S. J. N. Oil Mills v. The Sales Tax Officer — 1969 DIGILAW 128 (KER)

JUDGMENT V. Balakrishna Eradi, J. 1. The petitioner is the proprietor of an oil mill at Alleppey. For the years 1959-60 to 1962-63 inclusive, he has been assessed to sales tax by the respondent, namely, the Sales Tax Officer, Second Circle, Alleppey. The assessment order in respect of the year 1959-60 was passed on 26-12-1960 and in respect of the year 1960-61, the assessment was made on 30-12-1961. In respect of the years 1961-62 and 1962-63, the assessments were made against the petitioner by two separate orders passed on 9-3-1964. The petitioner filed appeals against these orders of assessment before the Appellate Assistant Commissioner for agricultural Income Tax and Sales Tax, Trivandrum. The appeals filed by him in respect of 1959-60 and 1960-61 were allowed by the appellate authority and the assessment proceedings were remanded to the respondent as per orders dated 20-11-1961 and 19-3-1964 respectively. In the affidavit in support of this writ petition, the petitioner has averred that the appeals filed by him before the Appellate Assistant Commissioner challenging the assessment orders passed for the years, 1961-62 & 1962-63 are still pending before that Authority and have not been disposed of, so far, to his knowledge. 2. By Ext. P1 notice dated 2-9-1968, the respondent called upon the petitioner to produce or cause to be produced before him, the petitioner's accounts and documents, sale bills, purchase invoice registers, cash book, Journal, Bank Pass Book, Personal Ledger and various other documents enumerated as items 1 to 7 in the said notice on the ground that it was considered necessary to examine them for the purpose of finalisation of the petitioner's liability or otherwise to sales tax for the years 1959- 60 to 1962-63. This notice was served on the petitioner on 9-9-1968. He filed this writ petition on 11-9-1968 seeking to quash the notice Ext. P1 contending that it is illegal and without jurisdiction. This Court by an interim order passed on 12-9-1968 in C.M.P. 9197 of 1968 stayed all proceedings against the petitioner pursuant to Ext. P1. It, however, appears that on 12-9-1968 itself the respondent passed orders completing the assessment for the years 1959-60 and 1960-61 and in view thereof, the petitioner has amended the writ petition with the permission of this Court by seeking to quash those orders of assessment, copies of which have been produced by him as Ext. P2 and P.3. 3. P1. It, however, appears that on 12-9-1968 itself the respondent passed orders completing the assessment for the years 1959-60 and 1960-61 and in view thereof, the petitioner has amended the writ petition with the permission of this Court by seeking to quash those orders of assessment, copies of which have been produced by him as Ext. P2 and P.3. 3. I shall first proceed to consider the grounds of objections raised by the petitioner against the notice Ext. P1. His objections are two fold: In so far as the notice relates to the assessment years 1959-60 and 1960-61, the petitioner contends that the proceedings initiated by the respondent are really for assessment of escaped turnover, though disguised as a proceeding for finalisation of an assessment, and that the respondent had no jurisdiction to take such action after the expiry of the period of three years prescribed by R.33 of the General Sales Tax Rules, 1950. In so far as the notice relates to the assessment years 1961-62 and 1962-63, the petitioner contends that the assessing authority had absolutely no jurisdiction to call upon him to produce books of account etc. for finalising the assessments for those years when the appeals preferred by him against the assessments already made for the very same periods were pending before the appellate authority. 4. Counsel appearing for the petitioner strenuously contended that in respect of 1959-1960 and 1960-61 the proceeding now initiated under Ext. P1 can be regarded in law only as one for the assessment of an escaped turnover. He pointed out that no action had been taken by the assessing authority in the matter of finalising the assessment for those years notwithstanding the lapse of nearly 7 years and 4 years respectively from the dates of orders of remand, passed by the appellate authority. He urges that the only reasonable inference is that the assessing authority must have decided to drop all proceedings for assessment of the petitioner's turnover relating to copra for the years 1959-60 and 1960-61 in the light of the pronouncement of a Division Bench of this Court in Poulose Bros. v. State of Kerala (XIV STC 40). holding that such turnover was not taxable. v. State of Kerala (XIV STC 40). holding that such turnover was not taxable. Hence, according to the petitioner's counsel there were no assessment proceedings at all pending against him with respect to those years and the case must be regarded as one in which the turnover, which has subsequently been declared to be taxable by virtue of the validating Act IV of 1965, had escaped assessment. On this basis, he contends that the period of limitation prescribed by R.33 will govern this case and the proceedings under Ext. P1 having been initiated beyond the period of 3 years from the last day of the financial year are barred. 5. In support of the above contention, counsel relied very strongly on the decision of the Supreme Court in Chattaram Horilarm v. IT. Commissioner B. & O ( AIR 1955 SC 619 ) On a reference to this decision, it is however seen that it did not deal with a case where at the time of initiation of the action for assessing the escaped income, the proceedings originally taken for assessing such income were pending. On the other hand, the present case is directly covered, in my view, by the decision reported in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax ( 14 STC 976), where their Lordships( 14 STC 976) have pointed out that a turnover cannot be said to have escaped assessment if the proceedings in respect of the first assessment are pending and no final order of assessment is made therein. Hence, the petitioner can succeed only if he is able to show that the proceedings originally started for assessment of his turnover for the years 1959-60 and 1960-61 were not pending on the date of Ext. P1. It was obviously with this in mind that the learned counsel urged that on account of the long delay on the part of the assessing authority in taking any further action pursuant to the orders of remand, it should legitimately be inferred that further action in the matter had been dropped by him. P1. It was obviously with this in mind that the learned counsel urged that on account of the long delay on the part of the assessing authority in taking any further action pursuant to the orders of remand, it should legitimately be inferred that further action in the matter had been dropped by him. As already pointed out, counsel suggested that it is perfectly consistent with the probabilities that the officer might have, quite reasonably, taken a decision to drop the proceedings in view of the pronouncement of a Division Bench of this Court declaring such levy on copra to be illegal and also a subsequent decision holding that the amending Act VIII of 1964 could not operate to save such levy. I am unable to uphold this contention because I do not think that it can be said merely from the circumstance that there has been considerable interval of time between the passing of the orders of remand by the appellate authority and the issuing of Ext. P1 that the assessment proceedings had either lapsed or been dropped. In my view, the learned counsel for the respondent is well founded in his contention that the proceedings in respect of the first assessment of the petitioner's turnover for these two years were pending before the respondent on the date of issuance of Ext. P1. That being so the proceeding initiated under Ext. P1 cannot be regarded as one for assessment of escaped turnover and R.33 will have no application. The first contention advanced on behalf of the petitioner cannot, therefore, be upheld. 6. In regard to the financial years 1961-62 and 1926-63, the petitioner's averment that the appeals filed by him before the Appellate Assistant Commissioner challenging the original orders of assessment made by the respondent are still pending and remain undisposed of has not been controverted on behalf of the respondent. Counsel for the respondent has not been able to show under what provision of law, the assessing authority has proceeded to initiate action for the so called "finalisation" of assessment for these two years under Ext. P1 when the original assessment proceeding was pending before the appellate authority. Ext. P1 in so far as it relates to the years 1961-62 and 1962-63 is therefore illegal and without jurisdiction and will stand quashed to that extent. 7. P1 when the original assessment proceeding was pending before the appellate authority. Ext. P1 in so far as it relates to the years 1961-62 and 1962-63 is therefore illegal and without jurisdiction and will stand quashed to that extent. 7. I come now to the attack made by the petitioner against the assessment orders evidenced by Exts. P.2 and P.3. In the additional affidavit filed by him on 27-11-1968 the petitioner has put forward a specific allegation that the respondent has completed the assessment for the years 1959-60 and 1960-61 and passed assessment order evidenced by Ext. P. 2 and P.3 only after the interim order of stay passed in C. M. P. No. 9197 of 1968 was issued by this Court. In para 7, the petitioner has stated that Ext. P.2 and P.3 orders though dated 12-9-1968 were served on him only on 12-10-1968 and that there is every reason to suspect that the assessment orders have been antedated with a view to circumvent the stay order issued by this Court. A copy of this affidavit has been served on the Government Pleader on 27-11-1968 itself. Surprisingly enough the respondent has not cared to put in any counter affidavit in the case denying at least this very serious allegation, and such indifference on the part of whomsoever is responsible certainly discloses a most unsatisfactory state of affairs which the State Government will do well to take note of and rectify. On the state of the pleadings, this Court would ordinarily be perfectly justified in proceeding on the basis that the averments contained in the petitioner's affidavit are not denied. But, in this case, notwithstanding the absence of a counter affidavit, I do not however propose to adopt that course of action. The notice Ext. P1 though dated 2-9-1968 was served on the petitioner on 19-9-1968. In that notice, the respondent had fixed 12-9-1968 as the date for production of documents and for the hearing of objections. I do not think that merely because the stay order happened to be passed by this Court on that very date or from the fact that the orders of assessment though dated 12-9-1968 were actually served on the petitioner on 12-10-1968, this Court will be justified in assuming that a responsible officer would have antedated the proceedings with a view to circumventing the order of stay issued by this Court. I am not therefore inclined to act upon the averments contained in the additional affidavit of the petitioner notwithstanding its being not controverted by any counter affidavit by the respondent. 8. There is yet another serious objection levelled by the petitioner against the assessments made under Ext. P.2 and P.3 and that is based upon the provisions contained in the second proviso to S.3(1) of the Kerala Sales Tax (Levy and Validation) Act, 1965 (Act IV of 1965.) It is specifically stated in the said proviso that no tax shall be levied under S.3(1) on copra or cashew nut kernel if a tax has already been levied on the purchase of coconut or cashew nut out of which such copra or cashew nut kernel is produced. In the Full Bench decision of this Court reported in Anantha Narayana Iyer v. State of Kerala ( 1967 KLT 141 (FB)) this Court, while upholding the validity of Act IV of 1965, has pointed out that S.3 and 4 of the said Act have to be read together and that an assessment, whether it be a fresh assessment made under S.3 on an old assessment validated under S.4, will be justified only to the extent of the liability created by S.3 and subject to all the trammels imposed thereon by the 2nd proviso to that section. Hence, it is clear that while determining the liability of the petitioner of tax under S.3, it was incumbent on the respondent to address himself to the question as to whether or not any part of the turnover of the petitioner relating to copra for the years 1959-60 and 1960-61 was exempt from taxation by reason of its being covered by the second proviso to S.3(1) of the said Act. A reference to Exts. P.2 and P.3 shows that this most vital aspect has not even been adverted to by the respondent. The petitioner has made a definite allegation before this Court that a good portion of his turnover for these years relates to copra produced from coconuts, the purchase of which had been already subjected to tax and his grievance is that he was not afforded any opportunity by the respondent to substantiate this contention. The orders Exts. The petitioner has made a definite allegation before this Court that a good portion of his turnover for these years relates to copra produced from coconuts, the purchase of which had been already subjected to tax and his grievance is that he was not afforded any opportunity by the respondent to substantiate this contention. The orders Exts. P.2 and P.3 are, in my opinion, vitiated by a failure on the part of the respondent to determine the question of the liability of the turnover to tax in the light of the second proviso to S.3(1) of Act IV of 1965. This is a defect which goes to the very root of the jurisdiction of the officer to impose tax because the liability to tax under S.3(1) is expressly subject to the trammels imposed by the second proviso thereto. 9. Exts. P.2 and P.3 orders are therefore quashed and the respondent is directed to make a fresh assessment in respect of the years 1959-60 and 1960-61 after giving due opportunity to the petitioner to substantiate his contentions based on the second proviso to S.3(1) of Act IV of 1965. The O.P. is allowed to the extent indicated above. The parties will bear their respective costs.