# [1977] 1 S.C.R. 716

- **Citation:** [1977] 1 S.C.R. 716
- **Court:** Supreme Court of India
- **Decided:** 1977
- **Case number:** Civil Appeal Nos. 415 and 962 of 1976
- **Bench:** H. R. Khanna, N. L. Untwaua, Jaswant S!Xgh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1977-1-s-c-r-716-6952
- **Pages:** 12

## Headnote

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Pun;ab General Sales Tax Act (P1111j,,b Act 46 of 1948), s. 11 (2)-Notice
1111dcr-Wiletlier should be issued within a particulnr period.
The appellant is an inter-State dealer.
In respect of all the eight •quarters of
the years 1969-70 and 1970-71, the appellant filed returns in time.
In respect
of the four quarters of 1969-70 the Assessing Authority did not accept the returns
and issued notices under s. 11(2) of the Punjab General Sales Tax Act. 1948,
requiring the appellant to produce evidence in support of the returns.
Since
the question of the appellant's liability 10 pay central sales tax for an earlier
assessment year (1962-63) was pending before the High Conrt. the matter was
not pursued by the Assessing Authority ~end was kept pending.
After the High
Court gave its decision against the appellant, and while the matter was pending
appeal in this Court, the Assessing Auth3rity took up the matter of assessment
for the year 1969-70 by the issue of nolice in September 1975. The appellant
thereupon filed writ petitions in the High Court to quash the proceedings.
In
respect of the four quarters of the year 1970·71 notices under s. 11(2) were
issued. by the Assessing Authority on Jarnary 30, 1976, and the appellant filed
writ petitions in the High Court for quashing those proceedings also.
All the
writ petitions were dismissed by the High Court.
In appeal to this Court, in view of the decision of this Court in appeal. the
appellant did not agitate the question of its tax liability under the Central Sales
Tax Act. but contended that, (i) the Assessing Authority could not assess the
tax payable by the appellant on the expiry of the period of 5 years from the
end of each quarter-in relation to the year 1970-71 the same contention was
raised even though notice under s. 11 (2) was within time apropns the last
quarter; and (2) the notice under s. 11 (2) and assessment under s. 11 (3) had ·
to be completed within a reasonable time.
Dismissing the appeals,
HELD : (1) Under s. 10 of the Act read along with Rules framed thereunder, the return has to be filed by a dealer for each quarter by the last day
of the following month of the quarter and admitted sales tax as per the return
has also got to be deposited.
Where a registered dealer has filed the return
the Assessing Authority can accept the return as correct and pass the assessment
order under s. 11 (I). If the Assessing Authority does not accept the return
he may issue notice under s. 11 (2) asking the asscssee to pr_oduce evidence in
support of the return. In such a case the, Assessing Authority shall hear the
evidence produced by the dealer on th<: day specified in the notice issued under
sub-s. (2). or adjourn the hearing to some other day and hear the evidence
produced by the dealer on the adjourned day or days. or may require the dealer
to produce furthet· evidence on specified points on the adjourned day, or days.
The Assessing Authority should under!;. 11(3), on the day on which the hearing
of the evidence is completed or 'as soon afterwa·rds as may be', assess the
amount of tax due from the dealer, thnt is, pass the order of assessment
[720 E-H]
Section 11 ( 4) is attracted in a case where a dealer ha vine furnished a return
fails to comply with the terms of a notice issued under s. 11 (1).
In such a case,
the Assessing Authority has to take some effective steps, such as issuance of a
notice to the assessee, within 5 year~; of the expiry of the period COP.cerned.
intimating to him that he is procecdhg to assess the tax due from the dealer
to the best of his judgment. Under s. 11 (5), on failure of a dealer to furnish
a return in respect of any period by the prescribed date the Assessing Authority,
after giving the dealer a reasonable 3pportunity of being heard can. within 5
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INDIAN ALUMINIUM V. E. & T. OFFICER
717
years after the expiry of the concerned pefiod proceed to assess to t~e best
of his judgment the amount of tax, if any, d~e fr!Jm the

## Text

716
A
INDIAN ALUMINIUM CABLES LTD. & ANR.
\ ',
EXCISE AND TAXATION OFFICER & ANR.
September L:3, 1976
B
[H. R. KHANNA, N. L. UNTWAUA AND JASWANT S!XGH, JJ.]
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Pun;ab General Sales Tax Act (P1111j,,b Act 46 of 1948), s. 11 (2)-Notice
1111dcr-Wiletlier should be issued within a particulnr period.
The appellant is an inter-State dealer.
In respect of all the eight •quarters of
the years 1969-70 and 1970-71, the appellant filed returns in time.
In respect
of the four quarters of 1969-70 the Assessing Authority did not accept the returns
and issued notices under s. 11(2) of the Punjab General Sales Tax Act. 1948,
requiring the appellant to produce evidence in support of the returns.
Since
the question of the appellant's liability 10 pay central sales tax for an earlier
assessment year (1962-63) was pending before the High Conrt. the matter was
not pursued by the Assessing Authority ~end was kept pending.
After the High
Court gave its decision against the appellant, and while the matter was pending
appeal in this Court, the Assessing Auth3rity took up the matter of assessment
for the year 1969-70 by the issue of nolice in September 1975. The appellant
thereupon filed writ petitions in the High Court to quash the proceedings.
In
respect of the four quarters of the year 1970·71 notices under s. 11(2) were
issued. by the Assessing Authority on Jarnary 30, 1976, and the appellant filed
writ petitions in the High Court for quashing those proceedings also.
All the
writ petitions were dismissed by the High Court.
In appeal to this Court, in view of the decision of this Court in appeal. the
appellant did not agitate the question of its tax liability under the Central Sales
Tax Act. but contended that, (i) the Assessing Authority could not assess the
tax payable by the appellant on the expiry of the period of 5 years from the
end of each quarter-in relation to the year 1970-71 the same contention was
raised even though notice under s. 11 (2) was within time apropns the last
quarter; and (2) the notice under s. 11 (2) and assessment under s. 11 (3) had ·
to be completed within a reasonable time.
Dismissing the appeals,
HELD : (1) Under s. 10 of the Act read along with Rules framed thereunder, the return has to be filed by a dealer for each quarter by the last day
of the following month of the quarter and admitted sales tax as per the return
has also got to be deposited.
Where a registered dealer has filed the return
the Assessing Authority can accept the return as correct and pass the assessment
order under s. 11 (I). If the Assessing Authority does not accept the return
he may issue notice under s. 11 (2) asking the asscssee to pr_oduce evidence in
support of the return. In such a case the, Assessing Authority shall hear the
evidence produced by the dealer on th<: day specified in the notice issued under
sub-s. (2). or adjourn the hearing to some other day and hear the evidence
produced by the dealer on the adjourned day or days. or may require the dealer
to produce furthet· evidence on specified points on the adjourned day, or days.
The Assessing Authority should under!;. 11(3), on the day on which the hearing
of the evidence is completed or 'as soon afterwa·rds as may be', assess the
amount of tax due from the dealer, thnt is, pass the order of assessment
[720 E-H]
Section 11 ( 4) is attracted in a case where a dealer ha vine furnished a return
fails to comply with the terms of a notice issued under s. 11 (1).
In such a case,
the Assessing Authority has to take some effective steps, such as issuance of a
notice to the assessee, within 5 year~; of the expiry of the period COP.cerned.
intimating to him that he is procecdhg to assess the tax due from the dealer
to the best of his judgment. Under s. 11 (5), on failure of a dealer to furnish
a return in respect of any period by the prescribed date the Assessing Authority,
after giving the dealer a reasonable 3pportunity of being heard can. within 5
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INDIAN ALUMINIUM V. E. & T. OFFICER
717
years after the expiry of the concerned pefiod proceed to assess to t~e best
of his judgment the amount of tax, if any, d~e fr!Jm the dealer. Sub-sectlon (6)
is attracted in the case ef a dealer who, being hable to pay tax under the Act,
had failed to apply for registration. Similar steps as the ones under sub-s. (_5)
are to be taken under sub-s. ( 6) within a period of 5 years after the expuy
of the concerned period. It is thus seen that for taking action under sub-:ss. (4),
( 5) and ( 6) bf s. 11 a time limit of 5 years has been ~ed by the legtsl~ture.
The reason is that best judgment assessments in the circumstances mentioned
in any of the sub-ss. (4), (5) or (6) are fresh proceedings and could .not be
. allo\\-·ed to be taken after the expiry of a. certain reasonable time \vhich the
legislature bas fixed at 5 yeafs. But the legislature advisedly did not fix any
period of time for taking steps or the passing of the assessment order u~er
any of the sub-ss. (1), (2) or (3). Where a dealer files a return the proceeding
under the Act commences and the issue of a notice under s. 11 (2) does not
initiate any fresh proceedings.
A notice under s. 11 (2) requiring !he dealer
to produce evidence can therefore be issued at any time after the filing of the
return. because, when once a return is duly made, the as.sessment could be
made at any time unless the statute prescribes a time limit. The _expectancy
of taling ~tcps V.'ithout any undue dela.y and within a reasonable tin;ie is an
expectancy of prudence, because, where a notice under sub-s. (2) is issued v.·hen
5 years arc about ·to expire and the dealer fails to comply with the terms of
the notice the Assessing Authority may have to proceed to make the best
judgment assessment under sub-s. (4) and he may not be able to do so lf the
period of 5 years had expired by then. [722 A-G]
Bi.resat /louse v. State of Bo1nbay & OtherJ 9 S.T.C. 654, anJ Ranieshwar
Lal Sarup Chand v. U. S. Naurath Excise & Taxation Officer, Assessing .Aut/1Q4
rity, Amritsar and Another 15 S.T.C. 932 overruled.
Ghanshya111das v. Regional Assistant Co1nniissioner of Sales Tax, Nagpur &:
Others 14 S.T·.c. 976. The State of Punjab &: Others v.
T11ra
Chand Lojpat
Rai 19 S.T.C. 493. The State of Punjab and another v. Murlidhar Mahabir
Prasad 21 S.T.C. 29, lt-fadhya Pradesh Industries Ltd. v. State of M(l/iuraslitra
and Others 22 S.T.C. 400 and Madan Lal Arora v. The Excise ant! .Taxation
Officer, Amritsar 12 S.T.C. 387 followed.
(2) The case of Gurbux Singh v. Union of India [1967] 3 · SCR 247 is: not
an authority for the contention of the appellant that the issue of the notice
under s. 11(2) and completion of assessment under s. 11(3) should be within
a reasonable time. In that case it was pointed out that since the legislaturei
had not provided any period of limitation within \\:hich an order v.·a~ to be
made by an Appellate or Revisional Authority, the period of limitation pn:~cribed
in other sections could not be imported for the exercise of such power. It
v.ras not stated in that case that the exercise of the revisional pO\\·er suo nioto
could not be made even after an undue long delay. It was merely found as a
fact in that case that there was_ no undLie delay in the exercise of the power.
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[727 A-D]
[Obiter. The phrase •as soon afterwards as: may be' ins. 11(3) may sugqert
that where assessment order under s. 11 (3) of the Act was passed after uerl.::.:
delay after the completion of the hearing of the evidence prG>duced by the
dealer. the order of assessment may not be valid. But that question does not
ar!se in the present case, because, the appellant has not yet prod.need any
e~·1dence].
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 415 and 962
of 1976.
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(Appeals by Special Leave from the Judgment and Orders dated
2-~-197~ :ind 21-7-1976 of the Punjab & Hacyana High Court in Civil
Wnt Pehhon Nos. 561 and 1961 of .1976 respectively).
H
S. T .. Desai, Talat Ansari and Shri Narain for I. B. Dadachanji, for
the Appellants (in both appeals).
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SUPREME COllRT REPORTS
[ 1977) 1 S.C.R.
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M. C. Bhandare and R. N. Sachthey, for the Respondents (in both
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appea'.s).
The Judgment of the Court was delivered by
UNTWALIA, J.
In these two appeals by special leave a common
question of law falls for our determination, hence, they have been heard
together and are being disposed of by this judgment.
The Indian Aluminium Cables Ltd., appCllant No. 1 in both the
appeals has got its factory at Faridabad in the S~ate of Haryana. It
sells and supplies aluminium cables to several State Electri@ity Undertakings or Boards situated in the various States.
In respect of the
assessment yerar 1962-63, the Company raised a dispute that it was not
liable to pay Central Sales Tax under the Central Sales Tax Act, 1956,
as it claimed to be exempt from inter-State tax on the sales of its prodμcts to the various State Undertaldngs or Boards by rea'son of the
provisions con~ained in section 5 (2) (a) (iv) bf the Punjab General
Sales Tax Act, 1948-hereinafter referred :to as the Act. The Tribunal decided the matter in favour of the assessee Company but the High
Court of Punjab and Haryana answered the Sales Tax Reference made
at the ins~ance of the Revenue against the assessee.
The decision of
the High Court is reported in The State v. Indian Aluminium Cable
Ltd., Faridabad(').
The matter was brought to this Court in appeal
and by a decision given on April 2, 1976 the view of the High Court
was affirmed and it was held that the sales were not exempt from tax
generally within the meaning of section 8(2A) of the Central Act read
with section 5(2) (a) (iv) of the Punjab Act.
The decision of this
Court is reported in Indian Aluminium Cables Ltd. and another v.
State of Haryan(l (').
The period of assessment concening the appellant is each quarter
of the year.
In respect of all the 8 quarters of the years 1969-70 and
1970-71, Returns were filed by the Company in time, i.e. on or before
the last day of the month following the quarter concerned.
The
Assessing Authority did not accept the Returns and issued notices on
May 22, 1970 under section 11 (2) of the Act in respect of ~he 4
quarters of 1969-70 requiring the as:;essee Company to produce evidence in support of the Returns.
Since the question of assessee's liability to pay Central Sales Tax was pending in reference before the
High Court the matter was not pursu1!d by the Assessing Authority and
as per the request of the assessee it was kept pending.
Even though
the High Court decision was given on November 5, 1973, the matter
beqame subjudice in appeal filed in this Court.
It appears that the
matter of assessment in respect of the year 1969-70 was taken up by the
Assessing Authority again by issuance of a notice on September 15,
1975. Thereupon, the Company filed Civil Writ Petition No. 561/
1976 in the High Court on January 27, 1976 to quash the notice dated
September 15, 1975 and to restrain the State of Hary;ana and its
Officer-the Excise and Taxation Ofacer, Faridabad, from proceeding
with the assessment.
It is said that in respect of the 4 quarters of the
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(2) 38 S.T.C. 108.
/...
lNDlAN /\LUMINIUM v. E. & T. OFFICER ( Untwalia, J.)
719
year 1970-71 notices under section 11 ( 2) of the Act were issued for
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the first time by the assessing authority on January 30, 1976. Thereupon, the Company filed in the High Court Civil Wrif Petition No.
1961/1976 for reliefs simi~ar to the ones asked for in the other writ
petition.
According to the appellant, in the first writ petition were raised
before the High Court the two main questions in the following terms :
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"(i) Whether the assessment proceedings with regard to
assessment year 1969-70 could be proceeded with and
• whether assessment order could be passed beyond a
period of 5 years after the expiry of the period to
which the assessment relates. In other words, whether
the Sales Tax Officer had jurisdiction to make assessment for the assessment year 1969-70 which had become time barred;
(ii) Whether Central Sales Tax was payable in respect of
·sale of electric cables manufactured and sold by the
petitioner Company to State Electric~ty Boards in
view of the exemption granted generally under section 8(2A) of the Central Sales Tax Act read with
section 5(2) (a) (iv) of the Punjab General Sales Tax
Adt, 1948".
This writ petition was dismissed in limine by a Bench of the High
Court stating "Reply has been filed.
The matter is covered in favour
of the respondent by 33 STC 152. Dismissed". It appears by the
time the second writ petition came to be filed the appellant's liability
to pay Central Sales Tax was decided by this Court in the case referred
to above.
Therefore, in the second writ petition, in the main, the
question raised was one of limitation as in the other writ petition.
Another Bench of the High Court dismissed this writ petition in limine
on July 21, 197 6.
In substance and in effect, in spite of the Full
Bench decision (by the majority) of the High Court in the case of
Rameshwar Lal Sarup Chand v. Shri U. S. Naurath, Excise & Taxation
Officer, Assessing Authority, Amritsar and Another('), on which
Mr. S. T. Desai, learned counsel for the appellant heavily relied upon
before us, neither Bench found iany substance in the point of limitation
raised by the Company and dismissed the two writ petitions in limine.
ln our opinion the High Court was right, for the reasons to be stated
hereinafter in this judgment, in not entertaining the point of limitation.
in spite of the full Bench decision aforesaid, as, the said decision in
view of many pronouncements of this Court to be alluded to hereinafter is no longer good law.
In face of the decision of this Court in Indian Aluminium Cables
Ltd. & Anr. v. State of Haryal1{1 (supra) the question of the appellant's
tax liability under the Central Sales Tax Act was not re-agitated before
(I) 15 S.T.C. 932.
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720
SUPREME COURT REPORTS
[1977] 1 S.C.R.
us.
Learned counsel for the appeiiant, however, strenuously urged
that the assessing authority could not assess the tax piayable by
the
appellant on expiry of the period of 5 years from the end
of each
quarter.
The 4th quarter of the year 1969-70 expired on March 31,
1970 and the period of 5 years having expired on March 31, 1975 no
assessment could be made thereafter. In relation to the year 1970-71
even the notice for the first time was issued under section 11 (2) of the
Act after the expiry or the period of S years in relation to the first three
quarters, although it was within time apropos the last quarter. The
period of the last quarter expired on March 31, 1971; but no assessment could be made, according to the appe!t,ant's counsel, even in
regard to the assessment year 1970-71 in respect of any quarter on the
exp:ry of the 5 years' period reckoning from the last date of the quarter.
Mr. M. C. Bhandare, learned counsel for the respondents submitted that although a time limit had been fixed in sub-sections ( 4),
(5) \and ( 6) of section 11 of the Act, no time limit was fixed by the
Legislature for actions and orders to be taken __ and passed under subsections (1), (2) and (3). Counsd, therefore, urged that neither the
issuance of any nofice under section 11 (2) of the Act was beyond any
period of time nor was the assessing authority under any disability of
any period of limitation in p\assing the final order of assessment in respect of any of the quarters in question.
The alternative submission of
Mr. Desai that in any view of the matter notice had to be issued under
section 11(2) and assessments had to be completed under section 11(3)
within a reasonable time was also refuted by Mr. Bhandare.-
·
It is beyond any dispu!e and debate that under section 10 of the
Act read along with the Rules framed thereunder, Return has to be
filed by a dealer for each quarter by the last day of the following month
of the quarter and admitted sales tax as per the Return has also got to
be deposited and challan filed along with the Return.
It will be seen
hereinafter from the authoritati'1e pronouncements of this Court that
the mere statutory liability of a dealer to file the Return or to pay the
tax has not the effect of commencement of any proceeding under the
Act. If a dealer ckles not file a Return being liable to pay tax, then
action under sub-section (5) or ~;uh-section (6), as the case may be,
has to be taken by the Assessing Authority within the period of 5 years
prescribed therein.
The expression "proceed to assess" in those two
sub-sections as also in sub-section ( 4) means taking some effective step
towards proceeding to make the be5t judgment assessment in accordance with the sub-section which may be applicable.
In a given case
action may be taken under section 11-A (1) of the Act treating the
case as a case of escaped assessment within the meaning of said section.
But the assessing authority has got to proceed to assess or
r~assess
within 5 years following the clos1~ of the year for which the turnover is
proposed to be assessed or re-assessed.
But in a case where the
assessee has filed the Return the proceeding under the Act commences
01!- the filing ,o,f the Return.
"If the Assessing Authority is satisfied
without requmng the presence of dealer or the production by him of
any evidence that the returns furnished in respect of any period are
correct and complete, he shall assess the amount of tax due from the
dealer on the basis of such returns" as provided for in section 11 ( 1).
The assessment under sub-section (1) can be made at any time even
INDIAN ALUMINIUM v. E. & T. OFFICER ( Untwalia, J.)
7 21
accordin<> to the Full Bench decision of the Bombay High Court in
Bisesar House v. State of Bombay and Others('), followed in Rameshwar Lal Sarup Chand('). But the view of the Bombay High Court
on a consideration of the similar provisions of the other State Statutes
that a notice under sub-section ( 2) must be issued within the period
of limitation mentioned in other sub-sections of section 11 or section
11-A no longer holds good.
A notice under sub-section (2) requiring
the dealer to produce evidence can be issued at any time after the filing
of the Return.
The expectancy of taking steps without any undue
del,iy and within a reasonable til!le is an expectancy of prudence.
But
legally the action cannot be nullified merely on the ground of delay in
the isswance of the notice under section 11 (2). Sub-section (3)
of
section 11 says :-
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"On the day specified in the notice or as soon afterwards
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as may be, the Assessing Authority shall, after hearing such
evidence as the dealer may produce, and such other evidence
as the Assessing Authority may require on specified points,
assess the amount of tax due from the dealer".
On a correct interpretation of the provision aforesaid what emerges is
as follows :-
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(i) That the Assessing Authority shall hear the evidence
produced by the dealer on the day specified in the
notice issued under sub-section (2).
(ii) It can adjourn the hearing to some other day and hear
the evidence produced by the dealer on the adjourned
day or days.
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(iii) The Assessing Authority may require the dealer to
produce further evidence on specified points on the
adjourned clay or days.
(iv) The Assessing Authority should assess the amount of
tax due from the dealer, tbiat is to say, pass the order
of assessment, on the day on which the hearing
of the evidence is completed or "as soon afterwards
as may be".
The Jast phrase is absent in some of the similar statutes. It, therefore,
may be open to argument whether the assessment order passed under
secti~m 11 (3) of ~he Act after undue delay of the completion of the
hearmg of the evidence produced or reqmred to be produced by the
dealer is valid or not.
But we are not concerned with the said question in this case as on the ~acts and in the circumstances appearing in
relation to the assessment proceedings of either of the two years the
production of evidence by the assessee could not and has not started
as yet because of the filing of the writ petitions and the appeals in this
Court.
It goes without saying that the assessing authority will be welladvised to complete the assessment proceedings in question as soon as
it may be possible to do so after the delivery of this judgment.
(I) 9 S.T.C. 654.
(2) 15 S.T.C. 932.
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722
SUPREME COURT REPORTS
[1977] 1 s.c.R:.
Sub-section ( 4) of section 11 is attracted in a case where a dealer
having furnished a Return in respect of a period fails to comply with
the terms of a notice issued under sub-section (2). In such a case the
Assessing Authority has to take some effective step, such as issuance
of a notice to the assessee intimating to him that he is proceeding to'
assess to the best of his judgment the amount of tax due from the
dealer.
On failure of a dealer to furn:sh a Return in respect of any
period by the prescribed date the Asse:;sing Authority after giving the
dealer a reasonable opportunity of being heard can proceed to assess
·,fo the best of his judgment the amount of tax, if any, due from the
dealer.
In such a case also ,an effective step such as issuancti of a
notice to the dealer concerned showing that the Assessing Authority is;
proceeding to assess has got to be tabn within 5 years of the expiry
of the period concerned. Sub-section ( 6) is attracted in the case of a
dealer who being liable to pay tax under the Act has failed to apply
for registration.
Similar steps as the ones to be taken under subsection (5) ,are to be taken under sub-section (6) within a period of
5 years after the expiry of the concerr.ed period.
But the Legislature
advisedly did not fix any period of limitation for taking up of the steps
or the passing of the assessment order under any of the sub-sections
(1), (2) or (3). The reason is obvious.
Best judgment assessments
in the circumstances mentioned in any of the sub-sections (4), (5) or
( 6) could not be allowed to be made after the expiry of a certain reasonable time which the Legislature thought was three years previously
but made it five years by Punjab Act 28 of 1965.
But where a registered dealer has filed the Return the assessing authority can pass the
assessment order under sub-section ( 1) and accept the Return iiled by
the dealer as correct and complete. In such a case the formality of
passing an order of assessment is to be completed without any further
demand of tax from the dealer. For the issuance of a notice under subsection (2) no time limit has been fixed, but the assessing authority
must remain on its gUard of taking the steps and completing the assessment as soon as it may be possible to do so.
Otherwise, the risk
involved may just be pointed out.
Take a case where a notice under
sub-section (2) is issued after the expiry or ,just on the verge of expiry
of the period of 5 years and the dealer fails to compfy with the terms
of the notice.
In such a case the assessing authority may Have to
proceed to make the best judgment assessment under sub-section ( 4)
attracting the bar of limitation of 5 years.
But, of course, there may
be a case where in spite of the failure of the dealer to comply with the
terms of a notice issued under sub-s1~ction (2) the a'ssessing authority
may be in a position to complete the assessment under sub-section (3),
treating the alleged failure of the dealer as not a real failure on his pa.rt.
We now proceed to discuss some of the relevant decisions on the
points at issue.
In Bisesar House case (supra), Chagla, C.J. delivering the judgment of a Full Bench of the Bombay High Court on a consideration of
the similar provisions of section 11 of the C.P. and Berar Sales Tax
Act, 1947 applied the ratio of his decision in Commissioner of lncometax, Bombay City v. Narsee Nagsee & Co.('), to a Qase covered by
(I) 31. I.T.R. 164.
( ,
INDIAN ALUMINIUM v. E. & T. OFFICER (Untwalia, J.)
723
section 11 (2) of the Sales Tax Act.
With respect to the learned Chief
A·
Justice we say that he was not right when he said at page 669 : "Section
11 ( 2) is in the substantial" sense an initiation of fresh proceedings by
the Commissioner. It is open to 1the Commissioner to be satisfied with
wh1at the assessee has done and pass an order under section
11 ( 1).
But if he is not satisfied, then he initiates fresh proceedings under-sec-·
tion 11 (2) by issuing a notice.
That undoubtedly
is putting
the
assessee to the peril of the apprehension tha1t as a result of the notice
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his tax might be enhanced. If the principle we have laid down in
Narsee Nagsee's case---31 I.T.R. 164 is correct, then that principle
would u~doubtedly ap{>lY to the issuing of a notice under section
11(2)".
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As held by this Court in the qase of Ghanshyamdas v.
Regional
Assistant Commissioner of Sales Tax, Nagpur & others('), even the
filing of a Return by a dealer is tantamount to initiation or .c?mmencement of a proceeding under the Sales Tax Act.
The decision .o~ ~he
Bombay High Court in Narsee Nagsee's case was affirmed by :a D1V1s1on
Dench (by majority) of this Court in Commissioner of Income-tax,
Bombay City Iv. Narsee Nagsee & Co.(').
Subba Rao, J. as he then was, delivering the majority opinion of a
Constitution Bench of this Court in Ghanshyamdas's
case
(supra)
referring to the decision of the Privy Council in Rajendranath Mukherjee v. Income-tax Commissioner('), said at page 983 of
14 S.T.C.
"This dec_ision is a clear authority for the position that if a return was
duly made, the assessment could be made at \any
time unless
the
statute prescribed a time limit.
This can only be for the reason that
the proceedings duly initiated in time will be pending and can, therefore, be completed without time limit".
At page 987 says the learned
Judge : "It is manifest that in the case of a registered dealer the proceedings before the Commissioner start factually when a return is made
or when a notice is issued to him either under section 10(3) or under
section 11 (2) of the Act".
As rightly pointed out by Shah, J. as he
then was, at page 436, if we may say so with respect, in the case of
Regional Assistant Commissioner of Sales Tax, Indore v.
Malwa
Vanaspati and Chemical Co. Ltd.( 4 ), section 11(2) is a typographical
error in the sentence extracted above.
In disapproval of the view of
the Full Bench expressed in Bisesar House case (supra) it was reiterated at page 989 in Ghanshyamdas's case "As we have held that the
submission of a statutory return would initiate the proceedirigs and that
the proceedings would be pending till a finar order of assessment was
made on the said return, no question of limitation would arise .....
For the foregoing reason we hold that a s~atutory obligation
to make a return within a prescribed time does not proprio
vigore
initiate the assessment proceedings before the Commissioner; but the
proceedings would commence after the return was submitted and would
continue till a final order of assessment was made in regard to the said
-return".
(1) 14 S.TC. 976,
(3) 2 I.T.R, 71.
(2) 40 l.T.R. 307.
(4) 21 S.T,C, 431.
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SUPREME COURT REPORTS
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Jn. Narsee Nagsee's ca·se (supra) it has been pointed out by the
maJonty of the Bench that a notice _under section 11 (1) of the Business
Profits Tax Act, 194 7 ·'must ~e given within the financial year which
c?mmences ne~t a~ter the expiry of the accounting period or the prevw~s y~ar whi~h ~~ by itself or includes the chargeable accounting
pe~1od m qu~st1on .
( vide page 31 7 of 40 I. T.R.). It was also
pomte~ out m that case. that the words "profits escaping assessment"
m sectwn _14 of the Bus~ness Profits Tax Act applied equally to cases
where notice had b_een given but had resulted in no assessment and to
cases ~here due to madvertence, oversight or any other reason Do notice
was given and therefore no assessment was made.
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This Court in The State of Punjab & Others v. Tara Chand Lajpat
Rai('), reversed the decision of the Punjab High Court in Civil Writ
No. 1088/61 and following the decision of this Court in Ghanshyamdas's case (supra) stated at page 501 :
"This decision is, therefore, a clear authority for the pro·
position that assessment proceedings commence in the case
of a registered dealer either when he furnishes a return
or
when a notice is issued to him under section 11 (2) of the
present Act, and that if such proceedings are taken within the
prescribed time though the assessment is finalised
subsequently, even after the expiry of the presciibed period,
Do
question of limitation would arise".
Jn the case o'r Tarachand La}pat Rai (supra) the dealer had filed the
.Returns after the expiry of 30 days from the relevant date but they--
were not rejected by the Department on that ground.
Notice under
section 11 (2) of the Act \\-1as issued and that also was done before the
expiry of period of 3 years' as the period of limitation stood then in
:he other sub-sections.
On the authority of Ghanshyamdas's case it
was held "the assessment proceedings commenced either when the respondent-firm filed the returns or in any event from the date of the said
notice.
Both the events, therefore, were within the prescribed time."
The decision of the Full Bench of. the Punjab High Court in the case
of Rameshwar Lal Sarup Chand (supra) was merely distinguished on
the ground that the question decided in Ghanshyamdas's case did nor
come up for consideration in Rameshwar Lal's case.
But we think it
is high time that the decision of the Full Bench of the High Court in
Rameshwar Lal's case should be clearly and expressly over-ruled now.
An identical view had been expressed by his Court reversing the d~ci
sion of the Punjab High Court in Letters Patent Appeal No. 319/63
in the case of The State of Punjab and another v. Mur/idhar Mahabir
Prasad(').
The challenge before this Court in the case of Madhya
Pradesh Industries Ltd. v. State of Maharashtra and Others(3), was
whether sub-section (3) of section 1 lA of the C. P. and Berar Sales
Tax Act, 1947 was violative of Article 14 ol' the Constitution.
The
argument was repelled and it was stated at page 402 by Hegcle, J.
(I) 19 S.T.C. 493.
(2) 21 S.T.C. 29.
(3) 22 S.T.C. 400.
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INDIAN ALUMINIUM v. E. & T. OFFICER (Untwalia. !.)
725
delivering the judgment on behalf of himself, Wanchoo, C.J. and Mitter,
J. :
"This Court in Ghanshyamdas' s case specifically overruled
the decision of the Bombay High Court in Bisesar House case.
Therein this Court held that while s.11 (2) deals with pending
proceedings, section 11 A concerns itself with matters which
are not pending.
This Court further ruled that in the case of
pending proceedings the Act has not prescribed any period
of limitation.
That decision proceeds on the basis that
section 11 (2) and section llA cover different fields and that
they do not overlap".
Bacha~at, J. speaking for himself and Ramaswami, J. went a step further and in their concurring judgment stated at pag~ 403 :
"There is no limitation for the issue of a notice under
section 11 (2). Thi's follows from a plain, reading of section
11 (2) independently of section 11A(3).
N~ither section
11 (2) nor section 11A(3) is violative of Article 14. A notice
under section 11 ( 2) is issued in a pending proceeding, whereas a notice under section llA ( 1) initiates a new proceeding.
There is a reasonable basis for classification and differential
treatment of the notices under sections 11 (2) and llA (1)
for the purposes of limitation."
The majority opinion of the Full Bench of the Punjab High Court
was delivered by two judges in the case of Rameshwar/al Sarupchand
(supr,a).
Pandit, J. gave a dissenting opinion.
It is wrong to say,
as stated by the majority, that the expression "proceed to assess" and
the word "assess" connote the same meaning.
The ratio of
the
majority opinion is chiefly based upon the decision of the Full Bench
Df the Bombay High Court in Bisesar House's case which decision was
not approved by this Court and must be deemed to have been overruled.
The majority we may also point out with respect, committed
a mistake in appreciating the decision of this Court in the case of
Madan Lal Arora v. The Excise and Taxation
Officer, Amritsar(')
Sarkar, J., as he then was, delivering the judgment on behalf of
a
Constitution Bench of this Court adverted to the facts of the ca·se and
stated that the registered dealer under the Punjab General Sales Tax
Act had filed returns for the 4 quarters of the financial year ending
on March 31, 1955 as also for the 4 quarters for the financial year
ending on March 31, 1956.
In respect of each year the Sales Tax
Assessing Officer served three successive notices on the dealer one
on March 7, 1958, the other on April 4, 1958, and the third on August
18, 1959.
The first two notices were merely under section
11 (2)
of the Act.
But in the .last notice which was issued after the expiry
of 3 years it was stated that on the dealer's failure to produce the documents and other evidence mentioned in the notice, the case would be
decided on best judgment assessment basis.
The dealer did not
comply with any of the notices and challenged with
success by a
petition under Article 32 of the Constitution the right of the authorities to make a best judgment assessment.
In that connection it was
(1) 12 S.T.C. 387 .
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726
SUPREME COURT REPORTS
(1977] 1 S.C.R' ..
pointed out that the period of 3 years mentioned in sub-section ( 4)
of section 11 of the Act had to be counted from the expiry of the
period in relation to which the returns had been filed and on expiry
of the said period the authorities could not proceed to make the best
judgment assessment.
The third and the last notice given on August
18, 1959 was taken to be a notice to the dealer that the assessing
autl1ority was proceeding to make the best judgment assessment and
~ince this was done more than 3 years after expiry of all the 8 quarters
Ill respect of the two years it was held to be without jurisdiction and
the respondent was restrained from making any best judgment assessment on the petitioner for sales tax for any quarter of the financial
years 1954-55 and 1955-56.
The decision of this Court in !lladan;
Lal Arora's(') case justifies our apprehension which we have mentioned in ilie beginning of our judgment to the effect that if a dealer fails.
to comply with the notice issued under section 11 (2) of the Act, then
in such a case, even though there may not be any time limit for issuance of a notice, but on the dealer's failure to comply with it the assessing authority may be obliged to take recourse to sub-section
( 4)
attracting the bar of limitation of 5 years for proceeding to assess
on the best judgment basis.
The majority, however, was wrong when
they said at page 949 of 15 S.T.C, with reference to Madan
Lal
Arora's case;
"In the case before the Supreme Court,
two notices
were within three years and the third notice was
beyond
three years and their Lordships held that the third notice
beyond three years, the Assessing Authority had no jurisdiction to make the assessment.
If the phrase "proceed to
assess" bears the meaning which the learned counsel for the
State contends for, namely, that only a step towards assessment has to be taken and the assessment can be made at
any time after the period of three years, their
Lordships
would on the basis of the two notices within the period of
limitation, have come to a different conclusion and that is
not what has been done."
This was, it appears to us, clearly a mistaken reading of the judgment of this Court.
The majority in our opinion, was also wrong in
importing the period of limitation provided in sub-sections ( 4),
(5)
and (6) of section 11 of the Act into sub-section (3) and in holding,
therefore, that an assessment under sub-section ( 3) must also
be
completed within 3 years from the last date on which the return should
be filed under the Act.
We are again constrained to point out that
the majority of the Full Bench committed a mistake in thinking that
this Court had held in Madan Lal Arora's case that the period of 3
years had to be counted from the last date on which the return should
be filed.
The decision of the Full Bench' of the Punjab High Court
in the case of Ramashwar Lal's case (supra) is clearly erroneous and
must be over-ruled.
Pandit, J.
in his dissenting opinion had, by
and large, taken a correct view in favour of the Revenue.
(I) 12 S.T.C. 387.
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INDJAN ALUMINIUM v. E. & T. OFFICER (Untwalia, J.)
727
Lastly, we may also make a reference to a recent decision of this
Court delivered by one of us (Untwalia, J.) in the case of Gurbaksh
Singh v. Union of India & Others(') An argument quite similar to
the one advanced before us was advanced on behalf of the assessee
appellan·t in that case ·before this Court.
It was argued that the
period of 4 years of limitation prescribed under sub-section (2a) of
section 11 of the Bengal Finance (Sales Tax) Act, 1941 as extended
10 the Union Territory of Delhi, should be imported into the revisional and the appellate power of the authorities Gonferred on them
under section 20. · This argument was repelled and it was pointed out
that the legislature had not provided any period within which an order
was to" be made by an Appellate or Revisional authority; no such
period should be imported in the exercise of the power on the basis
vf section 11 (2a). Mr. Desai relied upon the penultimate paragraph
of this decision in support of his contention that in any view of the
matter notice under section 11 (2) had to be issued and the assessment
completed within a reasonable time.
We do not accept this conten-
~ion to be sound. The argument as presented cannot be accepted to be
correct.
In Gurbaksh Singh's case it was not stated that the exercise
of the revisional power suo moto could not be made after an undue
long delay.
On such an assumption it was merely found as a fact
that there was no undue delay in the suo moto exercise of the power.
In the result we do not find any merit in the appeals.
They are
dismissed with costs.
Hearing fee one set only.
V.P.S.
Appeals dismissed.
(I) [1976] 3 S.C.R. 247.
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