Leeladhar Biyani and Sons Vs. Commercial Taxes Officer, - Court Judgment

Excerpt:
1. both these applications filed under section 8(1) of the rajasthan taxation tribunal act, 1995, and directed against the provisional assessment orders dated february 1, 1996 for the assessment years 1994-95 and 1995-96 passed under sections 7b, 16(1)(i), 11-b(f) of the rajasthan sales tax act, 1954 (for short, "the act") arise in the facts and circumstances to be stated as hereunder.2. since both these applications involve the common questions of law and fact they are being disposed of by a common judgment.3. for the sake of convenience we take up for consideration the application no. 44 of 1996 pertaining to the assessment year 1994-95.it has been alleged that the applicant-firm carries on its business of refining kalmi shora at hanumangarh. it refines this kalmi shora into a.....

Judgment:
1. Both these applications filed under Section 8(1) of the Rajasthan Taxation Tribunal Act, 1995, and directed against the provisional assessment orders dated February 1, 1996 for the assessment years 1994-95 and 1995-96 passed under sections 7B, 16(1)(i), 11-B(f) of the Rajasthan Sales Tax Act, 1954 (for short, "the Act") arise in the facts and circumstances to be stated as hereunder.

2. Since both these applications involve the common questions of law and fact they are being disposed of by a common judgment.

3. For the sake of convenience we take up for consideration the application No. 44 of 1996 pertaining to the assessment year 1994-95.

It has been alleged that the applicant-firm carries on its business of refining kalmi shora at Hanumangarh. It refines this kalmi shora into a substance called salt peter and thereafter sells it off. One of its partners by name Shri Kamal Prakash Biyani obtained from the Mining Department a mining licence on February 28, 1985 for extracting from the mine the Kalmi Shora for its being refined as salt peter. This mining lease, though in the name of the partner Shri Kamal Prakash Biyani, is being operated by the applicant-firm. All its accounts are being kept by the applicant-firm. The transactions concerning it are duly entered and accounted for in the books of account of the firm. It had never purchased kalmi shora from its partner Shri Kamal Prakash Biyani. The regular assessments of the applicant-firm were being regularly done and finalised by the regular assessing authorities on the basis of all these facts.

4. A survey of the business premises of the applicant-firm was conducted on December 14, 1995 by the non-applicant, the Commercial Taxes Officer, Anti-Evasion, Sriganganagar, who issued to the applicant-firm a notice to show cause as to why the kalmi shora obtained from the mine the lease of which stood in the name of Shri Kamal Prakash Biyani could not be taken to be a transaction of purchase by the applicant-firm from Shri Kamal Prakash Biyani and purchase tax be levied thereon. This notice dated January 3, 1996 was replied to on behalf of the applicant-firm on January 25, 1996. The position taken up by the applicant-firm was that the mine is being operated and worked by the applicant-firm itself of which Shri Kamal Prakash Biyani is a partner. Applicant-firm is responsible/liable for all the mining operations. No purchase tax is liable to be paid for the reason that no transactions of sale or purchase took place between the applicant-firm and its partner Shri Kamal Prakash Biyani. Shri Biyani does not operate the mine in his individual capacity. In spite of this the non-applicant on February 1, 1996 made a provisional assessment order, thereby creating a huge demand of Rs. 9,95,505 including penalty of Rs. 6,01,506. In the case of application No. 45 of 1996 for the assessment year 1995-96 the amount so demanded is Rs. 1,66,671 including the penalty of Rs. 1,06,847. Demand notices were issued. In the counter filed on behalf of the non-applicant it has been admitted that Shri Kamal Prakash Biyani is a partner of the applicant-firm. The position taken up is that since Shri Biyani holds the licence in his name it shall be considered that the mining operations are being done by him in his individual capacity and the Kalmi Shora extracted from the mine is sold by him to the applicant-firm. Hence purchase tax is payable. The provisional assessment orders dated February 1, 1996 and the demand notices issued thereafter are valid and proper.

5. In the rejoinder filed on behalf of the applicant-firm there is no allegation which deserves our serious consideration. The allegations contained in the application have been reiterated.

6. We have heard the arguments and examined the material on record. In the course of arguments it transpired that during the pendency of the applications the final assessments have been made. Thus provisional assessment orders dated February 1, 1996 have merged into the final assessment orders. It also transpired that the entire demand made on account of tax and interest has been deleted. What remains is the amount of penalty in both the applications.

7. Shri Sharma contends before us that once regular final assessment orders have been made and the position taken up by the applicant-firm has been accepted as correct the penalty could not be levied on it. He also contends that once regular assessments were made and the facts as alleged by the applicant-firm were taken as correct it could not be said that it was a case of avoidance or evasion of tax. In the absence of a case of avoidance or evasion of tax the non-applicant could not acquire the jurisdiction over the matter. He has also placed reliance upon the decision of this Tribunal in Application No. 237 of 1997 [D.K.Woollen Industries Private Limited v. Additional Commissioner (Anti-Evasion), Commercial Taxes, Rajasthan], wherein this Tribunal on December 19, 1997 Reported in [2000] 117 STC 96 came to the conclusion that in a case where the question of interpretation of a notification or circular is involved and there is a difference of opinion with regard to the interpretation between the regular assessing authority and the Commercial Taxes Officer (Anti-Evasion) it could not be said to be a case of evasion or avoidance of tax. In that case the question of interpretation of the notification dated March 23, 1989 was involved.

The regular assessments were completed. The Commercial Taxes Officer (Anti-Evasion) took a view different from the one taken by the regular assessing authority. It was held that such a case does not fall into the category of evasion of tax or concealment of liability to tax.

8. We have considered these contentions, In the present case before us the regular assessments were being made by the regular assessing authority on the basis of the factual position put up before him by the applicant-firm. Not only this the impugned provisional assessment orders dated February 1, 1996 have merged into final assessment orders wherein the factual position as alleged by the applicant-firm has been taken to be correct. It goes to show that it was the case neither of evasion of tax nor of avoidance of tax and nor of concealment of any liability to tax.

9. In these circumstances mentioned in the preceding paragraphs the question is whether the penalty which still remains can be allowed to stand. This question is to be answered in the negative. Once there is no tax liability the question of penalty being imposed did not arise.

The very imposition of penalty in these circumstances was bad. Once the tax liability is gone the penalty falls to the ground. But we would like to say that the provisional assessment orders could very well be challenged before the Deputy Commissioner (Appeals) wherein the question raised before us could be agitated and relief sought. In the present circumstances we do not think it proper to drive the applicant-firm to file the appeals before the Deputy Commissioner (Appeals).

10. We allow the applications and set aside the demand notices with regard to the penalty amounts. We make no order as to costs.