petitioner had volunteered the deposit aforesaid.
From the discussion made above, it is evident that the impugned order and judgment of the Tax Board is bad in law, hence the same is set aside and the order of the Appellate Authority is affirmed.
It is made clear that the Appellate Authority has made the petitioner liable to pay certain amount for using loose paper etc., instead of bound register of “Sauda Noon”, the same shall be payable by the petitioner.
This revision stands allowed.