LARSEN & TOUBRO LTD. Vs. COMMISSIONER, COMMERCIAL TAX

JUDGEMENT

(1.) THE petitioner, a registered company under the Indian Companies Act, 1956 carries on its business activities in the State of Madhya Pradesh which include cement manufacturing, trading, execution of turnkey project, etc. The company is a registered dealer under both the local and the Central Sales Tax Acts. The petitioner was assessed for the year 1992 -93 under the Madhya Pradesh Commercial Tax Act, 1994 (for brevity "the 1994 Act") and the assessment order was passed on March 30, 1996 determining the tax liability at Rs. 6,15,38,551. The said liability was fastened on the assessee partly due to disallowance of labour charges and disallowance of claim on inter -State sale. A rectification order came to be passed on May 25, 1996 and the demand was reduced to Rs. 5,64,68,015. The rectification was carried out as certain factual error had occurred. Against the aforesaid order an appeal No. 387/97 was preferred before the Deputy Commissioner, Commercial Tax, Bhopal which was allowed by order dated April 20, 1998 and the case was remanded to the Commercial Tax Officer for reassessment. In pursuance of the order of remand the assessing officer, respondent No. 2, passed a fresh order on May 31, 2001 and the demand was reduced to Rs. 5,12,89,521. The demand was reduced due to full exemption allowed for labour charges but on reassessment the assessing officer did not allow any part relating to inter -State sales.

(2.) BEING aggrieved by the aforesaid order the petitioner preferred revision before the Additional Commissioner, Commercial Tax, Bhopal, in revision No. 158 of 2001. The Additional Commissioner disposed of the revision and directed to reassess the inter -State transaction keeping in view the various judicial pronouncements in view. Thereafter the Assistant Commissioner assessed the petitioner and allowed inter -State sales relating to transit sales but disallowed the direct inter -State sales of specific goods moved from outside the State of M.P. in pursuance of respective contracts and on these sales imposed tax under section 6 and assessed the petitioner to a sum of Rs. 2,04,16,245. Though there was no concealment or inaccurate particulars yet the assessing officer without affording opportunity to the petitioner imposed a penalty amounting to Rs. 3,06,98,368. It is put forth that the petitioner had already deposited the tax but penalty was imposed by the respondents. It is set forth that during the assessment proceeding on March 30, 1991 a certificate was filed under the Central Sales Tax Act, 1956 relating to various works contract executed in the State of Madhya Pradesh and further the movement of goods was exclusively in pursuance of such contracts from outside the State of M.P. Because of the aforesaid demand and penalty imposed the petitioner has preferred the present writ petition. It is contended that while disallowing a turnover of Rs. 17,01,35,378 relating to dispatch of specific goods of project requirement from outside the State of M.P., the assessing officer has ascribed two grounds, namely, turnover relates to goods dispatched from other States which the petitioner had treated such supply as stock transfer and second the turnover claimed as inter -State sale was effected from outside the State of M.P. without providing proof of its having been declared or liability discharged in other States. It is urged that the reasons ascribed by the authorities are contrary to the settled position of law inasmuch as supply was effected from outside the State of M.P. in course of inter -State trade or commerce is covered as a deemed sale under sub -clause (29A) of article 366 of the Constitution of India and, therefore, it is not liable to any tax under the sales tax laws of the State. The finding of the second respondent about the petitioner having dispatched the goods from other State on stock transfer basis cannot be held as an inter -State sale for the purpose of exclusion while computing the taxable turnover as inter -State sale would be decided exclusively under section 3(a) of the CST Act, 1956 where the movement of goods from one State to another is found to be in pursuance of a contract of sale. The assessing officer has fallen into error by treating the transaction as a sale in the State of M.P. As pleaded, the second respondent failed to take note of the definition of "sale" under section 2(g) of the CST Act that was substituted by the Finance Act, 2002 which has substantially widened the scope of the concept of deemed sale. That apart it is urged that respondent No. 2 has failed to appreciate the correct position of law applicable to assessment year 1992 -93.

(3.) THE question that arises for consideration is whether the authorities below have correctly assessed the petitioner and justifiably imposed the penalty. The learned Senior Counsel for the petitioner has submitted that the order of assessment is contrary to the law laid down in Sahney Steel and Press Works Ltd. v. Commercial Tax Officer [1985] 60 STC 301 (SC); [1985] 4 SCC 173, State of Orissa v. IDL Chemical (P) Ltd. [2006] 147 STC 231 (Orissa), Oil India Ltd. v. Superintendent of Taxes [1975] 35 STC 445 (SC); [1975] 1 SCC 733, Indian Oil Corporation Ltd. v. Union of India [1981] 47 STC 1 (SC); [1980] Suppl SCC 426, Tan India Ltd. v. State of Tamil Nadu [2003] 133 STC 311 (Mad), Gannon Dunkerley and Co. v. State of Rajasthan [1993] 88 STC 204 (SC), State of Karnataka v. ECE Industries Limited [2006] 144 STC 605 (Karn), Desmet Chemfood Engg. Pvt. Ltd., Bombay v. Asstt. Commissioner of Sales Tax [1999] 32 VKN 121 and Pennwalt India Ltd. v. Divisional Deputy Commissioner [1999] 32 VKN 354. It is also urged by him that no notice to show cause was issued and, therefore, the order of penalty is vulnerable. The learned Senior Counsel has placed heavy reliance on the decision in South India Viscose Ltd. v. State of Tamil Nadu [1981] 48 STC 232 (SC) wherein it has been held as under : "If there is a conceivable link between the contract of sale and the movement of goods from one State to another in order to discharge the obligation under the contract of sale, the inter position of an agent of the seller who may temporarily intercept the movement will not alter the inter -State character of the sale." In this context we may refer with profit to the decision rendered in Pennwalt India Ltd. [1999] 32 VKN 354, wherein it has been held as under :