DUNLOP INDIA LIMITED Vs. ASSISTANT CST

JUDGEMENT

(1.) THE first petitioner is the Dunlop India Ltd., Kaloor, a public limited company, incorporated under the Companies Act, 1950. THE second petitioner is a shareholder of the company. THE petitioners seek to quash the assessment orders, exhibits P-4(a), P-4(b), P-4(c) and P-4(d) all dated January 31, 1984, assessing the company to sales tax for the years 1976-77, 1977-78, 1978-79 and 1979-80, respectively.

(2.) THE first petitioner-company is engaged in the manufacture of tyres, tubes and other rubber products. It has two factories, one in West Bengal and another in Tamil Nadu. THE company purchases natural rubber from Kerala and despatches the same to its factories in West Bengal and Tamil Nadu for use in its manufacturing process. According to the petitioner, the purchase turnover of rubber was subjected to tax under Section 5A(1)(c) of the Kerala General Sales Tax Act, 1963, and assessed as per the impugned orders of assessment. THE petitioners in the original petition have challenged the validity of Section 5A(1)(c) of the Act as unconstitutional and beyond the competence of the State Legislature for the reason of entry 92 B of List I of the Seventh Schedule to the Constitution. Rubber cess, according to the petitioners, cannot form part of the taxable turnover of the assessee and, if assessable, the cess determined is arbitrary. THE assessee had no opportunity to prove the actual amount of rubber cess paid, even if the same is to be included in the taxable turnover of the assessee.

(3.) THE only other contention raised by learned counsel for the assessee is against the arbitrary estimate of rubber cess paid as in violation of the principles of natural justice. THE assessee has no objection to the taxable turnover determined except as regards rubber cess. Exhibits P-1(a), P-1(b), P-1(c) and P-1(d) are the pre-assessment notices proposing estimates of rubber cess as equal to the purchase value of rubber during the assessment years in question. THEse notices require the assessee to file objections to the pre-assessment notice within seven days from the date of receipt of the same. Exhibit P-1(a) is dated January 20, 1984, and the same was received by the assessee on January 24, 1984. Exhibits P-1(b) and P-1(c) are dated January 24, 1984, and were received the same day. Exhibit P-1(d) is dated January 25, 1984. It was apparently received within a short time thereafter. All these notices allow seven days' time to the assessee to file objections to the assessment proposed. THE seven days' time allowed as per exhibits P-1 (a), P-1 (b) and P-1 (c) expires only on January 31, 1984, and the time allowed under exhibit P-1(d) expires on February 1, 1984, or thereafter. THE assessment orders, exhibits P-4(a), P-4(b), P-4(c) and P-4(d), were passed on January 31,1984, even before the time granted for filing objection had expired. THE assessee-company had, by exhibit P-2 dated January 31, 1984, inter alia, prayed for one month's time to furnish details of the rubber cess paid for the reason that payments were effected by the head office at Calcutta and that the details have to be gathered from the head office. Particulars relating to the rubber cess paid were, in fact, furnished as per exhibit P-3 dated February 13, 1984, but before that date, the assessing authority had already passed the assessment orders on January 31, 1984. On these facts, there cannot be any doubt that the assessment orders, exhibit P-4 series, are in violation of the principles of natural justice as the assessee had no opportunity to furnish the particulars relating to the rubber cess paid. THE estimate of rubber cess proposed under exhibit P-1 series, pre-assessment notices, was equal to the purchase value of rubber. In exhibit P-3, the assessee has stated that the cess payable up to August 1975 was at the rate of Rs. 300 per ton and from September 1975, at the rate of Rs. 400 per ton. In paragraph II of the original petition, the petitioners have stated that the rate of cess payable under the Rubber Act is fixed by a notification issued by the Central Government and it was fixed initially at 30 paise per kilogram of rubber and was later enhanced to 40 paise per kilogram. THE estimate of rubber cess as equal to the purchase value of rubber is, to say the least, arbitrary. THE orders of assessment, exhibits P-4(a), P-4(b), P-4(c) and P-4(d), are, therefore, unsustainable in so far as they relate to the estimate of rubber cess, for the reason of its arbitrary nature and also for violation of the principles of natural justice.