Purchase tax and substituted service principles upheld with remand for defective notice procedures in sales tax proceedings.

Purchase tax under section 4(6)(i) of the Bengal Finance (Sales Tax) Act, 1941 was treated as attracted where the dealer satisfied the statutory liability and registration conditions, even if the sales tax demand was nil, and the provision was read as requiring manufacture in West Bengal for sale, not an additional sale-in-West-Bengal condition. Conversion of raw goat skin into semi-finished goods was held to amount to manufacture, so the levy was sustained. The ex parte best judgment assessment in RN-2 of 1989 was upheld because service was proved and the estimate had a reasonable nexus with available material. RN-20 of 1989 and RN-105 of 1989 were remitted because substituted service did not comply with the required statutory safeguards.

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Issues: (i) Whether purchase tax under section 4(6)(i) of the Bengal Finance (Sales Tax) Act, 1941 could be levied where the dealer's sales tax liability was nil, and whether the provision required manufacture and sale in West Bengal; (ii) whether the ex parte best judgment assessment in RN-2 of 1989 was arbitrary or unsustainable for want of proper notice or relevant material; (iii) whether the notice and subsequent proceedings in RN-20 of 1989 and RN-105 of 1989 were invalid for want of proper service, warranting remand.

Issue (i): Whether purchase tax under section 4(6)(i) of the Bengal Finance (Sales Tax) Act, 1941 could be levied where the dealer's sales tax liability was nil, and whether the provision required manufacture and sale in West Bengal.

Analysis: The charging condition under section 4(6)(i) was held to depend on the dealer being liable to tax under the relevant charging provisions and being registered, even if the actual demand on sales turnover was nil because of exemption or the factual pattern of the case. The provision was also construed to require manufacture in West Bengal of goods for sale, but not sale in West Bengal as an additional precondition. On the facts, processing raw goat skin into semi-finished goods amounted to manufacture, as the commodity became commercially different. The burden under section 4(7) was not discharged by the applicant on the question whether the purchases were from an unregistered dealer.

Conclusion: The purchase tax levy was upheld against the assessee.

Issue (ii): Whether the ex parte best judgment assessment in RN-2 of 1989 was arbitrary or unsustainable for want of proper notice or relevant material.

Analysis: Service of notice was accepted as proved. The assessment record showed repeated adjournments and ultimate non-appearance. The best judgment power was held to permit estimate based on relevant material and honest guesswork, but not pure conjecture. In the present case, the turnover estimate had a reasonable nexus with the available materials, including earlier assessment material and the assessee's own figures, and the purchase price adopted was not found unreasonable.

Conclusion: The ex parte assessment in RN-2 of 1989 was upheld.

Issue (iii): Whether the notice and subsequent proceedings in RN-20 of 1989 and RN-105 of 1989 were invalid for want of proper service, warranting remand.

Analysis: The substituted service procedure under rule 84 of the Bengal Sales Tax Rules, 1941 required satisfaction that the dealer was avoiding service and recording of reasons before affixation or substituted service was used. In RN-20 of 1989, the appellate notice was not shown to have been validly served in accordance with that rule. In RN-105 of 1989, the demand notice in form VII likewise lacked proper compliance with the statutory requirements for substituted service, and the subsequent proceedings were therefore invalid.

Conclusion: RN-20 of 1989 and RN-105 of 1989 were remitted for fresh service and further proceedings in accordance with law.

Final Conclusion: The Tribunal sustained the assessment in RN-2 of 1989, but granted partial relief in RN-20 of 1989 and RN-105 of 1989 by setting aside the defective service-based proceedings and directing fresh action from the appropriate stage.

Ratio Decidendi: Purchase tax under the Act is attracted when the statutory conditions of liability and registration are met, manufacture may be inferred from conversion into a commercially distinct commodity, best judgment assessment must rest on relevant material, and substituted service is valid only upon compliance with the statutory prerequisites and recorded satisfaction.

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