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2005 DIGILAW 382 (KER)

CARBORUNDUM UNIVERSAL LIMITED v. STATE OF KERALA

2005-06-16

THOTTATHIL B.RADHAKRISHNAN

body2005
JUDGMENT THOTTATHIL B. RADHAKRISHNAN J. – Petitioner challenges exhibit P7 order of assessment issued by the third respondent determining the tax payable by the petitioner, for the assessment year 2000-01, under the Central Sales Tax Act, 1956 (hereinafter referred to as "the CST Act"). In reply to exhibit P1 notice issued under section 7(3) of the Kerala (General Sales Tax Act, 1963, hereinafter "the KGST Act", for short, and exhibit P2 notice issued under section 6(5) of the CST Act, the petitioner submitted exhibits P3 and P4 replies respectively and exhibit P5, an additional reply to exhibit P2 notice under the CST Act. Following the above, the assessment under the KGST Act was completed as per exhibit P6 and the impugned exhibit P7 was issued completing the assessment under the CST Act. Notwithstanding the availability of a statutory remedy by way of appeal against it, exhibit P7 assessment order is challenged invoking article 226 of the Constitution of India, contending that the same is vitiated by jurisdictional infirmity referable to non-exercise of power under section 6-A(2) of the CST Act and that the said order has been made without considering the materials placed by the writ petitioner before the assessing authority. It is urged that if an order under section 6-A is issued, the same would have resulted in the conclusion of the assessment, in view of the terms of the said provision of law. Heard Sri C. Natarajan, learned Senior Advocate on behalf of the petitioner and Sri Raju Joseph, the learned Special Government Pleader (Taxes). By virtue of the amendment made by section 151 of Central Act 20 of 2002 to sub-section (1) thereof, section 6-A of the CST Act reads as follows : "Section 6-A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale. By virtue of the amendment made by section 151 of Central Act 20 of 2002 to sub-section (1) thereof, section 6-A of the CST Act reads as follows : "Section 6-A. Burden of proof, etc., in case of transfer of goods claimed otherwise than by way of sale. - (1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of despatch of such goods, and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale. (2) If the assessing authority is satisfied after making such inquiry as he may deem necessary that the particulars contained in the declaration furnished by a dealer under sub-section (1) are true, he may, at the time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration relates shall be deemed for the purposes of this Act to have been occasioned otherwise than as a result of sale. Explanation. - In this section, 'assessing authority', in relation to a dealer, means the authority for the time being competent to assess the tax payable by the dealer under this Act." The underline portion in the afore-quote is introduced as per Act 20 of 2002. Explanation. - In this section, 'assessing authority', in relation to a dealer, means the authority for the time being competent to assess the tax payable by the dealer under this Act." The underline portion in the afore-quote is introduced as per Act 20 of 2002. Scope of section 6-A, before it was amended as aforesaid, was succinctly dealt with by this court in Vijayamohini Mills v. State of Kerala [1989] 75 STC 63; [1989] 1 KLT 515. It was held in the said decision that under section 6-A(1) of the CST Act, the burden cast on the dealer to prove that the movement of the goods was occasioned not by reason of sale, but by reason of transfer of such goods by him to any other place of business or to his agent or principal, may be discharged in any manner, even by adducing other evidence and the production of the prescribed F forms was not compulsive or mandatory. It was further held that it was open to the dealer to discharge the burden of proof cast on him either by furnishing the declaration in F forms as enjoined by section 6-A(1) or by adducing necessary proof in accordance with law and to show that the movement of the goods was occasioned not by reason of sale, but by reason of transfer of such goods by him to any other place of his business or to his agent or principal. It was held that the production of declaration (F forms) was only optional and permissive, but not compulsive. However, the aforesaid view that the production of the declaration (F forms) is not mandatory does not survive the amendment made by Act 20 of 2002 since, as and from the date of the coming into force of the said amendment, if the dealer seeks exemption on the ground that the inter-State movement of goods were occasioned otherwise than as a result of sale, he has to furnish the prescribed declaration. If he fails to do so, it shall be deemed for all purposes of the CST Act, that the transit of goods in question was occasioned as a result of sale. If he fails to do so, it shall be deemed for all purposes of the CST Act, that the transit of goods in question was occasioned as a result of sale. In C.P.K. Trading Company v. Additional Sales Tax Officer [1990] 76 STC 211, the division Bench of this court held as follows : "A plain reading of section 6-A(2) of the Central Sales Tax Act points out that in cases where the dealer exercises the option of furnishing the declaration (F forms), the only further requirement is that the assessing authority should be satisfied, after making such enquiry, as he may deem necessary, that the particulars contained in the declaration furnished by the dealer are 'true'. The scope or frontiers of enquiry, by the assessing authority under section 6-A(2) of the Central Sales Tax Act is limited to this extent, namely, to verify whether the particulars contained in the declaration (F forms) furnished by the dealer are 'true'. It means, the assessing authority can conduct an enquiry to find out whether the particulars in the declaration furnished are correct, or dependable, or in accord with facts or accurate or genuine. That alone is the scope of the enquiry contemplated by section 6-A(2) of the Act. On the conclusion of such an enquiry, he should record a definite finding, one way or the other. As to what should be the nature of the enquiry, that can be conducted by the assessing authority under section 6-A(2) of the Act, is certainly for him to decide. It is his duty to verify and satisfy himself that the particulars contained in the declaration furnished by the dealer are 'true'. As a quasi-judicial authority, the assessing authority should act fairly, and reasonably in the matter. During the course of the enquiry, under section 6-A(2) of the Act, it is open to him to require the dealer to produce relevant documents or other papers or materials which are germane or relevant, to find whether the particulars contained in the declaration (F forms) are 'true'. It is not possible to specify the documents or other materials or papers that may be required, to be furnished in all situations and in all cases. It depends upon the facts and circumstances of each case. The power vested in the officer is a wide discretionary power, to find, whether the particulars contained in the declaration (F forms) are "true". It depends upon the facts and circumstances of each case. The power vested in the officer is a wide discretionary power, to find, whether the particulars contained in the declaration (F forms) are "true". It is not possible or practicable to lay down the exact documents or materials that may be required in all the cases, by the assessing authority, to come to a proper and just finding as required by section 6-A(2) of the Act." The aforesaid principle laid down in C.P.K. Trading Company's case [1990] 76 STC 211 (Ker), was quoted with approval by the apex Court in Ashok Leyland Ltd. v. State of Tamil Nadu [2004] 134 STC 473, wherein their Lordships concluded that the order of an authority under section 6-A is conclusive for all practical purposes. It was laid down in the said case as follows : "34..... Section 6-A provides for exception as regard the burden of proof in the event a claim is made that transfer of goods had taken place otherwise than by way of sale. Indisputably, the burden would be on the dealer to show that the movement of goods had occasioned not by reason of any transaction involving sale of goods but by reason of transfer of such goods to any other place of his business or to his agent or principal, as the case may be. For the purpose of discharge of such burden of proof, the dealer is required to furnish to the assessing authority within the prescribed time a declaration duly filled and signed by the principal officer of the other place of business or his agent or principal. Such declaration would contain the prescribed particulars in the prescribed form obtained from the prescribed authority. Along with such declaration, the dealer is required to furnish the evidence of such dispatch of goods by reason of Act 20 of 2002. In the event, if it fails to furnish such declaration, by reason of legal fiction, such movement of goods would be deemed for all purposes of the said Act to have occasioned as a result of sale. Such declaration indisputably is to be filed in form F. The said form is to be filled in triplicate. The prescribed authority of the transferee State supplies the said form. Such declaration indisputably is to be filed in form F. The said form is to be filled in triplicate. The prescribed authority of the transferee State supplies the said form. The original of the said form is to be filed with the transferor State and the duplicate thereof is to be filed before the authorities of the transferee State whereas the counterfoil is to be preserved by the person where the agent or principal of the place of business of the company is situated. 35. When the dealer furnishes the original of form F to its assessing authority, an enquiry is required to be held. Such enquiry is held by the assessing authority himself. He may pass an order on such declaration before the assessment or along with the assessment. Once an order in terms of sub-section (2) of section 6-A of the Central Act is passed, the transactions involved therein would go out of the purview of the Central Act. In other words, in relation to such transactions, a finding is arrived at that they are not subjected to the provisions of the Central Sales Tax Act. It is not in dispute thereunder no appeal is provided thereagainst." Therefore, the assessing authority before whom the dealer furnishes a declaration as per the original of form F has to hold an enquiry. That enquiry has to be held by the authority himself. In doing so, he has to act fairly and reasonably, being a quasi-judicial authority. The authority has to decide whether the particulars contained in the declaration furnished by the dealer are "true". This means that he has to conduct an enquiry to find out whether the particulars contained in the declaration are correct, or dependable, or in accord with facts or accurate or genuine. It is open to him to require the dealer to produce relevant documents or other papers or materials which are germane or relevant to arrive at the truth or otherwise of the particulars in the declaration. It is not possible to specify the documents or other materials or papers that may be required to be furnished in all situations and in all cases. It is not possible to specify the documents or other materials or papers that may be required to be furnished in all situations and in all cases. It is not possible or practicable to lay down the exact documents or materials that may be required in all the cases, for the assessing authority to come to a proper and just finding as required by section 6-A(2) of the CST Act. - See C.P.K. Trading Company's case [1990] 76 STC 211 (Ker), as approved in Ashok Leyland's case [2004] 134 STC 473 (SC). The power vested in the officer is a wide discretionary power since the goal he has to achieve is a satisfaction as to whether the particulars contained in the declaration (F forms) are "true". On the conclusion of the said enquiry he should record a finding one way or the other. He has to pass an order on the said declaration made by the dealer. That order may be passed either before or along with the assessment. The assessee (writ petitioner) had, indisputably, filed declarations in form F and had produced different documents in its attempt to satisfy the assessing authority as to the genuineness of the particulars stated in the F forms during the enquiry. According to the writ petitioner, lorry receipts, as also goods consignment note and form 26 under the KGST Act, as well as excise invoices as prescribed under rule 52A of the Central Excise Rules, 1944 and sales tax declaration in form 27B were produced before the assessing authority. Exhibits P8 to P12 are produced by the petitioner to demonstrate the nature of the documents produced before the assessing authority. However, the impugned exhibit P7 is passed by the assessing authority by holding merely that the claim of exemption under section 6-A cannot be allowed in view of the judgment of this court in Esab India Ltd. v. State of Kerala [2006] 147 STC 417 [App]; [2004] 12 KTR 34. The assessing authority went on to hold that "the assessee have not produced the documents prescribed by the honourable High Court. Hence, the claim of exemption is disallowed and stock transfers made are treated as CST sales and assessed to tax". The assessing authority went on to hold that "the assessee have not produced the documents prescribed by the honourable High Court. Hence, the claim of exemption is disallowed and stock transfers made are treated as CST sales and assessed to tax". In Esab India Ltd.'s case [2006] 147 STC 417 [App]; [2004] 12 KTR 34, this court was considering a tax revision case in which the subordinate authorities and the Tribunal had come to the clear finding that the stock transfer was not proved. The contention that was pithily considered in paragraph 3 of the said judgment is the argument advanced on behalf of the assessee that F form declarations are sufficient to establish stock transfer. The Tribunal had not, in that case, dealt with any lorry receipt produced as proof of stock transfer, in its order. That apart, this court affirmed the finding by holding that in the absence of documents to prove physical transfer of goods across the boundary, there was nothing wrong in the Tribunal's order in the said case. In arriving at the said finding, it is true that this court had found that proof of crossing of goods by check-post seals being affixed on the transit papers can be considered as vital evidence. Indeed, the views expressed on the evidentiary value of such materials and the attending inferences are salutary. Yet, does it exclude other relevant materials ? Is Esab India Ltd.'s case [2006] 147 STC 417 [App]; [2004] 12 KTR 34, to be read as watering down the ratio of C.P.K. Trading Company's case [1990] 76 STC 211 (Ker), as regards section 6-A(2) as approved by the apex Court in Ashok Leyland's case [2004] 134 STC 473 ? In my considered view, the judgment in Esab India Ltd.'s case [2006] 147 STC 417 [App]; [2004] 12 KTR 34, cannot be treated as having laid down a law to the effect that in all cases where check-post cleared documents are not completely available, the decision under section 6-A ought to be against the assessee. In my considered view, the judgment in Esab India Ltd.'s case [2006] 147 STC 417 [App]; [2004] 12 KTR 34, cannot be treated as having laid down a law to the effect that in all cases where check-post cleared documents are not completely available, the decision under section 6-A ought to be against the assessee. I say so because, this court was considering only the particular fact-situation that had come up for consideration in the said case and, though the Bench had noticed C.P.K. Trading Company's case [1990] 76 STC 211 (Ker), and Vijayamohini Mill's case [1989] 75 STC 63 (Ker), all rendered by Benches of co-equal strength, the later decision of the apex Court in Ashok Leyland [2004] 134 STC 473, delivered on January 7, 2004 approving C.P.K. Trading Company's case [1990] 76 STC 211 (Ker), was not available while Esab India Ltd.'s case [2006] 147 STC 417 [App]; [2004] 12 KTR 34, was decided on September 30, 2002. Such a view, as has been read into the said judgment by the assessing authority (quoted at the end of paragraph No. 11 above) while issuing the impugned exhibit P7, is just not there in the decision in Esab India Ltd.'s case [2006] 147 STC 417 [App]; [2004] 12 KTR 34. The assessing authority, in my view, has grossly erred and has failed to exercise the jurisdiction vested in it under section 6-A of the CST Act in failing to consider all the materials placed by the assessee and also in not objectively assessing the materials as he should have done, in terms of law laid touching the content and scope of the jurisdiction of the said quasi-judicial authority under section 6-A of the CST Act, and passing an order, either way, based on the materials on record. In this context, it is worthwhile to remember that decisions emanate out of factual situations. It is apposite to notice the following words of caution sounded by the apex Court in Bharat Petroleum Corporation Ltd. v. N. R. Vairamani [2004] 8 SCC 579 : "Observations of courts are neither to be read as Euclid's theorems nor as provisions of a statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussions are meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes." In saying so, their Lordships quoted Megarry, J. in Shepherd Homes Ltd. v. Sandham [1971] 2 All ER 1267 : "One must not, of course, construe even a reserved judgment of Russel, L.J., as if it were an Act of Parliament." and Lord Morris in Herrington v. British Railways Board [1972] 1 All ER 749 (HL) : "There is always peril in treating the words of a speech or a judgment as though they were words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case." In the result, the impugned exhibit P7 is quashed. The assessing authority will proceed to consider the matter afresh after affording the petitioner such opportunity as the situation demands, in the views of the assessing authority. A final decision shall be taken within a period of three months from the date of receipt of a certified copy of this judgment. No order as to costs.