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Trilok Metal Craft Industries v/s State Of Assam

    WP(C) 4916 Of 2000

    Decided On, 01 June 2004

    At, High Court of Assam

    By, THE HONOURABLE MR. JUSTICE B.K. SHARMA

    For the Appearing Parties: B.P. Todi, P. Baruah, H.K. Mahanta, Advocates.



Judgment Text

(1.) This writ application is directed against the order of assessment dated 5.9.1998 passed by the Superintendent of Taxes, Bongaigaon and the revisional order dated 17.5.2000 passed by the Joint Commissioner of Taxes, Assam.

(2.) The petitioner is a small scale industrial unit and is engaged in manufacturing of almira, chairs, tables etc. It is a registered unit under the Assam General Sales Tax Act, 1993. It had undertaken expansion and modernisation of its unit before 1.4.1991 under the Industrial Incentive Scheme and the District Industries Centre, Goalpara issued eligibility certificate dated 18.6.1991 to the petitioner granting the benefit of tax exemption upto 17.6.1998. It also issued the final eligibility certificate dated 30.8.1993 providing the benefit of sales tax exemption upto 17.6.1998. The Superintendent of Taxes, Bongaigaon upon examination of the eligibility certificate granted certificate of authorisation dated 4.12.1998.

(3.) The petitioner being a registered dealer is required to file returns before the Assessing Officer i.e. the Superintendent of Taxes, Bongaigaon as per the provisions of the AGST Act, 1993. On the basis of the authorisation certificate issued by the Superintendent of Taxes, the petitioner submitted its return by producing all the books of accounts for the relevant period and the Assessing Authority being satisfied with the relevant records and upon hearing the petitioner completed the assessment by its order dated 4.12.1996 determining the tax payable as NIL. The petitioner was served with a notice dated 15.7.1998 issued by the Senior Superintendent of Taxes, Bongaigaon in exercise of power under Section 37(1) of the AGST Act, 1993 for rectification of assessment for the years 1993-94, 1994-95, 1995-96 and 1996-97. In response to the notice, the petitioner raised objections urging various grounds by its letter dated 9.9.1998. This was followed by the impugned order dated 5.9.1998 raising a demand of Rs. 1,70,625/- on the petitioner. Being aggrieved, the petitioner preferred revision petition before the Commissioner of Taxes. The Joint Commissioner of Taxes by his order dated 17.5.2000 upheld the reassessment order dated 5.9.1998.

(4.) It is the legality and validity of the aforesaid orders dated 5.9.1998 and 17.5.2000, which are under challenge in this writ proceeding. I have heard Dr. B.P. Todi, learned senior counsel appearing for the petitioner and Mr. H.K. Mahanta, learned State counsel appearing for the respondents. Dr. Todi submitted that the action on the part of the respondents in invoking the provision of Section 37(1) of the Act was unwarranted and that the Superintendent of Taxes could not have re-open the matter in the manner and method in which the same was done. As regards the revisional order dated 17.5.2000, Dr. Todi submitted that the same was passed in a most arbitrary and mechanical manner. He place reliance on the following decisions to buttress his argument: 1. 17 STC 360 (Master Construction Co. Ltd. v. State of Orissa) 2. 79 STC 409 (Sri Pankaj Kr. Dasgupta v. State of Tripura) 3. 93 STC 1 (Commercial Taxes Officer v. Dy. Controller of Stores) 4. 2001 (1) GLT 430 (Manjushree Extrusions v. State of Assam)

(5.) On the other hand, Mr. H.K. Mahanta, learned State counsel made submissions defending the impugned orders. According to him the impugned order dated 5.9.1998 having been passed in exercise of power under Section 37(1) of the Act within the limits, ambit and the scope of the power, there is nothing wrong in upholding the same by the Rvisional Authority by its order dated 17.5.2000 and consequently both the orders are legally sustainable and not liable to be interfered with.

(6.) Before proceeding with the matter in the given facts and circumstances and judging the impugned orders on that basis, it will be appropriate to quote the relevant provisions of Section 37(1) of the said Act under which the impugned order dated 8.5.1998 was issued.

"37. Rectification of assessment and orders - (1) The authority which made an assessment or order or passed an order in appeal or revision in respect thereof may, at any time within three years from the end of the financial year in which such assessment or order was made and of its own motion rectify any arithmetical mistake or other mistake of a factual nature apparent from the record of the case, and shall even beyond such period, rectify and as such mistake as is brought to its notice by a dealer or person affected by such order before the expiry of such time limit. Provided that no such rectification shall be made having the effect of enhancing the assessment unless the authority concerned has given notice to the dealer or person of its intention so to do and has allowed him a reasonable opportunity of being heard."

(7.) On a plain reading of the aforesaid provision of Section 37(1), the authority is empowered to rectify any arithmetical mistake or other mistake of a factual nature apparent from the record of the case. The question that arises for consideration is, whether there was any such arithmetical mistake or any other mistake of a factual nature apparent on the face of the record in the first order of assessment dated 4.12.1996 warranting interference with the same in exercise of power under Section 37(1) of the Act. It is in this context the aforesaid decisions have been pressed into service. Before adverting to the impugned orders and analysing the same so as to come to the conclusion as to whether the impugned orders are within the four corners of the jurisdiction, power, scope and ambit of Section 37(1) of the Act, it will be beneficial to refer and discuss those cases to understand the principles centering around the controversy.

(8.) In the case of Master Construction Company (supra), the Apex Court dealing with the scope and jurisdiction of the pari material clause under the Orissa Sales Rules, 1947 (Rule 83) and upon construction of the same held that Rule 83 provides a summary remedy within a narrow compass. The jurisdiction so vested on the authority is confined only to the correction of mistakes or omissions. Explaining the term "arithmetical mistake" or "error", it held that such error should not be an error which depends for its discovery, elaborate arguments on questions of fact or law. It went on to say that however wide the expressions in the rule are construed, they cannot countenance a re-argument on merits on questions of fact or law, or permit a party to raise new arguments which he has not advanced at the first instance. It further held that the wrong conclusion, if any arrived at by the authority in its earlier order, even if argued to be because of non-raising and non-consideration of the relevant points, cannot be said to be errors apparent on the face of the record or occurring from an accidental slip or omission and that the action of the authority on that basis would amount to re-hearing of the matter which was not permissible under Rule 83.

(9.) In the case of Sri Pankaj Kunar Dasgupta (supra), a Division Bench of this Court dealing with the pari material provisions of Tripura Sales Tax Act, 1976 (Section 12) held that the power under Section 12 is limited to rectification of mistakes which are apparent from the records of the case. Referring to the identical provisions in various other Acts and the decisions of the Apex Court, it was held that "a mistake apparent from record" means a mistake which is obvious, patent and self evident from the records of the case and that the same does not cover any mistake that may be discovered by a complicated process of investigation, argument or proof. The court further observed that a mistake on which conceivably there can be two opinions, cannot also be rectified exercising power under Section 12. It further went on to observe that a decision on a debatable point on law or failure to apply the law to a set of facts which remains to be investigated cannot also be corrected by way of rectification. It further observed that such mistake should not be the one which' calls for detailed investigation of facts or law or elaborate argument to establish the same.

(10.) In the case of Commercial Tax Officer (supra) also the Rajasthan High Court dealing with the pari material provisions under the Rajasthan Sales Tax Act reiterated the above principles. In the case of Manjushree Extrusions (supra), this Court dealing with the question of exemptions granted under the 1991 Industrial Policy to both new and existing industrial units and subsequent restriction imposed on such exemption, while allowing the writ appeals held such restriction to be inconsistent with the Industrial Policy of 1991. In the instant case also it is the case of the petitioner that in the first assessment order for the period 1993-94, the Assessing Authority found the petitioner to be entitled to get the benefit of tax holiday under the AI (STC) Scheme 95 with effect from 18.6.1991 to 17.6.1998 on the basis of the employment and eligibility certificates.

(11.) While issuing the notice dated 15.7.1998 towards rectification of assessment, the petitioner was intimated that while completing the assessment, sale of base year not taken into consideration which was allegedly apparent on the face of the case record. The petitioner responded to the notice by submitting its detailed reply dated 9.9.1998 taking specifically, the following grounds :

"That, Sir, it will be seen from your notice that there was neither any arithmetical mistake nor any factual mistake apparent from the records. The assessments were completed by your honour on due application of mind and by administration of the .quasi-judicial proceedings on taking into consideration our submissions, examination of books of accounts, documents and evidences produced by us before you. There was no lapse on our part in the process and the final order of assessments were passed by your honour judiciously. That, Sir, at this stage the proposed invocation of Section 37(1) of the Act will be nothing but a change of your opinion only and there are numbers of judgments of the Hon'ble Court of Law, which restricted such type of action by the Assessing Officer. That, Sir, while taking up such rectification of assessment proceeding under Section 37(1) of the Act for any arithmetical or factual mistake, the same must be within the records, but from your kind instant letters it appears that you intend to make investigations to substantial your alleged mistake, which means that you are not sure of the alleged apparent mistakes to invoke the provisions of Section 37(1) of the Act. Your notice is, therefore, intended to fishing and roving and such notice for investigation purpose is not tenable by law in as much as the very fact of arithmetical or factual mistake must be at your nose. Sir, we therefore, beg to state that such a notice with the proposed intention or rectification of mistake is beyond the spirit and intention of Section 37 of the Act and it is not tenable by law. You will kindly appreciate that while granting a certificate of authorisation No.BB/STE/AC/4812 dated 04.12.1996 in Form No. IV-B you had authorised us to make purchase of raw materials and sale of finished goods free of tax under the AGST and GST Acts for the period upto 17-06- 1996 with effect from 18-06-1991. Hence, your notice is also seems to be unwarranted and bad in law."

(12.) In the impugned order dated 5.9.1998 while recognising the entitlement of tax exemption under the 1995 scheme effective from April 1991, it has been held that the benefit under the scheme in respect of the finished products shall not be admissible to an eligible industrial unit in terms of para 10 of the 1995 scheme. Para 10 of the scheme as reflected in the impugned order itself provided that a holder of the certificate of authorisation shall not collect sales tax on his sales from the portion of the finished products, which is declared eligible for sales tax exemption in the certificate of authorisation. According to the impugned order, the petitioner did not disclose the base year production after commencement of production on expansion/diversification/ modernisation. However, it is admitted in the impugned order that there was no mention of base year production vis-a-vis sales tax exemption, but since the petitioner's Unit was in continuity prior to notifying 1995 scheme in the official gazette with effect from 16.8.1995, the authority did not charge the tax against the sales of base year production. It is on that basis the rectification was carried out by the impugned order. Thus on the face of it, a new reasoning having no nexus with any kind of arithmetical mistake or other factual mistake apparent from the record as has been interpreted by various Courts as noted above was made the foundation towards issuance of the impugned order. There is no dispute that the petitioner's Unit was expanded and in the earlier assessment order a categorical finding was recorded on verification on accounts that the petitioner was entitled to get the tax holiday under the 1995 scheme.

(13.) In the revisional order dated 17.5.2002, it has been held by way of implication that the petitioner was liable to pay taxes on sales of base year production. With such a finding the Revisional Authority held the rectification to be regular. The Revisional Authority did not deal with the contentions raised on behalf of the petitioner, although recorded the same and abruptly came to the conclusion by way of implication that the petitioner was liable to pay taxes on sales of base year production. The reasons furnished in the impugned orders are on the face of it by way of countenance a re-argument on merits on question of fact and law. The error projected in the notice to be apparent is in fact a new discovery with re-arguments on questions of fact and law unconnected with any arithmetical mistake or other mistake of a factual nature apparent from the record as has been interpreted in various decisions. As has been held in the case of Sri Pankaj Kumar Dasgupta (supra), the power under Section 37(1) of the Act does not cover a situation in which a complicated process of investigation, argument or proof is required towards re-assessment. A mistake, on which conceivably there can be two opinions, cannot also be rectified exercising power under Section 37(1). A decision on a debatable point on law or failure to apply the law to a set of facts, which remains to be investigated, cannot also be corrected by way of rectification. Such mistake should not be the one which calls for detailed investigation of facts or law or elaborate argument to establish the same.

(14.) The Revisional Authority rejected the revision petition filed by the petitioner by way of implication that the petitioner was liable to pay taxes on sales on base year production and upheld the re-assessment order dated 5.9.1998. The order dated 5.9.1998 does not speak of any arithmetical mistake or any error apparent from the record of the case. It gives altogether a new argument and reasoning. The petitioner in course of the first of assessment submitted its returns under Section 16 of the Act disclosing its gross turnover and the same was accepted upon examination of the books of account, documents and evidences produced in that respect and the assessment was completed under Section 17(4) of the Act. The impugned order that was preceded by the notice does not reflect any arithmetical mistake or any factual mistake apparent from the records. The entire process was carried out by way of innovation and re-argument. The petitioner took the specific plea in his reply that while granting the certificate of authorisation, the petitioner was authorised to purchase raw materials and sale of finished goods free of tax under the Act and the Central Sales Act for the period upto 17.6.1998 with effect from 18.6.1991. However, nothing has been stated in the impugned orders about this aspect of the matter, except by way of a new innovation of base year production. Such a course of action cannot be adopted invoking power under Section 37(1) of the Act, the scope and ambit of which have been discussed above.

(15.) In the case of Manjushree Extursions (supra), dealing with the Industrial Policy and the Incentive Scheme of Government of Assam, 1991, it has been held that, new units as well as the existing units undertaking expansion, mod

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ernisation and diversification are to be treated at par for tax exemption. It has been held that the benefits conferred by the 1991 policy cannot be curtailed by another scheme as was sought to be done by introducing the 1995 scheme. It has further been held that a promise made out by the State cannot be withdrawn. Noticing that no condition whatsoever was laid down in the certificates that the exemption would be available only on the increase in production resulting from the expansion, modernisation or diversification, it was held that it was too late in the day to ask the industrial units to pay the sales tax beyond the increased capacity when they had neither paid the same on raw materials purchased nor charged the same on finished goods from their customers. In the instant case also the authority has admitted in the impugned order that in the original Industrial Policy of 1991, there was no mention of base year production vis-a-vis the sales tax exemption and yet on the basis of continuity of the unit prior to the notification dated 16.8.1995 notifying the 1995 scheme relating to tax exemption, held that the petitioner did not charge the tax against the sales of base year production. Such a reasoning was completely a new one giving altogether a different interpretation to the issue in question and the same cannot be said to be within the four corners of the arithmetical mistake or a mistake of factual nature apparent from the record. The propositions of law laid down in the aforesaid cases squarely cover the case of the petitioner. (16.) In view of the above, the impugned orders are not sustainable and liable to be set aside and quashed. Consequently the impugned orders dated 5.9.1998 and 17.5.2000 stands set aside and quashed. (17.) Writ petition stands allowed. There shall be no order as to cost
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