Concessional tax rate on sales against valid Form 3-B upheld; assessment set aside for lack of notice and hearing.

Sales of molasses made against valid Form 3-B issued by the purchasing dealer's assessing authority were entitled to the concessional rate, and the seller could not be denied that treatment merely because the goods were used in one unit of the purchaser rather than another. The assessment also failed because the revisionist was not given adequate opportunity of hearing and no proper show cause notice was issued before the order was made. On both grounds, the Tribunal's order was set aside and the first appellate authority's restoration of concessional tax treatment was affirmed.

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Issues: (i) whether sales of molasses made against Form 3-B issued to the purchasing dealer's assessing authority were liable to tax at the concessional rate or at the higher rate; (ii) whether the assessment order could be sustained when no adequate opportunity or show cause notice was given to the revisionist.

Issue (i): whether sales of molasses made against Form 3-B issued to the purchasing dealer's assessing authority were liable to tax at the concessional rate or at the higher rate.

Analysis: The Form 3-B had been issued by the assessing authority of the purchasing dealer. The purchasing concern was treated as a unit having different divisions, and the material purchased was used in its chemical unit. Since the sales were made against validly issued Form 3-B, the revisionist was justified in charging tax at the concessional rate. No illegality could be attributed to the seller merely because the material was ultimately used in another unit of the purchaser.

Conclusion: The transaction was liable to be taxed at the concessional rate and not at the higher rate.

Issue (ii): whether the assessment order could be sustained when no adequate opportunity or show cause notice was given to the revisionist.

Analysis: The record showed that the revisionist was not afforded adequate opportunity of hearing and no proper show cause notice was issued before completing the assessment. In such circumstances, the adverse assessment could not be sustained consistently with procedural fairness.

Conclusion: The assessment order was unsustainable for breach of natural justice.

Final Conclusion: The Tribunal's order was set aside and the order of the first appellate authority restoring the concessional tax treatment was affirmed, resulting in success for the assessee.

Ratio Decidendi: Where the purchasing dealer's assessing authority has issued the prescribed form and the sale is made bona fide against that form, the seller cannot be denied the concessional rate merely because the goods are used in a particular unit of the purchaser, and an assessment made without adequate notice and hearing is vulnerable on natural justice grounds.

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