SAYAJI MILLS LTD Vs. STATE OF GUJARAT

JUDGEMENT

(1.) THOUGH there are three questions raised in this petition, the main question that we are called upon to consider is whether a certain order made by the Commissioner of Sales Tax imposing sales tax on the petitioners in respect of certain sales of machinery effected by the petitioners discloses an error of law apparent on the face of the record. In order to understand how the question arises and to be able to arrive at a proper determination of it, it is necessary to state briefly a few facts giving rise to the petition. The facts are as follows :- The petitioners at all material times carried on business of manufacturing and selling cotton textile goods and were registered as such under the Bombay Sales Tax Act, 1953. In or about 1955 the petitioners imported under actual user's licence a mercerizing plant from Switzerland at the cost of Rs. 3,32,000 and two doubling plants from the United Kingdom, one at the cost of Rs. 83,558 and the other at the cost of Rs. 63,976. The petitioners also purchased from Bombay at about the same time a cooling plant at the cost of Rs. 24,375. The doubling plants and the cooling plant were to be installed along with the mercerizing plant, but after import it was found that the mercerizing plant was not suitable for the requirement of the petitioners and the petitioners, therefore, sold off the mercerizing plant and along with the mercerizing plant also the doubling plants and the cooling plant to Rohit Mills Limited, a sister concern, under five different bills bearing dates between 16th October, 1955, and 25th December, 1955. The aggregate price realised by the petitioners was Rs. 4,82,740 as against the total cost of Rs. 5,03,909, incurred by the petitioners and the petitioners thus incurred a loss of about Rs. 21,000. In the assessment of the petitioners to sales tax for the assessment period 1st April, 1955, to 4th March, 1956, the Sales Tax Officer included the price received by the petitioners on these sales in the turnover of the petitioners and assessed these sales to tax under the provisions of the Act. The petitioners preferred an appeal against the order of the Sales Tax Officer to the Assistant Commissioner of Sales Tax. The petitioners contended before the Assistant Commissioner of Sales Tax that the sales in question were casual sales not amounting to business and were, therefore, not chargeable to tax. This contention was accepted by the Assistant Commissioner of Sales Tax who taking the view that the sales were casual sales not constituting business activity of the petitioners, held that the sales were not chargeable to tax and excluded the sum of Rs. 4,82,740 representing the price received by the petitioners on the sales from the turnover of the petitioners. This order was made by the Assistant Commissioner of Sales Tax on 24th August, 1960. Before this order was passed by him, the Bombay Sales Tax Act, 1959, had already come into force and by section 76 of that Act the Bombay Sales Tax Act, 1953, was repealed. Section 77 of the Bombay Sales Tax Act, 1959, however, enacted a saving provision and prior to its amendment it was in the following terms :- "77. (1) Notwithstanding the repeal by section 76 of any of the laws referred to therein, - (a) those laws (including any earlier law continued in force under any provisions thereof), and all rules, regulations, orders, notifications, forms and notices issued under those laws and in force immediately before the appointed day shall, subject to the provisions of sections 35 and 42, continue to have effect for the purposes of the levy, assessment, reassessment, collection, refund or set-off of any tax, or the granting of a drawback in respect thereof, or the imposition of any penalty, which levy, assessment, reassessment, collection, refund, set-off, drawback or penalty relates to any period before the appointed day, or for any other purpose whatsoever connected with or incidental to any of the purposes aforesaid; * * *"

(2.) THE operation of the Bombay Sales Tax Act, 1953, in regard to levy, assessment, reassessment, collection, refund or set-off of any tax or granting of any drawback or imposition of any penalty in respect of the period prior to the coming into force of the Bombay Sales Tax Act, 1959, was thus saved by section 77 notwithstanding the repeal of the Bombay Sales Tax Act, 1953, but the saving was subject to the provision of section 35 which ran as follows :- "35. (1) If the Commissioner has reason to believe that any turnover of sales or turnover of purchases of any goods chargeable to tax under this Act or any earlier law, has in respect of any year escaped assessment, or has been under-assessed or assessed at a lower rate, or that any deductions have been wrongly made, then the Commissioner may, - (a) ........................................ (b) where he has reason to believe that the dealer has concealed such sales or purchases or any material particular relating thereto, or has knowingly furnished incorrect returns, at any time within eight years, and (c) in any other case, at any time within five years, of the end of that year, serve on the dealer liable to pay tax in respect of such turnover, a notice containing all or any of the requisitions which may be included in a notice under sub-section (3) of section 33 and may proceed to assess or reassess the amount of the tax due from such dealer; and accordingly, the other provisions of this Act shall apply as if the notice were a notice served under that sub-section : ..................."

(3.) THE order of the Tribunal was made on 13th March, 1962, at a time when sections 35 and 77 of the Bombay Sales Tax Act, 1959, were in their unamended form. But on 12th August, 1962, the Gujarat Legislature passed an Amending Act called the Bombay Sales Tax (Gujarat Amendment) Act, 1962, which by section 11 amended sections 35 and 77 of the Bombay Sales Tax Act, 1959. That section was in the following terms :- "11. Amendment of sections 35 and 77 of Bom. 51 of 1959 and validating provisions. - (1) In section 35 of the principal Act, in sub-section (1), the following shall be, and shall be deemed always to have been, deleted, namely :- (i) the words "or any earlier law"; (ii) clause (a); (iii) in the first proviso, the words "or as the case may be, any earlier law"; (iv) in the second proviso, the words "or the relevant earlier law" : Provided that any notice issued, or any proceedings commenced, or continued or completed under the provisions of section 35 of the Bombay Sales Tax Act, 1959, before the commencement of the Bombay Sales Tax (Gujarat Amendment) Act, 1962 (Guj. 25 of 1962), in respect of any turnover of sales or turnover of purchases of any goods chargeable to tax under any earlier law shall be vaild and effectual as if issued, commenced, continued or completed under the earlier law applicable thereto, and no such notice or proceedings and no assessment, reassessment, collection, refund, set-off, drawback or penalty made, given, granted or imposed thereunder shall be called in question in any court of tribunal or before any authority on the ground that the notices should have been issued or the proceedings should have been commenced or continued or completed within the period of limitation prescribed in the section 35 and not under the provisions of the relevant earlier law. (2) In section 77 of the principal Act, in clause (a) of sub-section (1), for the words and figures "of sections 35 and 42" the words and figures "of section 42" shall be, and shall be deemed always to have been, substituted; and accordingly, notwithstanding anything in any judgment, decree or order of a court or order of a tribunal, any proceedings commenced or continued (including any notice issued) or completed under the provisions of any earlier law, shall be valid and effectual, and no such proceedings and no assessment, reassessment, collection, refund or set-off, drawback or penalty made, given, granted or imposed shall be called in question in any court or tribunal, or before any authority, on the ground only that the proceedings should have been commenced or continued or completed or any notice should have been issued under section 35 of the Bombay Sales Tax Act, 1959 (Bom. 51 of 1959) and within the period of limitation therein prescribed, and not under the provisions of any earlier law, in respect of any sales or purchases of any goods made before the 1st day of January, 1960."