J.M.PANCHAL J. - (1.) BY filing these petitions under article 226 of the Constitution, the petitioner, i. e. , M/s. Asian Paints India Limited, has prayed to set aside four reassessment orders dated February 16, 2006 passed by the respondent, i. e. , the Deputy Commissioner of Sales Tax, Circle-2 (6), Ahmedabad, under section 44 of the Gujarat Sales Tax Act, 1969 ("the State Act", for short) by which self-explanatory provisional assessment orders dated July 26, 1999, passed under section 41-B of the State Act are confirmed and it is directed that the amounts representing branch transfers, indicated in the orders be added in the total turnover of the petitioner and the tax be levied thereon in accordance with law. The petitioner has further prayed to quash and set aside the order dated April 5, 2006, passed by the Assistant Commissioner of Sales Tax, Division-21, Ahmedabad, by which Current Account No. 28 being operated by the petitioner with the State Bank of India, Shah-e-alam Branch, Ahmedabad, is attached for non-payment of Rs. 7,48,94,727 recoverable under the above-referred four reassessment orders.
(2.) IN order to appreciate the points raised by the petitioner in these petitions, it is necessary to notice the facts emerging from the record of the case, which are as under : (1) The petitioner is a company registered under the provisions of the Companies Act, 1956. It manufactures industrial paints as well as household paints and allied products. In the State of Gujarat, the petitioner has its manufacturing plant at Ankleshwar and branches at Narol, Sarkhej, Surat, Rajkot and Halol. The head office of the petitioner - company is situated at Mumbai. The petitioner is registered as a dealer, both under the State Act and the Central Sales Tax Act, 1956 ("the Central Act", for short ). The old number of its certificate of registration was 20105551-GUJ-1-J410, whereas the new number is 0750001437. The Commissioner of Sales Tax has permitted the petitioner to furnish a consolidated return relating to all the places of business of the petitioner in the State of Gujarat at Ahmedabad, with reference to the above-numbered certificate of registration. (2) The Sales Tax Department has created a special squad called flying squad for the purpose of detecting evasion of tax. The Sales Tax Officer of Flying Squad, Unit-I, discharging duties in the office of the Commissioner of Sales Tax, Ahmedabad, conducted a checking of manufacturing plant of the petitioner located at Ankleshwar on February 4, 1999. During the course of checking, he found that three transactions of branch transfers effected by the petitioner were shady in nature. He, therefore, seized certain documents available at that time relating to those branch transfers. Thereafter, by a notice dated March 16, 1999, he called upon the petitioner to produce original documents, accounts, etc. , relating to branch transfers. The petitioner gave reply dated April 4, 1999, emphasising that the transfers of goods to its branch offices were genuine. The Sales Tax Officer again wrote a letter dated June 4, 1999, calling upon the petitioner to produce relevant documents for his perusal so as to enable him to ascertain the true nature of branch transactions effected by the petitioner. However, the petitioner did not produce the relevant documents such as original accounts, excise registers maintained at different depots of the petitioner, stock registers, the original permission sanctioning branch transfers and other collateral material for the perusal of the Sales Tax Officer, but offered further explanation by letter dated July 2, 1999. As material documents and accounts were not furnished by the petitioner, it was not possible for the Sales Tax Officer to ascertain the correctness of the branch transfers effected by the petitioner. Therefore, he disallowed the transactions of the petitioner of industrial paints effected by the petitioner to different branches from manufacturing unit of the petitioner located at Ankleshwar, which were mentioned by the petitioner in its letter dated March 5, 1999, for the assessment years 1997-98 and 1998-99. The competent officer had reason to believe that the petitioner had evaded the payment of tax. Therefore, after taking into account all the relevant materials gathered and after giving the petitioner a reasonable opportunity of being heard, the Sales Tax Officer assessed the petitioner provisionally to the best of his judgment under section 41-B of the State Act vide orders dated July 26, 1999, and held that the amounts of following sales as indicated below were liable to tax. ----------------------------------------------------------------------------------------- Year Amt. under the State Act Amt. under the Central Act Total ----------------------------------------------------------------------------------------- 1997-98 Rs. 2,28,86,300 Rs. 5,23,00,657 Rs. 7,51,86,957 ----------------------------------------------------------------------------------------- 1998-99 Rs. 2,56,06,703 Rs. 2,10,04,519 Rs. 4,66,11,222 ----------------------------------------------------------------------------------------- (3) The competent officer thereafter determined the liability of the petitioner to pay the tax with penalty and interest as under : -------------------------------------------------------------------- Year Amt. under the State Act Amt. under the Central Act -------------------------------------------------------------------- 1997-98 Rs. 79,30,105 Rs. 1,49,05,686 -------------------------------------------------------------------- 1998-99 Rs. 99,09,794 Rs. 74,04,093 -------------------------------------------------------------------- (4) It may be mentioned that the provisional assessment orders dated July 26, 1999, under section 41-B of the State Act were passed in respect of Ankleshwar unit of the petitioner with reference to the old certificate of registration No. 20105551-GUJ-1-J410. (5) Though the petitioner was permitted to furnish consolidated return relating to all the places of its business in the State of Gujarat at Ahmedabad and was fully aware of the fact that it was subject to the appellate jurisdiction of the Deputy Commissioner of Sales Tax, Circle-2 (6), Ahmedabad, the petitioner invoked the appellate jurisdiction of the Assistant Commissioner of Sales Tax (Appeal), Surat, on August 18, 1999, and filed appeals against the provisional assessment orders dated July 26, 1999. Before filing the appeals, the petitioner had not paid the amount of tax with penalty and interest and therefore, the appeals were admitted on condition of the petitioner depositing a total sum of rupees one crore. The petitioner had deposited the said amount by way of challans on different dates as indicated in the application dated May 29, 2002, submitted by the petitioner. The appellate authority took into consideration the points raised by the petitioner for its consideration. The contention that the provisional assessment orders were liable to be set aside as they were contrary to the principles of natural justice was rejected by the appellate authority holding that before passing the assessment orders, show cause notice was served upon the petitioner and the petitioner was given opportunity of hearing. Similarly, the contention that the assessing officer was not justified in not accepting the branch transfers effected from Ankleshwar unit of the petitioner was rejected by the appellate authority holding that on the basis of seized documents, the assessing officer was justified in coming to the conclusion that movement of goods from Ankleshwar plant had ended in Gujarat State itself. The contention that the assessing officer was not justified in holding that the branch transfers were effected pursuant to the existing contract of sales and were therefore sales, was rejected by holding that the assessing officer was justified in coming to the said conclusion, more particularly, when the petitioner had failed to produce stock transfer memos, 23-D registers, transport receipts of Ankleshwar Depot, test certificates, etc. In view of the above-referred and other findings, the appellate authority rejected the appeals by reasoned order dated February 2, 2000. (6) Against the order dated February 2, 2000, passed by the Assistant Commissioner of Sales Tax (Appeal) 8, Surat, rejecting the appeals, the petitioner preferred second appeals before the Gujarat State Sales Tax Tribunal. Before filing the appeals, the petitioner had submitted regular consolidated return relating to all the places of business of the petitioner in the State of Gujarat for assessment years 1997-98 and 1998-99 and also claimed benefits relating to the branch transfers effected from Ankleshwar unit, which were not accepted and treated as sales while passing the provisional assessment orders under section 41-B of the State Act. To the returns, separate sheets were annexed but it was not mentioned therein by the petitioner that branch transfers effected from Ankleshwar unit were not accepted but were treated as sales or that Sales Tax Officer had passed provisional assessment orders dated July 26, 1999, under section 41-B of the State Act against the petitioner or that the petitioner had invoked the appellate jurisdiction of the Assistant Commissioner of Sales Tax (Appeal) 8, Surat, against the orders passed under section 41-B of the State Act or that pursuant to the conditional stay order, the petitioner had deposited in all a sum of rupees one crore or that the appeals were dismissed by an order dated February 2, 2000 and got the regular assessment completed under section 41 (3) of the State Act for assessment year 1997-98, vide order dated June 30, 2001, and for assessment year 1998-99 vide order dated January 31, 2002. (7) When the appeals filed before the Gujarat State Sales Tax Tribunal were taken up for hearing by the Tribunal, the petitioner produced regular assessment orders passed under section 41 (3) of the State Act for the relevant assessment years for consideration of the Tribunal. The Tribunal was of the view that the provisional assessment orders had merged into the regular assessment orders made under section 41 (3) of the State Act and therefore disposed of the second appeals filed by the petitioner by order dated March 11, 2002, as having become infructuous. (8) Thereafter, the petitioner submitted an application dated May 29, 2002, stating that against the orders made under section 41-B of the Act, the petitioner had deposited a sum of rupees one crore and therefore, the regular assessment orders should be rectified and excess amount should be refunded to it with interest under section 54 of the State Act. While processing the said application, the Sales Tax Officer for the first time learnt that the provisional assessment orders under section 41-B of the State Act were passed against the petitioner and that the petitioner had deposited a sum of rupees one crore as condition precedent for entertaining appeals by the first appellate authority and that the second appeals preferred before the Tribunal were disposed of as having become infructuous. On learning these material facts, the Sales Tax Officer was of the view that the petitioner had intentionally concealed the important facts that the provisional assessment orders were made against it and it had not claimed refund of rupees one crore with a bad intention and if the relevant facts had been brought to the notice of the assessing officer during the course of regular assessment proceedings, the regular assessment would not have been completed under section 41 (3) of the State Act, as a result of which, a good case was made out for exercise of powers under section 44 of the State Act. However, it was noticed by the Sales Tax Officer that regular assessment orders passed under section 41 (3) of the State Act were also revisable under section 67 of the State Act by the Commissioner of Sales Tax and if the Commissioner of Sales Tax was inclined to exercise his powers under section 67 of the State Act, then there was no point in his exercising powers under section 44 of the State Act. Under the circumstances, the Sales Tax Officer addressed a detailed letter dated January 31, 2003, to the Commissioner of Sales Tax and sought his guidance whether action should be taken against the petitioner under section 44 or section 67 or section 72 of the State Act. The Commissioner of Sales Tax informed the Sales Tax Officer on February 14, 2003, through administrative officer discharging duties in the office of the Deputy Commissioner of Sales Tax, Division-2, Ahmedabad, that action against the petitioner should be taken under section 44 of the State Act. (9) After abovementioned clarification was made by the Commissioner of Sales Tax, the respondent issued notice dated February 18, 2003, calling upon the petitioner to show cause as to why the amounts covered by transactions of branch transfers accepted during the course of regular assessments be not subjected to tax. The petitioner gave reply and was afforded sufficient opportunity of being heard. The respondent, by four different orders dated February 16, 2006, has upheld the self-explanatory provisional assessment orders dated July 26, 1999, passed under section 41-B of the State Act and after disallowing the amounts representing the branch transfers, as indicated in the orders, has directed to add the said amounts in total turnover of the petitioner and to recover tax thereon in accordance with law. Following the orders of the respondent under section 44 of the State Act, the liability of the petitioner to pay the amount of tax with penalty and interest is determined at Rs. 7,48,94,727. The petitioner did not make payment of the said amount though called upon to do so and therefore, by an order dated April 5, 2006, Current Account No. 28 being operated by the petitioner with the State Bank of India, Shah-e-Alam branch, Ahmedabad, is attached. It is the case of the petitioner that during the course of regular assessments for the assessment years 1997-98 and 1998-99, the petitioner had produced original "f" forms indicating branch transfers which were scrutinised and accepted after which regular assessments were completed under section 41 (3) of the State Act and therefore, reassessment orders under section 44 of the State Act which are passed without jurisdiction are liable to be set aside in view of the decision of the Supreme Court in Ashok Leyland Ltd. v. State of Tamil Nadu reported in [2004] 134 STC 473. According to the petitioner, the assessment notices were issued because of change of opinion on the part of the respondent which has totally invalidated the reassessment orders and therefore, those orders should be set aside. The petitioner has averred that though the reassessment orders are purportedly passed on February 16, 2006, they could not have been passed before February 19, 2006, as both, the petitioner's officer and the tax consultant, had attended the office of the respondent on February 17, 2006, and February 18, 2006, whereas, the verification of the records had taken place on February 15, February 16 and February 17, 2006, and written submissions were handed over to the respondent on February 18, 2006, and as the orders in fact passed on February 19, 2006, are ante-dated, the same should be set aside. The petitioner has stated in the petitions that the respondent had issued reassessment notices at the behest and under the directions of the higher authority, namely, the Joint Commissioner of Sales Tax, and therefore, initiation of reassessment proceedings should be regarded as illegal and without jurisdiction. The petitioners has averred that the respondent did not decide the petitioner's objections to the assessment notices by a speaking order as required by the Supreme Court in the decision rendered in the case of G. K. N. Driveshafts (India) Ltd. v. Income-tax Officer reported in [2003] 259 ITR 19 and therefore, the respondent could not have passed the reassessment orders. The petitioner has asserted in paragraph 14 of the petition that though the appeals lie against the reassessment orders, the petitioner is entitled to invoke extraordinary jurisdiction of this court under article 226 of the Constitution as reassessment notices were issued without jurisdiction and the respondent had failed to decide the petitioner's objections to the assessment notices by a speaking order whereas the assessment orders have been passed in total disregard of the decision of the Supreme Court in Ashok Leyland Ltd. v. State of Tamil Nadu [2004] 134 STC 473. Under the circumstances, the petitioner has filed the instant petitions and claimed reliefs to which reference is made earlier.
(3.) ON service of notice, Mr. Anilkumar Harilal Thakker, who is now designated as Deputy Commissioner of Commercial Tax and who was Deputy Commissioner of Sales Tax, has filed an affidavit-in-reply controverting the averments made in the petition. It is stated in the reply that alternative effective remedy of filing of appeals against the reassessment orders in terms of the statute is available and therefore, the petitions should not be entertained and should be dismissed. After narrating the facts which led to passing of four provisional assessment orders under section 41-B of the Act, it is mentioned in the reply that admittedly, the goods were manufactured at Ankleshwar, within the State of Gujarat, but they were purportedly shown as branch transfers to Maharashtra and other States though the goods were manufactured pursuant to confirmed orders of different parties as per their specifications and therefore, in view of illegal and malicious tax evasion modus operandi adopted by the petitioner, the petitioner, who has committed fraud on the revenue, is not entitled to the reliefs claimed in the petitions. Elaborating the tax evasion method adopted by the petitioner, it is explained in the reply that first Mumbai branch of the petitioner received an order from the Reliance Industries, Jamnagar and then Mumbai branch instructed the Ankleshwar factory about having received the said order and specifically instructed the Ankleshwar factory to apply all the available resources so that the goods required by Reliance Industries at Jamnagar could be delivered before the end of January 1999, after which what were actually local sales were effected purportedly by branch transfers and from Mumbai the goods were delivered to the Reliance Industries at Jamnagar by paying four per cent Central sales tax in Maharashtra and evading deliberately and intentionally the payment of 11 per cent tax in the State of Gujarat. It is stated in the reply that the branch transfers do not attract any tax liability and if the sales had been directly made from Ankleshwar to Jamnagar, the State of Gujarat would have received 15 per cent local sales tax, payment of which was evaded by the petitioner.;