NATRAJ RUBBERS Vs. SALES TAX OFFICER

JUDGEMENT

(1.) The petitioner challenges by way of this special civil application order Annexure A/2 dated 9.3.98 passed by the Sales Tax Officer Divn. 2 Bhavnagar u/s 59(4) of the Gujarat Sales Tax Act seizing the books of accounts and Annexure A/3(1) to A/3(5) notices u/s 44 of the Gujarat Sales Tax Act, 1969 for reassessing turnover of sales or purchase alleged to have escaped assessment for the period 1990-91, 1991-92, 1992-93, 1993-94 and 1994-95 respectively. The challenge is on the ground that in respect of both the actions of the Sales Tax Officer the condition for exercise of such power under the statute did not exist in the facts and circumstances of the case.

(2.) The business of the petitioner is to manufacture rubber insertion sheets also known as rubber insertion packing sheets. This product is claimed to be accessory of machinery by the assessee. Selling is through distributors who in their turn sell those sheets to manufacturers having plant and machinery to manufacture various goods. The sheets are used in packing after cutting them into required size and shapes and making necessary holes for being fitted in the pipe or nuts and bolts of machinery so as to see that no leakage of any gas, or air, or fluid required in the machinery may take place. In other words, the sheet is used as accessory of machineries as washers. After obtaining it from the seller the required size is cut from the whole sheet and processed through other activity by creating a hole of required size by the user. The sales of this article in the hands of the assessee had been taxed as accessory of machinery covered under Entry 36 of Notification u/s 49(2) of the Act at the rate of 6% or 7% as the rate was prescribed from time to time during the period in question from 1990-91 to 1994-95. As the order, Annexure A/2 suggests, the dealer has paid sales tax at the rate of 6% to 7% for this period in question instead of making payment of tax under Entry 13 of Schedule III appended to the Act. Power u/s 59(4) as well as u/s 44 has been exercised for making the impugned order Annexure A/2 and issuing impugned notices Annexure A/3(1) to A/3(5).

(3.) According to the petitioner, for the purposes of the Act rate of tax applicable to rubber insertion sheet or rubber insertion packing sheet has been determined by the Commissioner in exercise of his powers u/s 62 of the Act by his orders dated 25.8.76 and 26.2.82 which have been followed by the authorities under the Sales Tax Act in the State since then. Under the two orders, the rubber insertion packing sheet or single insertion sheet has been classified as accessory to machinery and admissible for benefit of reduced rate of taxation as per Entry 36 of Notification issued u/s 49 of the Act. The contention of the learned counsel for the petitioner goes further that since the assessment order conform to the determination of rate of tax by the Commissioner of Sales Tax u/s 62, neither the Commissioner can have reason to believe that any dealer has evaded or is attempting to evade payment of any tax due from him so as to invoke power under sub-section (4) of sec. 59 the order of seizure of books of account of the petitioner nor can he have reason to believe that the turnover has escaped assessment within the meaning of sec. 44 of the Act so as to issue notices for reassessment inasmuch as the order under sec. 62, until revised or set aside in appeal is pending, a subordinate officer, while implementing the Act as such determination by the Commissioner is for the purposes of the Act. Therefore, even if orders u/s 62 are now revised or modified, they cannot affect already completed assessments but could affect future assessments as any new order which may come into existence will operate prospectively. It is also the case of the petitioner that belief for exercising jurisdiction under the respective provisions must be that of the jurisdictional authority and not the belief of some other authority or a belief foisted on him. It was urged that the entire proceedings have been taken at the behest of audit authority notwithstanding that the audit objection was replied to by the assessing authority and has refused to agree with that by referring to two orders u/s 62 and pointing out to the audit authorities that the levy of tax at the rate as per Entry 36 of the Notification under sec. 49(2) was justified. When the audit query was replied to by the assessing authority, the directions were sent to another officer who in turn directed the jurisdictional authority to take action and thus impugned acts have come into existence. In the face of two orders u/s 62 determining rate applicable on the goods sold by the assessee determining rate of tax applicable for the purposes of Act and attending circumstances the reasons disclosed by the assessing authority for initiating proceedings are mere pretence and on nonexistent material.