1984 (8) TMI 296 - HC - VAT and Sales Tax

Court Allows Appeal, Rejects Res Judicata in Tax Assessment.

State of West Bengal Versus Hind Tea Company (P.) Ltd.

State of West Bengal Versus Hind Tea Company (P.) Ltd. - [1984] 57 STC 97 (Cal) Issues Involved:1. Validity of the assessment order and demand notice for the year ending December 31, 1966.2. Applicability of rule 3(30)(a) of the Bengal Finance (Sales Tax) Act, 1941, as amended.3. Whether the principle of res judicata applies to tax assessment proceedings.4. Maintainability of the writ petition under Article 226 of the Constitution of India.Issue-wise Detailed Analysis:1. Validity of the Assessment Order and Demand Notice for the Year Ending December 31, 1966:The company challenged the assessment order dated September 6, 1967, and the demand notice dated September 13, 1967, for the year ending December 31, 1964. The Commercial Tax Officer disallowed a significant portion of the company's claim for deductions under section 5(2)(a)(vi) read with rule 3(30) of the Bengal Finance (Sales Tax) Act, 1941. The company argued that the deductions were disallowed despite the production of account sales statements from the broker, which had been accepted in previous years. The officer imposed a tax of Rs. 15,950.34, although the company claimed that the tax payable should have been Rs. 66.20 only.2. Applicability of Rule 3(30)(a) of the Bengal Finance (Sales Tax) Act, 1941, as Amended:The company contended that the sales of tea made through auctions conducted by a broker-member of the Calcutta Tea Traders' Association should be exempt from sales tax under rule 3(30)(a). The rule required the production of a copy of the relevant account of sale rendered by the broker-member and a declaration in writing signed by the broker-member. The company argued that the account sales statements provided by the broker were sufficient and that the officer's demand for separate account sales for each lot of auction sales was unreasonable.3. Whether the Principle of Res Judicata Applies to Tax Assessment Proceedings:The court examined whether the principle of res judicata or principles analogous thereto applied to tax assessment proceedings. The court noted that each assessment year is a separate and distinct proceeding, and decisions in earlier assessments do not bind subsequent assessments. The court referred to several cases, including Devilal Modi v. Sales Tax Officer, Ratlam, and Raja Bahadur Visheshwara Singh v. Commissioner of Income-tax, Bihar and Orissa, to support this view. The court concluded that the rule of res judicata does not ordinarily apply to tax statutes, and the Commercial Tax Officer is not bound by previous decisions.4. Maintainability of the Writ Petition under Article 226 of the Constitution of India:The company filed the writ petition under Article 226, challenging the assessment order and demand notice. The court considered the maintainability of the writ petition in light of the availability of alternative remedies under the Sales Tax Act. The court referred to the case of Titaghur Paper Mills Co. Ltd. v. State of Orissa, where it was held that when a statute provides a complete machinery for challenging an assessment order, the remedy provided by the statute must be availed of, and a writ petition under Article 226 is not maintainable. The court concluded that the writ petition was not maintainable as the company had not exhausted the alternative remedies available under the Sales Tax Act.Conclusion:The court allowed the appeal, set aside the judgment and order of the learned judge, and confirmed the orders as impeached in the writ petition. The court held that the rule of res judicata does not apply to tax assessment proceedings and that the writ petition under Article 226 was not maintainable. The court also noted that the Commercial Tax Officer acted within his jurisdiction in demanding separate account sales statements and declaration forms as required under rule 3(30)(a). The court directed that if the company now files separate account sales statements and declaration forms in terms of the judgment, the authorities should reconsider their case.