Full Judgment Text
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PETITIONER:
BHARAT STEEL TUBES LTD. & ANR.
Vs.
RESPONDENT:
STATE OF HARYANA & ANR.
DATE OF JUDGMENT04/05/1988
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
PATHAK, R.S. (CJ)
DUTT, M.M. (J)
CITATION:
1988 SCR (3) 895 1988 SCC (3) 478
JT 1988 (2) 320 1988 SCALE (1)842
ACT:
Haryana General Sales Tax Act, 1973: Sections 25, 28
and 28A: Punjab General Sales Tax Act, 1948: Section 11(3):
Sales Tax-Assessment-When complete-When no statutory period
fixed-Necessity for assessment to be completed
expeditiously-Within reason-able period-What is reasonable
period-Dependent on facts of case-Best judgment assessment-
Prior notice to dealer by assessing authority-Whether
necessary-Question left open.
HEADNOTE:
The petitioners are a public limited company and its
General Manager (Legal). The Company was a manufacturer of
electric resistence, welded steel tubes and pipes, and
registered as a dealer under the Haryana General Sales Tax
Act, 1973 as also the Central Sales Tax Act. It filed
returns for all the quarters covered within the period 1968-
69 to 1974-75 as prescribed by the Punjab General Sales Tax
Act, 1948 till March 31, 1973 and under the Haryana Act for
the quarters of the remaining years as the Haryana Act came
into force with effect from May 5, 1973. On the receipt of
notice relating to the assessment years 1968-69 to 1973-74
in the prescribed form ST-XIV under s. 14(2) of the Punjab
Act, and in the prescribed form ST-25 under s. 28(2) of the
Haryana Act relating to the year 1974-75 the petitioner-
Company appeared before respondent No. 2-Assessing
Authority, and complied with the requirements of the said
notice by production of documents, books and other papers.
While the matter was thus proceeding, respondent No. 2 again
issued a notice on September 24, 1982 requiring the
petitioner-Company to produce certain further records and
documents.
The petitioners in their writ petition challenged the
notices and also the vires of Section 28A of the Haryana
General Sales Tax Act, 1973.
On the question: Whether an order of assessment under
subsection (3) of section 11 of the Punjab Act or section
28(3) of the Haryana Act can now be completed or would be
barred by limitation.
896
Dismissing the writ petition,
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^
HELD: 1. Assessment of tax should be completed with
expedition. It involves the revenue to the State. [905B-C]
2. In the case of a registered dealer who collects
sales-tax on behalf of the State, there is no justification
for him to withhold the payment of the tax so collected. If
a timely assessment is completed, the dues of the State can
be conveniently ascertained and collected. Delay in
completion of assessment often creates problems. Long delay
is not in the interest of either the assessee or the State.
[905C-D]
3. In the absence of any prescribed period of
limitation, the assessment has to be completed within a
reasonable period. What such reasonable period would be,
would depend upon the facts of each case. [904E-F]
4. Until by statute, a limitation is provided, it is
proper for the State Government to require, by statutory
rules or appropriate instructions, to ensure completion of
assessments with expedition and reasonable haste but subject
to rules of natural justice. [905E-F]
In the instant case, though notices were issued under
sections 11(2) of the Punjab Act or Section 28(2) of the
Haryana Act within a reasonable period from the filing of
returns for the respective quarters in the assessment years
under consideration, further action had not been taken by
the assessing officer to complete the assessments. Now that
the assessing authority intends to complete assessments
under section 11(3) of the Act, no prejudice is seen to be
caused to the assessee if the assessing authority is
permitted to complete the assessment now. In the situation
which has thus arisen, it would be appropriate to call upon
the assessing authority to complete all these pending
assessments within a total period of four months on the
basis of available material in the record before him, and
such other material as the authority may obtain. Such
assessment has to be only under section 11(3) of the Act.
[904D-E;G-H;905A-B]
5. It may be that in a given case the original notice
under section 11(2) or a subsequent order requiring
production of some more material on specific points is not
complied with. Non-compliance with the notice under section
11(2) of the Act leads to a situation where a best judgment
assessment can be complied. This Court in Indian Aluminium
Cables Ltd. & Anr. v. Excise and Taxation Officer & Anr.,
[1977] 1
897
SCR 716 has indicated that a further notice has to be given.
The question that fell for determination before the Court
did not require examination as to whether such a notice was
necessary. Though such a notice is not a statutory
prescription, judicial propriety would require a larger
bench of the Court to examine the correctness of the view in
the Indian Aluminium case. On an appropriate occasion, the
question as to whether such a notice is a condition
precedent to completion of assessment would be examined.
[903E-H]
Ghanshyamdas v. Regional Assistant Commissioner of
Sales Tax, Nagpur & Ors. 14 STC 976; Madan Lal Arora v.
Excise and Taxation Officer, Amritsar, 12 STC 387; Jagat Ram
Om Prakash v. Excise and Taxation Officer, Amritsar, 16 STC
107 and Indian Aluminium Cables Ltd. & Anr. v. Excise and
Taxation Officer & Anr., [1977] 1 SCR 716, referred to.
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JUDGMENT:
CIVIL APPELLATE JURISDICTION: Writ Petition Nos. 3589-
3594 & 12587 of 1983.
(Under Article 32 of the Constitution of India).
Raja Ram Aggarwal and Vineet Kumar for the Petitioners
in WP. Nos. 3589-94 of 1983.
Harish N. Salve and Vineet Kumar for the Petitioners in
WP. No. 12587 of 1983.
Harbans Lal, Ms. I.S. Goel and C.V. Subba Rao for the
Respondents.
The Judgment of the Court was delivered by
RANGANATH MISRA, J. These are applications under
Article 32 of the Constitution and challenge in these
proceedings is to the validity of notice issued by the
Excise and Taxation Officer-Cum-Assessing Authority,
Respondent no. 2, under the Haryana General Sales Tax Act,
1973 (hereinafter referred to as ’the Haryana Act’). Such
notice is said to have been issued on 18th of December,
1980. The relevant periods are 1968-69 to 1974-75 and each
of the writ petitions relates to one of these years. As
common questions of fact and law arise in these petitions
and a common set of arguments has been advanced at the Bar,
we proceed to dispose of all these writ petitions by a
common judgment.
898
The petitioner No. 1, a Public Limited Company, has its
factory at Ganaur within the District of Sonepat in Haryana
State and petitioner No. 2 is its General Manager (Legal)
and duly constituted Attorney. Petitioner No. 1 a
manufacturer of electric resistence, welded steel tubes and
pipes, is a dealer registered under the Haryana Act as also
under the Central Sales Tax Act. It filed returns for all
the quarters covered within the period indicated above as
prescribed by the Punjab General Sales Tax Act, 1948
(hereinafter referred to as ’the Punjab Act’) till 31.3.1973
and under the Haryana Act for the quarters of the remained
years in question as the Haryana Act came into force with
effect from 5th May, 1973. On the receipt of notice relating
to assessment years 1968-69, 1969-70, 1970-71, 1971-72,
1972-73 and 1973-74 in the prescribed form ST-XIV under
section 14(2) of the Punjab General Sales Tax Act and in the
prescribed form ST-25 under section 28(2) of the Act
relating to year 1974-75, the petitioner company appeared
before the respondent No. 2 and complied with the
requirements of such notice by production of documents,
books and other papers. While the matter was thus
proceeding, the second respondent again issued a notice on
24.9.1982 requiring the petitioner company to produce
certain further records and documents. The petitioner has
challenged that notice as also the vires of section 28A of
the Haryana Act.
Section 11 of the Punjab Act lays down the procedure of
assessment which broadly corresponds to section 28 of the
Haryana Act. Though a major part of the period involved in
these proceedings would be covered by the Punjab Act, it
would be sufficient to refer for convenience to the
corresponding provisions of the Haryana Act. Section 25 of
the Haryana Act obliges every registered dealer to furnish
its return in the manner prescribed and the relevant rules
require returns to be submitted on quarterly basis. Sub-
section (1) of section 28 entitles the assessing authority
to accept the returns and assess the amount of tax due from
the dealer on the basis of such returns when he is satisfied
without requiring the presence of the dealer or the
production by him of any evidence that the returns furnished
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are correct and complete. Sub-section (2) requires the
assessing authority, where he is not satisfied without
requiring the presence of the dealer or production of
evidence in support of the return to serve on such dealer a
notice in the prescribed manner requiring him to attend in
person or to produce or cause to be produced such evidence
as he may rely upon in support of the return. Under sub-
section (3), where the dealer responds to the notice under
sub-section (2), the assessing authority after hearing such
evidence as the dealer may produce and such other evidence
as the
899
assessing authority may require on specified points, has to
assess the tax. Sub-section (4) authorises the assessing
authority in the event of default of compliance with the
terms of notice issued under sub-section (2) to proceed to
assess, to the best of his judgment, the amount of tax due
from the dealer. Sub-section (5) deals with the situation
where returns are not furnished and provides a period of
five years after the expiry of such period to which the
returns, if filed, would be related as the outer limit for
completing the assessment to the best of the assessing
authority’s judgment. The five sub-sections of section 28
thus deal with four different situations:
Sub-section(1) authorises the making of assessment on
the basis of returning without anything more;
Sub-sections (2) and (3) deal with one particular
situation, namely, when the assessing authority looks for
evidence and supporting material, he calls upon the dealer
to appear and produce his accounts and on the basis of such
material he is to complete the assessment;
Sub-section (4) deals with the situation where there is
failure of compliance with the notice under sub-section (2)
and this provision enjoins upon the assessing authority to
complete the assessment, according to the best of his
judgment, within a period of five years;
Sub-section (5) deals with the situation where no
return is filed.
For each of these years under consideration, that is,
either under section 11(2) of the Punjab Act or under
section 28(2) of the Haryana Act, notice has been issued by
the assessing officer. The assessing officer in his
affidavit has made it clear that assessments for these years
were intended to be completed following the procedure in
sub-sections (2) and (3) of either of the sections in the
two Acts. It has, therefore, been contended, relying on
judgments of this Court that there is no prescribed
limitation for completing such assessments. In course of
argument, learned counsel for the State has further
indicated that action under section 28A of the Haryana Act
was not intended to be taken. In that view of the matter, it
is indeed unnecessary to refer to the provisions of section
28A of the Haryana Act and deal with several contentions
advanced at the Bar with reference to that provision.
Equally unnecessary would be to find out the exact meaning
of "proceed to assess to the best of his judgment" appearing
in sub-section (4) of section 28 of the Haryana Act.
In Ghanshyamdas v. Regional Assistant Commissioner of
Sales Tax, Nagpur & Ors., 14 STC 976 a five-Judge bench of
this Court was
900
actually dealing with a case of assessment of escaped turn-
over and for that purpose had to find out whether there was
any escapement of tax if proceedings in respect of the first
assessment itself was still pending and no final order of
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assessment had been made. Dealing with this aspect, this
Court held:
"It is manifest that in the case of a registered
dealer, the proceedings before the Commissioner
start factually when a return is made or when a
notice is issued to him either under section 10(3)
or under section 11(2) of the Act. The acceptance
of the contention that statutory obligation to
file a return initiates the proceeding is to
invoke a fiction not sanctioned by the Act. The
obligation can be enforced by taking a suitable
action under the Act. Taking of such an action may
have the effect of initiating proceedings against
the defaulter. The default may be the occasion for
initiating the proceedings but the default itself
proprio vigore cannot initiate proceedings.
Proceedings in respect of the assessment of the
turn-over for the relevant period cannot,
therefore, be said to be pending before the
Commissioner ...... For the foregoing reasons, we
hold that a statutory obligation to make a return
within a prescribed time does not proprio vigore
initiate the assessment proceedings before the
Commissioner; but the proceedings would commence
after the return was submitted and would continue
till a final order of assessment is made in regard
to the said return."
On the basis of this authority, it would follow that
notices under sub-section (2) of either section 11 or
section 28 of the relevant Acts, having already issued and
final orders of assessment having not been made, assessment
proceedings are still pending.
In Madan Lal Arora v. Excise and Taxation Officer,
Amritsar, 12 STC 387 a five-Judge Bench was examining the
question of limitation in respect of a best judgment
assessment. At that time, section 11 of the Punjab Act had a
time limit of three years within which the best judgment
assessment had to be completed. Now that period of
limitation in section 28(4) is of five years. In view of
what we have already noted, consideration of the procedure
for best judgment assessment is not relevant.
Nor are we concerned with the examination of the view
taken by
901
the Full Bench of the Punjab and Haryana High Court in Jagat
Ram Om Prakash v. Excise and Taxation Officer, Amritsar, 16
STC 107. Therein, the examination was with reference to the
provisions in section 11(4) of the East Punjab General Sales
Tax Act, 1948 and the question of the time limit for
completion of a best judgment asscssment was in issue. The
Court pointed out that as to at what point of time the
assessing officer did actually proceed to so assess would
have to be determined on the facts and circumstances of each
case and it is not possible to lay down any definite and
clear-cut test applicable to all cases. It was, however,
pointed out that there must be some definite act or step
taken from which it can be clearly perceptible that from
that point of time the assessing officer has proceeded to
access to the best of its judgment and the commencement of
this process must be within the period of three years, as
provided in section 11(4) of that Act.
In Indian Aluminium Cables Ltd. & Anr. v. Excise and
Taxation Officer & Anr., [1977] 1 SCR 716 a three-Judge
Bench of this Court was considering the procedure of
assessment laid down under section 11 of the Punjab Act.
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This Court observed:
"On a correct interpretation of the provision
aforesaid, what emerges is as follows:
(i)That the assessing authority shall hear
the evidence produced by the dealer on the
day specified in the notice issued under sub-
section (2).
(ii)It can adjourn the hearing to some other
day and hear the evidence produced by the
dealer on the adjourned day or days.
(iii)The assessing authority may require the
dealer to produce further evidence on
specified points on the adjourned day or
days.
(iv)The assessing authority should assess the
amount of tax due from the dealer, that is to
say, pass the order of assessment, on the day
on which the hearing of the evidence is
completed as soon afterwards as may be."
There can be no opposition to the position as
summarised with reference to section 11(2) and (3) of the
Punjab Act corresponding to section 28(2) and (3) of the
Haryana Act.
902
The Court proceeded to state:
"Sub-section (4) of section 11 is attracted
in a case where a dealer having furnished a return
in respect of a period fails to comply with the
terms of a notice issued under sub-section (2). In
such a case, the assessing authority has to take
some effective step, such as issuance of a notice
to the assessee ntimating to him that he is
proceeding to access to the best of his judgment
the amount of tax due from the dealer. On failure
of a dealer to furnish a return in respect any
period by the prescribed date the assessing
authority after giving the dealer a reasonable
opportunity of being heard can proceed to access
to the best of his judgment the amount of tax, if
any, due from the dealer. In such a case, also an
effective step such as issuance of a notice to the
dealer concerned showing that the assessing
authority is proceeding to access has got to be
taken within five years of the expiry of the
period concerned. Sub-section (6) is attracted in
the case of a dealer who being liable to pay tax
under the act has failed to apply for
registration. Similar steps as the ones to be
taken under sub-section (5) are to be taken under
sub-section (6) within a period of five years
after the expiry of the concerned period. But the
Legislature advisedly did not fix any period of
limitation for taking up of the steps or the
passing of the assessment order under any of the
sub-sections (1), (2) or (3). The reason is
obvious. Best judgment assessments in the
circumstances mentioned in any of the sub-sections
(4), (5) or (6) could not be allowed to be made
after the expiry of a certain reasonable time
which the Legislature thought was three years
previously but made it five years by Punjab Act 28
of 1965. But where a registered dealer has filed
the return, the assessing authority can pass the
assessment order under sub-section (1) and accept
the return filed by the dealer as correct and
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complete. In such a case the formality of passing
an order of assessment is to be completed without
any further demand of tax from the dealer. For the
issuance of a notice under sub-section (2) no time
limit has been fixed, but the assessing authority
must remain on its guard of taking the steps and
completing the assessment as soon as it may be
possible to do so. Otherwise, the risk involved
may just be pointed out. Take a case where a
notice under sub-section (2) is issued after the
expiry or
903
just on the verge of expiry of the period of five
years and the dealer fails to comply with the
terms of the notice. In such a case, the assessing
authority may have to proceed to make the best
judgment assessment under sub-section (4)
attracting the bar of limitation of five years.
But, of course, there may be a case where in spite
of the failure of the dealer to comply with the
terms of the notice a suit under sub-section (2)
the assessing authority may be in a position to
complete the assessment under sub-section (3)
treating the alleged failure of the dealer as not
a real failure on his part."
Section 11(4) of the Punjab Act which has been
considered in this case no where requires a notice to be
given to the dealer by the assessing authority of the fact
that he was going to assess to the best of his judgment.
Where it is not possible for the assessing authority to
complete the assessment on the basis of the return and a
notice under sub-section (2) has been issued, the assessee
appears before the assessing authority and respond to the
notice. Once the assessee is before the authority and the
documents and evidence produced by the assessee are
examined, the assessee would certainly know which way the
assessment proceeding is heading. It is quite possible that
in course of examination of the papers produced by the
assessee in answer to the notice, the assessing authority
would indicate his dissatisfaction with the compliance. It
may be that in a given case the original notice under
section 11(2) or a subsequent order requiring production of
some more material on specific points is not complied with.
Non-compliance with the notice under section 11(2) of the
Act leads to a situation where a best judgment assessment
can be complied. It is true that this Court in Indian
Aluminiuim case (supra) has indicated that a further notice
has to be given. The question that fell for determination
before the Court did not require examination as to whether
such a notice was necessary. In view of the position as has
emerged in the matter before us, we also do not think it
necessary to finally indicate as to whether such a notice
has to be issued and failure to issue such a notice would
prevent the assessing officer from making a best judgment
assessment. Though we are of the opinion that such a notice
is not a statutory prescription, we do not intend to say
anything more about it as judicial propriety would require a
larger bench of the Court to examine the correctness of the
view in the Indian Aluminium case. On an appropriate
occasion, we hope the question as to whether such a notice
is a condition precedent to completion of assessment would
be examined.
904
In Indian Aluminium case (supra) this Court has
approved the earlier decision in Gurbax Singh v. Union of
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India, [1976] 3 SCR 247. The ratio in Gurbax Singh’s case is
that in the absence of a period provided by statute for
completion of assessment, an order of assessment made with
some delay would not be without jurisdiction. Even in Indian
Aluminium case (supra), where the statute requires
assessment to be completed within a reasonable time, the
Court indicated that the argument of the learned counsel
that the assessment had to be completed within a reasonable
time in order to be sustainable was not acceptable as a
sound one.
The short question that really falls for examination in
this case is whether an order of assessment under sub-
section (3) of section 11 of the Punjab Act or section 28(3)
of the Haryana Act can now be completed or would that be
barred by limitation. Undoubtedly, the assessment
proceedings have been very delayed. As the material placed
before us shows, the assessee had gone before different
courts from time to time to ask for injunction against the
completion of assessment but that trial appears be have
started in December, 1980 when a suit was filed and
injunction was obtained. Though notices were issued under
sections 11(2) of the Punjab Act or 28(2) of the Haryana Act
within a reasonable period from the filing of returns for
the respective quarters in the assessment years under
consideration, further action has not been taken by the
assessing officer to complete the assessments. But as we
have said above, in the absence of any prescribed period of
limitation, the assessment has to be completed within a
reasonable period. What such reasonable period would be,
would depend upon facts of each case. One view can be that
it should be a period not exceeding five years as the
Legislature has fixed the limitation of five years for
completing assessments in case of escaped turnover. Unless
then be an assessment made soon after the period to which
such assessment relates, the question of consideration of
escapement would indeed become difficult to consider and
examine. We, are, however, not inclined to extend into a
situation like the one before us, a period of limitation for
completion of assessments under sections 11(3) or 28(3) of
the respective Acts. The assessee has made returns for all
the quarters and must have paid its admitted tax. Now that
the assessing authority intends to complete assessments
under section 11(3) of the Act, we see no prejudice to the
assessee if the assessing authority is permitted to complete
the assessment now. On the other hand, if no assessment is
made an anomalous situation might arise and even though the
assessee has collected the sales tax on its sale turnover,
it might raise a claim for refund of it in the absence of an
assess-
905
ment. We do not propose to create such a situation. It would
suffice to say that in the situation which has arisen it the
matter before us, it would be appropriate to call upon the
assessing authority to complete all these pending
assessments within a total period of four months from today
on the basis of available material in the record before him
and such other material as the authority may obtain. We,
however, make it clear that such assessment has to be only
under section 11(3) of the Act.
Before we part with the case, we would like to indicate
that assessment of tax should be completed with expedition.
It involves the revenue to the state. In the case of a
registered dealer who collects sales-tax on behalf of the
State, there is no justification for him to withhold the
payment of the tax so collected. If a timely assessment is
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completed, the dues of the State can be conveniently
ascertained and collected. Delay in completion of assessment
often creates problems. The assessee would be required to
keep up all the evidence in support of his transactions.
Where evidence is necessary, with the lapse of time, there
is scope for its being lost. Oral evidence as and when
required to be produced by the assessing authority may not
be available if a long period intervenes between the
transactions and the consideration of the matter by the
assessing authority. Long delay thus is not in the interest
of either the assessee or the State. In view of the fact
that a period of limitation has been prescribed for bringing
the escaped turn-over into the net of taxation, such an
eventuality cannot be grappled with appropriately unless
timely assessment is completed. In several taxing statutes,
even in a situation like this, where assessment under
sections 11(3) or 28(3) of the respective Acts is
contemplated, a period of limitation is provided. Until by
statute, such a limitation is provided, it is proper for the
State Governments to require, by statutory rules or
appropriate instructions, to ensure completion of
assessments with expedition and reasonable haste but subject
to rules of natural justice.
We would like to clarify the position that we have not
dealt with the vires of section 28A of the Haryana Act nor
have we found any necessity to deal with the requirement of
notice before the assessing authority proceeds to complete
the assessment according to the best of his judgment. These
questions are left open.
Each of the writ petitions is, therefore, dismissed.
Parties are directed to bear the respective costs.
N.V.K. Petitions dismissed.
906