# ASHOK LEYLAND LTD v. STATE OF TAMIL NADU AND ANR

- **Citation:** [2004] 1 S.C.R. 306
- **Court:** Supreme Court of India
- **Decided:** 2004-01-07
- **Case number:** Civil Appeal Nos. 976-979 of 2001
- **Bench:** V.N. Khare, S.B. Sinha, A.R. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ashok-leyland-ltd-v-state-of-tamil-nadu-and-anr-19679
- **Pages:** 54

## Headnote

1'
Central Sales Tax Act, 1956-Section 6A(2)-lnter-State Sale-legal
fiction created-Effect of-Acceptance of Form F filled by the assesseec Held, legal .fiction operates-Order accepting Form F becomes final and
cannot be reopened unless found illegal/void/voidable-Tamil Nadu General
Sales Tax Act, 1959-Section 16.
Code of Civil Procedure, 1908-Section 11-Res Judicata-Applicability
of-Held, would not apply where jurisdictional question wrongly decided.
D
Interpretation of Statute-Must be interpreted having regard to the /ext
'
and context-Stall/le must be read in its entirety-General and special
"iprovision-Special provision prevails over general provision-Central Sales
Tax Act, 19.56-Tamil Nadu Sales Tax Act, 1959.
E
Words and Phrases-legal Fiction-Meaning of
The appellants were manufacturers of commercial vehicles. They
were registered under the Tamil Nadu General Sales Tax Act, 1959 and
also the Central Sales Tax Act, 1956. They had several regional sales offices
in States other than Tamil Nadu. The regional sales offices were registered
F under the sales tax law governing the concerned State. The appellants
transferred vehicles to the regional sales offices for marketing the products
under the cover of stock transfer invoices and local sales tax was collected
and paid by the regional offices on such vehicles. The appellants filled
Form Fin terms of Section 6 A of the Central Sales Tax Act, 1956 in Tamil
G
Nadu stating that the transactions constituted transfer of stock and there
was no inter-State sale. After enquiry, the assessing officer accepted Form
F filed by the appellants holding that that there was only a stock transfer
to the depots of the appellants situated in other States and no inter-State
"'
~
sale had taken place. The assessing authorities, thereafter, sought to review
the order accepting Form F. The appellants contested the reopening of
H
306
ASHOK LEYLAND LTD. r. STATE
307
• i
the assessment on the ground that it cannot be reopened as under the A
provisions of Section 6 A (2) of the Central Sales Tax Act, 1956, the
assessment attained finality on acceptance of Form F. However, the
assessing authority reopened proceedings, held that the transfers made by
the appellants were inter-State sales and also imposed penalty on the
appellants.
The appellants filed writ petition before the High Court, which was
, '(
dismissed. On appeal to the Court, a two-Judge Bench of the Court held
that it was permissible for the assessing authority to reopen a proceeding
even after acceptance of Form F. (As/wk Leyland v. Union of India and Ors.,
B
1199719sec10).
c
Pursuant to the judgment of the Court, an order of reassessment was
passed imposing tax on the appellants on the sales made by the regional
sales offices of the appellants.
The appellants filed appeal to the Court and contended that when D
an order is passed by the assessing authority after holding an enquiry
accepting the Form F declaration made by the assessee, the same could
'<...I'
not be reopened. The judgment of the Court in Ashok Leyland v. Union of
India and Ors., [199719SCC10 therefore, required reconsideration. The
respondent contended, inter alia, that the earlier judgment of the Court
would operate as res judicata and the issue raised by the appellants could E
not be re-examined.
Disposing of the appeal and allowing the appellants to move the High
Court for redressal of their grievance, the Court
HELD: 1.1. In the rules of evidence, there exist several presumptions. · F
These presumptions may be rebuttable or irrebuttable. lrrebuttable
presumptions are referred to as conclusive presumptions as they stand as
conclusive proof of certain facts and are open to challenge only on the
meagre grounds. In several cases validity of rules of conclusive
presumptions have been upheld. 1336-F, G; 337-C!
G
Stumpf v. Mantgome1y, (1924) I 01 OKL 256; Re Eric Holmes Ltd.,
1196512 All ER 333; lnzar Ahmad Khan v. Union of India, 119621Supp.3
'<
SCR 235; M. Jlenugopa/ v. Divisio

## Text

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.,. .
A
ASHOK LEYLAND LTD.
v.
STATE OF TAMIL NADU AND ANR.
JANUARY 7, 2004
B
[V.N. KHARE, CJ., S.B. SINHA AND A.R. LAKSHMANAN, JJ.]
1'
Central Sales Tax Act, 1956-Section 6A(2)-lnter-State Sale-legal
fiction created-Effect of-Acceptance of Form F filled by the assesseec Held, legal .fiction operates-Order accepting Form F becomes final and
cannot be reopened unless found illegal/void/voidable-Tamil Nadu General
Sales Tax Act, 1959-Section 16.
Code of Civil Procedure, 1908-Section 11-Res Judicata-Applicability
of-Held, would not apply where jurisdictional question wrongly decided.
D
Interpretation of Statute-Must be interpreted having regard to the /ext
'
and context-Stall/le must be read in its entirety-General and special
"iprovision-Special provision prevails over general provision-Central Sales
Tax Act, 19.56-Tamil Nadu Sales Tax Act, 1959.
E
Words and Phrases-legal Fiction-Meaning of
The appellants were manufacturers of commercial vehicles. They
were registered under the Tamil Nadu General Sales Tax Act, 1959 and
also the Central Sales Tax Act, 1956. They had several regional sales offices
in States other than Tamil Nadu. The regional sales offices were registered
F under the sales tax law governing the concerned State. The appellants
transferred vehicles to the regional sales offices for marketing the products
under the cover of stock transfer invoices and local sales tax was collected
and paid by the regional offices on such vehicles. The appellants filled
Form Fin terms of Section 6 A of the Central Sales Tax Act, 1956 in Tamil
G
Nadu stating that the transactions constituted transfer of stock and there
was no inter-State sale. After enquiry, the assessing officer accepted Form
F filed by the appellants holding that that there was only a stock transfer
to the depots of the appellants situated in other States and no inter-State
"'
~
sale had taken place. The assessing authorities, thereafter, sought to review
the order accepting Form F. The appellants contested the reopening of
H
306
ASHOK LEYLAND LTD. r. STATE
307
• i
the assessment on the ground that it cannot be reopened as under the A
provisions of Section 6 A (2) of the Central Sales Tax Act, 1956, the
assessment attained finality on acceptance of Form F. However, the
assessing authority reopened proceedings, held that the transfers made by
the appellants were inter-State sales and also imposed penalty on the
appellants.
The appellants filed writ petition before the High Court, which was
, '(
dismissed. On appeal to the Court, a two-Judge Bench of the Court held
that it was permissible for the assessing authority to reopen a proceeding
even after acceptance of Form F. (As/wk Leyland v. Union of India and Ors.,
B
1199719sec10).
c
Pursuant to the judgment of the Court, an order of reassessment was
passed imposing tax on the appellants on the sales made by the regional
sales offices of the appellants.
The appellants filed appeal to the Court and contended that when D
an order is passed by the assessing authority after holding an enquiry
accepting the Form F declaration made by the assessee, the same could
'<...I'
not be reopened. The judgment of the Court in Ashok Leyland v. Union of
India and Ors., [199719SCC10 therefore, required reconsideration. The
respondent contended, inter alia, that the earlier judgment of the Court
would operate as res judicata and the issue raised by the appellants could E
not be re-examined.
Disposing of the appeal and allowing the appellants to move the High
Court for redressal of their grievance, the Court
HELD: 1.1. In the rules of evidence, there exist several presumptions. · F
These presumptions may be rebuttable or irrebuttable. lrrebuttable
presumptions are referred to as conclusive presumptions as they stand as
conclusive proof of certain facts and are open to challenge only on the
meagre grounds. In several cases validity of rules of conclusive
presumptions have been upheld. 1336-F, G; 337-C!
G
Stumpf v. Mantgome1y, (1924) I 01 OKL 256; Re Eric Holmes Ltd.,
1196512 All ER 333; lnzar Ahmad Khan v. Union of India, 119621Supp.3
'<
SCR 235; M. Jlenugopa/ v. Divisional Manager, Life Insurance Corporation
of India, Machilipatnam, A. P. and Anr., 119941 2 SCC 323; The Municipal
Board, Hapur v. Raghuvendra Kripal and Ors., AIR (1966) SC 693; State of H
308
SUPREME COURT REPORTS
[2004) I S.C.R.
A Madras v. Mis Radio and Electdcals ltd.. 119661 Supp SCR 198; Balabh~1gas
t •
Hu/aschand v. Stale ol Oris so, 119761 2 SCC 44 and C P. K. Trading Co. , .
Additional Sales Tax Officer Ill Circle Matlancherty, (1990) 76 STC 211,
referred to.
1.2. Whenever a legal fiction is created by a statute, the same shall
B be given full effect. Legal fictions have been applied in a number of cases.
1340-G; 342-EI
Shrisht Dhawan v. Mis. Shall' Brothers, 119921 1 SCC 534; Roshan
Deen, v. Preeti Lal, AIR (2002) SC 33; Smt. Anita v. R. Rambilas, AIR (2003)
C A.P. 32; Ram Preeti Yadav v. UP. Board of High School and Intermediate
Education and Ors., 1200318 SCC 311 and Ram Chandra Singh v. Sita Devi
and Ors., [20031 8 SCC 319, referred to.
D
1.3. The mere use of the word 'deemed' is not in itself sufficient to
set up a legal fiction:J341-EI
Consolidated Coffee ltd v. Coffee Board, [198012 SCC 358; St. Aubyn
v. Attorney General, 119511 2 All E R 473; Bhavnagar University v. Palitana
y
Sugar Mills (P) Ltd, [20031 2 SCC 111; East End Dwellings Co. ltd. '"
'\y
E
FinsbUIJ' Borough Council, 1195112 All ER 587and ITW Signode India Ltd
v. Collector of Central Excise, (2003) 9 SCALE 720, referred to.
2.1. A statute, as is well known, must be interpreted having regard
to the text and context thereof. A statute for the purpose of its
interpretation must be read in its entirety. It is to be given a purposive
construction. Mischief Rule may also be applied in a given case. While
construing a statute, the object of the Act must be taken into consideration.
F
1342-F; 343-DI
Killick Nixon ltd v. Deputy Commissioner of Income Tax, [200311 SCC
144, referred to.
2.2. Special provisions shall prevail over the general provisions.
CJ
[350-FI
South India Corporation (P) ltd v. Secretat)', Board of Rel'et1lle, AIR
( 1964) SC 207, referred to.
3.1. There cannot be any doubt or dispute that while defining sale,
H the situs of sale can be fixed by the Parliament which having regard to
" i
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..
... /"
AS HOK LEYLAND LTD. v. ST A TE
309
Article 286 of the Constitution of India is within its exclusive domain. Once
the situs of sale either by way of legal fiction or otherwise is determined,
the State Legislature will be denuded of its power to fix another situs
having regard to the fact that the Parliament alone has the exclusive
jurisdiction therefor. 1345-A;q
3.2. The principles for determination as to what would cause a interState sale is to be laid down in terms of the provisions of a Parliamentary
Act having regard to the express provisions contained in Clause (3) of
Article 269 and Clause (3) of Article 286 of the Constitution of India.
1348-Ci
Consolidated Coffee Ltd. v. Coffee Board, 11980) 2 SCC 358, referred
to.
4.1. By reason of sub-section (2) of Section 6 A of the Central Sales
Tax Act, 1956, a legal fiction has been created. The initial burden of proof
is on the dealer to show that the movement has occasioned by reason of
transfer of such goods which is otherwise than by reason of sale. The
assessee may file a declaration. On a declaration so filed an inquiry is to
be made by the assessing authority for the purpose of passing an order
on arriving at a satisfaction that movement of goods has occasioned
otherwise than as a result of sale. Whenever such an order is passed, a
legal fiction is created. Through the means of a legal fiction if it is
determined that the sale is not an inter-State sale, then it amounts to a
transfer of stock. 1336-D-F; 344-AI
Gannon Dunkerley and Co. v. State of Rajasthan, 11993) l SCC 364
and State of Bombay v. Pandurang, AIR (1953) SC 244, referred to.
4.2. The finding under Section 6 A of the Central Sales Tax Act, 1956
is arrived at by the statutory authority who has the jurisdiction to do so
and there is no provision for appeal. Therefore, the order made by such
authority is conclusive in that it cannot be reopened on the basis that there
A
B
c
D
E
F
had been a mere error of judgment. It also cannot be re-opened under G
the Tamil Nadu General Sales Tax Act, 1959, when the order had been
made under the Central Sales Tax Act, 1956. The order of an authority
under Section 6 A of the Central Sales Tax Act, 1956 is conclusive for all
practical purposes. Thus, it is only in the limited cases of fraud,
misrepresentation etc. that reassessment can be directed and not if there
had been a mere error of judgement. 1344-A-Ci
H
310
SUPREME COURT REPORTS
[2004] I S.C.R.
A
Co111111issioner of Income Tax, Bombay v. Mis. Amritlal Bhogilal & Co.,
119591 SCR 713; Indian Handicrafts Emporium and Ors. v. Union of India
and Ors., [200317 SCC 589 and Ameer Trading Corporation Ltd. v. Shapootji
Data Processing Ltd., JT (2003) 9 SC 109; Words and Phrases, Permanent
Edition Vol. 41A; H.L. Sud, Income Tax Officer, Companies Circle I (!),
B Bombay v. Tata Engineering and Locomotive Co. Ltd., AIR (1969) SC 319;
M.K. Kochu Devassy v. State of Kera/a etc., [19791 2 SCC 117; Shrisht
Dhawan v. Mis. Shaw Brothers, [19921 I SCC 534; A. V. Fernandez v. The
State of Kera/a, [195711 SCR 837; Sahney Steel & Press Works Ltd. v. CTO,
1198514 SCC 173; Sodhi Transport Co. v. State of UP., [1986j 2 SCC 486;
State of A.P. etc. v. National Thermal Power Corpn. Ltd., [20021 5 SCC 203
C and Mis. Chunni Lal Parshadi Lal v. Commissioner a/Sales Tax, UP., [19861
2 SCC 501; 20th Century Finance Corpn. Ltd. and Anr. v. State of
Maharashtra, [2000[ 6 SCC 12 and Mahan/ Dharam Das etc. v. The State of
Punjab and Ors., [197513SCR160, referred to.
Black's Law Dictionary, 5th Edn.; Law Lexicon by P. Ramanatha
D Aiyar, 2nd Edn. referred to.
4.3. Suppression of a material document would also amount to fraud
on the Court. [354-Cj
Gowrishankar and Anr. v. Joshi Amba Shankar Family Trust and Ors.,
E [19961 3 sec 310 and SP. Chengalvaraya Naidu (Dead) by lrs. v.
F
Jaggannath (Dead) by LRs. and Ors, [199411 SCC 1 referred to.
4.4 An order passed by the statutory authority who has jurisdiction
therefor would amount to a part of substantive and not procedural law.
In addition to this there is no provision for appeal. [349-DI
4.5 The particulars required to be furnished in Form F clearly
manifest that the proof required is as to .whether the goods were actually
transferred to the assessee himself or his branch office or his agent and
not to any third party. Any other enquiry is beyond the realm of the
G assessing authority. The purpose of verification of the declaration made
in Form F, therefore, is as to whether the branch office acted merely as a
conduit or the transaction took place independent to the agreement to sell
entered into by and between the buyer and the registered office or the
office of the company situated outside the State. [349-G; 352-C, DI
H
5. The observations made by the Court in Ashok Leyland v. Union of
+- •
ASHOK LEYLAND LTD. v. STATE
311
India and Ors., 119971 9 sec I 0 to the effect that an order passed under A
sub-section (2) of Section 6 A of the Central Sales Tax Act, 1956 can be
subject matter of reopening of a proceeding under Section 16 of the Tamil
Nadu General Sales Tax Act, 1959 was not correct. However, the same
would not mean that even wherein such an order has been obtained by
commission of fraud, collusion, misrepresentation or suppression of B
material facts or giving or furnishing false particulars, the order being
vitiated in law would not come within the purview of the aforementioned
principle. !352-E, F!
Ashok Leyland v. Union of India and Ors., ! 1997( 9 SCC I 0, overruled,
6. The principle of res judicata is a procedural provision. A
jurisdictional question if wrongly decided would not attract the principle
of res judicata. When an order is passed without jurisdiction, the same
becomes a nullity. When an order is a nullity, it cannot be supported by
invoking the procedural principles like estoppel, waiver or res judicata.
c
(354-D-Ef D
Sri Ramnik Vallabhdas Madhvani and Ors. v. Taraben Pravinlal
Madhvani, (2003) SCALE 412, referred to.
Dharam Dutt and Ors. v. Union of India and Ors., (2003) IO SCALE
141, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 976-979
of 2001.
From the Judgment and Order dated 12.3.1999 of the Tamil Nadu Sales
E
Tax Appellate Tribunal, Chennai in T.A. Nos. 353, 456, 457/97 and 47 of F
1998.
WITH
C.A. Nos. 53/2004, 943, 944/200 I and W.P. (C) No.195 of 1999.
G
K. Parasaran, A.K. Ganguli, B. Sen, P.P. Rao, A.T.M. Sampath, V.
Balaji, Ms. T.S. Santhi, Ms. Aarthi Radhakrishnan, K.K. Mani, R.L. Ramani,
Ms. Manika Pandey, K.V. Vijaykumar, Subramonium Prasad, Ms. Chitra
Venkataraman, R. Gopalakrishnan, S.N. Jha, Dilip Sinha, J.R. Das, Guntur
Prabhakar, Sanjay R. Hegde, V.G. Pragasam, Ms. Kiran Bharadwaj, K.C.
Kaushik, Rajiv Tyagi, Ms. Anil Katiyar, (NP), D.S. Mahra (NP.), Ravindra H
312
SUPREME COURT REPORTS
[2004] I S.C.R.
A K. Adsure, Mukesh K. Giri, R.P. Wadhwani, (NP). B.S. Banthia, Naveen
Sharma, Sakesh Kumar, Satish K. Agn ihotri, Ms. Krishna Sanna, Ms. Asha
G. Nair, V.K. Sidhai1han, Ms. Hemantika Wahi, P.R. Ramasesh, (NP), R.S.
Hegde, Chandra Prakash, Devish P., Ms. Savithri Pandey, P.P. Singh, B.B.
Singh, (NP), M:N. Shroff. (NP}, G. Prakash, (NP}, N. Ganapathy, (NP), K.
B Ram Kumar, (NP}, V. Krishnamurthy, (NP), V. Ramasubramaniam, (NP) for
the appearing parties.
c
The Judgment of the Cou11 was delivered by
S.B. SINHA, J. Leave granted in S.L.P. (Civil) No.5579 of 200 I.
Interpretation of Section 6A of the Central Sales Tax Act, 1956 is
involved in these appeals and the writ petition. The appeals arise out of
judgments and orders dated 12.3 .1999 passed by the Tamil Nadu Sales Tax
Appellate Tribunal in T.A. Nos. 353, 456 and 457 of 1997 and 47 of 1998;
dated 13.11.2000 in STA No.459 of 1999; dated 14.11.1997 in Appeal No.
D 383 of 1996; and dated 2.12.1997 in Tax Case (Revision) No. I 096 of 1990
passed by the High Court of Madras.
The writ petition under Article 32 was filed by the Petitioner inter alia
for declaring that Section 9(2) of the Central Sales Tax Act, 1956 designating
the authorities of the movement State to adjudicate upon the situs of sales
E and character of a transaction in the course of an inter-State sale, whether as
falling under Section 3 or under Section 4 of the Central Sales Tax Act, 1956,
is arbitrary, unworkable and ultra vires Articles 14, 19(1)(g) and Chapter
XIII of the Constitution of India, in matters involving elements of transactions
taking place in more than one State.
F
BACKGROUND FACTS:
· Civil Appeal Nos. 976-979 of 200 I
The appellants herein are engaged in manufacture of commercial
vehicles. They have their factories at Bhandara in the State of Maharashtra
G and Alwar in the State of Rajasthan for manufacture of popular models of
passenger chassis. They are, inter alia, registered under Tamil Nadu General
Sales Tax Act, 1959 (hereinafter called for the sake of brevity as "the State
Act'') as also the Central Sales Tax Act, 1956 (hereinafter referred to as ''the
Central Act". l11ey are registered as dealers in the Office of Assistant
H Commissioner (Central Assessment Circle-Ill), the third respondent herein,
t •
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•
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-'""'·
• --t
'(
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A
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ASHOK LEYLAND LTD. v. STATE [S.B. SINHA, J.]
313
under both the Acts.
A
Indisputably, the appellants have several regional offices throughout
the country wherewith Regional Sales Offices are attached for the purpose of
receiving, warehousing and selling the vehicles produced by the appellants.
The appellants contend that they transfer both goods vehicle and passenger
chassis to their different Regional Sales Offices for marketing the products B
which in turn are registered under the Sales Tax laws governing the State in
question. The stock of vehicles are transferred to the Regional Sales Offices
under the cover of stock transfer invoices, excise gate pass, and entrusted to
the transport contractors for movement and delivery thereof where upon
transfer of such vehicles local sales tax are collected and paid by the different c
Regional Sales Offices. The appellants herein upon transfer of such purported
stocks of vehicles filled up forms in terms of Section 6A of the Central Act,
the original whereof having been filed before the assessing authority of the
State of Tamil Nadu, an enquiry was made and/or caused to be made pursuant
whereto and in furtherance whereof the claim of the appellants to the effect
that by reason of such transactions transfer of stock of goods had taken effect D
as contra-distinguished from inter-State sale was accepted. On or about
29.11.1990, the assessing authority upon completion of the order of original
assessment under the Central Act allowed transfer of stocks of the motor
vehicle chassis and other automobile parts to the branches stating:
"The dealers have got 26 branch sales depots in other States. They E
have despatched their products - chassis, spare parts etc., to their own
sales depots in other States for sales and the goods involved in the
stock transfer have moved from Tamil Nadu to other State as "stock
transfer", i.e., the movement was occasioned by reason of branch
transfer and not by reason of sale. The despatches are supported by F
stock transfer invoices, transport details and Form F. These records
have been verified with the exemption claimed."
An order of assessment for the year 1987-88 dated 28.8.1991 was
passed finding:
"The dealers have filed detailed statement of stock transfer of vehicles G
to their outside State Regional Sales Offices and Spares to their
warehouses. The statement was verified in detail with reference to
Form "F" declaration filed by them and despatching documents. The
dealers have also filed completed assessment orders of their Regional
Sales Offices in other States. Their claim was examined in length and H
314
A
SUPREME COURT REPORTS
[2004] I S.C.R.
found to be in order. The Form .. F" filed by them are accepted and
the exemption granted."
(Underlining is mine for emphasis)
The assessing authority despite the said findings issued notices directing
B the appellants to show cause as to why the order dated 29.11.1990 should not
be revised and the stock of vehicles allegedly transferred to the Regional
Sales Offices so far as the same related to the State Transpm1 Undertakings
are concerned should not be taxed as inter-State sales taxable in Tamil Nadu.
The appellants filed their show cause inter alia questioning the
C jurisdiction of the assessing authority to reopen the assessment inter alia on
the ground that the issues stood determined in terms of the provisions of Subsection (2) of Section 6A of the Central Act relying or on the basis of the
declarations made by the appellants in terms of Form F. However, the
reassessment proceeding was completed relying upon the provisions contained
D in Section 16 of the State Act read with Section 9(2) of the Central Act as
also in terms of the decision of this Court in Sahney Steel & Press Works ltd
v. CTO, (1985] 4 SCC 173: 60 STC 301 (SC). Consequent to the said order
the sales of the Regional Sales Offices in relation to the deliveries made to
the State Transport Undertakings of other States were reassessed. Penalty for
non-disclosure of the turnover as taxable sales in terms of Section 16(2) of
E the State Act read with Section 9(2) of the Central Act was also imposed.
Similar show cause notices were issued in relation to other assessment years
also.
A writ petition was tiled by the appellants before the Madras High
Court questioning the said orders inter a/ia contending that having regard to
F the provisions contained in Section 6A of the Central Act and further having
regard to the fact that the appellants had paid tax to the other States the
orders impugned therein were illegal. The States wherein the local sales tax
had been paid in terms of the respective State Acts, namely, State of Kera la,
Karnataka, Andhra Pradesh, Maharashtra and Gujarat, were impleaded as
G parties therein and they in turn also questioned the jurisdiction of the authorities
of the State of Tamil Nadu to enquire about the transactions carried out by
the appellants. A question was also raised that the Madras High Court had no
jurisdiction to grant any relief touching the orders of assessment completed
under the respective State Jaw. Upholding the jurisdiction of Tamil Nadu
authorities to reopen an assessment completed despite acceptance of declaration
H in Form F, the Madras High Court by a judgment and order dated 13.6.1996
,,.,
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ASHOK LEYLAND LTD. v. STATE [S.B. SINHA, J.]
315
dismissed ihe said writ application inter a/ia holding that they had no A
jurisdiction to grant any relief. Thereafter the reassessment was completed
and penalty was imposed.
JUDGMENT OF THIS COURT :
The matter came up for consideration before this Court in Ashak Leyland B
v. Union of India and Ors., since reported in [1997] 9 SCC 10 at the instance
of the appellant herein; and upon referring to the decisions rendered in
Balabhagas Hu/aschand v. State of Orissa, [ 1976] 2 SCC 44, lzhar Ahmad
Khan v. Union of India, [1962] Supp. 3 SCR 235, Sodhi Transport Co. v.
State of U.P., (1986] 2 SCC 486 and several others, this Com1 by a judgment c
dated 20.2.1997 held:
(a) Section 6A does not create conclusive presumption as contended
on behalf of the assessee.
(b) An order of assessing authority accepting Form F, whether passed
during the assessment or at any point earlier thereto, forms part D
and parcel of the order of assessment.
(c)
lts amenability to the power of reopening and revision depends
upon the provisions of the concerned sales tax enactments by
vi11ue of the operation of Section 9(2) of the Central Act.
(d)
1t is not possible to accept that an order under Section 6A(2) has E
an independent existence.
(e)
An order refusing to accept Form F may or may not be appealable
independently depending upon the provisions of the State sales
tax enactments, but it is ce11ainly capable of being questioned if
F
an appeal is preferred against the order of assessment.
(f)
If orders accepting Form F are sought to be reopened, it can be
done as part of reopening of assessment or may be done
independently, which wou Id depend upon the language of the
relevant provisions of the concerned State Acts.
G
(g)
1t is permissible to reopen an assessment accepting Form F as
true, without, even though such a reassessment necessarily leads
to revision/ modification of the assessment order.
(h) If the reopening is confined to the order accepting Form F as
true, the enquiry shall be confined to the matters relevant thereto. H
316
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SUPREME COURT REPORTS
[2004] I S.C.R.
In that case, it was noticed that the assessments were sought to
be reopened only in respect of the turnover relating to sales of
vehicles to State Transport Undertakings and not turnover relating
to persons other than State Transport Undertakings.
(i)
In the facts of the case, the question as to whether the power had
B
been exercised validly or not did not call for consideration. If the
assessing authority decided against the appellants, it would be
open to the assessee to file appeal (s) directly before the Tribunal
(in order to shorten the litigation and in the interest of justice).
If and when the Tribunal decides against the appellants, it shall
c
be open to the appellants to approach the Supreme Court.
Having said so, this Court noticed the anomalous situation created by
reason of the absence of a proper mechanism to adjudicate the question as to
whether a particular transaction is an inter-State sale or a local sale in the
presence of an assessee and the relevant States concerned and the need for
D the Parliament to intervene and provide for a suitable mechanism.
The Cou1t appreciated the difficulties to be faced by the appellant
having regard to the fact that it had paid tax to the other State Governments.
This Court further noticed the contention of the appellant that the attitude
adopted by the sales tax authorities in Tamil Nadu is not conducive of judicial
E conduct as they are pre-determined to treat the transactions as inter-State sale
and levy tax thereon ignoring the fact and correct legal situation, but did not
express any opinion on the correctness or otherwise of the said submissions.
It, however, felt the necessity of evolving a central mechanism which would
decide once for all questions of this nature. Elucidating certain instances, it
was opined that although the assessment proceedings before certain States
F had become final, this Court in exercise of its jurisdiction under Article 32
or 136 or 142 of the Constitution of India may issue appropriate directions,
whereupon the following directions were issued:
G
"22 ... Let the Tamil Nadu assessing authorities first decide the matters
before them. Thereafter, if the orders are against the appellant, we
permit the appellant to file the appeal(s) directly before the Tribunal.
If the Tribunal decides in favour of the appellant, no further question
would arise. But if it decides against the appellant, to wit, if it holds
that the sale of vehicles to the STUs of various States are inter-State
sales and if it is found that those very transactions have also been
H
taxed as intra-State sales under the State sales tax enactments of
t' •
_,
'
• i
ASHOK LEYLAND LTD. v. STA TE [S.B. SINHA, J.]
317
another State, that would be the stage for considering the advisability A
of giving appropriate directions of the nature contemplated above by
this Court-that is, of course, if by that time, no Central mechanism to
meet such a situation comes into existence.
23. In the interest of inter-State trade and commerce, the suggestion
for creation of a Central mechanism to decide such disputes-which B
are really in the nature of inter-State disputes-may be well worth
considering; every dealer affected may not be in a position to approach
this Court for appropriate directions. It is for the Government of
India to consider this aspect and take necessary decision in that behalf."
SUBSEQUENT PROCEEDINGS :
Pursuant to or in furtherance of the said directions an order of
reassessment was passed for the years 1988-89 imposing tax on the sales of
c
the appellants to the State Transpo11 Undertakings at the respective Regional
Sales Offices by an order dated 12.12.1997. It, however, appears that when D
companies similarly situated, as for example, lndicarb Limited approached
the State Appellate Tribunal, it refused to entertain an appeal there against
holding that the direction of this Court in Ashok Leyland (supra) was confined
to the fact of that case. The Special Leave Petitions having been filed by the
assesses, this Court in Civil Appeal No. 14406-14408 of 1997 by an order
dated 17.3.1998 held:
"As these special leave petitions and writ petitions involve important
questions involving conflict between States' sales tax assessment
proceedings and the Central sales tax assessment proceedings regarding
E
the alleged very same sale transactions and as the problem is of a
recurring nature and as a decision of a Bench of two Judges of this F
Court in As/10k Leyland Ltd. v. Union of India and Ors., l 05 STC
152, has to be applied with suitable modifications, if required, it
would be appropriate that these matters are heard by a Bench of three
learned Judges. In the meantime, the Union of India who is one of the
respondents in these proceedings, may have to be heard with a view G
to suggest a modus operandi to resolve this conundrum. We, therefore,
request the learned Attorney General to appear for respondent No. 2
Union of India for assisting the court in these proceedings.
The office may obtain orders from Hon'ble the Chief Justice for
placing these matters before an appropriate Bench of three learned H
318
SUPREME COURT REPORTS
[2004] I S.C.R.
A
Judges."
B
Notices, pursuant to the said directions, were issued to the concerned
States. Thereafter, even for the subsequent periods also the Appellate Tribunal
upheld the order passed in Indicarb Limited which are also the subject matter
of challenge before us.
PARLIAMENTARY INTERVENTION :
We may notice that having regard to the several orders passed in the
connected matter, the Parliament enacted Central Sales Tax (Amendment)
Act, 200 I and Finance Act, 2002. Suggestions, as regards certain provisions
C of the said Acts, however, having been mooted at the Bar, the matter is said
to be receiving fresh consideration at the hands of the Central Government.
It is also not in dispute that by enacting Central Sales Tax (Amendment)
Act, 2001 by Central Act 20 of 2002, which came into force from 11th May,
2002, Section 2(g) of the Act has been substituted by a new sub-section by
D which the definition of sale has been widened to include the deemed sales
defined by Article 366 (29-A) of the Constitution to enable the levy of
Central Sales Tax inter alia on the transactions involving transfer of property
in the goods involved in the execution of works contract or transfer of the
right to use the goods so that now even these transactions are open to levy
E by two different States either as inter-State transaction, or intra-State
transaction. Section 6A of the Central Act was also amended insofar as in
sub-Section (I) thereof the following words have been inserted:
"If the dealer fails to furnish such declaration, then, the movement of
such goods shall be deemed, for all purposes of this Act, to have been
F
occasioned as a result of sale."
G
The appellants filed applications in these appeals, seeking leave to raise
additional grounds in the light of the said amendment.
SUBMISSIONS:
Mr. K. Parasaran, learned senior counsel appearing on behalf of the
appellants would inter alia submit that the ratio arrived at by this Court in
Ashok Leyland (supra) requires a fresh look insofar as by reason of subsection (2) of Section 6A of the Central Act, the statute provided for conclusive
evidence as regards the nature of transaction and as the orders passed
H thereunder attained finality, the same could not have been reopened on any
AS HOK LEYLAND LTD. v. STA TE [S.B. SINHA, J.]
319
ground whatsoever. Drawing our attention to the history of legislation as also A
the case laws leading to incorporation of Article 286, enactment of the Central
Act as also amendments made in Article 269 of the Constitution of India, the
learned counsel wou Id submit that once by reason of the Central Act in terms
of the determination made by the statutory authorities thereunder, certain
transactions by creating a legal fiction were kept outside the purview of the B
Central Act, the assessing authorities cannot exercise their purported
jurisdiction of reopening an order of assessment under Section 16(2) of the
State Act or Section 9(2) of the Central Act. Formulation of principles for
determining when a sale or purchase of consignment of goods takes place in
the course of inter-state trade or commerce being within the exclusive domain
of the Parliament having regard to Clause (3) of Article 269 of the Constitution C
of India, Mr. Parasaran, would contend; statutory authorities created under
the State Act could not exercise any jurisdiction contrary to or inconsistent
therewith.
The learned counsel would submit that the word "detennination" signifies
expression of opinion which ends a controversy or a dispute by some authority D
to whom it is submitted under a valid law.
Mr. Parasaran would contend that in terms of Section 6A of the Central
Act, as it then stood, the assessee had two options, namely, to file Form F
or subjected himself to an assessment proceeding. If the assessee opts to file
a declaration in terms of Form F, whereupon an order is passed holding an
enquiry by the assessing authority; the same being conclusive in nature, no
proceeding for reopening the same would be permissible in law. Reliance in
this connection has been placed on Izhar Ahmad Khan (supra), Balabhagas
Hu/aschand (supra) and Mahant Dharam Das etc. v. The State of Punjab and
Ors., [1975] 3 SCR 160.
The learned counsel would argue that the expressions "for the purpose
E
F
of the Act" would imply "for the purpose of all the provisions of the Act"
and, thus, once an order is passed under Sub-Section (2) of Section 6A of the
Central Act, Section 9(2) thereof will have also no application whatsoever.
Reliance in this behalf has been placed by Mr. Parasaran on M.K. Kochu G
Devassy V. Stale of Kera/a, [ 1979] 2 sec 117.
Mr. Parasaraf' would urge that while exercising the option, it is
mandatory for the assessee to supply all information(s) which are required in
tenns of Form F and once compliance of statutory requirements are made,
the adjudication thereupon shall become final and binding. He in support of H
320
SUPREME COURT REPORTS
[2004] 1 S.C.R.
A the said contention placed reliance on Shrisht Dhawan v. Mis. Shaw Brothers,
(1992) 1 sec 534.
According to the learned counsel, such a provision has been inserted so
as to emphasise .the necessity of expeditious determination as regard a
transaction involving transfer of goods in terms whereof different States claim
B themselves to be entitled to levy different rates of taxes under the respective
State Acts. If with a view to give effect thereto, no appeal has been provided,
the same would not invalidate the law. In other words, argument of Mr.
Parasaran is that Section 6A has been granted a higher status than the
proceeding of assessment under the general law.
c
Mr. B. Sen, the learned senior counsel appearing on behalf of the State
of West Bengal while supporting the submission of Mr. Parasaran would
fu1iher argue that the Central Act being relatable to Article 286 of the
Constitution of India as also Entry 97 of List I of the Seventh Schedule of
the Constitution, a presumption must be drawn that the purpose thereof was
D to take away the taxing power of the State taken away and, thus, in relation
to such transactions the State cannot levy any tax. It is evident that order of
such nature passed by the assessing authorities of the State of Tamil Nadu
would not only affect the assesses but also other States as well and once it
is held that the burden of proof has been discharged by the assessee, such
transactions must be held to have taken place outside the purview of the
E Central Act.
Mr. A.K. Ganguli, the learned senior counsel appearing on behalf of
the respondents, per contra, would contend that the question as regard the
conclusiveness or otherwise of an order under Sub-Section (2) of Section 6A
F of the Act shall operate as res judicata, keeping in view the fact that the said
issue has already been determined by this Court in Ashok Leyland (supra)
and, thus, binds the parties herein. The learned counsel would contend that
Section 6A of the Act cannot be given a higher status than the State Act or
Section 9(2) of the Central Act inasmuch as an order passed in terms of SubSection (2) thereof is passed merely in aid of assessment and in that view of
G the matter if an order of assessment can be appealed against or subjected to
a reopening proceeding, the same legal provisions must be held to be applicable
also in relation to an order passed under Sub-Section (2) of Section 6A.
Mr. Ganguli has drawn our attention to the findings of the Tribunal to
the effect that raids were conducted by the authorities and that the appellant
H herein had escaped proper assessment by taking recourse to suppressio veri
ASHOK LEYLAND LTD. v. STATE [S.B. SINHA, J.]
321
.. -1
and suggestio falsi. According to the learned counsel, as fresh materials had A
been discovered, a reasoned show cause notice was issued and pursuant
thereto and in furtherance thereof, the impugned orders had been passed, and
in that view of the matter no case has been made out for interference therewith.
STATUTORY PROVISIONS:
B
'Sale' has been defined in Tamil Nadu General Sales Act, 1959 as:
~ -'f
"2(n) "Sale" with all its grammatical variations and cognate expressions
means every transfer of the property in goods (other than by way of a mortgage,
hypothecation, charge or pledge) by one person to another in the course of c
business for cash, deferred payment or other valuable consideration and
includes -
(i)
a transfer otherwise than i!1 pursuance of a contract, of property
in any goods for cash, deferred payment or other valuable
consideration;
D
(ii) a transfer of property in goods (whether as goods or in some
~
other form) involved in the execution of a works contract; ... "
'Turnover' in the said Act has been defined as under:
"2(r) "turnover" means the aggregate amount for which goods are
brought or sold, or delivered or supplied or otherwise disposed of in E
any of the ways referred to in clause (n), by a dealer either directly
or through another, on his own account or on account of others whether
for cash or for deferred payment or other valuation consideration,
provided that the proceeds of the sale by a person of agricultural or
horticultural produce, other than tea and rubber (natural rubber latex F
.-l
and all varieties and grades of raw rubber), grown within the State by
himself or on any land in which he has an interest whether as owner,
usufructuary mortgagee, tenant or otherwise, shall be excluded from
his turnover;"
Section 12 of the said Act provides for the procedure to be followed by G
the assessing authority in terms whereof the dealer is required to file the
prescribed return relating to his turnover submitted in the prescribed manner
• ....
within the period prescribed therefor. The Act provides for self-assessment
subject of course to the exceptions contained in Clause (b) of Sub-Section (I)
of Section 12. The errors contained in the ~eturn can, however, be corrected.
H
A dealer making self-assessment is required to make true and correct statements
322
SUPREME COURT REPORTS
[2004] I S.C.R.
A of fact. In the event, the dealer does not file a return within the prescribed
'r '
period and the return is found to be incorrect; in addition to the tax assessed,
the assessing authority may direct it to pay the amount of penalty levied in
terms of Sub-Section (3) of Section 12.
Section 16 provides for assessment of escaped turnover which reads
B thus:
"16. Assessment of escaped turnover.-(! )(a) Where, for any reason, the
'1'
whole or any part of the turnover of business of a dealer has escaped
assessment to tax, the assessing authority may, subject to the provisions of
C sub-section (2), at any time within a period of five years from the date of
order of the final assessment by the assessing authority to determine to the
best of its judgment the turnover which has escaped assessment and assess
the tax payable on such turnover after making such enquiry as it may consider
necessary and after giving the dealer a reasonable oppo1iunity to show cause
D
against such assessment.
(b) where, for any reason, the whole or any part of the turnover of
business of a dealer has been assessed at a rate lower than the rate at which
it is assessable, the assessing authority may, at any time within period of five
years from the date of order of the final assessment by the assessing authority
reassess the tax due after making such enquiry as it may consider necessary
E and after giving the dealer a reasonable opportunity to show cause against
such re-assessment."
F
G
In case of willful non-disclosure of assessable turnover by the dealer
while passing an order of reassessment, penalty can also be imposed. SubSection (3) of Section 16 provides for the manner in which limitation is to
be computed.