JUDGMENT
1. Heard Dr. A.K. Saraf, learned Senior Advocate, assisted by Shri D. Baruah. None appeared for the respondents.
2. This is an application under article 226 of the Constitution of India for quashing the notices, the order of suo motu revision and the order of assessment, dated October 22, 1999, passed by the Superintendent of Taxes, Guwahati, Under Section 17(4) of the Assam General Sales Tax Act, 1993, for short “the Act”, read with Section 36 of the Act, for the assessment years 1993-94 and 1994-95.
3. The Nestle India Limited, a limited company, is a registered dealer under the Act. For the assessment years 1993-94 and 1994-95, the petitioner filed its return and, thereafter, the assessments were completed by the Superintendent of Taxes, vide orders, dated May 31, 1996 and November 2, 1996, after examination of the books of accounts, documents, etc. Subsequently, the Superintendent of Taxes issued a notice, dated December 3, 1999, Under Section 44(1) of the Act to show cause, and accordingly the petitioner filed its reply. The Superintendent of Taxes, thereafter, did not proceed with the said show cause notice. However, the Deputy Commissioner of Taxes issued notice Under Section 36(1) of the Act to the petitioner- company to show cause, and accordingly the petitioner-company filed their replies. Some correspondence went on and subsequently the Deputy Commissioner of Taxes, set aside the order of assessment and directed the Superintendent of Taxes to make fresh assessment. Accordingly, the Superintendent of Taxes issued further notices and thereafter the impugned order of assessment was passed.
4. In this writ petition, the petitioner has challenged the initiation of suo motu revision by the Deputy Commissioner of Taxes as well as the impugned order passed by the Deputy Commissioner of Taxes, and the consequential orders passed by the Superintendent of Taxes.
5. Before entering into the legal submission, we may briefly record the bare facts, which led to the order of revision/fresh assessment.
6. The petitioner-company is engaged in the sale and supply of food products within the State of Assam and they supply goods to the distributors, who, in turn, sell to the dealers. The case of the company is that during transit, in certain cases, there is leakage in the package/container and the food products become damaged and unfit for human consumption. Sometimes the shelf-life of the products or goods expires and the article of food becomes unfit for human consumption; and in such cases, on receipt of information from the concerned distributors, the officers of the company visit the premises of the distributors, make verification and such damaged goods are taken back from the distributors and credit notes are issued to such distributors in respect of the above goods. However, in order to allay the apprehension that such goods may be clandestinely routed back to the market, and thereby damage the goodwill of the company, and also affect the health of the society, such damaged goods are destroyed at the business premises of the distributor itself and they are never brought back to the godown of the petitioner-company.
7. As stated, credit notes were issued to the distributors in respect of the returned goods, reckoning the costs of the goods along with the tax, etc., these are reflected in the taxable turnover of the company. The documents in respect of the sales, etc., which were shown in the above return and assessment, are accordingly made.
8. The notice issued by the Deputy Commissioner of Taxes shows that the assessing officer has wrongly determined the figures in the closing stocks of the goods, resulting in suppression/escapement of the turnover. In other words, as per the respondent-authorities, the returned goods were not included in the closing stock, adding to escapement of turnover. The Deputy Commissioner was also of the opinion that the destruction of the food products was not certified by the Food Inspector and this was not mentioned by the Superintendent of Taxes in its assessment order.
9. Under the provision of the Prevention of Food Adulteration Act, 1954, any article of food, which has become unfit for human consumption, cannot be stored for sale or sold. Thus, the moment it becomes unfit for human consumption, it is required to be destroyed. There is also no provision under the said Act that such destruction should be in presence of the Food Inspector, or that a certificate is required to be given by the Food Inspector. The responsibility is entirely with that of the vendor, distributor or manufacturer.
10. In this case, we find that the broad facts of the case are not in dispute. The returned goods were never shown in the stock book or included in the closing stocks, as these were never brought to the godown of the petitioner-company and those were destroyed. As regards the factum of destruction, the petitioner-company has filed affidavit from its distributor supporting such destruction.
11. Dr. A.K. Saraf, learned Senior Counsel for the petitioner, has submitted that under the facts and circumstances of the present case, there was no material whatsoever to entertain a suo motu revision. As per the respondents’ own statement this was a case of alleged escapement, for which the Superintendent of Taxes issued a notice and reply was given by the petitioner-company. The Superintendent of Taxes thereafter did not proceed further, which means that the Superintendent of Taxes was satisfied from the explanation furnished by the petitioner-company, and that was the end of the matter.
12. Section 18(1) of the Act reads as follows:
18. Turnover escaping assessment.–(1) Where after a dealer has been assessed Under Section 17 for any year or part thereof, the assessing officer has reason to believe that the whole or any part of turnover of the dealer in respect of any period has escaped assessment to tax or has been under-assessed or has been assessed at a rate lower than the rate at which he is assessable, or any exemption or deduction or relief has been wrongly allowed in excess, the assessing officer may–
(a) in a ease where the dealer has concealed, omitted or failed to disclose fully and truly the particulars of such turnover or furnished incorrect or incomplete particulars of his turnover or the rate of tax applicable to any part thereof or made incorrect claim for any exemption, deduction or relief, within eight years from the date of the relevant year for which or part of which the assessment or reassessment is required to be made; and
(b) in any other case, within four years from the end of the relevant year for which or part of which an assessment or reassessment is required to be made;
serve a notice on the dealer and after giving the dealer an opportunity of being heard and making such enquiry as he considers necessary, proceed to determine to the best of his judgment, the amount of tax due from the dealer in respect of such turnover:
Provided that no such notice shall be issued in a case falling Under clause (a) after the expiry of four years from the end of the year in which an assessment Under Section 17 for the relevant period was first made in his case unless the Commissioner is satisfied on the reason recorded that it is a fit case for issue of such notice;
Provided further that notwithstanding anything contained in Sub-section (4) of Section 3, the powers of the Commissioner to accord sanction for the issue of notice, as aforesaid shall not be delegated by him to any person appointed to assist him Under Sub-section (1) of Section 3;
Provided also that a notice under the foregoing provisions may be issued at any time for the purpose of giving effect to any finding or direction contained in an order passed in any proceedings under this Act by way of appeal, revision or reference.
13. The section provides a time-limit of four years Under Sub-clause (b), and a time-limit of eight years Under Sub-clause (a) and the power under the section vests with the assessing officer, which in the present case was the Superintendent of Taxes.
14. Section 37(1) of the Act reads as follows:
37. Rectification of assessment and order.–(1) The authority which made an assessment or order or passed an order in appeal or revision in respect thereof may, at any time within three years from the end of the financial year in which such assessment or order was made and of its own motion, rectify any arithmetical mistake or other mistake of a factual nature apparent from the record of the case, and shall even beyond such period, rectify any such mistake as is brought to its notice by a dealer or person affected by such order before the expiry of such time-limit:
Provided that no such rectification shall be made having the effect of enhancing the assessment unless the authority concerned has given notice to the dealer or person of its intention so to do and has allowed him a reasonable opportunity of being heard.
15. The power of rectification has also been given to the assessing authority and the time frame of three years have been provided.
16. Section 36 provides for the power of revision and Section 36(1) reads as follows:
36. Revision of order by the Commissioner.–(1) The Commissioner may call for and examine the records of any proceeding under this Act and if he considers that any order passed therein by any person appointed Under Sub-section (1) of Section 3 to assist him is erroneous in so far as it is prejudicial to the interest of the Revenue, he may, after giving the dealer or the person to whom the order relates an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order, as the circumstances of the case justify including an order enhancing or modifying the assessment of tax or penalty or cancelling such order and directing that a fresh order should be made:
Provided that no order under this Sub-section shall be made after the expiry of eight years from the end of the financial year in which the order sought to be revised was made.
17. On a conjoint reading of the above provisions of law we find that these are three different provisions, providing for three different authorities to exercise powers. The provisions have different scopes for interference by the concerned authorities and the powers therein are to be exercised by the competent authority and cannot be construed that in case one authority fails to exercise the jurisdiction vested in it, the other authorities can step in. The revisional authority no doubt can examine the order of assessment and if it is of the view that there is omission on the part of the assessing authority affecting the interest of the State or that of the assessee even, it can pass an appropriate order.
18. The matter was examined by the honourable Punjab and Haryana High Court in the case of Haryana Agro Industries Corporation Limited v. State of Haryana [2002] 125 STC 18, wherein it was held:
The above analysis of sections 31 and 40 shows that the Legislature has conferred powers upon the Assessing Authority and the Commissioner to deal with different types of cases and has prescribed different periods of limitation for exercise of powers under the two sections. While the Assessing Authority can undertake the exercise for reassessment if it discovers that the turnover of the business of a dealer has been under-assessed or escaped assessment, the Commissioner has been vested with the power to call for the record of pending as well as decided cases to satisfy himself as to the legality and/or propriety of any proceedings or of any order and then pass appropriate order. In our opinion, the use of different phraseology in the two sections is clearly indicative of the Legislature’s intention to confer powers upon different authorities to deal with different situation and, therefore, the power exercisable by one authority cannot be exercised by another authority. In other words, the power vested in the Commissioner to suo motu call for the record of pending proceedings or decided cases to satisfy himself as to the legality and/or propriety of the pending proceedings or final order cannot be used for dealing with a case of escaped assessment which is the exclusive preserve of the Assessing Authority.
19. In the State of Kerala v. K.M. Cheria Abdulla and Company [1965] 16 STC 875, the apex Court held:
It would not invest the revising authority with power to launch upon enquiries at large so as either to trench upon the powers which are expressly reserved by the Act or by the Rules to other authorities or to ignore the limitations inherent in the exercise of those powers. For instance, the power to reassess escaped turnover is primarily vested by rule 17 in the assessing officer and is to be exercised subject to certain limitations, and the revising authority will not be competent to make an enquiry for reassessing a tax-payer. Similarly the power to make a best judgment assessment is vested by Section 9(2)(b) in the assessing authority and has to be exercised in the manner provided. It would not be open to the revising authority to assume that power. The revisional power has to be exercised for ascertaining whether the order passed is illegal or improper or the proceeding recorded is irregular and it is in aid of that power that such orders may be passed as the authority may think fit. One of the inquiries in considering the legality or propriety of the orders passed by the subordinate officer which the revising or the appellate authority may make is about the correctness of the tax levied and if after perusing the record the authority is prima facie satisfied about the illegality or impropriety of the order or about the irregularity of the proceeding, it may in passing its order direct an additional enquiry. Neither Section 12 nor Rule 14-A authorises the revising authority to enter generally upon enquiries which may properly be made by the assessing authorities and to reopen assessments.
20. The scope and ambit of entertaining suo motu revision under the Act, was considered by this Court in the case of Rajendra Singh v. Superintendent of Taxes [1990] 79 STC 10; (1990) 1 GLR 449 and this Court held that to invoke the suo motu power of revision both the conditions precedent, i.e., erroneous and prejudicial to the interest of Revenue must co-exist. The court further analysed and interpreted that the above expression must reflect a defect which is jurisdictional in nature in the assessment order which is sought to be defeated. It was further observed that the power of suo motu revision would not be available to the Commissioner merely because the Commissioner disagrees with the view of the assessing authority. The respondents have failed to show that there was ever any jurisdictional incompetency in the matter, or there was any jurisdictional error. The above view was followed by this Court in a recent case of Santalal Mehendiratta (HUF) v. Commissioner of Taxes (1992) 1 GLR 197.
21. Now coming to the facts of the present case, let us examine whether this is a case of escapement. The show cause notice dated December 3, 1998 shows that the petitioner-company was asked to show cause and produce the records as the assessing authority found that the petitioner-company had not accounted for the goods returned by the purchaser during the period. The reply furnished by the petitioner shows that the return of goods/destruction of the damaged goods was shown in the annual return and this was accepted by the assessing authority. We find force in the submission of the petitioner that as the assessing authority issued notice and after receipt of show cause, they did not proceed further, it can be safely inferred that the matter was dropped by them. Moreover, the revisional power cannot be exercised in the matter of reassessment of escaped turnover, which is expressly reserved for assessing authority.
22. On perusal of the impugned order of the Deputy Commissioner of Taxes, we find that the revisional authority was of the view that the assessment orders for the years 1993-94 and 1994-95 were erroneous and prejudicial to the interest of the Revenue as there was glaring suppression of sales. The revisional authority interfered in the matter on the following counts:
1. The assessment orders speak about the goods returned against which credit notes were stated to have been issued. But the assessment orders do not speak about the damage of goods and destruction of goods by the company’s sales officers in respect of goods returned shown in the annual returns.
2. The annual returns and monthly returns submitted by the dealer for the years 1993-94 and 1994-95 do not speak about the destruction of goods in respect of goods return.
3. If the goods were returned by the purchaser to seller these goods ought to be incorporated in the stocks of the seller. As the goods were not accounted for in the stocks the audit presented the suppression of sales as discussed above.
4. As the assessment orders completed by the assessing authority for the years 1993-94 and 1994-95 are silent about the damage, destruction of goods in respect of goods returned, thereby no question of damage of goods and destruction of goods by the sales officer.
5. There is no provision in the Assam General Sales Tax Act, 1993 as to the fact that the dealer can destroy goods whenever he feels necessary and he need not disclose the destruction of goods in the annual return/monthly return and at the time of verification of books of accounts in connection with assessment.
6. The fact of destruction of damaged goods was divulged in the show cause reply by the dealer only after detection of suppression by the audit party.
23. So far the factum of destruction of damaged goods is concerned, this was not disputed by the assessing authority at any point of time and the revisional authority was not empowered to take a different opinion or view of the matter. Moreover, as stated above, the destruction of the damaged articles of food cannot be disputed on the ground that the food authority or the taxing authority were not intimated earlier or that no certificates were obtained from them. There was no requirement of law to obtain any prior approval either from the health authority or from the taxing authority. In view of the facts and circumstances of the case we hold that there was no suppression of sales.
24. The impugned order further shows that the concerned authorities exercised their revisional jurisdiction in view of the audit objection raised in allowing the reduction/refund of sales tax on the returned/damaged goods. The law on this point was laid down by the apex Court in the case of Sirpur Paper Mills Ltd, v. Commissioner of Wealth-tax, Andhra Pradesh , held:
Where the Addl. Commissioner did not exercise his discretion and judgment and acted on audit objection, the notice cannot be sustained.
25. In view of what has been stated above, we are of the view that no case for entertaining revision by the Deputy Commissioner of Taxes was made out and, as such, the impugned order passed by the Deputy Commissioner of Taxes and the consequential orders passed by the assessing authorities are bad in law and cannot be maintained. Accordingly, the writ petition is allowed and the impugned orders dated August 27, 1999 and October 22, 1999 are set aside and the earlier orders of assessment dated May 31, 1996 and November 21, 1996 are restored. There will be, however, no order as to costs.