UNION OF INDIA Vs. COMMERCIAL TAX OFFICER

JUDGEMENT

(1.) This rule is directed against the assessment order dated 12th February, 1972, for the period from 1st April, 1967, to 31st March, 1968, under the Bengal Finance (Sales Tax) Act, 1941 and the demand notice dated 25th February, 1972, issued by the Commercial Tax Officer, Shyambazar Charge. The petitioner also prays for appropriate writ or writs directing the respondents to recall, rescind and/or withdraw the registration certificate No. 964A H.C. Central dated 13th September, 1962, as referred to in the writ petition. The petitioner, namely, the Union of India through the General Manager, Gun and Shell Factory, Cossipore, Calcutta, contends that the said Gun and Shell Factory is owned and controlled by the Government of India, Ministry of Defence and the said factory manufactures items of defence services principally, but occasionally the factory also manufactures goods required by the Central Government departments. State Government departments and various undertakings, projects and/or institutions of the Central and State Governments and very occasionally to some of the private concerns as and when directed by the State or the Central Government authorities. It is contested by the petitioner that such manufacture and/or supply of goods to different other institutions and Government undertakings is done only to absorb surplus capacity of the said Gun and Shell Fatory and to minimise or avoid imports and also to help such undertakings and/or concerns to execute the Government orders. It is contended by the petitioner that even when the factory utilises its surplus resources for the production of non-defence for the purposes indicated hereinbefore, such production and/or distribution and supplies are made in a non-commercial and non-trading manner and not with the purpose of making profit. In support of the said contention, the petitioner has also annexed documents showing pricing of stores manufactured by the said Gun and Shell Factory and other ordnance factories, production of civil goods in different ordnance factories and utilisation of production capacities in ordnance factories. It is contended by the petitioner that the petitioner through the said Cossipore Gun and Shell Factory, does not carry on any business which is liable for sales tax under the said Bengal Finance (Sales Tax) Act, 1941. The petitioner, so far as the activities of the Gun and Shell Factory are concerned, is not a "dealer" in respect of the aforesaid non-trading and non-commercial activities and the supplies and/or distribution made from the said factory cannot be treated as "sales" as understood under Section 4 of the Indian Sale of Goods Act and/or the Sales Tax Act and/or the Central Sales Tax Act, 1956. It is, however, contended by the petitioner that in spite of the aforesaid facts, the petitioner was wrongly proceeded with by the Commercial Tax Officer, 24-Parganas Charge, under Section 9(3) of the Central Sales Tax Act, 1956, read with Section 14 of the Bengal Finance (Sales Tax) Act, 1941. The petitioner's representative appeared before the Commercial Tax Officer and on the basis of the discussion the said representative had, the petitioner was of the impression that it would be necessary for the petitioner to get registered as a "dealer". Accordingly, the petitioner got registered under Section 7 of the Central Sales Tax Act read with Rule 5(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957, framed under the Central Sales Tax Act, 1956. It is however, contended by the petitioner that although such registration was made by the Commercial Tax Officer, 24-Parganas Charge, it transpired that the said officer had no territorial jurisdiction on the said Gun and Shell Factory and respondent No. 1, viz., the Commercial Tax Officer, Shyambazar Charge, has or had territorial jurisdiction over the said factory. It is contended by the petitioner that although the said registration certificate was issued by the Commercial Tax Officer, 24-Parganas Charge, after calculating and/or fixing liability of the petitioner under Section 6(1) of the Central Sales Tax Act read with Section 4(2) of the Bengal Finance (Sales Tax) Act, 1941, such registration was void and without jurisdiction.

(2.) It is further contended by the petitioner that prior to the issue of the said registration certificate, the Commercial Tax Officer, 24-Parganas Charge, wrongly fixed the petitioner's liability to pay tax but as aforesaid, the Commercial Tax Officer, 24-Parganas charge, was not vested with power under Section 15 of the Bengal Finance (Sales Tax) Act, 1941, read with Rule 71 of the Bengal Sales Tax Rules, 1941, with the power to fix such liability for payment of tax and/or for registration under the Central Sales Tax Act or under the Bengal Finance (Sales Tax) Act. It is contended by the petitioner that such power remained only with the Commissioner of Commercial Taxes, West Bengal, appointed under Section 3(1) of the Bengal Finance (Sales Tax) Act, 1941. The petitioner further contends that apart from the said question of lack of jurisdiction on the part of the Commercial Tax Officer, 24-Parganas Charge, the commercial tax authorities had also no power to fix any liability on the petitioner to pay sales tax either under the Central Sales Tax Act or under the Bengal Finance (Sales Tax) Act because the petitioner in the matter of production and supplies from the said Gun and Shell Factory had not carried on any business within the meaning of the said Act as the petitioner was not a "dealer" liable to pay sales tax under the said Acts. It appears that the Commercial Tax Officer, Shyambazar Charge, by his memo dated 30th March, 1962, intimated the General Manager, Cossipore Gun and Shell Factory, that the said registration certificate issued by the Commercial Tax Officer, 24-Parganas Charge, was void ab initio and also directed the petitioner by memo dated 21st May, 1962, to submit fresh application for registration and ultimately a new registration certificate dated 13th September, 1962, was also issued by the said Commercial Tax Officer, Shyambazar Charge. By the said registration certificate, the petitioner was not allowed to purchase any item from places outside West Bengal without payment of Central sales tax or on payment of concessional rate of such tax and the petitioner contends that the said registration certificate was practically useless to the petitioner. The said registration certificate only entitled the petitioner under Section 9A of the Central Sales Tax Act, 1956 and the Rules framed thereunder to collect tax on the inter-State sales of the petitioner. To effect inter-State purchases for the said factory, the petitioner had issued the certificates in form D under Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957. It appears that the petitioner by letter dated 26th December, 1963, made a representation to the State of West Bengal, respondent No. 2, requesting to issue necessary orders for waiving the payment of Central sales tax by the petitioner in respect of sales during the pre-registration period from 1st July, 1957, to 12th September, 1962, just as the said respondent No. 2 waived sales tax earlier in respect of similar pre-registration liability of the petitioner under the Bengal Finance (Sales Tax) Act upon similar representation made by the Director General, Ordnance Factories. It is contended by the petitioner that while the said representation for waiver of sales tax was pending with the State Government, the petitioner was served with a notice in form 3 dated 29th October, 1962, purporting to fix the hearing of the assessment case on 15th January, 1964, for the pre-registration period from 6th July, 1957, to 12th September, 1962. The petitioner prayed for adjournments of the hearing of the said case on some occasions explaining the reasons therefor, but respondent No. 1, viz., the Commercial Tax Officer, Shyambazar Charge, rejected the petitioner's prayer for adjournment and directed the representative of the petitioner to appear on 12th March, 1964, but the petitioner's representative could not appear on the said date and by order dated 14th March, 1964, the said respondent No. 1 made an ex parte assessment imposing a huge tax demand of Rs. 33,97,409.66 for the period from 6th July, 1957, to 12th September, 1962 and accordingly the demand notice dated 18th March, 1964, was served on the petitioner. It appears that after the receipt of the said demand notice the petitioner requested the State Government to keep the matter in abeyance till a final directive was received from the Government of West Bengal on the representation already made for waiver of taxes during the pre-registration period. The petitioner was informed by the Commercial Tax Officer, Shyambazar Charge, by letter dated 16th June, 1964, that the said representation for waiving the tax liability had been referred to the higher authority and the decision of such authority would be communicated to the petitioner as soon as the same would be received, but the State Government subsequently by letter dated 23rd June, 1964, informed the petitioner that the said representation of the petitioner to waive the tax liability was not accepted. It appears that thereafter the petitioner moved this Court under Article 226 of the Constitution and a rule being Civil Rule No. 6608(W) of 1969 was issued. The said rule was made absolute in part by this Court and the assessment orders were quashed and the said demand of tax was also quashed. This Court remanded the matter to the Commercial Tax Officer, Shyambazar Charge, with liberty to proceed afresh in the matter in accordance with law. The question of law and/or the mixed question of law and fact, viz., whether or not the activities in the said Gun and Shell Factory were of non-trading and noncommercial nature and whether or not the petitioner had run a business and was a dealer under the said Act was not decided by this Court in the said civil rule. The petitioner contends that as the said basic question, the nature of activity of the petitioner in the said Gun and Shell Factory and the liability of the petitioner to be a dealer under the said Act was not decided, the petitioner preferred an appeal before this Court being F.M.A.T. No. 2458 of 1972 and the same is pending decision. It appears that thereafter assessment orders under Section 9(3) of the Central Sales Tax Act, 1956, for the four periods of assessment ending on 31st March, 1963, 31st March, 1964, 31st March, 1965 and 31st March, 1966, were also made and the petitioner moved four writ petitions under Article 226 of the Constitution before this Court and four civil rules, viz., C.R. Nos. 2171(W), 2402(W), 2404(W) and 2476(W) all of 1972, were issued. The said rules were also pending. The petitioner contends that despite the said dispute being raised by the petitioner before this Court and despite the fact that adjudications by this Court were pending, the Commercial Tax Officer, Shyambazar Charge, served a notice on 16th August, 1967, purporting to start the impugned assessment proceeding under Section 9(3) of the Central Sales Tax Act read with Section 11(1) of the Bengal Finance (Sales Tax) Act, 1941, for the period of 4 quarters ending 31st March, 1968. The said respondent No. 1 thereafter fixed the hearing Of the said case and the petitioner filed a petition of objection contending that the initiation of the said impugned assessment proceeding was unlawful. The said objection petition was, however, rejected by respondent No. 1 inter alia on the ground that no interim injunction was issued by this Court restraining the respondents from initiating any sales tax proceeding. The said respondent No. 1 ultimately passed the impugned assessment order dated 12th February, 1972, imposing a demand of Rs. 71,334.40 for the period of 4 quarters ending 31st March, 1968 and served on the petitioner the impugned notice dated 25th February, 1972, for the said amount. The petitioner thereafter moved the instant writ petition before this Court contending inter alia that the petitioner had not carried on any "business" as defined under Section l(la) of the Bengal Finance (Sales Tax) Act, 1941 and the petitioner was also not a "dealer" as defined under Section 2(b) of the said Act and the petitioner did not transact any "sale" as defined under Section 2(g) of the said Act. The petitioner also contends that whatever tax had been imposed or assessed or realised or collected by the respondents from the petitioner and/or paid by the petitioner consequent upon calculation, finding or fixation of liability, issue of registration certificate and/or the assessment order or demand notice were all made under mistake of law, but the inherent lack of jurisdiction to impose sales tax were not cured by efflux of time and all such actions should be quashed and the respondents should be directed to refund the petitioner the payment already made. It is also contended by petitioner that the respondents have acted in excess or in abuse of their jurisdiction in assuming powers to make the impugned assessment order and to issue the impugned demand and other notices for the said period.

(3.) During the hearing of the rule, Mr. Debesh Mukherjee, the learned counsel appearing for the petitioner, has informed this Court that on 8th March, 1976, Civil Rules Nos. 2403(W) of 1972 and 2404(W) of 1972 had been disposed of by this Court and against the decision made in the said civil rules, the appeals being F.M.A.T. Nos. 941 and 943 of 1976 are pending decisions. It also appears that another civil rule being C.R. No. 2171(W) of 1972 was also disposed of by this Court on 22nd February, 1977 and an appeal being F.M.A.T. No. 371 of 1977 is now pending adjudication before this Court. Mr. Mukherjee therefore submits that as the very basic question with regard to the nature of transactions carried on by the said factories vis-a-vis the liability under the sales tax laws is pending decision before the appeal court, this Court should either stay the hearing of this rule and/or decide in favour of the petitioner following the decision made in the other civil rules since decided by this Court or refer this rule to a Division Bench for adjudication on the ground that important question of law is involved. The said contention of the learned counsel for the petitioner was seriously opposed by Mr. S. N. Dutt, the learned counsel appearing for the respondents and it is contended by the learned counsel for the respondents that the contentions of the respondents in support of the said impugned order of assessment and demand notice which are intended to be raised in this proceeding had not been decided by this Court earlier and as such it will not be proper either to adjourn the hearing of this rule and/or to refer the matter to the Division Bench. In view of such contentions, the rule has been heard on merits.