M.B. Sharma, J.
1. In both the above writ petitions identical questions have come up for adjudication and therefore they are being disposed of by this common order.
2. D.B. Civil Writ Petition No. 687 of 1991 is by P.N. Dhoot Investment Company Pvt. Ltd., Jaipur (for short, 'the investment company') through its director, Shri V.N. Dhoot. The investment company is manufacturing washing machines of household at its Aurangabad factory. D.B. Civil Writ Petition No. 970 of 1991 is by Dome Bell Investment Pvt. Ltd. (for short, 'the company') through one of its directors Shri P.N. Dhoot. The company is manufacturing colour television sets at Noida factory. The investment company as well as the company are transferring the manufactured products to different branches situated in different States which are its selling points and such branches are registered in their respective States in sales tax laws as well as the Central Sales Tax Act, 1956 (for short, 'the Central Act'). So far as the investment company as well as the company are concerned, they are also registered under the Rajasthan Sales Tax Act, 1954 (for short, 'the State Act'). There is another concern, namely, Videocon International Limited (for short, 'the VIL'). The investment company receives the washing machines from its factory situated at Aurangabad, octroi is paid by it, the machines are kept in the godown taken by the VIL and all machines are alleged to have been first sold to the VIL and sales tax is paid on the turnover of the investment company. The VIL in its turn sells the washing machines at a much higher price. Similarly, the company is manufacturing colour television sets at its Noida factory and at its Jaipur branch, the company has no godown of its own which is taken on rent by VIL, It is the VIL which thereafter further sells the television sets and the company pays sales tax on the turnover which it receives after sale to the VIL.
3. The Commercial Taxes Officer, Anti-evasion, Headquarters-II, Jaipur, raided the business premises of the investment company as well as the company on November 5, 1990 and noticed that sales have been made by both of them to the VIL. On physical verification, it was found that the stock of washing machines and television sets with the investment company and the company was not in accordance with the stock register and it was disclosed on behalf of the investment company and the company by the persons present that the stock was not available as per record because the washing machines and television sets numbering 87 and 508, respectively, have been sold to the VIL in the month of October, 1990. It was also disclosed that challans and bills had not yet been issued. It was also disclosed during the sudden inspection of the business premises that business premises were on rent with the VIL and so far as the investment company and the company are concerned, the premises were not on rent with either of them. It was also noticed that the investment company and the company have no separate rooms to keep the stock. The Commercial Taxes Officer, Anti-evasion, Headquarter II also noticed that the sales tax was paid only on the documents of transfer of goods and even the octroi, freight and other expenses are not incurred. The Commercial Taxes Officer was also of the opinion that the delivery of goods received from the factories at Aurangabad and Noida is taken by the VIL. He being satisfied that the investment company and the company, the two dealers, with a view to avoid payment of tax have shown in their account books sale of washing machines and television sets at a price lower than their prevailing market price, a notice was issued under Sub-section (4-A) of Section 10 of the State Act to the investment company and the company. Reply was filed and after considering the reply and not being satisfied with it, the Commercial Taxes Officer, Anti-evasion, under his two separate orders dated November 20, 1990, framed best judgment assessment under Section 7-B read with Sub-section (4-A) of Section 10 of the State Act for a period from April 1, 1990 to November 4, 1990. So far as the investment company is concerned, the assessing authority came to the conclusion that it evaded the tax on the payment of Rs. 14,25,386. The investment company was ordered to pay Rs. 46,131.75 + Rs. 1,71,046 = Rs. 2,17,177.75. It was also ordered that the investment company shall pay penalty under Section 16(1) amounting to Rs. 2,56,500 and interest under Section 11-B(1)(9 of Rs. 11,305, the total amount which was payable by the investment company was Rs. 4,85,482.75. So far as the company is concerned, the assessing authority came to the conclusion that with a view to avoid the payment of tax it has shown in its account books sale of television sets at a price lower than the prevailing market price and taking into consideration the price charged by the VIL, the assessing authority came to the conclusion that it was the prevailing market price and therefore the difference in the price charged by the company and the VIL, i.e., Rs. 76,28,171.20 was held to be the amount on which the company evaded the tax and it was called upon to pay the tax and penalty, etc., amounting to Rs. 23,61,417.
4. The investment company and the company challenged the aforesaid orders of the Commercial Taxes Officer, Anti-evasion, Headquarter-II, Jaipur, on the following grounds :
(i) The orders are without jurisdiction because of the plurality of the assessing authorities and the notification conferring jurisdiction on the Commercial Taxes Officer, Anti-evasion, Headquarter-II, is without jurisdiction ;
(ii) the provisions of Sub-section (4A) of Section 10 of the State Act and Rule 30A of the Rajasthan Sales Tax Rules (for short, 'the Rules, 1955') are ultra vires, or in the alternative, even if the provisions are valid, they have not been validly applied ;
(iii) the decision of the Additional Commissioner made under Subsection (3) of Section 11 of the State Act is arbitrary and against the principles of natural justice ;
(iv) in the facts and circumstances of the case, the penalty provisions of the State Act could not be invoked.
5. Notice of each of the writ petitions was given to the respondents and though Mr. G.S. Bapna, learned counsel for the respondents, has not chosen to file any reply to the show cause notice, but he has raised submissions and he has also raised preliminary objections that there is an alternative remedy by way of appeal and therefore this Court should not invoke its extraordinary writ jurisdiction under Article 226 of the Constitution of India.
6. We may at the very outset say that when the jurisdiction of any authority is challenged and/or there is challenge to the statutory provisions of a statute this Court cannot and does not decline to invoke its extraordinary writ jurisdiction under Article 226 of the Constitution. Even otherwise in such cases where there may be an alternative remedy available to a person, such remedy may be by way of filing appeal or revision, it cannot be said that in such a case there is absolute bar to the exercise of powers of this Court under Article 226 of the Constitution of India. Though, generally, more so, in taxation matters, this Court refuses to invoke its extraordinary writ jurisdiction in case there is an alternative remedy provided under the statute, but in this case as will appear from points which have been urged before us and reference to which has already been made in the earlier part of this order, the jurisdiction of the Commercial Taxes Officer, Anti-evasion, Headquarter-II, Jaipur, has not only been challenged, but the petitioners, in both the cases have also raised a challenge to the vires of Sub-section (4-A) of Section 10 of the State Act as well as Rule 30-A of the Rules. Therefore, we may examine the challenge though, if the aforesaid challenge does not survive, so far as the facts of the case are concerned, we will decline to go into them and the investment company as well as the company will have to agitate the matter in appeal, etc., which may be prescribed under the State Act.
7. The Notification dated July 3, 1986, as amended vide Notifications dated July 21, 1988 and June 2, 1989 reads as under :
Under the aforesaid notification the Commercial Taxes Officer, Anti-evasion, Headquarter-I, Commercial Taxes Officer, Anti-evasion Headquarter-II, and Commercial Taxes Officer, Anti-evasion, Headquarter-Ill, Jaipur, have been conferred jurisdiction for whole of the Rajasthan and the circles created are Anti-evasion I, Headquarters, Jaipur, Anti-evasion II, Headquarters, Jaipur and Anti-evasion III, Headquarters, Jaipur. It was contended by Mr. V.K. Singhal, learned counsel for the petitioners, that the Commissioner, Commercial Taxes, after having appointed more than one Commercial Taxes Officer, Anti-evasion, under Rule 3 of the Rules, as required by Rule 4 of the Rules must have distributed business among them. He further contends that under Rule 4, whole or part of the State could not be the circle. According to the learned counsel, there cannot be plurality of assessing authorities under Rule 3 read with Rule 4 of the Rules and under the scheme of the Rules such a situation is not envisaged. Mr. G.S. Bapna, learned counsel for the respondents, contended that there can be no bar to appoint more than one assessing authority for an area and whosoever detects evasion among three Commercial Taxes Officers, Anti-evasion, will have jurisdiction to the exclusion not only of other Commercial Taxes Officers, Anti-evasion, but to the exclusion of Commercial Taxes Officer, Special Circle, if any and also Commercial Taxes Officer, if any.
8. Section 12-B of the State Act reads as under :
'12-B. Dispute regarding jurisdiction.--No person shall be entitled to call in question the territorial jurisdiction of any assessing authority or appellate authority after the expiry of thirty days from the date of receipt by such person of any summons or notice under the Act issued by such authority or, in case the summons or notice was issued prior to the commencement of the Rajasthan Sales Tax (Amendment and Validation) Ordinance, 1967, (Rajasthan Ordinance 2 of 1967), after the expiry of thirty days from the commencement of the said Ordinance. If within the period aforesaid an objection is raised as to the territorial jurisdiction of any such authority by submitting a memorandum to him the authority concerned shall if satisfied with the correctness of the dispute, refer the question to the Commissioner, who shall, after giving the person raising the objection a reasonable opportunity of being heard, make an order determining the question. The order made by the Commissioner shall be final.'
A bare reading of the aforesaid Section 12-B will show that so far as objection to the territorial jurisdiction of any authority is concerned, a person can raise an objection within 30 days of the receipt by him of any summons or notice under the State Act from such authority and if within the aforesaid period of 30 days no such objection is raised, then after the expiry of 30 days, he cannot raise such an objection in respect of territorial jurisdiction of the assessing authority. If within the period of 30 days any objection is raised as to the territorial jurisdiction of the assessing authority by submitting a memorandum to him, the assessing authority concerned shall refer the question to the Commissioner, who shall after giving the person raising such objection a reasonable opportunity of being heard, make an order determining the said question and the order made by the Commissioner shall be final. Section 12-B was inserted vide Section 2 of the Rajasthan Act No. 1 of 1968. Thus, the objection having not been raised as aforesaid by the investment company and the company, as to the jurisdiction of the assessing authority, it cannot be allowed to be raised now. That apart, in our opinion this point has no force, firstly because there is no challenge to the vires of Section 12-A of the State Act and secondly because even otherwise there is no merit in this submission. We may now refer to the Notification No. F. 3(a)(28)Tax/CCT/67/130 dated October 23, 1967 and the said notification reads as under :
'In pursuance of Rule 3 of the Rajasthan Sales Tax Rules, 1955 and in supersession of all previous notifications or orders issued in this behalf, I, Ram Singh, Commissioner of Commercial Taxes, Rajasthan hereby fix the areas shown in column 3 of the Schedule below as the areas of jurisdiction of the Commercial Taxes Officers mentioned in column 2 of the said Schedule. These areas shall be called the circles of these Commercial Taxes Officers and named as in column 4 of the Schedule.
2. In pursuance of Rule 4 of the said Rules it is also hereby directed that--
(i) The Commercial Taxes Officers, Special Circles, shall have jurisdiction over the following category of dealers, namely :
All manufacturers, importers and other dealers whose turnover in the previous year relevant to the assessment year 1979-80 were not less than the following amount :
S. No.Category of dealersAmount of turnover1.Manufacturers,Rs. 30 lacs2.Importers.Rs. 50 lacs3.Other dealersRs. 1 croreProvided that the Commercial Taxes Officers, Special Circles, shall exercise jurisdiction subject to the provisions of Clause (ii) below.
(ii) The Commercial Taxes Officers, Anti-evasion Circles, Bikaner, Jaipur, Jodhpur, Kota, Udaipur and Headquarters Circles, Jaipur, shall have jurisdiction over dealers in whose case any evasion of tax or concealment of liability to tax has been detected by him or by any officer not below the rank of Commercial Taxes Inspector of his Circle in respect of the dealer's years of accounts to which such evasion or concealment relates.
(iia) The Commercial Taxes Officer, Special Investigation Circle, Jaipur, shall have jurisdiction over the dealers whose cases have been transferred to him by the Commissioner under Rule 52 of the said Rules.
(iib) The Commercial Taxes Officers, Areas Circle, shall have jurisdiction over the dealers whose cases are transferred to them by the Commissioner under Rule 52 of the said Rules.
(iii) The other Commercial Taxes Officers shall have jurisdiction in their respective areas of jurisdiction subject to the provisions of Clauses (i) and (ii) above.'
9. With the view which we will take, it is not necessary for us to examine the legality or validity of the aforesaid notifications dated July 3, 1986, as amended vide notifications dated July 21, 1988 and June 2, 1989 or the notification dated October 23, 1967 extracted above, in detail and suffice it to say that prima facie to us it does not appear that the aforesaid notifications are beyond the powers conferred on the Commissioner, Commercial Taxes, under Rule 3 or 4 of the Rules. Under Rule 3(1), the Commercial Taxes Officer for the area within his jurisdiction as fixed by the Commissioner shall be the assessing authority for that area and such area shall be called his 'circle'. Under Sub-rule (2) the jurisdiction of an assessing authority shall be determined with reference to the place of business of the dealer. If a dealer carries on business within the limits of the jurisdiction of more than one assessing authority, the assessing authority within whose jurisdiction, the principal place of business is situated, shall be assessing authority in respect of such dealer. Under explanation to Sub-rule (2) where the dealer has declared a place to be his principal place of business in writing that place shall ordinarily be regarded as his principal the place of business. Whenever there is doubt in respect of jurisdiction of the assessing authority, it is the Commissioner who shall determine which assessing authority shall have the jurisdiction over the dealer and his decision shall be final. Under Rule 4 where there are more than one Commercial Taxes Officers in a Circle, their respective jurisdiction and the distribution of business amongst them shall be such as may be fixed by the Commissioner. It is in exercise of the aforesaid powers above notifications were issued by the Commissioner, Commercial Taxes. A bare reading of Notification dated October 23, 1967, as amended from time to time will show that its second paragraph gives direction that the Commercial Taxes Officers, Anti-evasion Circle, Jaipur and Kota shall have jurisdiction over dealers in whose case any evasion of tax or concealment of liability has been detected by him or by any officer not below the rank of Commercial Taxes Officer of his circle, in respect of dealer's year of account to which such evasion or concealment relates. The first clause relates to the jurisdiction of the Commercial Taxes Officers, Special Circle and there is a proviso that such Commercial Taxes Officers shall exercise jurisdiction subject to the provisions of Clause (ii). The third clause of the said paragraph says that 'the other Commercial Taxes Officers shall have jurisdiction in their respective areas of jurisdiction subject to the provisions of Clauses (i) and (ii) above'. A bare reading of the aforesaid paragraph 2 along with its above referred clauses of the notification will show that the Scheme of the notification is very clear and the Anti-evasion Officers acquire jurisdiction when evasion of tax or concealment of liability is detected. Subject to this, the officers of the Special Circles have jurisdiction over a specified category of dealers. Subject to both cases, the other Commercial Taxes Officers, have jurisdiction over the residuary field of business. It cannot be said that so far as dealers whose evasion has been detected by any of the three Commercial Taxes Officers, there is plurality of assessing authorities because it is only that Commercial Taxes Officer out of three referred to earlier, who has detected evasion, will be having jurisdiction to assess.
10. This point came up for consideration before a larger Bench of the Board of Revenue in the case of Kaul Engineering Works v. Commercial Taxes Officer, Anti-evasion, Ward HI, Jaipur RRD 1976 33 and the learned members of the Board of Revenue said that even if regular Commercial Taxes Officers are having jurisdiction in the matter in every part of the State under Notification dated October 23, 1967, as amended from time to time, the Anti-evasion Officers acquire jurisdiction when the evasion of tax or concealment is detected and their jurisdiction is primary and their jurisdiction has been lawfully fixed in accordance with Rules and Anti-evasion Officers competent to assess in respect of such matters. Learned counsel has referred to the cases Sri Balaji Rice Company v. Commercial Tax Officer , McDowell & Co. Ltd. v. Commercial Tax Officer and Mansa Ram v. J.S. Rajyana, Excise and Taxation Officer [1966] 18 STC 57 (Pun). In the first of the aforesaid three cases, i.e., in the case of Sri Balaji Rice Company , the court was dealing with Section 4 of the Andhra Pradesh General Sales Tax Act, 1957. Under the aforesaid section the Government could appoint as many as Joint Commissioners of Commercial Taxes, Deputy Commissioners of Commercial Taxes, Assistant Commissioners of Commercial Taxes, Commercial Tax Officers and Deputy Commercial Tax Officers as they thought proper. That section further provided that such officers shall perform the said functions within such local limits as the State Government or any authority or officer empowered by them in this behalf may assign to them. The Government had delegated the aforesaid powers on the Board of Revenue to notify the local limits within which the aforesaid officers may perform them in their respective areas. The officers including Special Commercial Tax Officers (Evasion) were given jurisdiction over one or more revenue districts. Later on the Commissioner replaced the Board of Revenue and in exercise of the aforesaid powers issued a notification conferring powers on the ten Commercial Tax Officers (Intelligence) with headquarters at various places. The jurisdiction was conferred over the entire State of Andhra Pradesh. The High Court said that the State Government or any other authority or officer empowered by them in that behalf can only assign 'local limits' for all the said officers mentioned therein and cannot fix the whole of the State of Andhra Pradesh for making assessment. The court said that in the context in which the expression 'local limits' occurs in the latter part of Section 4, it can only mean a limited area and it cannot mean the whole of the State of Andhra Pradesh. The court further said that without laying down any guidelines as to who should exercise the powers of assessment to assess a single dealer could not be conferred on plurality of officers. The notification appointing ten officers for whole of the State of Andhra Pradesh was quashed. In the second of the three cases, i.e., in the case of McDowell & Company Ltd. the court said that the notification delimiting their areas of operation could not have retrospective effect to validate the impugned notice. The court further said that however it does not preclude the jurisdiction to take fresh proceedings according to law. In the third of the aforesaid case, i.e., in the case of Mansa Ram the question was different and it was whether once the return has been filed before the competent officer, then no other sales tax authority if he has jurisdiction can proceed without formal transfer of the case. That case is not applicable to the instant case. It appears from the aforesaid two cases referred, to above that in the notification appointing ten officers for whole of the State no guidelines have been issued as to who among them will exercise jurisdiction and in what circumstances. In the instant case a perusal of the aforesaid notification referred to earlier will show that a specific guideline is contained that so far as the Commercial Taxes Officer, Anti-evasion, is concerned, only such of the three who detects the evasion will have the jurisdiction to the exclusion of not only other two Commercial Taxes Officers, Anti-Evasion, but also the regular Commercial Taxes Officer or the Commercial Taxes Officer, Special Circle, if any. 'Assessing authority' has been defined in Section 2(b) of the State Act and in relation to a dealer it means the Commercial Taxes Officer or the Assistant Commercial Taxes Officer having jurisdiction for the time being. Under Rule 3(1) of the Rules the Commercial Taxes Officer for the area within his jurisdiction as fixed by the Commissioner is the assessing authority for that area and such area is called his circle. Under Rule 4 where there are more than one Commercial Taxes Officers in a circle, their respective jurisdiction and the distribution of business amongst them shall be such as may be fixed by the Commissioner. It will appear from the Notification dated July 3, 1986, as amended from July 21, 1986 and June 2, 1986, a reference to which has already been made in the earlier part of this order, that so far as three Commercial Taxes Officers, Anti-evasion, Headquarters I, II and III are concerned, their jurisdiction is throughout the State of Rajasthan and their circle is Anti-evasion, Headquarters I, II and III, respectively. The word used in Rule 3 is 'area' and not 'local area'. In our opinion, the aforesaid cases of the Andhra Pradesh High Court are not applicable to the instant case and as said earlier, if there are more than one Commercial Taxes Officer having jurisdiction, only such of them who detects the evasion shall have the jurisdiction to the exclusion of others including regular or Special Circle Commercial Taxes Officers and the question that there is plurality of the assessing authorities is of no consequence and any assessment or reassessment made by the Commercial Taxes Officer, Anti-evasion, under the circumstances mentioned in various notifications mentioned above will be within the jurisdiction of that authority and the jurisdiction of such assessing authority cannot be called in question.
11. A connected question now arises for consideration as it has been urged by the petitioner that the Commercial Taxes Officer, Anti-evasion having detected evasion, if any, became in the position of prosecutor and therefore he could not be the judge of his own cause, and his contention is that his position was that of prosecutor and investigator and therefore doctrine of bias is attracted and he could not have made the assessment order. We find no substance in this submission. In the case of Khurjawala Buckles Manufacturing Co. v. Commissioner of Sales Tax [1965] 16 STC 778, the court was dealing with the doctrine of bias and its applicability to sales tax proceedings. The court said that bias can be of two kinds, official or personal. Official bias is when a person acts as a party and as a judge in the same cause, in his official capacity sits in appeal over his own judgment. Personal bias is suggested by attributed, inter alia, bad faith or ill-will operating in the mind of the tribunal as against the litigant or where the officer is acting with a view to satisfy some private or personal grudge against the litigant. The court further said that in such cases it becomes necessary to see whether there is reasonable ground for assuming the possibility of a bias because a man's state of mind is very difficult to prove by direct evidence. Hence it is pertinent to enquire whether the circumstances and the facts are such as are likely to produce in the mind of the litigant, a reasonable doubt about the fairness of the concerned officer or Tribunal. In our opinion that case has no application to the facts of this case. In the aforesaid case the court on the material placed before it came to the conclusion that the officer concerned was biased. In the instant case so far as personal bias is concerned, it is not even alleged and so far as official bias is concerned merely because he detected the evasion of tax and thereafter passed assessment order having been conferred jurisdiction as assessing authority, no case of any official bias can be said to have been made out. In Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri : [1954]26ITR1(SC) , the Supreme Court was examining the question of guarantee of equal protection of laws given in Article 14 of the Constitution of India. The court also examined the jurisdiction of the Commission under the provisions of Section 5(4) of the Taxation on Income (Investigation Commission) Act, i.e., (Act 30 of 1947) as well as both the assessing authorities under Section 34 of the Income-tax Act. The court also examined the scheme of the provisions of the aforesaid Act as well as Income-tax Act. The court said that a person dealt with under Section 5(4) of the said Act has no right of appeal. A person who has evaded payment of income-tax and is proceeded with under Section 34 of the Income-tax Act has right of appeal to the Appellate Assistant Commissioner and can challenge all the findings of fact given fay the Income-tax Officer. The court further said that :
'If there was a provision for reviewing the conclusions of the Investigation Commission when acting both as investigators and judges, there might not have been such substantial discrimination in the two procedures as would bring the case within Article 14 ; but as pointed out above, there is no provision of that kind in the impugned Act.'
The court further held that the provisions of Sub-section (4) of Section 5 and the procedure prescribed by the impugned Act in so far as it affects the persons proceeded against under that Sub-section being a piece of discriminatory legislation offends against the provisions of Article 14 of the Constitution and is thus void and unenforceable. It will therefore be clear that if there would have been provision of reviewing the conclusions of the Investigating Commissioner either by way of appeal or any other forum, the provisions of Section 5(4) of the impugned Act would not have been held to be discriminatory. In Sunil Kumar Banerjee v. State of West Bengal : [1980]3SCR179 an argument was advanced that the Inquiry Officer combined in himself the role of both prosecutor and judge. In that case the report of investigation was considered by the Vigilance Commissioner with a view to recommend to the disciplinary authority whether a disciplinary proceeding should be instituted or not, the report of investigation was referred by the Vigilance Commissioner to Shri A.N. Mukherji for his views and for preparation of draft charges if institution of disciplinary proceedings was to be recommended. Shri Mukherji expressed his opinion that there was material for framing five charges and he also prepared five draft charges and forwarded them to the Vigilance Commissioner. The Vigilance Commissioner in turn forwarded the papers to the Government who finally decided to institute a disciplinary proceeding against the appellant. Thereafter, Shri A.N. Mukherji was appointed as Enquiry Officer. From the circumstances that Shri Mukherji considered the report of investigation with a view to find out if there was material for framing charges and prepared draft charges, it cannot possibly be said that Shri A.N. Mukherji when he was later appointed as Enquiry Officer constituted himself both as prosecutor and judge. Anybody who is familiar with the working of criminal courts will at once realise that there is nothing strange in the same magistrate who finds a prima facie case and frames charges, trying the case also. It cannot for a moment be argued that the magistrate having found a prima facie case at an earlier stage and framed charges is incompetent to try the case, after framing charges. In the instant case under Section 22 of the State Act the assessing authority, and we have already said that the Commercial Taxes Officer, Anti-evasion, is the assessing authority, has power to seize the books of account of a dealer. Under Sub-section (3) of Section 22 of the State Act, if any such authority or person has reason to suspect that any dealer is attempting to evade payment of any tax or other dues under that Act, he may for reasons to be recorded in writing, seize such accounts, registers or other documents of the dealer as he may consider necessary and shall give the dealer or any other person from whose custody such accounts, registers or other documents are seized a receipt for the same. The validity of Section 22 of the State Act is not under challenge. Any assessment order made by the Commercial Taxes Officers, Anti-evasion, is subject to appeal under Section 13 and under Section 14, to the appellate authority and thereafter to the Tribunal. A revision also lies to the State. Therefore, any order of assessment is subject to review by the appellate authority or revisional authority. We find no substance in the argument of the learned counsel for the petitioner that there is official bias in the Commercial Taxes Officer, Anti-evasion because he combined himself both in the prosecutor and the judge.
12. Sub-section (4-A) of Section 10 and Rule 30A of the Rules are reproduced here which read as under :
'Section 10(4-A).-If the assessing authority is satisfied that a dealer has, with a view to avoid or evade the payment of tax, shown in his accounts, sale or purchase of any goods at prices lower than the prevailing market price of such goods, it may estimate the price of such goods on the basis of prevailing market prices and assess or reassess the dealer, to the best of its judgment, after making such enquiry as it may consider necessary and after affording the dealer a reasonable opportunity of being heard.'
'Rule 30-A. Guidelines for best judgment assessment to be completed under Section 10(4-A).--(1) Every assessing authority, while initiating proceeding under Section 10(4-A) of the Act shall compare the prevailing market price in the case of manufacturers with the prices being charged by the manufacturers, in the case of wholesalers with the prices being charged by the wholesalers and in the case of retailers with the prices being charged by the retailers.
(2) Where according to the practice prevailing in a trade, if any kind of discount is allowed at the time of sale such discount shall also be kept in view while comparing prevailing market price.'
Sub-section (4-A) was inserted by the Rajasthan Act No. 8 of 1990 with effect from April 1, 1990 and it contains provisions regarding assessment or reassessment of a dealer to the best of the judgment of the assessing authority in case the conditions mentioned therein are satisfied. Those conditions are (i) the dealer in his account books has shown sale or purchase at price lower than the prevailing market price of some goods, and (ii) the satisfaction of the assessing authority that it has been done with a view to evade payment of tax. In case these conditions are satisfied, the assessing authority has power to estimate the price of such goods on the basis of prevailing market prices and assess or reassess the dealer to the best of his judgment after affording the dealer a reasonable opportunity of being heard. Rule 30-A which too has been extracted just above contains the guidelines for the best judgment assessment to be completed under Subsection (4-A) of Section 10 of the State Act. As per the aforesaid guidelines, the assessing authority has to compare the prevailing market price in the case of manufacturers with prices being charged by the manufacturers, in the case of wholesalers with the prices being charged by the wholesalers and in the case of retailers with the prices being charged by the retailers. According to Sub-rule (2) of Rule 30-A of the Rules where according to the practice prevailing in a trade, if any kind of discount is allowed at the time of sale, such discount shall also be kept in view while comparing prevailing market price. A perusal of Sub-section (4-A) of Section 10 of the State Act as well as Rule 30-A of the Rules, will therefore show that the scheme of the aforesaid provisions is that they have been made to facilitate the functioning of the department and to enable the assessing authority to arrive at a real sale price and the aforesaid provisions contain the procedure to determine the real sale price. The aforesaid provisions prescribe machinery for computation of tax and do not relate to the charging provisions of the State Act. Rule of interpretation and construction in so far as a provision which prescribes machinery for computation of tax and not with a charging provision of the Sales Tax Act, is that that construction should be preferred which makes the machinery workable. In the case of Murarilal Mahabir Prasad v. B.R. Vad [1976] 37 STC 77, the Supreme Court was dealing with a provision which prescribed machinery for computing the tax and not with charging tax. The Supreme Court referred to the case of Commissioner of Income-tax v. Mahaliram Ramjidas [1940] 8 ITR 442 and said in the case of Murarilal Mahabir Prasad [1976] 37 STC 77 that it was held by the Privy Council that Section 34 of the Income-tax Act, 1922, although a part of a taxing Act, imposed no charge on the subject but dealt merely with the machinery of assessment. Lord Normand who delivered the judgment of the Judicial Committee observed :
'In interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable, ut res valeat potius quam pereat.'
In India United Mills Ltd. v. Commissioner of Excess Profits Tax : [1955]27ITR20(SC) , the Supreme Court held that Section 15 of the Excess Profits Tax Act was not a charging section, but a machinery section and a machinery section should be construed as to effectuate the charging sections. The Supreme Court again said in the case of Murarilal Mahabir Prasad [1976] 37 STC 77 that--
'The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the Legislature which is to make a charge levied effective.'
Therefore, it can be taken to be settled law that while construing the machinery section of the State Act, the court has to prefer that interpretation which makes the same workable. Under Section 3 a dealer whose turnover in the previous year in respect of sales or supplies of goods exceeds the limits prescribed therein is liable to pay tax under that Act on his taxable turnover. Under the explanation to that section for the purpose of limits specified in Clause (a), (b) or (c) the turnover shall include the aggregate amount for which all goods are sold or supplied irrespective of the fact whether any of such goods are imported or manufactured or otherwise obtained by the dealer concerned or whether or not they are exempted from payment of tax. 'Taxable turnover' is defined in Clause (s) of Section 2 which means that part of a turnover which remains after deducting therefrom the aggregate amount of the proceeds of sale of goods, (i) on which no tax is leviable under the Act, (ii) which have already been subjected to tax under the Act, (iii) which have been sold to persons outside the State for consumption outside the State and (iv) which are taxable at a point of sale within the State subsequent to the sale by the dealer and such sale is covered by a declaration as may be required under any provision of that Act or the rules made thereunder. 'Turnover' has been defined in Section 2(t) which means the aggregate amount of sale prices received or receivable for a sale, transfer, delivery or supply by a dealer in any of the ways referred to in Clause (o). According to the learned counsel for the petitioners to construe a 'sale' within the meaning of Clause (o) of Section 2 of the State Act the court has to see the consideration which has actually passed for transfer of property in goods and it cannot take into consideration what consideration ought to have been passed. According to the learned counsel for the petitioners by virtue of Section 10(4-A), a provision has been incorporated to provide to estimate price of sale higher than the price actually charged by the seller from time to time and such a provision is arbitrary and against the powers vested in the State Legislature under entry 54 of List II (State List) of the Seventh Schedule to the Constitution of India. According to the learned counsel for the petitioners, the aforesaid provisions of Subsection (4-A) of Section 10 as well as Rule 30-A of the Rules empower the assessing authority to determine the turnover of the assessee at a price higher than the sale price charged if the assessing authority is satisfied that the assessee in his account books has shown sale or purchase of any goods at a price lower than the prevailing market price of such goods and it has been done with a view to evade or avoid payment of tax. By making the aforesaid provisions the assessing authority takes the sale of the assessee at a higher price than actually charged and it is violative of Articles 14 and 19(1)(g) of the Constitution of India. It is further contended that the provisions of Subsection (4-A) of Section 10 are capable of being abused in arbitrary manner and have been left to the discretion of the assessing authority. In support of his contention learned counsel has placed reliance upon the case of Delux Wines v. State of Andhra Pradesh [1990] 77 STC 373. In that case the Andhra Pradesh High Court was dealing with the provisions of the Andhra Pradesh General Sales Tax Act, 1957 (Act No. 6 of 1957) as well as the provisions of the Andhra Pradesh General Sales Tax (Amendment) Act (No. 18 of 1985). In the aforesaid Act the 'turnover' has been defined in Section 2(1)(s) and after the amendment the 'turnover' means not only the total amount set out in the bill of sale, but also the total amount of consideration for the sale or purchase of goods as may be determined by the assessing authority, if the bill of sale does not set out correctly the amount for which the goods are sold. Section 14-B which was brought on the statute book with effect from July 1, 1985, reads as under :
'Section 14-B. Assessment of the sales shown in accounts at low prices.--(1) If the assessing authority is satisfied that a dealer has, with a view to evade the payment of tax, shown in his account, sales or purchases of any goods at prices which are abnormally low compared to the prevailing market prices of such goods, it may, at any time within a period of four years from the date on which any order of assessment was served on the dealer, assess or reassess, the dealer to the best of the judgment on the turnover of such sales or purchases after making such enquiry as may be necessary and after giving the dealer a reasonable opportunity to show cause against such assessment.
(2) The provisions of Section 14 including penalty shall apply to assessment and reassessment of escaped turnover under this section.'
Notices had been issued which were challenged in the writ petition. The only allegation levelled was that the rates charged by the petitioners were abnormally low when compared to the prevailing market prices, that the rates charged by the petitioners as set out in the bills raised cannot be accepted and the difference between the turnover determined on the basis of the bills and the turnover computed with reference to the prevailing market price, is liable to be assessed as 'escaped turnover' by the respective Commercial Tax Officers in the reassessment proceedings. In that case the challenge to Section 2(1)(s) read with Section 14-B was on the ground that those provisions confer unbridled powers on the assessing authority, there being no guidelines and such power leads to exercise of discretion in an arbitrary manner. The court said that the Act does not prescribe any method or manner for determination of prevailing market price and no rules are framed for the purpose. In the words of the court :
'Section 14-B(1) of the Act as already stated contemplates best judgment assessment and estimate of turnover for levying tax if the assessing authority is satisfied that the prices charged by the dealer are abnormally low when compared to the prevailing market prices. The expression 'abnormally low' is also not defined in the Act. Such a vague and uncertain provision is capable of being interpreted by each assessing authority according to his whims and fancies. While a particular authority may hold that variation of prices by 50 per cent as abnormally low, another authority may say even variation of prices by 10 per cent is abnormally low.'
The court then referred to the statement showing the selling price of idly in the hotels situated in the twin cities and then declared the aforesaid provisions of the Act as ultra vires and said :
'We also declare that Section 2(1)(s)(ii) and Section 14-B of the Andhra Pradesh General Sales Tax Act, 1957, as incorporated by the Amendment Act 18 of 1985, must be read down by not giving effect to the said provisions until and unless the Legislature prescribes guidelines for exercising the power conferred thereunder and defines the expressions 'prevailing market prices' and 'abnormally low' occurring in Section 14-B of the Act. We, however, make it clear that as and when the Legislature chooses to define the said two expressions and indicate the method and manner of determination of turnover with reference to the prevailing market prices, Section 14-B of the Act can be enforced from such date.'
It will therefore be clear that so far as provisions of Section 14-B of the aforesaid Act are concerned, they were struck down primarily on the ground that no guidelines were prescribed by the Legislature for exercising discretion conferred upon the assessing authority. In the instant case it will appear that not only Sub-section (4-A) of Section 10 of the State Act was inserted with effect from April 1, 1990, but the guidelines were provided in Rule 30-A of the Rules and a perusal of the guidelines will show that in the aforesaid guidelines it has been provided what shall be the market price and the assessing authority shall compare the prevailing market price in the case of manufacturers with the prices being charged by the manufacturers, in the case of wholesaler with the prices being charged by the wholesaler and in the case of retailers with the prices being charged by the retailers. It will further appear that if according to the practice prevailing in the trade if any kind of discount is allowed at the time of sale such discount shall also be kept in view while prevailing market price. It can therefore not be said that no guidelines have been prescribed and there are no guidelines to arrive at a prevailing market price for making best judgment assessment. We are therefore of the opinion that the provisions of Section 10(4-A) of the State Act as well as Rule 30-A of the Rules cannot be said to be arbitrary or unreasonable so as to suffer from the vice of arbitrariness under Article 14 of the Constitution of India. It can be said that the provisions have been incorporated to arrive at a real sale price of the goods sold to facilitate the working of the provisions of the State Act. They contain the procedure to compute the turnover of the assessee for the purposes of assessment under the provisions of the State Act. Under Section 5 of the State Act read with Rule 15 of the Rules, the tax shall be payable at the first point in the series of sale by successive dealers. So for as washing machines and television sets are concerned, they are taxable at the first point. The investment company as well as the company are manufacturers of washing machines and television sets. Whether as held by the Sales Tax Tribunal they are wholesaler or not, we express no opinion and it will be for the appellate authority to decide whether they or any of them was only manufacturer or wholesaler and whether in their case prevailing market price is to be of manufacturer or wholesaler. We have already given the facts of this case in the earlier part of this order and we shall not like to say any further as it may prejudice the case of either party when the authorities under the Act decide the matter. As said earlier, the difference of the price charged by the investment company and the VIL was about 35 per cent and the assessing authority came to the conclusion that the real market price was the price which was charged by VIL, and in the accounts of the investment company the price of goods has been shown lesser only with a view to evade payment of tax and it has given rise to arrive at such a conclusion. Whether those conclusions are correct or not, it is not for this Court to say in its extraordinary writ jurisdiction and it is for the various forums provided under the State Act, such as the appellate authority, Appellate Tribunal and at 'any rate it can be said that the assessing authority, came to the conclusion that the dealer in his account books has shown sale/sales at a lesser price than the prevailing market price. It may also be stated that the VIL sold the television sets during the period in question at a higher price. The earlier law that it is open to everyone to so arrange his affairs as to reduce the brunt of taxation to the minimum and such a process does not constitute tax evasion has not been approved by the Supreme Court in the case of McDowell and Company Ltd. v. Commercial Tax Officer [1985] 59 STC 277 ; (1985) 3 SCC 230. The court said that colourable measures are discouraged. Chinnappa Reddy, J., who gave concurring judgment concurring with R.N. Misra, J. who gave the main judgment on his behalf as well as on behalf of Y.V. Chandrachud, C.J. as well as D.A. Desai and Venkataramiah, JJ. said in para 17 that (at page 286 of STC):
'We think that time has come for us to depart from the Westminster [1936] AC 1 principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah, J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare State like ours. Next there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, direct causing inflation. Then there is 'the large hidden loss' to the community (as pointed out by Master Wheatcraft in 18 Modern Law Review 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on one side and the tax-gatherer and his perhaps not so skilful, advisers on the other side. Then again there is the sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it. 'Last but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless, good citizens from those of the 'artful dodgers'. It may indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said 'taxes are what we pay for civilized society. I like to pay taxes. With them I buy civilizations.' But, surely, it is high time for the judiciary in India too to part its ways from the principle of Westminster [1936] AC 1 and the alluring logic of tax avoidance. We now live in a welfare State whose financial needs, if hacked by the law, have to be respected and met. We must recognise that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that it stands on no less moral plane than honest payment of taxation. In our view, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. A hint of this approach is to be found in the judgment of Desai, J. in Wood Polymer Ltd. v. Bengal Hotels Limited [1970] 40 Comp Gas 597 where the learned Judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax.'
The court again in para 18 (at page 286 of STC) of the judgment said that :
'It is neither fair nor desirable to expect the Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation (sic as) was done in Ramsay [1982] AC 300, Burmah Oil (1982) Simon's TC 30 and Dawson [1984] 1 All ER 530, to expose the devices for what they really are and to refuse to give judicial benediction.'
It will therefore be clear from the judgment of the Apex Court that proper way to construe taxing statute is whether or not a transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. The provisions of Sub-section (4-A) of Section 10 as well as Rule 30-A of the Rules were introduced to see that a dealer is not able to avoid tax and that they were introduced to facilitate the working of the department. In the present case, as said by the assessing authority, the prices at which the VIL sold washing machines was about 35 per cent more than the price charged by the investment company. The investment company sold it to the VIL, a concern of none-else than the family members of the Directors of the investment company or the company. If the sale is such of the goods on which the sales tax is paid on first point the goods are sold and sales are shown in the accounts at a lower price than the prevailing market prices and the difference in the price charged on the first sale in the series of sales and subsequent sales inasmuch as 35 per cent and tax is only paid on the first point of sale and that too to a concern of which the directors are family members of the first company, then if the assessing authority on the material comes to the conclusion that the sales were shown in the accounts at a lower price than the prevailing market price which is determined in accordance with the guidelines, in our opinion, it cannot be said that the provisions of Sub-section (4-A) of Section 10 as well as Rule 30-A of the Rules are discriminatory, arbitrary, unreasonable or violative of Article 14 of the Constitution of India. In our opinion, the challenge to Subsection (4-A) of Section 10 of the State Act as well as Rule 30-A of the Rules does not survive and we hold that they are valid piece of legislation.
13. So far as the contention of the learned counsel for the petitioner that the provisions have not been validly applied, we have already said that it is to be examined by the authorities provided under the State Act, i.e., the appellate authority, Appellate Tribunal or in revision, and we would not like to go into this question. We would not like to go into the question whether the penalty awarded is invalid, as it is again a matter to be examined by the hierarchy of the authorities under the State Act.
14. Last and not the least contention of the learned counsel for the petitioners was that the petitioners were required to deposit 20 per cent tax and without their depositing the said tax, appeal could not be filed and the stay application filed by the petitioners was dismissed, under Section 11(3) of the State Act by the Additional Commissioner, Anti-evasion, Commercial Taxes, Jaipur. Under the proviso to Sub-section (3) of Section 11 of the State Act where an assessee has presented an appeal under Section 13 of the State Act, the Commissioner or a Deputy Commissioner (Administration) subject to such limits and conditions, as may be prescribed in this behalf, may on an application in writing from the assessee, stay the recovery of the disputed amount of tax or any part thereof, during the pendency of the appeal, if the assessee furnishes sufficient security to his satisfaction in such form and in such manner as may be prescribed, but before the application can be disposed of it is incumbent upon the concerned authority to give and record reasons. Therefore, it was necessary for the Additional Commissioner to record reasons to come to the conclusion that there was no prima facie case in favour of the assessee. No doubt, it depends upon the facts and circumstances of the case and in a given case the court may despite the existence of alternative remedy of appeal, may interfere under Article 226 of the Constitution, but a perusal of Section 13 of the State Act under which the first appeal will lie will show that no appeal can be entertained under Sub-section (1) of Section 13 unless it is accompanied by a satisfactory proof of the payment of tax or other amounts admitted by the appellant to be due from him or such instalment thereof as might have become payable or twenty per cent of the tax or other amounts assessed, whichever is higher as the case may be. Therefore, appeal can be entertained even if there is proof of amount of tax or other amounts admitted by the appellant to be due from him or twenty per cent of the tax or other amount assessed, whichever is higher, as the case may be.
15. Consequently, we find no merit in these writ petitions. They are hereby dismissed with no order as to costs.