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2005 DIGILAW 1779 (SC)

State of J & K v. K. C. Vanaspati

2005-11-08

A.R.LAKSHMANAN, RUMA PAL

body2005
ORDER : Ruma Pal, J. The respondent sells vanaspati in the State of Jammu and Kashmir. In respect of the period 2.9.81 to 31.8.86 assessment orders were passed under the Jammu and Kashmir General Sales Tax Act, 1962 (for short , 'the Act'). Being aggrieved by the assessment orders, the respondent along with other similarly situated filed writ petitions in the High Court claiming that they were exempt from payment of sales tax. The writ petitions were dismissed. The appeals filed by the sellers were filed before this Court. 2. The appeals were heard and disposed of by a judgment on 16.1.92. The decision of this Court has been reported as M/s Pine Chemicals Ltd. & Ors. v. Assessing Authority & Ors. in 1992 (2) SCC 683 . This Court considered the facts of the case as well as law applicable and came to the conclusion that the assessees/appellants were entitled to exemption under the Act. 3. Before this Court it was contended that the assessees were liable to deposit the amounts which they had realised by way of tax under Section 8-B of the Act. This Court in M/s Pine Chemicals Ltd. v. Assessing Authority (supra) held that since neither the High Court had any occasion to decide the question of applicability of Section 8-B of the Act on the basis that the sales turnover were exempt from payment of tax nor the assessing authorities had any opportunity to decide or make any order under Section 8-B of the Act, therefore "the entire question relating to the applicability of Section 8-B of the Local Act and even the question whether there was any collection of sales tax will have to be left open". Since the assessment order had proceeded on the basis that the assessees were not entitled to exemption, their appeals were allowed. In the light of this finding, as this Court observed in the judgment, the question then arose whether the assessee had collected any tax and whether the amount was collected by way of tax and whether any element of sales tax has merged in the fixation of the price and whether those amounted to collection of sales tax. In the light of this finding, as this Court observed in the judgment, the question then arose whether the assessee had collected any tax and whether the amount was collected by way of tax and whether any element of sales tax has merged in the fixation of the price and whether those amounted to collection of sales tax. These questions were directed to be decided if the State considered that the assessees had collected sales tax in separate proceedings that may have to be initiated under Section 8-B of the Local Act or when the State demanded payment of money under Section 8-B of the Local Act. Consequent upon the allowing of appeal the assessees' demand for refund of the sales tax levied by the State was stayed until the determination of the proceedings under Section 8-B. It was made clear that the stay of the refund of money collected by the State would be only for a period of six months by which time the department should initiate proceedings if any under Section 8-B, if so advised. 4. Accordingly notices were issued on 7.4.92 relating of the Revenue's claim of the State under Section 8-B of the Act. The respondents replied to the notices. The assessing authorities however, did not accept the case of the respondents and held sales tax had indeed been collected by the respondent for the relevant period and not deposited under Section 8-B of the Act. Various grounds were given in support of this conclusion. The plea of the respondent that what had been collected from the customers of the respondent was merely distribution charges was held to be mere misnomer for the levy of sales tax. The order which is dated 14.7.92 could have been challenged by way of an appeal under Section 11 of the Act. Instead of preferring an appeal the respondent filed a writ petition before the High Court. The High Court went into the evidence and came to the conclusion that what the respondent had collected was indeed distribution charges and not sales tax and therefore there was no question of the respondent depositing the same with the State Government under Section 8-B. It was further held that since it was distribution charges no tax was leviable thereon. The High Court went into the evidence and came to the conclusion that what the respondent had collected was indeed distribution charges and not sales tax and therefore there was no question of the respondent depositing the same with the State Government under Section 8-B. It was further held that since it was distribution charges no tax was leviable thereon. Finally, it was held that the determination of liability of the respondent for the demand under Section 8-B could only be made under Section 7 of the Tax. Section 7 deals with regular assessment and Section 7(14) provides for a period of limitation of four years. As the High Court came to the conclusion that the determination of the quantum under Section 8-B was to be done under Section 7, it was held that the claim of the Revenue thereunder was barred by virtue of Section 7(14). There was no discussion whatsoever of the various facts as found by the assessing authority in its order dated 14.7.92. We are of the view that the High Court erred in entertaining the writ petition particularly since the question was ultimately a disputed question of fact. Whether the sales tax was being collected by the respondent from its consumers in the guise of distribution charges was a question of fact which could not have been satisfactorily, and indeed was not, decided under Article 226 by the High Court. 5. As far as the finding of the High Court was concerned regarding the applicability of Section 7(14) to determination under Section 8-B of the Act, in our view, the observations of this Court in the Pine Chemicals Ltd. case (supra) as noted above clearly indicate to the contrary. The determination envisaged was one which was independent of Section 7 and this Court had expressly granted six months time to the appellant to complete the decision on the issue. The appellant acting on the basis of the direction of this Court commenced and completed proceedings within the time limit. The finding of the High Court on the issue of limitation therefore cannot be sustained. 6. The only issue which was required to be examined, as has been indicated in the Pine Chemicals Ltd. case (supra), was a matter of evidence which should have been left to the departmental authorities to finally adjudicate in the normal course. The finding of the High Court on the issue of limitation therefore cannot be sustained. 6. The only issue which was required to be examined, as has been indicated in the Pine Chemicals Ltd. case (supra), was a matter of evidence which should have been left to the departmental authorities to finally adjudicate in the normal course. We, therefore, set aside the decision of the High Court and grant liberty to the respondent to prefer an appeal from the impugned order dated 14.7.92 within a period of 30 days from date. We clarify that in view of the special circumstances of the case the period of 30 days as provided under Section 11 will not apply. All questions relating to the issue whether sales tax was collected by the respondents within the meaning of Section 8-B and not deposited as required under that Section will be determined by the appellate authority without being in any way influenced by any observation of the High Court. Our attention has been drawn to the requirement for pre-deposit as a pre-condition to filing of the appeal. It is made clear that any amount which may have already been deposited by the respondents in this Court or in the High Court or with the authorities towards the disputed demand will be held subject to the outcome of the appeal. Needless to say if no such deposit has been made as claimed by the respondent, it will be open to the appellate authority to demand a deposit in terms of Section 11. 7. The appeal is disposed of but without any order as to costs. CA.No.4346/2004: Except for the assessment period which is 1.9.81 to 31.8.92, the facts and issues arising in this appeal are identical with the case of K.C. Vanaspati and is disposed of in terms of the order passed in the CA.No.4347/2004.