Research › Search › Judgment

Delhi High Court · body

2000 DIGILAW 426 (DEL)

RAJ PHOTO STUDIO v. SALES TAX OFFICER

2000-05-16

ARIJIT PASAYAT, D.K.JAIN

body2000
ARIJIT PASAYAT, CJ. ( 1 ) DISALLOWANCE of claim of deduction under Section 4 (2) (V) of Delhi Sales Taxact, 1975 ( in short the Act ) in respect of sales to registered dealers as made by thesales Tax Officer, Ward 61, Bikri Bhawan, New Delhi, hereinafter referred to as theassessing officer, is the subject matter of challenge in this Writ Petition. ( 2 ) A brief reference to the factual aspects would suffice. Petitioner, a dealerregistered under the)Act, claimed deduction in respect of sales stated to have beenmade to registered dealers. Fifty four declaration forms in Form ST-1 were furnishedin support of the claim. Assessing officer rejected the claim on the ground that thepurchasing dealers who had issued those forms had indicated different figures inrespect of the transactions covered by the forms. On the aforesaid ground, theassessment for the year 1983-84 was completed raising extra demand of Rs. 10,60,185. 00 additionally which is required to be dealt with under Section 50 of theact. Petitioner submitted its reply and took a stand that the claim was in order. Aprayer was made to summon the concerned purchasing dealers under Section 42 forthe purpose of verification of the Act. Since no action was taken on the request andthe extra demand was raised, the present Writ Petition has been filed. ( 3 ) PETITIONER has taken the stand that non-issuance of summons to the concernedparties amounted to violation of the principles of natural justice and a fair opportunityhas been denied. Learned counsel for the Revenue, on the other hand, submitted thatrecords of purchasing dealers were verified in detail and since the figures reflected inthe documents available with the assessing officer were different than those reflectedby the Petitioner, disallowance has been rightly made. According to him there was nodenial of opportunity and/or violation of principles of natural justice. ( 4 ) SECTION 4 of the Act deals with the rates of tax and deals with various deductionspermissible while determining the gross and taxable turnover. The turnover of adealer, as provided under Section 2 (0) means aggregate amount of sale pricereceived or receivable by the dealer subject to certain deductions. Taxable turnoverassumes importance as it is linked with quantification of tax liability of a dealer. The turnover of adealer, as provided under Section 2 (0) means aggregate amount of sale pricereceived or receivable by the dealer subject to certain deductions. Taxable turnoverassumes importance as it is linked with quantification of tax liability of a dealer. Sub-clause (V) of Section 4 (2) (a) deals with sales made by a registered dealer to anotherregistered dealer, Such sales are allowed to be deducted from the turnover providedsuch sales have been made to the purchasing dealers for any of the three purposes,i. e. for manufacturing some other items from the goods purchased; or for resellingthem or for the purpose of using them as packing material for the goods which aremanufactured or are sold. Rule 8 of the Delhi Sales Tax Rules, 1975 ( hereinafterreferred to as the Rules) deals with authority from whom declaration forms may beobtained and used, custody and maintenance of record of such forms and the matterincidental thereto. Rule 7 stipulates conditions subject to which a dealer may claimdeduction on his turnover from sales to registered dealers. As the controversy isnonmistakably linked with Section 4 (2) (a), Rules 7 and 8, it is necessary to reproducethem: SECTION 4 (2) (a) (v ). For the purpose of the Act, "taxable turnover" means that part of a dealer sturnover during the prescribed period in any year which remains afterdeducting therefrom: (a) his turnover during that period on - (v) sale to a registered dealer :rule 7. Conditions subject to which a dealer may claim deductionfrom his turnover on account of sales to registered dealers- 1. Adealer who wishes to deduct from his turnover the amount in respect of saleson the ground that he is entitled to made such deduction under the provisionsof sub-clause (v) of clause (a) of sub-section (2) of section 4, shall produce : (a) copies of the relevant cash memos or bills according as the sales arecash sales or sales on credit; and (b) a declaration in Form ST-1 duly filled in and signed by the purchasingdealer or a person authorized by him in writing. Rule 8. Authority from whom the declaration form may be obtained,and use, custody and maintenance of records of such forms andmatters incidental thereto.- 1. Rule 8. Authority from whom the declaration form may be obtained,and use, custody and maintenance of records of such forms andmatters incidental thereto.- 1. The declaration referred to in the secondproviso the clause (a) of sub-section (2) of Section 4 shall be in form ST-1 which shall be printedunder the authority of the Commissioner and shall be obtained from theappropriate assessing authority by the registered dealer intending to purchasegoods on the strength of his certificate of registration. ( 5 ) FOR claiming deductions the declaration form required to be produced has to bein terms of Form ST-1. The said form consists of three parts, i. e. original, duplicateand counterfoil. Various particulars have to be filled in while using the form. Petitioner sstand is that if there was any discrepancy, it should have been granted an opportunityto reconcile the figures with those of the purchasing dealer and for that purpose aprayer was made under Section 42 of the Act which deals with the powers of thecommissioner and other authorities to take evidence on oath. The Revenueauthorities seem to have proceeded on the basis that when the purchasing dealerhave furnished the details on the basis of counterfoils retained by them there was nonecessity for further opportunity being granted to reconcile the discrepancy, if any. Initially, the burden is on the dealer who claims a deduction to show that he is in lawentitled to claim such a deduction, In the case at hand, the Revenue relied ondocuments of persons from whom forms were obtained and discrepancy was alleged. Principles of natural justice and fair play demanded that the prayer made to summonthe purchasing dealers deserved acceptance. ( 6 ) BY a catena of decisions it has been held that the assessing authority is entitledto collect materials behind the back of the assessee, and is not required to disclosethe source in all cases. But, he is bound to disdose that materials adverse to theassesses in his possession which he intends to utilize against the assessee in theassessment. It is the salutary requirement of the principles of natural justice mandatingthat a person is entitled to know the materials which are sought to be utilized againsthim for any adverse adjudication. After collecting the materials which are sought tobe utilized against the assessee, a reasonable opportunity of staling his case is to begiven. It is the salutary requirement of the principles of natural justice mandatingthat a person is entitled to know the materials which are sought to be utilized againsthim for any adverse adjudication. After collecting the materials which are sought tobe utilized against the assessee, a reasonable opportunity of staling his case is to begiven. If the assessee demands that the person who has stated something adverseto him is to be cross-examined, same is to be allowed. If Revenue is of the view thatthere are entries in the accounts of another person which have not been reflected inthe assessee s account, or have not been correctly reflected and it is claimed thatthose entries related to the assessee, the person in whose accounts the entries havebeen made have to be produced by the Revenue for the purpose of cross-verificationand/or cross-examination if a demand is made by the assessee for the said purpose. This position was succinctly stated by the apex Court in State of Kerala Vs. K. T. Shaduli Yusuff {1977} 39 STC 478. It has to be noted that in such cases, the personin whose books the entries appear stands in the position of a witness for the Revenuewhen the entries in his books of accounts are sought to be utilised for drawingadverse inference. Different figures as appearing in the purchasing dealers booksof account are essentially relatable to materials providing foundation for the view ofassessing officer. If he proposes to utilize the materials collected, he is bound to givean opportunity to the assessee to inspect them and to grant copies if applied for. It isin line with the principles of natural justice. Essential characteristic of "natural justice"is put by Romans in two maxims : (i) nemo judex in causa, sua and (ii) audi alterampartem, which respectively mean (i)no one can be a Judge in his own cause, and (ii)hear both sides. The said rules of natural justice is to secure justice to preventmiscarriage of justice. The person affected must have: (i) a reasonable opportunity ofbeing heard; and (ii) the hearing must be a genuine one and not an empty publicrelation exercise. It is a basic requirement of principles of natural justice that beforean order adverse to a person is passed, he should be granted an opportunity ofhearing. The person affected must have: (i) a reasonable opportunity ofbeing heard; and (ii) the hearing must be a genuine one and not an empty publicrelation exercise. It is a basic requirement of principles of natural justice that beforean order adverse to a person is passed, he should be granted an opportunity ofhearing. Two fundamental principles of natural justice are that a man should not ajudge of his own cause, and no order should be passed without hearing the affectedparty. The maxim audi alteram partem (hear the other side) mandates it. A new ruleclosely and intrinsically linked with the aforesaid maxim is being accepted asfundamental. It is " qui aliquid statueritparte inaudia altera, acquum licet dixerit,haud acquum facerit" ( he who determines any matter without hearing both sides,though he may havesaid what is right, will not have done what is right ). Logically,justice should not only be done, but should appear to have been done. The requirementof natural justice is to disclose such materials, which are used against the affectedperson. In the celebrated case of Cooper-Vs. Hendwoath Board of Works ( 1963)143 HR414, the principle was thus stated: "even God did not pass a sentence uponadam before he was called upon to make his defence. " "adam" says God, "where artthou" " has thou not eaten of the tree whereof I commanded thee that thou should noteat". Since then the principle has been chiselled, honed and refined, enriching itscontent. A more recent statement of the law in Mulloch Vs. Aardeen 1971 (2) ER1278 is that " the right of a man to be heard in his defence is the most elementaryprotection". This position was highlighted in Eric Alvares Vs. Collector Sundargarh1996 (1) OLR 25, and Banamali Jena (after him) Subasini Mohapatra (after her)Haris Chandra Mohapatra Vs. State of Orissa ( 1996) 82 CLT 402. It is consonantwith the principles of natural justice to conclude that no opportunity of being heard canbe said to be "reasonable" unless the authority discloses to the person aggrieved thematerials upon which he proposes to decide ( See R. Vs. Westminster Asst. CIT{1940} 5 All ER 132; R. Vs. Bondmin [1947] 1 All ER 109. ( 7 ) UNDER the circumstances, we feel that the Petitioner was denied due and properopportunity to place materials in support of its claim. There was no legal impedimenton the part of the assessing officer inissuing summons to the purchasing dealers, asrequested. Westminster Asst. CIT{1940} 5 All ER 132; R. Vs. Bondmin [1947] 1 All ER 109. ( 7 ) UNDER the circumstances, we feel that the Petitioner was denied due and properopportunity to place materials in support of its claim. There was no legal impedimenton the part of the assessing officer inissuing summons to the purchasing dealers, asrequested. In the circumstances, we deem it necessary to remand the matter to theassessing officer to make a fresh assessment after issuing summons to thosepersons whom the Petitioner wants to summon. Whether the assessing officer wouldaccept the claim after that is a matter for him to decide. We have not expressed anyopinion on that aspect. The Petition is allowed to the extent indicated.