PROJECTS AND SERVICES CENTRE Vs. STATE OF TRIPURA

JUDGEMENT

(1.) THE petitioner is a partnership firm having its place of business at Calcutta. The petitioner undertakes execution of contracts for supply, erection and commissioning of electrical equipments in different States. On 7th February, 1986, it entered into an agreement with the Executive Engineer, Micro Hydel Investigation Division, Government of Tripura, for execution of the work of "supply, erection and commissioning of 66/11 K. V. 6. 3 MVA sub-station at Sonamura in the State of Tripura". The work also involved supply of materials required for the purpose. The petitioner purchased the materials in different States outside the State of Tripura or placed orders for supply of the same in Tripura for use in execution of the aforesaid contract. The terms of the contract stipulated movement of the goods from such other States to the State of Tripura. As the transactions in this case related to a period after the coming into force of the Constitution (Forty-sixth Amendment) Act, 1982, which enables the States to levy tax on the transfer of property in goods involved in execution of works contract and incorporation of section 3a in the Tripura Sales Tax Act, 1976, hereinafter "the Tripura Act", by the Tripura Sales Tax (Third Amendment) Act, 1984, which provides for payment of tax on such transfers, there is no controversy as to whether the transfer of property in execution of the aforesaid contract amounts to sale or not. The undisputed position is that it amounts to sale and is exigible to tax. As the supplies of materials in the instant case for use in execution of the contract were all made from outside the State of Tripura, such supplies, according to the petitioner, amounted to inter-State sales exigible to tax under the Central Act. There was no inter-State sale in Tripura. The petitioner, therefore, did not register himself as a dealer under the Sales Tax Act in Tripura. It was, however, registered as a dealer under the Central Sales Tax Act, 1956, hereinafter "the Central Act", in the State of West Bengal. It also filed its returns of turnover under the Central Act with the authorities under the said Act in West Bengal.

(2.) ON 9th May, 1987, the petitioner-firm received a notice of demand issued by the Superintendent of Taxes, Agartala, under section 23 of the Tripura Sales Tax Act demanding a sum of Rs. 3,79,832. 68 by way of sales tax. An order of assessment was also annexed. From the order of assessment, it could be gathered that tax had been levied by the Superintendent of Taxes on the value of materials supplied by the petitioner to the Executive Engineer, Tripura, from places outside the State of Tripura, treating the same as "intra-State sales in Tripura". It was done on the ground that the actual transfer of property in the materials used in the contract took place in the State of Tripura. In the said order of assessment, reference was also made to a notice under section 6 (1) of the Tripura Sales Tax Act issued by the Superintendent of Taxes asking the petitioner-firm to show cause as to why it should not be registered as a dealer under the said Act. The petitioner, however, denied the receipt of any such notice. As the Superintendent of Taxes was of the opinion that the supplies made by the petitioner during the period 3rd July, 1986 to 11th February, 1987, amounting to Rs. 37,98,326. 86 were intra-State sales, he made the impugned assessment under section 11 (2) of the Tripura Act. The petitioner has challenged the aforesaid order of assessment made under section 11 (1) of the Tripura Act on two grounds. The first ground is that the assessment is wholly illegal and without jurisdiction as it has been passed without initiating any proceeding for assessment under section 11 (1) of the Tripura Sales Tax Act by service of a valid notice calling for a return, which is a condition precedent for such initiation. The second contention of the petitioner is that the assessment is not tenable even on facts, inasmuch as there is no intra-State sale involved in the transaction in question. The submission, in other words, is that the Superintendent of Taxes acted erroneously in holding that as the actual transfer of property in the materials took place in the State of Tripura it was a intra-State sale, in complete disregard to the well-settled principles for determining when a sales is deemed to take place in the course of inter-State trade or commerce.

(3.) FROM a bare reading of section 11 it is clear that this section provides for assessment or reassessment of a dealer on fulfilment of conditions specified therein. There are three stages of the proceedings under this section - (1) assumption of jurisdiction, (2) initiation of proceedings for assessment, and (3) assessment. The following conditions must be satisfied before the authority concerned can assume jurisdiction under this section - (1) It should be satisfied that - (a) any dealer has been liable to pay tax under this Act in respect of any period and has nevertheless failed to apply for registration and to make the return required of him, or that (b) sales of taxable goods (i) has escaped assessment in any period, or (ii) has been under-assessed, or (iii) assessed at a lower rate, or (iv) any deduction has been wrongly made therefrom. (2) The satisfaction should be based upon information which has come into his possession. If the aforesaid conditions are satisfied, the authority concerned can assume jurisdiction under section 11 and initiate the proceedings for assessment of the dealer for the relevant period. The initiation of proceedings can be done by service on the dealer concerned a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 8 of the Act. No form of notice has been prescribed. What is required is that a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 8 should be served. Sub-section (2) of section 8 provides for a notice in the prescribed form requiring a dealer to furnish a return of his turnover to the authority concerned. Therefore, to initiate a proceeding under sub-section (1) of section 11 for assessment or reassessment of a dealer, a notice must be served on the dealer concerned within the specified time requiring him to furnish return of his turnover for a particular period during which the evasion or escapement is alleged. Proceedings under section 11 (1) commence only with the service of such a notice. The time-limit for service of such notice is eight years of the end of the relevant period. Service of a valid notice within the specified time is thus a condition precedent for initiation of proceedings for assessment or reassessment. If the aforesaid conditions for assumption of jurisdiction and initiation of proceedings are fulfilled, the authority concerned can proceed to assess the dealer. The machinery for assessment has not been set out in section 11. What has been provided is that once proceedings are validly initiated under his section, assessment shall be made in accordance with the provisions of the Act dealing with regular assessment. Section 9 is the relevant section which deals with assessment. Thus an assessment, though made in pursuance of proceedings under section 11 (1) of the Act, shall be an assessment under section 9 of the Act and all the requirements of the said section shall apply to such an assessment. Section 9 provides for three kinds of assessment, namely, (i) assessment on the basis of the return, (ii) assessment on the basis of evidence adduced by the dealer in pursuance of notice issued to him under sub-section (2) of section 9, and (iii) best judgment assessment. Thus, if a return is submitted by a dealer in response to the notice it may be accepted by the authority concerned as correct and complete and he may be assessed on the basis of such return. If such a return is not accepted, the dealer must be given an opportunity of being heard as in the case of original assessment proceedings under section 9 (2) of the Act. If the assessee fails to comply with a notice requiring him to furnish a return or to produce books of account or other documents under sub-section (2) of section 9 of the Act, best judgment assessment can be made under section 11 (1) of the Act read with sub-section (4) of section 9.