R.B. AGARWAL Vs. STATE OF ORISSA

JUDGEMENT

(1.) In the present Writ Petition, the Petitioner has challenged the suo motu Revisional Orders Dated 31st December, 2007 passed by the Assistant Commissioner of Sales Tax (O.P. No. 2) for the periods 2002 -03, 2003 -04 and 2004 -05 (Annexure -6 series) and show cause notice (Annexure -7) issued under Rule 16 (2) of the Central Sales Tax (Orissa) Rules, 1957 (hereinafter referred to as 'the CST (O) Rules') on the ground that the revisional authority has no jurisdiction to exercise its suo motu power of revision and consequently the notice issued under Section 16(2) is not sustainable in law.

(2.) BEREFT of unnecessary details, the facts and circumstances giving rise to the present Writ Petition are that the Petitioner is a company registered under the Companies Act, 1956 having its place of business at IDCO Plot No. 180/184, Sector -B, Industrial Estate, Kalunga, Dist: Sundergarh, Orissa. It carries on business in manufacturing of cast -iron casting like manhole covers, sanitary fittings etc. During the relevant periods the Petitioner sold its manufacturing goods, i.e., cast iron casting to M/s R.B. Agarwala and Co., Kolkata (hereinafter referred to as 'REA'). The RBA after receiving the goods undertook certain processings like fumigation and other tests as were found necessary to export the same out of the territory of India to foreign buyers who had placed orders upon the RBA as merchant exporters. As under Central Excise Act and Rules framed thereunder, for the limited purpose, packing, fumigation and testing amount to manufacture, RBA after exporting such goods to foreign buyers claimed the requisite Cent Vat Credit under Cent Vat Credit Rules, 2004. The regular assessments for the above assessment years were made by the Sales Tax Officer, Rourkela (II) Circle (hereinafter referred to as 'the assessing officer') under Rule 12(4) of the CST (0) Rules, wherein the Petitioner's claim for deduction on account of export under Section 5(3) of the Central Sales Tax Act, 1956 (hereinafter referred to as 'the CST Act') was allowed by the Assessing Officer after examination of the books of account and necessary documents. Mer completion of the regular assessments for the periods mentioned above, the Petitioner received notice in Form -Ill issued under Rule 10 of the CST (O) Rules from the office of Assessing Officer -Opposite Party No. 2 for the above three years. In response to said notice, Learned Counsel for the Petitioner appeared before the Opposite Party No. 2 with the books of account of the Petitioner and also submitted the written notes of argument. After examining the books of account and documents with reference to the allegations made in the A.G. Audit Report, the Assessing Officer -Opposite Party No. 2 rejected the allegations made in A.G. Audit Report and completed the reassessments without raising any demand. Thereafter, the Petitioner received three notices dated 28th July, 2007 from the office of the Assistant Commissioner of Sales Tax, Sundargarh Range Rourkela -Opposite Party No. 3 (hereinafter referred to as 'the revisional authority') for the aforesaid three assessment years. The said notices were issued by the revisional authority under Rule 80 of the OST Rules read with Rule 22 of the CST (O) Rules for revision of the re -assessment orders passed by the Assessing Officer as it appeared to him that allowance of claim of penultimate sales under Section 5(3) of the CST Act by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. In response to the said notices, the Petitioner submitted detailed written notes of submission on 5th October, 2007 and appeared along with his Advocate before the revisional authority with the relevant details. However, the revisional authority disallowing Petitioner's claim held that the goods sold by the Petitioner to the merchant exporters were different from the goods actually exported by the merchant exporters to the foreign buyers, and hence the Petitioner is not entitled to exemption from payment of Central Sales Tax under Section 5(3) of the CST Act. Accordingly, suo motu revision ended by raising the demands of Rs. 1,13,18,001, Rs. 1,52,98,613 and Rs. 43,08,121 for the years 2002 -03, 2003 -04 and 2004 -05 respectively. Hence, the present Writ Petition.

(3.) Dr. Debi Pal, Learned Sr. Counsel, appearing on behalf of the Petitioner submitted that the Petitioner during the relevant period manufactured finished goods as per the order received from the merchant exporter and sold those goods to the merchant exporter ill loose condition. The merchant exporter on receipt of the [finished goods undertook certain processings like fumigation and other tests. The process of fumigation (disinfecting) and radiation checking is carried out by the merchant exporter to meet the statutory requirements of the importing countries. After inspection, fumigation and radiation checking, the goods are packed by the merchant exporter in wooden carrots and tied with steel strips. In this way the goods become fit and presentable for sale in the international market. However, the goods supplied, i.e., C.I. Castings (Cast Articles of Iron) by it remain C.I. Castings (Cast Articles of Iron) without any change in character or property after the processings like fumigation, inspection and radiation checking is carried out on the said goods by the merchant exporter and, therefore, the pre -condition under Section 5(3) that the same very goods, i.e., 'those goods' stands fully satisfied. The sale of cast iron castings by the Petitioner/manufacturer to the merchant exporter in the present case precedes the sale or purchase occasioning the export and such last sale or purchase was for the purpose of complying with the agreement or order for or in relation to such export. The Petitioner manufactured those finished goods in terms of the agreement contained in the order placed by the merchant exporter. The goods, which are manufactured by the Petitioner, are the same goods which were exported to the foreign buyers although the nomenclature may be slightly different under the Central Excise Law and commercial parlance. The 'Cast Iron Castings' are classified under the category of 'Cast Articles of Iron' as defined in Chapter Sub -heading number 7325.10 of the First Schedule to the Central Excise Tariff Act, 1985 ('the CETA') on the basis of rules of classification of excisable goods as set out thereunder. Chapter 73 of the CETA deals with 'Articles of Iron or Steel'. Hence to clearly indicate the classification of their product they wrote the name of their product on all excise documents as 'Cast Articles of iron'. It was further submitted that the merchant exporter had issued required number of Form - H to the Petitioner, which were produced before the Assessing Officer. In the column where the merchant exporter should have filled up the agreement/order number, they have drawn reference to the annexures annexed to the Form -H wherein the necessary details like bill of lading number, date, name of the vessel, destination, foreign buyers' order number and date are clearly mentioned. Form -H and annexures submitted before the Assessing Officer at the time of hearing formed part of the assessment record. Thus, the allegation in the audit report that the Form -H has not been properly filled up is not correct. It was also argued that under the central excise laws there are generally two types of clearance for excisable goods, i.e., clearance for home consumption and clearance for export. The clearance for export may be with payment of excise duty under claim of rebate (Rule 18 of CER) or may be without payment of duty under bond (Rule 19 of the CER). The above provisions of Rule 19 deal with clearance for export goods without payment of duty and it applies only where the manufacturer is directly engaged in the export of excisable goods. It is the choice of the merchant exporter to purchase the excisable goods without payment of duty under bond or on payment of duty under claim of rebate. A merchant exporter may prefer to purchase excisable goods from the manufacturer on payment of excise duty and then claim rebate of excise duty from the Central Excise authorities on exportation of the goods. In such situations, the goods are cleared by the manufacturer to the merchant exporter as home clearance on payment of duty, which is later claimed by the merchant exporter as rebate. Therefore, drawing a presumption that the goods have been sold by the Petitioner for home consumption and were not made for the purpose of complying with any agreement or order placed by the foreign buyer is wholly based on assumptions and presumptions guided by misconception of law. In the impugned order, the Assessing Officer has entered a clear finding that he has perused the date of foreign buyers order and the date of dispatch of goods as given in the annexures annexed to the form H(B/L, ARE -1, foreign buyers orders etc.), which reveal that the supplies have been made against the pre -existing contracts with the foreign buyers. Therefore, the exercise of jurisdiction under Rule 80 without any cogent reason IS wholly illegal. Dr. Pal further submitted that before the Assessing Officer they demanded cross -examination of the Central Excise Officer(s) of A.G. Audit team, which was not allowed to them. The Assessing Officer also did not provide a copy of the information/document received from the Central Excise Department. At the time of re -assessment the Assessing Officer after fully considering the Petitioner's submission rejected the audit objections. The Assistant Commissioner in exercise of its suo motu power of revision has relied upon the very same audit objections and revised the reassessment orders. It was further submitted that when an officer adopted one view of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible, the Assessing Officer takes one view with which the Assistant Commissioner does not agree, it cannot be said an erroneous order prejudicial to the interest of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. In support of his contention; Dr. Pal relied upon the Judgment of the Hon'ble Supreme Court in Malbar Industries & Company Ltd. v. Commissioner of Income Tax (2000) 243 ITR 83 and Judgment of Madras High Court in Commissioner of Income Tax v. MEP Co. Industries Ltd. : [2007]294ITR121(Mad) . The view taken by the Assistant Commissioner in purporting exercise of suo motu power of revision is at the highest an alternative view. Therefore, the Assistant Commissioner has no power of competence or jurisdiction to exercise its suo motu power of revision. The order of the Assistant Commissioner is clearly illegal, invalid and without jurisdiction and in violation of the principles of natural justice and the condition precedent for the assumption of jurisdiction under Section 23(4) read with Rule 80 is clearly violated. Consequently, the notice dated 19.2.2008 issued under Rule 16(2) of the Central Sales Tax Act (Orissa) Rules, 1957 is also illegal, arbitrary and without jurisdiction.