JUDGMENT
G.S. Singhvi, J.
1. The petitioner was incorporated as Stepen Chemical Ltd. Subsequently, with the permission of the Government, its name has been changed as M/s. Hind Levers Chemicals Ltd. It is a subsidiary of M/s. Hindustan Lever Ltd. It is engaged in the manufacture of soaps and detergents. In furtherance of its manufacturing activities, the petitioner entered into two separate agreements – one for processing and the other for leasing of plant building and machinery with Hindustan Lever Ltd. (for short, “HLL”) on November 11, 1983 for a period of five years. The period of agreements was subsequently extended up to 1993. In terms of the agreements, HLL supplied raw material to the petitioner. After converting the raw material into finished products, the petitioner used to return the same to HLL.
2. The assessing officer did not feel satisfied with the returns filed by M/s. Stepen Chemical Ltd., for the year 1988-89. He, therefore, issued notice to the petitioner in form ST-XIV requiring it to produce books of account and other relevant documents. After considering the reply filed by M/s. Stepen Chemical Ltd., and hearing its representative, the Assessing Authority-cum-Excise and Taxation Officer, Rajpura, passed the order dated November 28, 1991 and held the petitioner liable to pay tax amounting to Rs. 31,57,000. The assessing authority also ordered issuance of notice for imposing penalty under section 10(6)/10(7) and interest under section 11B of the Punjab General Sales Tax Act, 1948.
3. The petitioner filed appeal against the order of the Assessing Authority. After noticing the arguments of the petitioner, the Deputy Excise and Taxation Commissioner (Appeals) dismissed the appeal on February 23, 1993. Further appeal filed by the petitioner has been dismissed by the Tribunal on May 29, 1996.
4. Two-fold contentions have been advanced by Shri M. L. Sarin, learned counsel for the petitioner. His first contention is that no tax can be levied on the processing income earned by the petitioner from the works contract because what is sought to be taxed under the Act of 1948 is transfer of property in the goods used in a works contract and not the income derived from the works contract. Learned counsel argued that the Assessing Authority as well as the appellate authority and the Tribunal have erred in holding that the income derived from the processing is liable to tax. Shri Sarin pointed out that the Assessing Authority and others have failed to take into consideration the fact that under the processing agreement raw material was to be supplied by HLL and the petitioner was required to process the same into finished products and further that the property in goods remained with HLL and in fact no transfer of property in goods was involved. The second contention of Shri Sarin is that the Assessing Authority as well as the appellate authority and the Tribunal committed serious illegality in rejecting ST-XXII forms submitted by the petitioner. He argued that if the Assessing Authority felt that if ST-XXII declaration form was not acceptable, then it should have given opportunity to the petitioner to produce proper declaration for separate quarters. The learned Deputy Advocate-General argued that the processing agreement entered into between the petitioner and HLL falls within the amended definition of “works contract” and, therefore, Assessing Authority has rightly taken action by issuing notice under ST-XIV. She argued that the petitioner had deliberately refrained from disclosing the income earned by it by the dispatch of processed goods. Mrs. Charu Tuli argued that the Assessing Authority has rightly held that ST-XXII declarations worth Rs. 139.05 lacs procured by the petitioner from HLL were not acceptable.
5. After having considered rival contentions, we are of the opinion that the agreements entered into between the petitioner and HLL fall in the amended definition of “works contract”. A look at the definition of the phrase “works contract” shows that it includes any agreement for carrying out the building construction, manufacturing, processing, etc. The learned counsel for the petitioner could not show as to how the processing agreement entered into between the petitioner and HLL would fall outside the extended definition of the phrase “works contract”. We, therefore, do not find any inherent lack of jurisdiction in the action taken by the Assessing Authority.
6. However, there is considerable force in the argument of Shri Sarin that the Assessing Authority did not give reasonable opportunity to the petitioner to produce appropriate ST-XXII declaration forms. If at all the Assessing Authority felt that the forms submitted by the petitioner were not in accordance with law, it was the duty of the Assessing Authority to have pointed out the defects to the petitioner and to give an opportunity to it to produce appropriate ST-XXII declaration forms. Failure of the Assessing Authority to do so has resulted in grave injustice to the petitioner because by producing appropriate ST-XXII forms the petitioner could claim deductions under the provisions of the Act of 1948.
7. A look at the orders passed by the appellate authority and the Tribunal shows that although the petitioner had specifically raised the plea of denial of proper opportunity to produce ST-XXII forms, the appellate authority and the Tribunal failed to deal with this aspect of the matter. The order passed by the appellate authority is extremely cryptic and arbitrary. That order does not contain any reason for rejecting the points raised in the appeal. Even the Tribunal has adopted a lope-sided approach while deciding the appeal filed by the petitioner.
8. On the basis of the above discussion, we allow the writ petition and quash the orders annexures P3, P4 and P6 and direct the Assessing Authority to pass fresh order after hearing the petitioner and after taking into consideration the evidence already produced and the evidence which the petitioner may produce at the time of re-hearing. We direct the Assessing Authority to pass appropriate order within four months of the receipt of a certified copy of this order.
9. A copy of this order be made available to the learned Deputy Advocate-General by the Bench Reader after due attestation so that the competent authority may initiate early action for compliance of this order.
10. Writ petition allowed.