COMMISSIONER OF SALES TAX Vs. NANDLAL MADHAVJI

JUDGEMENT

(1.) ON an application made by the Commissioner of Sales Tax under section 69 of the Gujarat Sales Tax Act, 1969, the Tribunal has referred the following question for our decision : " Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that the department had no legal authority to proceed to recover the amount of Rs. 17,982. 72 as tax straight-away from the opponent as the principal under section 22 (1) of the Gujarat Sales Tax Act, 1969, without complying with the provisions of section 43 thereof, in order to first determine or assess the opponent's liability to pay the said amount of tax which was not paid by M/s. Mehta and Co. , as the selling commission agent as declared in terms of certificate in form No. 21 ?".

(2.) M /s. Nandlal Madhavji (hereinafter referred to as "the opponent') is carrying on business of selling oil-seeds. It is a dealer registered under the Gujarat Sales Tax Act, 1969. Between Kartik Sud 1 and Aso Vad 30 of Samvat year 2027, the opponent, through its commission agent, M/s. Mehta and Co. , Rajkot, sold oil-seeds worth Rs. 11,13,334. In respect of these sales, the commission agent had issued certificate in form 21 to the opponent and those certificates were produced by the opponent along with its returns wherein the said sales were included. Thus, in respect of its own assessment, the opponent had declared that the selling agent had included the said sales in his returns and had paid tax to the Government for the same. The certificates were accepted by the Sales Tax Officer, who completed the assessment proceedings, and relying upon the same, excluded those sales from the opponent's total taxable turnover of sales. On an inquiry, the Sales Tax Officer came to know that the commission agent, though had disclosed all the sales, had paid tax on sales worth Rs. 3,19,359 only. Though the commission agent had declared in the certificates in form No. 21 that the tax was paid in respect of all the sales, it turned out that he had not paid tax worth Rs. 17,982. 72 in respect of the sale worth Rs. 5,99,424. The Sales Tax Officer, therefore, on September 15, 1975, issued notice in form No. 37 for initiating reassessment proceedings. The said notice was, however, withdrawn, possibly because it was believed by him that it was not open to him to issue such a notice under section 44 of the Act. Thereafter, he issued another notice dated June 9, 1977, under section 22 of the Act calling upon the opponent to show cause why Rs. 17,982. 72 being the tax payable on the sales of Rs. 5,99,424 should not be recovered from it as the principal, it being jointly and severally liable to pay that amount. As the opponent had not remained present in the inquiry following that notice, the Sales Tax Officer passed an order on September 14, 1977. The Sales Tax Officer also passed an order for issuance of demand notice for payment of the said amount of tax. The opponent then preferred an appeal before the Assistant Commissioner. It is not necessary to refer to the various grounds on which the order passed by the Sales Tax Officer was challenged as ultimately, in the second appeal before the Tribunal, only one contention was pressed and others were given up. The Assistant Commissioner did not find any substance in any of the contentions raised before him and he dismissed the appeal.

(3.) THE Tribunal agreed with the contention raised on behalf of the Commissioner of Sales Tax that the opponent as the principal was primarily liable to pay tax on the sales effected by its commission agent, and that in view of section 22 (1) of the Act the opponent and its commission agent both were jointly and severally liable to pay tax on the turnover of such commission sales under section 6 of the Act. The Tribunal further held that because of sub-section (2) of section 22, the opponent was absolved from its liability to pay tax as it had produced declarations in form No. 21 issued by the commission agent. The Tribunal also agreed with the department that when as a matter of fact it was shown that the commission agent had not paid the tax as declared in the certificates issued in form No. 21, it was open to the department to recover the same even from the principal. The Tribunal was, however, of the view that such unpaid tax cannot be recovered straightaway from the principal by merely issuing a demand notice under section 48 of the Act. In such an eventuality, section 43 would become applicable and, therefore, it would be necessary for the department to either assess or reassess the principal in order to make him liable for payment of tax in respect of such commission sales. As regards the facts of this case, the Tribunal was of the view that as the previous notice dated September 15, 1975, issued for that very purpose was withdrawn, the reassessment proceedings can be said to have been dropped by the Sales Tax Officer. It further held that the subsequent notice dated June 9, 1977, was not a notice issued for the purpose of initiating reassessment proceedings but was a notice issued under section 22 of the Act. The Tribunal then observed that section 22 does not provide machinery for recovering the tax due and, therefore, the second notice must be regarded as a demand notice only. It further held that as no proceedings for assessment in respect of the said commission sales were initiated, it was not open to the department to issue a demand notice straightaway and recover the unpaid tax from the opponent. The Tribunal taking this view allowed the appeal and held that the action of the Sales Tax Officer was without any authority of law. As stated earlier, the Commissioner of Sales Tax moved the Tribunal under section 69 of the Act and as the Tribunal was of the view that the question of law did arise, has referred the above stated question for our decision.