Mahabir Coke Industries Pvt. Ltd. vs Commissioner Of Taxes And Ors.

on 21 February, 2003

Gauhati High Court Gauhati High Court Mahabir Coke Industries Pvt. Ltd. vs Commissioner Of Taxes And Ors. on 21 February, 2003 Equivalent citations: (2003) 2 GLR 175 Author: A Ray Bench: A Roy JUDGMENT Amitava Ray, J. 1. The subject-matter of challenge in this batch of writ petitioners are the order dated 28.10.1998 passed by the Superintendent of Taxes , Jalukbari Check Post, Guwahati, respondent No. 2 assessing the petitioner company under Section 17(4) of the Assam General Sales Tax Act, 1993 (hereinafter referred to as the '1993 Act') read with Section 9(2) of the Central Sales Tax Act, 1956 (hereinafter referred to as the '1956Act') for the period ending 31.3.1992 to 1997-1998 as well as the consequential notices of demand on the basis thereof. As common questions of law have arisen, the petitioners were analogously heard and are being disposed of by this common judgment and order. For the sake of brevity and convenience, the relevant facts would be culled out from the pleadings available in Civil Rule No. 6205/98. 2. I have heard Dr. A. K. Saraf, learned senior counsel assisted by Mr. S. K. Agarwal for the petitioners and Mr. B. Talukdar, learned State counsel for the respondents. 3. Shortly put, the facts leading to the filing of the petitions as narrated therein are that the petitioner, a Private Limited Company owns M/s Mahabir Coke Industries Pvt. Ltd., an industrial unit situated at Beltola, in the district of Kamrup Assam, Guwahati. The said unit is a small scale industrial unit and its production commenced from 2.10.1985. The petitioner is engaged in the business of manufacture and processing of Coal into Coke, In the year 1982, the Government of Assam announced an industrial policy vide notification dated 12.10.1982 offering various incentives including exemption from payment of sales tax on purchase of raw materials as well as on sale of finished products for a period of 5 years to the new industrial units established in the State. The petitioners unit being a new industrial unit as contemplated under the 1982 Incentive Scheme, applied for an eligibility certificate and the same was accordingly issued by Udyog Sahayak, granting sales tax exemption from 2.10.1985 to 1.10.1990. The petitioner company was therefore exempted from paying sales tax for a period of 5 years under the 1982 industrial policy read with the provisions of Assam Industries (Sales Tax Concession) Act, 1986. 4. Another Policy was announced by the Government of Assam in the year 1991, which was made effective from 1.4.1991. Under the said policy the Government announced various incentives including exemption from payment of sales tax for a period of 7 years to the new industrial units as well as the existing industrial units undertaking expansion, modernisation and diversification on or after 1.4.1991. The exemption was available on the purchase of raw materials to be used in the manufacture of finished products as well as on the sale of finished products within the State as well as in course of inter-State trade and commerce. 5. The petitioner's unit which was an existing unit under the 1982 Policy/Scheme being inspired by the above mentioned incentive scheme evolved by the Government in the year 1991, undertook expansion works in its said unit and made additional investments in conformity with the norms laid down in the industrial policy and applied for the eligibility certificate before the appropriate authority who after being satisfied that all norms for issuance thereof had been fulfilled, issued the eligibility certificate bearing No. DIC (US)/84/93/79 dated 17.5.1994 granting exemption amongst others from payment of sales tax with effect from 1.12.1991 to 301.11.1998. 6. However, inspite of above, the respondent No. 2 the Superintendent of Taxes, Jalukbari Check Post, Guwahati issued a notice dated 19.4.1994 directing the petitioner to produce the books of account and
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documents for the period ending 31.3.1992 to 30.6.1993. In response to the said notice, the petitioner submitted a copy of the eligibility certificate whereby it was granted exemption was granted exemptions from payment of sales tax from 1.12.1991 to 30.11.1998. As the authorisation certificate to avail benefit of the sales tax exemption was not issued, the petitioner on 20.7.1994 addressed a communication to the Superintendent of Taxes, respondent No. 2 requesting the said authority to issue the authorisation certificate so as to enable the petitioner to avail the benefit of sales tax exemption under the 1991 policy. A request was also made to the said authority in the above circumstances not to proceed with the assessment. The respondent No. 2 on one hand did not take any action for issuing the authorisation certificate and on the other informed the petitioner that there was no provision for grant of exemption from payment of sales tax under the 1991 policy and no exemption would be granted in respect of sales made in course of inter-State trade and commerce and that the assessment would be completed summarily and thereafter tax would be levied. 7. Being aggrieved, the petitioner approached this court with an application under Article 226 of the Constitution of India, which was registered as Civil Rule No.3437/94. By order dated 3.9.1994, the writ petition was admitted and the operation of the impugned notice dated 19.4.1994 was suspended. This court further observed that in case any assessment had been made, no amount would be realised on the basis thereof. 8. While the matter rested at that, the Government of Assam in exercise of its powers under Section (4) of the 1993 Act read with Clause (f) of Sub-section (3) of Section 74 thereof framed a scheme known as Assam Industrial (Sales Tax Concession) Scheme, 1995 (hereinafter referred to as 'the Scheme') and notified the same by notification dated 16.8.1995. The scheme granted relief by way of sales tax exemption on the purchase of raw materials as well as on the sale of finished products in the State or in the course of inter-State traded and commerce. The scheme, which came into effect from 1.4.1991, however, provided that the exemption would be restricted to the increase in production due to expansion, modernisation or diversification. As the provisions of the new scheme were perceived to be contrary to those in the Industrial Policy of 1991 and having an adverse bearing on the entitlements of the petitioners regarding exemptions, it filed an amendment petition in Civil Rule No. 3437/94 for incorporating necessary amendments in the writ petition for challenging the legality and validity of the provisions of the scheme. The writ application was eventually dismissed by judgment and order dated 28.5.1998. The petitioner preferred an appeal, being Writ Appeal No. 155/98 against the same. This court by order dated 22.6.1998 admitted the appeal and stayed the operation of the impugned judgment and order. 9. In the meantime, the respondent No. 2 had issued another notice on 27.11.1996 directing the petitioners to show cause as to why it should not be prosecuted for having failed to make payment of Rs. 45,694,685 by way of tax under the 1956 Act. The petitioner inter alia pointed out that no assessment proceeding had been initiated and therefore the notice without completion of such assessment proceeding was arbitrary and illegal. The fact that the petitioners unit was exempted from payment of sales tax upto 30.11.1998 and that this court earlier stayed the operation of the notice relating to the proposed assessment of tax was also highlighted in its reply. The petitioners, was thereafter informed by the notice dated 17.12.1996 that the action proposed to be taken in terms of the notice dated 27.11.1996 had been temporarily suspended. The petitioners was however directed to produce necessary evidence to satisfy the assessing authority about the correctness and completeness of its returns submitted for the assessment year 1984-85 (sic) 1995- 96 along with the documentary evidence that it had not committed any offence under Sections 60 and 61 of the 1993 Act read with Section 9(2) of the 1956 Act and that further it had not charged and realised tax from its customers. 10. The above notice was followed by another dated 17.4.1997 issued by the same authority directing the petitioners to submit an application for authorisation certificate along with the eligibility certificate as provided under the 1995 scheme observing that otherwise the claim for tax exemption under the scheme would not be entertained. In its reply submitted on 28.4.1997, the petitioner informed the said authority that it had already submitted an application for the authorisation certificate before him on 5.9.1995. The petitioner further informed the said authority that it had already applied for the eligibility certificate under the 1995
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Mahabir Coke Industries Pvt. Ltd. vs Commissioner Of Taxes And Ors. on 21 February, 2003

Scheme in 28.3.1996 and that the same was under process. Thereafter the respondent No. 2 by notice dated 3.5.1997 directed the petitioner company to produce its book of accounts for the assessment year 1994-95 and 1995-96 in support of its return. The petitioner informed the said authority in response to the said notice that the books of account were under verification by the Income-tax Authorities and prayed for some time for production thereof. 11. Subsequent thereto by notice dated 9.5.1997 issued by the respondent No. 2 the petitioners was directed to show cause as to why the sum of Rs. 2,36,97,346 should not be demanded from it on the ground that the same was collected by way of Central Sales Tax at the rate of 4% but the same had not been deposited in the Government Account. The petitioners submitted its reply thereto on 26.5.1997 where it inter alia contended that the notice had been issued based on inferences and not on facts and that too without affording any opportunity to it to go through the books of account and to explain the position. It was further pointed out that the charge against the petitioner of having collected Central Sales Tax from the assessment year 1990-91 to 1996-97 clearly revealed that it was framed in a wholly mechanical manner and without application of mind. The petitioners was thereafter directed by notice dated 30.7.1997 to furnish the detailed addresses of the sellers of raw material (Coal) along with their Central Sales Tax registration numbers. It was also directed to provide a copy of the order of supply of Coal placed with the seller by the petitioner. The necessary informations were furnished to the respondent No. 2 by the petitioners on 7.8.1997. The petitioner was thereafter by notice dated 12.8.1997 directed to show cause as to why it should not be charged for the giving false statement under Section 60 of the 1993 Act read with Section 25(6) of the Assam Finance (Sales Tax) Act, 1956 on the ground that the petitioners had purchase coal from persons other than the commission agents and that the identity of such seller had been kept in dark. The allegations were denied by the petitioner in its reply dated 26.8.1997. Eventually by notice dated 9.6.1998 issued by the respondent No. 2 the petitioner was informed that the reply submitted by it on 26.5.1997 with regard to collection of Central Sales Tax was not acceptable and it was directed to appear before the said authority with necessary written statement in the matter. The petitioners submitted its reply on 28.8.1998 asserting therein that it had sold the finished product without charging any tax. However, from some of the parties, who were ready to pay tax, it collected the same and deposited it in the Government treasury. Its categorical stand was that it had by 30.9.1996 deposited a sum of Rs. 40,37,039,46 on account of Central Sales Tax . It further contended that it had paid local taxes on the raw materials purchased by it and after adjustment of such taxes paid by the petitioner against the tax collected by it, a sum of Rs. 40,67,560 was still refundable to the petitioner under Section 15(b) of the 1956 Act as well as under the Scheme. 12. It was at this stage that by the impugned order the respondent No. 2 completed the assessment under Section 17(4) of the 1993 Act read with Section 9(2) of the 1956 Act and tax was levied at the rate of 8 % on the total turnover on the ground that the petitioner had failed to produce the relevant 'C' Form against the inter-State sales. The tax was levied on the ground that the petitioner had collected sales tax from the customers but had not deposited the same in the Government account. Pursuant to the said orders of assessment, demand notices were issued directing payment of the demand on or before 5.12.1998. 13. In the counter filed on behalf of the respondent it has been inter alia contended that the writ petition is not maintainable as alternative remedies by way of appeal and revision are available against the orders of assessment impugned in the instant proceedings. While admitting that the petitioner had been granted sales tax exemption for the period of 5 years from 2.5.1985 to 1.10.1990 it was asserted that thereafter the 1993 Act was enacted and the provision for exemption of sales tax to a dealer was contained in Section 9(4) thereof. The State Government was empowered under Section 9(4) of the 1993 Act to frame schemes by publishing notification in the official gazette granting exemption from payment of tax thereunder to any class of industries within the State. Accordingly, the Assam Industries (Sales Tax Concession) Scheme, 1995 was published vide notification dated 16.8.1995 under Section 74(3)(f) of the said Act. The answering respondents, therefore, contended that the issue with regard to grant of sales tax exemption to the petitioner was to be guided and regulated by the provisions of the 1993 Act and the 1995 Scheme. According to them, therefore, the petitioner was entitled to exemption from payment of sales tax only on fulfilling of all the
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Mahabir Coke Industries Pvt. Ltd. vs Commissioner Of Taxes And Ors. on 21 February, 2003

conditions as mentioned in 1995 Scheme and on filing of the application in Form II-B furnishing the necessary informations as contained therein. According to them, the eligibility certificate dated 17.5.1994 issued by the Udyog Sahayak did not ipso facto make the petitioner eligible for granting authorisation certificate by the Tax Authority. They maintained that the petitioner had applied in Form 1(A) instead of Form II-B as required under the 1995 Scheme. As the petitioner was thus not entitled to be issued the authorisation certificate on the basis of the eligibility certificate dated 17.5.1994, the petitioner was not entitled to any sales tax exemption. It was alleged that the petitioner had evaded payment of tax collected on sale of coke in the course of inter-State trade and commerce. Moreover, as exemption was granted conditionally under the 1993 Act, payment of Central Sales Tax was not exempted. Further the petitioner purchased coal as the basic raw material and no exemption was allowed on the said item under Rule 2(f) of the Assam Industries (Sales Tax Concession) Rules, 1988. The petitioner was found not entitled to get any authorisation certificate exempting it from payment of sales tax and, therefore, the notice dated 19.4.1994 issued under Section 9(2) of the 1956 Act was legal and valid. 14. Supporting the notice dated 27.11.1996 the answering respondents contended that the same was issued as it transpired on the verification of the books of account of the petitioner that it had committed an offence under sections 59, 60 and 61 of the 1993 Act read with Section 9(2) of the Central Sales Tax Act, 1956 Act and had evaded tax to the tune of Rs. 4,56,94,685. The notice dated 9.5.1997 was sought to be justified on the ground that the petitioner in spite of charging and realising the Central Sales Tax had not deposited the same in the Government account. On receiving the reply dated 26,5.1997 of the petitioner denying collection of such tax, it was asked to furnish detailed addresses of its sellers with their Registration Certificate Numbers to verify the correctness of the statements made in the said reply. In the enquiry that was made on the basis of the addresses furnished by the petitioner, it appeared that the suppliers named by the petitioner were fictitious. It was thereafter, according to the answering respondents, that the notice dated 12.8.1997 was issued. With reference to some bills annexed to the affidavit, the answering respondents alleged that the petitioner charged sales tax @ 6% while raising its bill on M/s Carbon Ever Flow Ltd., Nasik. It also realised Central Sales Tax @ 4% from M/s H.E.P. Ltd. Bhopal. It was further alleged that the petitioner raised two bills against a single transaction bearing same account number and date, one charging tax meant for its purchasers and the other without charging tax to be submitted before the department. Two documents being Annexure C-1 and C-2 have been annexed in support of the said averment. According to the respondents, therefore, the reply dated 26.5.1997 of the petitioner was found to be not acceptable and accordingly the notice dated 9.6.1998 was issued. With regard to the stand taken by the petitioner that it had collected Rs. 62,88,150.33 from its customers as Central Sales Tax during 1995-96, the answering respondents stated that the Central Sales Tax amount shown to have been deposited for the period from 1.10.1991 to 30.6.1993 (excluding from 1.4.1992 to 30.6.1992) had been adjusted against the assessment for the respective periods. However, the amount for the period from 1.4.1992 to 30.6.1992 could not be adjusted as the Bank draft depositing the amount for the said period was not available in the records, The respondents reiterated that the petitioner after manufacturing and processing the raw materials, i.e., Coal into Coke, sold the finished products in course of inter-State trade and commerce to various traders/ parties realising the Central Sales Tax from them but it did not deposit any tax against such sales. According to them, the provision of Section 15(b) of the 1956 Act was not attracted in the present case and the claim for refund on the basis thereof was not tenable. Besides, as the petitioner did not submit any 'C' Form as required under Section 8(4) of the 1956 Act, read with Rule 12 of the Central Sales Tax Rules, no benefit of declared goods was available to it. The amount of Rs. 40,37,039.46 said to have been deposited by the petitioner related to the period ending 30.9.1990 which is much before the period involved in the present petitions. Moreover, the amount so deposited had already been adjusted against the corresponding period/years. It was further contended that the Civil Rule No. 3537/94 was on a different footing and even if exemption under the 1991 policy to the petitioner is conceded it would not amount to granting exemption from Central Sales Tax as the exemption under the 1995 Scheme was a conditional one. It was thus asserted that as the petitioner had collected Central Sales Tax from different parties it was bound to deposit the same in the Government Account and the same having not been done the respondents were fully justified in taking the impugned decision.
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Mahabir Coke Industries Pvt. Ltd. vs Commissioner Of Taxes And Ors. on 21 February, 2003

15. The petitioner submitted a reply to the counter of the respondents where it asserted that as the impugned order of assessment was illegal and without jurisdiction, besides being violative of the principles of natural justice, the instant writ petition was thus, maintainable even in face of any alternative remedy available to it. It contended that as it had challenged the validity of the provisions of the 1995 Scheme in Civil Rule No. 3437/94 and thereafter had carried the challenge in Writ Appeal No. 155/98, the question of applying for the eligibility certificate under the Scheme did not arise. According to it, the eligibility certificate that was issued under the 1991 Industrial Policy had conferred on it a legal right which could not have been taken away subsequently by a notification under the 1993 Act and it was thus entitled to be issued the authorisation certificate granting sales tax exemption from 1.12.1991 to 30.11.1998. The Civil Rule 3437/94 was infact filed by the petitioner for a directed to the respondent to grantion sales tax exemption from the period from 1,12.91 to 30.11.1998. However, since the writ application was filed in the year 1994 and at that point of time notices for the period ending 31.3.1992, 30.9.1992 31.3.1992 and 30.6.1993 had only been issued by the respondent No. 2 for completion of the assessment, this court stayed the operation of the said notices and directed that no assessment would be made and in case any assessment had been made, no tax should be realised from the petitioner. As the issue in Civil Rule No. 3437/94 involved the question of grant of sales tax exemption to the petitioner for the period of 7 years on the basis of the eligibility certificate issued to it under the 1991 Industrial Policy, the petitioner contended that it was not open for the respondent No. 2 to complete the impugned assessment in view of the interim order passed by this court. The allegation that the petitioner had collected Rs. 2,30,90,346 as Central Sales Tax was denied. It reiterated that the tax collected by it from the customer had been duly deposited. With reference to the instance of M/s. HEF Ltd., Bhopal, it was contended that through the agreement with it provided for payment of 4% Central Sales Tax, in fact no such tax was charged by the petitioner. The bills annexed as C-1 and C-2 were not issued by the petitioner. With regard to the Form 'C' the stand of the petitioner in its reply is that it had submitted a number of declarations in Form 'C' for the period from 1.10.1990 to 31.3.1993 but for the subsequent periods it was not afforded any opportunity to produce the 'C' Form though those are in its possession. It reiterated that Section 15(b) of the 1956 Act was attracted in the instance case, inasmuch as, Coal and Coke being declared commodities, local taxes paid on the purchase of raw materials are to be reimbursed to the person making the sales in course of inter-State trade and commerce. The petitioner maintained that in the 1995 scheme, exemption had been granted from payment of Central Sales Tax in view of Section 8(5) of the 1956 Act. The stand of the petitioners in the alternative is that assuming that a dealer had collected the tax but has not deposited the same in the Government Account, during the period of exemption, the only course open to the assessing authority is to initiate a proceeding under Section 65A of the 1993 Act for the forfeiture of tax so collected. But the Assessing Authority would not have the power to make assessment and levy tax during the period of exemption on the ground that on some of the sales, the dealer had collected tax. Further simply because on some transactions tax had been collected it cannot be inferred that on all the transactions tax was realised. Instead each other and every transaction will have to be independently examined in a forfeiture proceeding. The petitioner reiterated that the four suppliers, the particulars whereof it had furnished to the respondent authority were assessees, with Bank Account and that the allegation that they were fictitious was wholly baseless. 16. Dr. A. K. Saraf, learned senior counsel for the petitioners has advance three-fold arguments. Firstly, the petitioner is entitled to exemption from payment of sales tax both under the 1993 Act and the 1956 Act under the scheme and therefore, the contention of the State respondent that it is not entitled to benefit of exemption from Central Sales Tax is wholly untenable. Secondly, according to the learned senior counsel as the petitioner is exempted from payment of sales tax under both the enactments, assuming that the Central Sales Tax as alleged by the State respondents had been collected by it, the procedure warranted is prescribed under Section 65A of the 1993 Act for forfeiture of the amount of tax so collected. Dr. Saraf, however, maintained that in case the State respondent decide to embark upon that exercise, even then, it would have been incumbent on them to examine and scrutinise each and every transaction to ascertain the amount of tax so collected to be forfeited under that provision of law. In such a case also, according to the learned senior counsel, it would still not be open for the State respondents to make the entire turnover liable on detection of unauthorised collection of tax in some transactions. As in the instant case, according to him, while making the
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impugned demand, the respondent No. 2 did neither resort to the procedure prescribed under Section 65A of the 1993 Act not had verified each and every transaction for which allegedly the Central Sales Tax had been collected by the petitioner, the same is illegal, arbitrary and without jurisdiction. Thirdly, the impugned orders are, following a purported assessment under Section 17(4) of the 1993 Act read with Section 9(2) of the 1956 Act', and having regard to the vague and omnibus findings contained therein, those are clearly unsustainable in law and on facts. Besides, keeping in view the allegation that the petitioner had collected the Central Sales Tax but had evaded the payment thereof, Section 17(4) of the 1993 Act and Section 9(2) of the 1956 Act were not attracted and on that grounds as well, the impugned orders are patently illegal and without any authority of law. Consequently Dr. Saraf contended that the demand notices which were issued on the basis of the impugned orders are liable to be adjudged, illegal and nonest in law. In support of this submissions Dr. Saraf has placed reliance on the following decisions. 1. Pine Chemicals Ltd. and Anr., Appellant v. Assessing Authority and Ors. Respondents, reported in, (1992) 2 SCC 683. 2. Commissioner of Sales Tax, J & K and Ors., Petitioners v. Pine Chemicals Ltd. and Ors. Respondents, reported in (1995) 1 SCC 58. 3. Manjushree Extrusions Ltd. and Anr. Appellants v. State of Assam and Ors., Respondents, reported in (2001) 2 GLR 218. 17. Mr. B. J. Talukdar, learned State counsel prayed for week's time to file written argument which was allowed. However, till date the learned State counsel has not submitted the same. Considering the fact that the cases are of the year 1998, I am not inclined to delay the disposal thereof any further. However, while adjudicating the issues involved in the present proceeding the stand of the State respondents as put forward in their counter has been taken note of. 18. The issues, which thus surface from the pleadings of the parties and the submissions made, can be para-phrased thus. 1. Are the writ petitions maintainable for the alternative remedies available to it under the enactments involved ? 2. Whether the petitioner is entitled to the exemption from payment of sales tax under the above mentioned Acts in view of the scheme? 3. If yes, whether the impugned assessment and demand made under Section 17(4) of the 1993 Act, read with Section 9(2) of the 1956 Act is sustainable? 4. Whether the impugned assessment order is otherwise sustainable in law and on facts in view of the omnibus nature of the findings and conclusions as recorded therein? The writ petitions having been filed in the year 1998 and pending since then, I am not inclined to non-suit the petitioner on the plea of availability of alternative remedy. This issue is thus answered in the negative. The next issues with regard to the entitlement of the petitioner to enjoy exemption from payment of sales tax under the Scheme need not detain this court for long. The decision of this court rendered in Manjushree Extrusions Ltd. (supra) has set at rest all controverses relating thereto. A batch of appeals preferred against the common judgment and order dated 29.4.1998 passed in the corresponding writ petitions upholding the validity of the scheme were disposed of by this decision. One of the appeals so disposed is Writ Appeal No. 155/98 referred to hereinabove while narrating the case of the petitioner. The appellants therein which includes the present petitioner had approached this court under Article 226 of the Constitution of India assailing the validity of the scheme inter alia on the ground that it curtailed the benefits of sales tax exemption provided in the 1991
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Mahabir Coke Industries Pvt. Ltd. vs Commissioner Of Taxes And Ors. on 21 February, 2003

Industrial Policy. It was contended therein that the appellants were industrial units and were in production prior to 1.4.1991 and had undertaken expansion, modernisation and diversification thereof and though they have been enjoying the benefit of full sales tax exemption under the 1991 Industrial Policy with the introduction of the scheme, the said benefit was curtained, inasmuch as, the sales tax exemption was confined to the part of the production which had increased due to such expansion, etc. 19. The Division Bench, which heard the appeals, was divided in its opinion. The matter, therefore, was referred to the third Judge and eventually per majority it was held that both the new units and existing units were eligible to sales tax exemption limit in its entirety whether it be on purchase of raw materials or sales of finished products. The contention raised on behalf of the State that in terms of the scheme, the sales tax exemption would be available to the industrial units to the extent only to which expansion was made by them was negatived. While reaching the said conclusion, it was noticed that the eligibility certificate to the appellants (which were existing units) had been granted to avail the benefit to exemption under the 1991 policy for a period of 7 years. It was thus held in essence that the scheme was in continuation of the 1991 Industrial Policy and therefore the appellants were entitled to the benefit of the scheme and that the eligibility certificate issued in favour of the appellants under the 1991 policy had created enforceable rights in them and consequently by the benefit under said policy could not be curtailed by the scheme. 20. In view of the above dicta of this Court, there is no room to contend that the petitioner is not entitled to the benefit of exemption under the scheme. 21. Before I part with this issue it would be apposite to make a brief reference to the scheme. It contemplates three types of industrial units eligible to avail the benefit thereunder. Category-B contemplates an industrial unit having its Registered Office within the State of Assam which is or was in production at any time prior to 1.4.1991, undertaking expansion, modernisation, diversification to the minimum extent of 25% at the same location or at other places of the State of Assam and with an additional employment at least by 10% and is in compliance with the criteria on the industrial units employing the people of Assam. The petitioner satisfies this description. Part-1 of the scheme provides for full exemption of sales tax on the purchase of raw materials within the State of Assam by the eligible industrial units situated within the State of Assam and also on the sale of finished products, manufactured in such eligible units in the State of Assam or in the course of inter-State trade and commerce. The scheme which has been given effect to from 1.4.1991 under the above part also provides for refund of sales tax paid by the eligible industrial units in course of purchase of the permitted raw materials. With regard to the finished products, the eligible industrial units are competent to sell the same in the State of Assam or in course of inter state trade and commerce without paying an tax under the 1991 Act. However, if any tax is collected on such sales the same would have to be deposited into the Government treasury. 22. Part-II of the scheme grants exemption from payment of sales tax under the 1956 Act in respect of goods manufactured by the eligible units in the State of Assam and sold in course of inter-State trade and commerce. However, if any tax if collected, the same has to be deposited into the Government Treasury. 23. On a reading of the said scheme, without however dilating on the details thereof, it is apparent that thereunder the eligible industrial units are granted exemption of sales tax for transactions covered by both the enactments. In other words, the eligible industrial units under the scheme have been granted the benefit of exemption from payment of the sales tax under the 1993 Act as well as the Central Sales Tax of 1956 Act during the currency of the scheme. In view of the decision in Manjushree Extrusions Ltd. and Anr. v. State of Assam and Ors. (supra) the petitioners is thus entitled to the aforementioned benefits under the scheme. I am, therefore, inclined to uphold the contention raised on behalf of the petitioner on this issue. 24. Before taking up the other issues for consideration it would be profitable to refer to the decisions of the Apex Court cited by Dr. Saraf.
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25. In Pine Chemicals Ltd. and Ors. v. Assessing Authority and Ors. (supra), one of the contentions raised was that, as in the assessment order involved therein there was a finding that the assessee had collected sales tax in respect of its sales turnover for which exemption was claimed, the said amount was refundable under Section 8(B) of the Jammu and Kashmir General Sales Tax Act, 1962. The Apex Court while leaving the question of applicability to Section 8(B) in that case open, held that in view of its finding that the sales involved were exempted, the question, whether the assessee had collected any tax and whether the amount was collected by way of tax and whether any element of sales tax had merged in the fixation of the price and that amounts to collection of sales tax, would have to be decided in a separate proceeding that may have to be initiated under Section 8(B) of the said Act or if the State demands payment, under the said provisions of the Act. 26. This decision has been relied upon by the learned senior counsel for the petitioner understandably to reinforce his argument that, as the petitioner is entitled to exemption from payment of sales tax under both the Acts, any question as to whether any amount had been collected, in spite of such exemption and if so, what is the amount and whether it had been collected as tax etc. cannot be looked into in a normal assessment proceeding but only in a proceeding initiated under Section 65A of the 1993 Act providing for forfeiture of such amount if collected in the contingencies narrated herein. 27. In Commissioner of Sales Tax, JK and Ors. v. Pine Chemcials Ltd. and Ors. (supra), and application for review of the abovemetioned judgment in Pine Chemicals Ltd. and Ors. v. Assessing Authority and Ors. (supra) was filed. Though the Apex Court partially reviewed its said decision, the above aspect pertaining to refund under Section 8(B) of the J & K General Sales Tax Act, 1962 and its decision relating thereto was not touched. The Apex Court while dealing with the review application vis-a-vis Section 8(2A) of the 1956 Act held that the said sub-section does not say that wherever a particular sale or purchase of goods is exempt from tax under the State enactment, it would equally be exempt from tax under the Central enactment. Such sales or purchases of goods to be exenipted from tax under the Central enactment should be exempt from tax generally under the State enactment. 28. The above decision, however, does not pose any hindrance for the petitioner, inasmuch as, under the scheme it is entitled to exemption from the Central Sales Tax as well. The learned senior counsel for the petitioner has referred to his decision only to emphasise the fact that the dicta of the Apex Court in Pine Chemicals Ltd. and Ors. v. Assessing Authority and Ors., (supra) with regard to the issued refund under Section 8(B) of the Jammu & Kashmir Act was not reviewed/by it. 29. The clear and categorical assertion in the impugned assessment orders as well as in the counter of the State respondents is that the petitioner in course of its transactions had collected Central Sales Tax, but had not deposited the same. In view of the facility of exemption from sales tax which the petitioner had been enjoying in law under the scheme, the allegation if correct would render any collection of such tax to be in contravention of the provisions of the 1956 Act. The Acts having provided the consequences in such an eventuality, in my view, the State respondents ought to have resorted to the relevant provision thereof. The Apex Court in similar circumstances, in Pine Chemicals Ltd. and others referred to above has also prescribed the same course of action, I respectfully subscribe to that view. 30. One more aspect of the matter has to be noticed. If any allegation of unauthorised collection of tax is established, the consequence as provided in Section 65A of the 1993 Act and/or Section 10 of the 1956 Act as the case may be, would follow. In a given case, the person collecting such tax may be penalised as well. Having regard to the adverse consequences that would result in such cases, the most rational and logical approach in the matter would be to examine and scrutinise each and every transaction in course of which tax is alleged to have been collected in contravention of the enactments to conclude that a person has illegally collected tax in his transactions comprising the annual turnover. Inference thereof from the incidence of such collection in one or more of such transactions besides not being permissible and sanctioned by law would amount to over simplification of the procedure prescribed at the cost and prejudice of the person concerned. In that view of matter, I am inclined to concur with the submission made by the learned Senior Counsel for the
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Mahabir Coke Industries Pvt. Ltd. vs Commissioner Of Taxes And Ors. on 21 February, 2003

petitioner. In the face of specific provision in the two Acts providing for such an eventuality, the impugned action of making a general assessment of all the transactions of the petitioner in exercise of power under Sections 17(4) and 9(2) of the 1956 Act and raise a demand for the tax computed on its entire turnover without examining each and every transaction to verify as to whether any tax was at all collected in spite of the exemption granted, cannot be countenanced. 31. The impugned orders cannot survive on another consideration as well. The respondent No. 2 as the said orders reveal, had proceeded to make an assessment of the tax payable by the petitioner for the periods covered thereby on the supposition that the petitioner was not entitled to the exemption of tax. The consideration which runs through the impugned orders has been that though the petitioner was liable to pay the Central Sales Tax and had collected the same in all its transactions for the periods in question, it did not deposit the same. In other words, the assessing authority made an assessment of the tax payable by the petitioner in exercise of its power under Section 17(4) of the 1993 Act and Section 9(2) of the 1956 Act. As the petitioner in view of the decision rendered in Manjushree Extrusions Ltd. and another (supra) is entitled to the exemption from tax under both the enactments, the question of assessment of any tax payable by it cannot arise. The bottom plank of the impugned orders in the above premises is therefore nonest in law as well as on facts. On this reasoning as well the impugned orders cannot be sustained. 32. Except a reference to one agreement with M/s H.E.F. Ltd., Bhopal and some sample bills relating to M/s Carbon Everflow Ltd., Nasik no specific instances have been mentioned in the impugned orders. On examining the documents filed along with counter of the State respondents, it appears that 5 sample bill have been submitted of which 2 relating to M/s H.E.F. Ltd., Bhupal do not contain any signature on behalf of the petitioner company. Three documents containing, terms and conditions for purchase of Coke by M/s H.E.F. Ltd. Bhupal from the petitioner have also been filed indicating inter alia that it was agreed upon that 4% Central Sales Tax would be paid on the transactions. Simple bills corresponding to the transactions entered into have not been filed. Even assuming that the petitioner had realised the Central Sales Tax in the transactions contained in the documents filed by the State respondents it cannot be itself be decisively held that in all the transactions executed by the petitioner for the periods in question it had collected the tax as alleged and had thereafter defaulted to deposit the same in the Government Treasury. The Assessing Authority, however, as would be evident from the impugned orders, had proceeded on the basis that the petitioner had collected such tax in all the transactions for the entire period and therefore, held it liable to pay tax computing the same on the entire turnover. At the plain of reiteration it has to be again observed that the Assessing Authority in coming to its conclusion as above did not deal with the transactions separately and thus its findings are general, speculative, hypothetical and sweeping. There is nothing in the impugned orders to indicate that the petitioner was afforded any opportunity to have its say on all the transactions comprising its turnover for the periods in question so as to ascertain whether in spite of the exemption, granted, any amount was collected as tax thereon and if so, what was the amount and from whom. In my considered view, unless a searching enquiry into these questions vis-avis the relevant records pertaining to each and every transaction is made it would not be permissible on the part of the Assessing Authority to raise a demand for payment of any amount by way of tax collected and not deposited by the person/dealer concerned on the entire turnover in the manner done. The petitioner in its affidavit-in-reply has taken a categorical stand that all 'C' Forms pertaining to the transactions in question are available with it, some of which had been submitted before the authority and so far as the others are concerned it was not afforded any opportunity to do so. This assumes importance in view of the fact that the Assessing Authority in the impugned orders has levied tax at the rate of 8% for the failure on the part of the petitioner to submit the 'C' Forms. In this connection the stand taken by the petitioner that it is entitled to a refund of Rs. 40,67,560 by way of refund of the local taxes paid by it on the raw materials for the relevant period also cannot be lost sight of. There is no indication in the impugned orders that the above claim of the petitioner had been considered by the Assessing Authority though it was laid before it. Coal including Coke being one of the declared goods under Section 14 of the 1956 Act, the petitioner's claim for refund cannot be lightly brushed aside.

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Mahabir Coke Industries Pvt. Ltd. vs Commissioner Of Taxes And Ors. on 21 February, 2003

33. In the light of the above discussion I cannot persuade myself to uphold the impugned orders. The orders dated 28.10.1998 impugned as well as the consequential notices of demand are therefore unsustainable and are set aside and quashed. I would however, hasten to add that this would not came in the way of the State respondents to take any appropriate action in the attending facts and circumstances under the aforementioned two enactments in accordance therewith, if they deem it necessary. The petitions succeed and are allowed. In the facts and circumstances of the case, however, there would be no order as to costs.

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