1. This is an application under Section 8 of the West Bengal Taxation Tribunal Act, 1987 challenging the order dated July 17, 2002 passed by the Additional Commissioner, Commercial Taxes in revision and for a declaration that the liability to pay tax under Section 6D of the Bengal Finance (Sales Tax) Act, 1941 (in short, "the Act, 1941") cannot arise since such liability under Section 4(2) of the Act, 1941 was already determined.
2. The petitioner-company was assessed to pay tax under Section 11(1) of the Act, 1941 on December 21, 1990 for a period of four quarters ending December 31, 1986 without assessing any tax liability on contractual transfer price under Section 6D of the Act, 1941.
3. On November 28,1991 the assessing authority fixed liability of the petitioner to pay tax under Section 6D of the Act, 1941 with effect from January 1, 1986 and reviewing the assessment order dated December 21, 1990 by a subsequent order dated November 30, 1991 and also determined tax at Rs. 1,17,734 under Section 6D of the Act, 1941.
4. The order was challenged in revision on the ground that the provision of Section 6D did not confer the power on the appropriate authority to fix up liability to pay tax under Section 6D of the Act, 1941, otherwise than in an assessment proceeding. The order dated November 28, 1991 passed under Section 6D independent of assessment proceeding, therefore, was illegal and invalid.
5. Another application in revision was filed against the order dated November 30, 1991 determining the tax under Section 6D, on the ground that the liability was not fixed by the respondents in course of assessment proceeding as required under law. The ground for revision was not accepted and the application was dismissed.
6. Second revision was preferred against the order of the Deputy Commissioner before the Additional Commissioner. The learned Additional Commissioner dismissed the application although he held that the liability to pay tax under Section 6D of the Act, 1941 can be fixed independent of an assessment proceeding only after February 1, 1993 since the Sub-section (1a) was incorporated by amendment with effect from February 1, 1993. At the same time, he held that the petitioner, since already incurred liability to pay tax under Section 4(2) of the Act, 1941, there was no need to fix liability to pay tax on the contractual transfer price under Section 4(2) of the Act, 1941. Since the provision of Section 6D does not provide any scope for determining tax liability without assessment proceedings, the said order passed by the revisional authority is bad in law.
7. It is the contention of the learned lawyer for the petitioner that the provision of Section 4(2) of the Act, 1941 states about the liability of a dealer to pay tax with effect from the date immediately following the day on which the gross turnover first exceeds taxable quantum on all sales other than those mentioned in Section 6D. The provision of Section 4(2) thus, excludes the sales referred to under Section 6D of the Act, 1941 only because the contractual transfer price is not considered as a sale under this Act but is considered as a deemed sale. The liability to pay tax, therefore, has to be fixed under Section 6D independent of the provision of Section 4(2) of the Act, 1941 in such a case. Hence, the order passed by the learned Commercial Tax Officer and the revisional authorities are illegal and liable to be set aside.
8. In support of his contention, the learned lawyer for the petitioner relied on the decisions reported in Sri Surajmal fain v. Commercial Tax Officer , Sudhir CH. Mukherjee v. Additional Bholanath Sreemany v. Additional Commissioner of Commercial Taxes and Debendra CH. Das v. Commercial Tax Officer, 9. On behalf of the respondents, it is submitted that Section 6D of the Act, 1941 is complete and independent in nature. There is no need to determine the liability as the dealer becomes automatically liable to pay tax. According to the learned State Representative, the dealer since has already incurred liability to pay tax under Section 4(2) of the Act, 1941, there is no need of fixing liability to pay tax on the contractual transfer price under Section 6D of the Act, 1941. It is, further submitted that the petitioner since did not raise any question when a notice under Section 14(1) was served upon the petitioner for production of the documents, he has no right to raise such question before the revisional authority. The impugned orders passed by the respondents, according to the learned State Representative, are sustainable under law.
10. The only point for consideration, therefore is, if liability to pay tax for a certain period under Section 4(2) is to be determined in a proceeding under Section 11(2) of the Act, 1941 and if the respondents have jurisdiction to fix liability to pay tax under Section 6D of the Act, 1941.
11. In the instant application, the assessment in question, relates to the period of four quarters ending December 31, 1986. The Sub-section (1a) was inserted in the Section 6D with effect from February 1, 1993 which states as follows: "The Commissioner, after making such enquiry as he may think necessary and after giving the dealer an opportunity of being heard, shall fix the date on and from which such dealer shall become liable to pay tax under Clause (b) of Sub-section (1)".
Therefore, the observation of the learned Additional Commissioner made in his order dated July 17, 2002 that with the effect from February 1,1993 the Commercial Tax Officer may fix liability independent of an assessment proceeding though is proper and legal, yet not applicable in the present case.
12. According to Section 4(2) the date of commencement of liability to pay tax shall arise from the day next following the day when the gross turnover of a dealer during any accounting year exceeds the taxable quantum. The turnover of sales referred to in Section 6D cannot be taken into consideration, in as much as, the provision of Section 4(1) states about "all sales" effected after the date of notification in the official gazette except "contractual transfer price" which has been "deemed" to be a sale of goods. Thus Section 6D was kept out of the scope of Section 4 since the contractual transfer price was not considered as sales referred to in Section 4(1) of the Act, 1941. It cannot therefore, be said that the provision of Section 6D is a self-contained section for the purpose of fixing liability as well as for assessing tax.
13. The Scheme of all sales tax legislations was elaborately discussed by the honourable Justice Devi Pal, in a case of Sri Surajmal Jain v.Commercial Tax Officer [1973] 32 STC 601. It was held that the obligation to pay tax arises at the moment a dealer makes either purchases or sales which are subject to tax and taxability is also attracted although that liability cannot be enforced till the quantification is effected by assessment proceeding. His Lordship further observed, "The proposition is now well-settled since the statement of law by Lord Dunedin in Whitney v. Commissioners of Inland Revenue [1926] AC 37, that there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what persons in respect of what properties are liable. Next, there is the assessment. Assessment particularises the exact sum which a person is liable to pay. Lastly comes the methods of recovery, if the person taxed does not voluntarily pay the sum assessed. The liability to pay sales tax does not depend upon an assessment, that ex-hypothesi has already been fixed by the charging section. The subsequent provision as to assessment provides the machinery by which the liability may be quantified and when quantified to be enforced for the purpose of recovery: see Chatturam v.Commissioner of Income-tax, Bihar [1947] 15 ITR 302 (FC) and Tata Iron and Steel Co. Ltd. v. State of Bihar . The scheme of all sales tax legislations, including the statute with which we are dealing, is that the moment a dealer makes either purchases or sales which are subject to tax, the obligation to pay the tax arises and taxability is attracted although that liability cannot be enforced till the quantification is effected by assessment proceeding: Kedarnath Jute Manufacturing Co. v. Commissioner of Income-tax (Central) Calcutta , and State of Madhya Pradesh v. Shyama Charan Shukla . Having regard to the scheme of the Act, the Commercial Tax Officer, in my view, has no power to fix or determine the liability to pay sales tax by making an order under Section 6 of the Central Act or under Section 4 of the Bengal Act. That liability is created and determined by the charging section and is independent of the assessment".
14. Similar view was taken by the division Bench of the Calcutta High Court in a case of Sudhir Ch. Mukherjee v. Additional Commissioner, Commercial Taxes, West Bengal reported in [1976] 37 STC 554. It was held that Section 4 of the Act, 1941 was a mere charging section creating the liability of a dealer to pay sales tax from the date when his total turnover exceeded the taxable quantum but it did not contemplate the fixation or determination of the date of commencement of the liability which can be made only in a proceeding for assessment as envisaged under Section 11(2) of the Act. Therefore, an order determining the liability of a dealer to pay tax from a certain date under Section 4(2) independently of, and prior to, the initiation of any proceeding under Section 11(2) was without jurisdiction and illegal. In other cases, Bholanath Sreemany v. Additional Commissioner of Commercial Taxes [1978] 42 STC 248 and Debendra Ch. Das v.Commercial Tax Officer, Coochbehar [1978] 42 STC 458, the Calcutta High Court has taken the same views. Hence, we find from all these decided cases that liability to pay tax can only be fixed after initiating a proceeding under Section 11 of the Act, 1941. In the instant case, the impugned order dated November 28, 1991 passed by the Commercial Tax Officer, Shyambazar Charge, fixing liability of the petitioner to pay tax under Section 6D of the Act, 1941 with effect from January 1, 1986, therefore, illegal and without jurisdiction. The revisional orders passed by the revisional authorities accordingly are not sustainable under law and are liable to be set aside.
15. The orders passed by the learned Commercial Tax Officer and also the order dated June 30, 2000 and July 17, 2002 passed by the learned Deputy Commissioner and learned Additional Commissioner are set aside.
The respondents shall take no steps on the basis of such impugned orders against the petitioner. The application isallowed without costs.