Full Judgment Text
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CASE NO.:
Appeal (civil) 4913 of 2006
PETITIONER:
Commissioner, Sales Tax, U.P.
RESPONDENT:
M/s Mohan Brickfield, Agra
DATE OF JUDGMENT: 13/11/2006
BENCH:
ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
(Arising out of S.L.P. (C) No. 19958 of 2005
ARIJIT PASAYAT, J.
Leave granted.
The Commissioner of Sales Tax, Uttar Pradesh, calls in
question legality of the order passed by a learned Single Judge
of the Allahabad High Court allowing the revision petition filed
by the respondent under Section 11 of the Uttar Pradesh
Trade Tax Act, 1948 (in short the ’Act’). The dispute relates to
the assessment year 1984-85. The High Court set aside the
order passed by the Sales Tax Tribunal, Agra (in short the
’Tribunal’) in Second Appeal No.129 of 1989.
High Court by the impugned order observed that the
rejection of accounts on the ground that books of accounts
were not produced at the time of survey conducted on
29.3.1984 and 30.3.1985 was really of no consequence since
no defect was specifically pointed out in respect of books of
accounts produced at the time of assessment.
The factual position in a nutshell is as follows:-
Respondent (hereinafter referred to as ’assessee’) at the
relevant point of time was carrying on business of
manufacturing and sales of bricks. Two surveys were
conducted in the business premises of the respondent on
29.3.1984 and 30.3.1985. But the books of accounts were not
produced on either of the dates. The Assessing Officer was of
the view that non-production of books of accounts at the time
of these surveys established that books of accounts were not
maintained in the regular course of business and, therefore,
were liable to be rejected. It was also noted that apart from the
fact that books of accounts were not produced as noted above,
two other factors existed to discard the books of accounts.
Firstly, the respondent-assessee had indicated the Fukai
period of seventy two days, but had shown lesser production.
The selling rate was found to be lesser than the rate prevailing
during the year in question when compared to sales at kilns in
the same vicinity. No explanation was offered as to how this
was possible. It was noted that the assessee did not disclose
the capacity of the kiln. Therefore, taking into account the
productions and rates in similar cases, the Assessing Officer
took the established norm of production to be one lakh bricks
in six days and accordingly fixed the production at 12 lakhs
bricks. Accordingly, assessment was completed to the best of
judgment.
An appeal was preferred by the assessee before the
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Assessment Commissioner (Judicial), Range I. The said
authority with reference to the material on record found as
follows:
(1) No allowance for weightage for after
adjusting the opening and closing stock of
bricks outside kiln that 76000 and
2,08,000 respectively. The sale of burn
bricks was determined to be 13,68000
breaking allowance 58000 was given and
the sale was determined at 10,10,000
bricks.
For the year 1983-84 the average sale was determined at
Rs.280/- by the appellate authority. Taking that into account
the sale rate was fixed at Rs.320/- for the year in question.
An appeal was preferred by the assessee against the
Assistant Commissioner’s order before the Tribunal. The
Commissioner of Sales Tax also preferred appeal. Both the
appeals were taken up together. The Tribunal found that the
rejection of accounts was justified. Though reliance was
placed on certain decisions of the Allahabad High Court to
contend that when books of accounts were produced at the
time of assessment which were free from defect, it cannot be
held that they were not maintained in the regular course of
business, merely on the ground that at the time of survey they
were not produced. Tribunal found that that was not the only
reason for rejection of the accounts and other factors relating
to rates and low production were reflected. However, the sale
of bricks was fixed at nine lakh bricks. Accordingly the appeal
filed by the assessee was partly allowed and the revenue’s
appeal was dismissed.
The assessee filed revision application before the High
Court. As noted above, by the impugned judgment the learned
Single Judge allowed the same.
In support of the appeal learned counsel for the
appellant submitted that the High Court proceeded on
erroneous premises to hold that the only ground for rejection
of books of accounts was non-production of books of accounts
at the time of survey. As elaborately dealt with by the
Tribunal, that was not the only ground. Even otherwise the
High Court’s view if accepted will render Sections 12 and 13 of
the Act redundant. It is also pointed out that Section 11 of
the Act confers limited jurisdiction on the High Court to
interfere only on the question of law. The High Court should
not have interfered with the findings of fact while exercising
the revisional jurisdiction.
The learned counsel for the assessee on the other hand
supported the order of the High Court.
We shall first deal with the power of the High Court in
dealing with the revision petition. Section 11 of the Act reads
as follows:
"11. Revision by High Court in special
cases.\027(1) Any person aggrieved by an order
made under sub-section (4) or sub-section (5)
of Section 10, other than an order under sub-
section (2) of that section summarily
disposing of the appeal, or by an order passed
under Section 22 by the Tribunal, may, within
ninety days from the date of service of such
order, apply to the High Court for revision of
such order on the ground that the case
involves any question of law.
(2) Any person aggrieved by an order made by
the Revising Authority or an Additional
Revising Authority refusing to state the case
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under this section, as it stood immediately
before April 27, 1978, hereinafter referred to
as the said date, may, where the limitation for
making an application to the High Court
under sub-section (4), as it stood immediately
before the said date, has not expired, likewise
apply for revision to the High Court within a
period of ninety days from the said date.
(3) Where an application under sub-section (1)
or sub-section (3), as they stood immediately
before the said date, was rejected by the
Revising Authority or an Additional Revising
Authority on the sole ground that the period
of one hundred and twenty days for making
the reference, as specified in the said sub-
section (1), has expired, such applicant may
apply for revision of the order made under
sub-section (2) of Section 10, to the High
Court within sixty days from the said date on
the ground that the case involves any
question of law.
(4) The application for revision under sub-
section (1) shall precisely state the question of
law involved in the case, and it shall be
competent for the High Court to formulate the
question of law or to allow any other question
of law to be raised.
(5) Every application for making a reference to
the High Court under sub-section (1) or sub-
section (3), as they stood immediately before
the said date, pending before the Revising
Authority or an Additional Revising Authority
on the said date, shall stand transferred to
the High Court. Every such application upon
being so transferred and every application
under sub-section (4) as it stood immediately
before the said date, pending before the High
Court on the said date, shall be deemed to be
an application for revision under this section
and disposed of accordingly.
(6) Where the High Court has before the said
date, required the Revising Authority or an
Additional Revising Authority to state the case
and refer it to the High Court under sub-
section (4), as it stood immediately before the
said date, such authority shall, as soon as
may be, make reference accordingly. Every
reference so made, and every reference made
by such authority before the said date in
compliance with the requirement of the High
Court under sub-section (4), as it stood before
the said date, shall be deemed to be an
application for revision under this section and
disposed of accordingly.
(6-A) Where the Revising Authority or an
Additional Revising Authority has, before the
said date, allowed an application under sub-
section (1) or sub-section (3), as they stood
immediately before the said date, and such
authority has not made reference before the
said date, it shall, as soon as may be, make
reference, to the High Court. Every such
reference, and every reference already made
by such authority before the said date and
pending before the High Court on the said
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date, shall be deemed to be an application for
revision under this section and dispose of
accordingly.
(7) Where an application under this section is
pending, the High Court may, on an
application in that behalf, stay recovery of any
disputed amount of tax, fee or penalty
payable, or refund of any amount due, under
the order sought to be revised :
Provided that no order for the stay of
recovery of such disputed amount shall
remain in force for more than thirty days
unless the applicant furnishes adequate
security to the satisfaction of the Assessing
Authority concerned.
(8) The High Court shall, after hearing the
parties to the revision, decide the question of
law involved therein, and where as a result of
such decision, the amount of tax, fee or
penalty is required to be determined afresh,
the High Court may send a copy of the
decision to the Tribunal for fresh
determination of the amount, and the
Tribunal shall thereupon pass such orders as
are necessary to dispose of the case in
conformity with the said decision.
(8-A) All applications for revision or orders
passed under Section 10 in appeals arising
out of the same cause of action in respect of
the same assessment year shall be heard and
decided together.
Provided that where any one or more of
such applications have been heard and
decided earlier, if the High Court, while
hearing the remaining applications, considers
that the earlier decision may be a legal
impediment in giving relief in such remaining
application, it may recall such earlier
decisions and may thereafter proceed to hear
and decide all the applications together.
(9) The provisions of Section 5 of the
Limitation Act, 1963, shall, mutatis
mutandis, apply to every application, for
revision under this section.
Explanation \026 For the purpose of this section,
the expression "any person" includes the
Commissioner and the State Government."
The parameters of exercising power under the said
provision were considered by this Court in Commissioner of
Sales Tax, U.P. v. Kumaon Tractors & Motors (2002 (9) SCC
379). It was inter alia noted as follows:
"8. x x x x x
It appears that the High Court ignored the
provisions of Section 11 of the Trade Tax Act
which confers limited jurisdiction to interfere
with the order of the Tribunal only on the
question of law, that too the said question of
law is required to be precisely stated and
formulated. Instead of deciding the question
of law, the High Court simpliciter re-
appreciated the evidence and ignored the
material documents maintained and produced
by the assessee, that is, books of accounts,
bills and Form ’C’ submitted by it. In this view
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of the matter, the impugned order cannot be
sustained."
Apart from the fact that the High Court proceeded on
erroneous premises to hold that rejection of accounts was only
on the ground of non-production of accounts at the time of
survey, the conclusions are also not otherwise sustainable.
Sections 12 and 13 of the Act are relevant for the purpose.
They read as follows:
"12. Accounts to be maintained by dealers.\027
(1) Every dealer including a dealer exempted
from tax on payment of fee under any provision
of the Act, shall keep and maintain a true and
correct account showing the value of the goods
sold and bought by him, and in case the
accounts maintained in the ordinary course do
not show the same in an intelligible form, he
shall maintain true and correct account in
such form, as may be prescribed in this behalf
Provided that this section shall not apply
to such dealers as are not liable to taxation
under this Act.
(2) A manufacturer liable to pay tax under
this Act shall, in addition to the accounts
referred to in sub-section (1), maintain stock
books in respect of raw materials as well as the
products obtained at every stage of production:
Provided that in the case of any class of
manufacturers, the aggregate of whose
turnover, as referred to in Clauses (a) to (d) of
sub-section (2) of Section 3, in an assessment
year does not exceed five lakh rupees, the
Commissioner, and in any other case the
State Government, may relax the
requirements of this sub-section subject to
such conditions and restrictions as he or it
may deem fit to specify.
(3) The accounts and the stock books required
to be maintained under sub-section (1) or sub-
section (2) shall be preserved by the dealer or,
as the case may be, by the manufacturer for
such period as may be prescribed."
"Section 13: Power to order production of
accounts and powers of entry and inspection.
- (1) Any officer empowered by the State
Government in this behalf may, for the
purposes of this Act, require any dealer to
produce before him any book, document or
account relating to his business and may
inspect, examine and copy, the same and
make such enquiries from the dealer relating
to his business, as may be necessary:
Provided that books, documents and
accounts of a period more than four years
prior to the assessment year shall not be so
required, unless in any special case, for
reasons to be recorded, such officer considers
it necessary.
(2) All books, documents and accounts
maintained by any dealer in the ordinary
course of his business, the goods in his
possession, and his place of business or
vehicle shall be open to search and inspection
at all reasonable times by such officers, as
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may be authorised by the State Government in
this behalf.
(3) If the officer authorized under sub-section
(2) has reasonable grounds for believing that
any dealer is trying to evade liability for tax or
other dues under this Act and that anything
necessary for the purpose of an investigation
into his liability may be found in any account,
register or documents, he may seize such
account, register or document, as may be
necessary. The officer seizing the account,
register or document shall forthwith grant a
receipt for the same and shall be bound to
return them to the dealer or the person from
whose custody they were seized, within a
period of ninety days from the date of such
seizure, after having such copies or extracts
taken therefrom as may be considered
necessary; provided the dealer or the aforesaid
person gives a receipt in writing for the
account, register or document returned to
him. The officer may, before returning the
account, register or document, affix his
signature and his official seal at one or more
places thereon, and in such case the dealer or
the aforesaid person will be required to
mention in the receipt given by him, -the
number of places where the signature and
seal of such officer have been affixed on each
account, register or document.
(3-A) Notwithstanding anything contained in
sub-section (3), the officer seizing any
account, register or other document under
that subsection may for reasons to be
recorded by him in writing and with the prior
approval of the Commissioner, retain such
account, register or document for such period
not extending beyond thirty days from the
date of completion of all the proceedings
under this Act in respect of the years for
which they are relevant, as he deems
necessary.
(4) For the purposes of this section, the officer
authorised thereunder may enter and search
any place of business or vehicle, or any other
building or place where he has reason to
believe that the dealer keeps or is, for the time
being, keeping, any books, registers,
documents, accounts or goods relating to his
business :
Provided that no residential
accommodation (not being a place of
business-cum-residence) shall be entered into,
inspected or searched by such officer unless
specially authorised in this behalf by the
Commissioner in writing.
(4-A) An officer authorised to act under sub-
section (2)\027
(i) shall have the power to seal the place of
business or vehicle, or any box, almirah or
other receptacle found on such place of
business or vehicle in which he has reason to
believe that any account, register or other
documents or goods are kept or contained, if
the owner or the person in occupation or
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incharge of such place of business or vehicle
or box, almirah or other receptacle leaves the
place or is not available or fails or refuses to
open it when called upon to do so;
(ii) where the owner or other person in
occupation or incharge of the place of
business or vehicle or of the box, almirah or
other receptacle found on the place of
business or vehicle is present but leaves the
place or after an opportunity having been
given to him to do so, fails to open, as the case
may be, such place of business or vehicle or
box, almirah or other receptacle, may break
open the same and prepare a list of the goods
and documents found therein.
(4-B) [ *]
(4-C) No person shall tamper with any seal
put under sub-section (4-A).
(5) Any officer empowered under sub-section
(1) may require any person,\027
(a) who transports or holds in custody, for
delivery to or on behalf of any dealer, any
goods, to give any information likely to be in
his possession in respect of such goods or to
permit inspection thereof, as the case may be,
(b) who maintains or has in his possession
any account, book or document relating to the
business of a dealer, to produce such account,
book or document for inspection.
(6) Every person transporting goods by any
public service motor vehicle or by any vessel
and every forwarding agent shall submit to
assessing authority of the area from which the
goods are despatched, such returns, as may
be prescribed, of all goods transported or
forwarded him. The Assessing Authority
concerned shall have the power to for and
examine the books of account or other
documents in the possession of such
transporter or agent with a view to verify the
correctness the returns submitted, and that
transporter or agent shall be bound furnish
the books of account or other documents,
when so called.
(7) The provisions of Sections 100 and 165 of
the Code of Criminal Procedure, 1973 shall,
’as far as may be’, apply in relation to any
entry, search or inspection under this section,
as they apply in relation any inspection or
search under the said Code.
Explanation.\027In calculating the period
specified in sub-section the period during,
which proceedings under this Act remain
stayed under the orders of any Court or
authority shall be excluded."
Power to order production of accounts and powers to
entry and inspection are provided in Section 13. An officer
empowered by the State Government for the purpose of the
Act may require any dealer to produce before him any book,
document of the business and may inspect and make such
enquiries from the dealer relating to his business as
necessary. Section 7(3) empowers the Assessing Officer to
make an assessment to the best of his judgment if no return
is submitted or return submitted by the assessee appears to
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him to be incorrect or incomplete.
As noted above, Section 12 mandates a dealer to keep
and maintain true and correct accounts. Obviously, the
books of accounts are to be kept at the place of business. If
they are not kept at the place of the business, the power of
inspection in terms of Section 13 becomes redundant. Sub-
section (4) of Section 13 empowers the officer of the authority
to enter and search any place or any other building or place
where he has reason to believe that the dealer keeps or for the
time being keeps any documents and accounts relating to his
business.
The expression "place of business" is defined in Section
2(c)(1). The definition is an inclusive one and includes any
place where a dealer keeps his books of accounts.
That being so, non-production of the books of accounts
at the time of survey is a factor which can be taken into
consideration by the Assessing officer while examining the
return to find out whether the same is incorrect or incomplete.
Non-production of books of accounts at the time of
assessment does not take away the effect of non-production at
the time of survey. Such non-production is a relevant factor
which can be considered by the Assessing Officer while
considering whether the books of accounts are to be accepted
as to have been maintained in the regular course of business.
It is incumbent upon the assessee to offer plausible
explanation as to why they were not produced at the time of
survey. The burden is on him to show as to why no adverse
inference should be drawn.
Looked at from any angle, the order of the High Court is
indefensible and is set aside.
The appeal is allowed. No costs.