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The Titaghur Paper Mills Co. Limited v. State Of Orissa & Others Opp. Parties.

Orissa High Court

Apr 9, 1980

Judgment

CaseIQ

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Factual and Procedural Background

Twelve writ petitions (O.J.C. Nos. 195–206 and 198–203 of 1977, collectively) challenge assessments and tax demands for the financial years 1973-74, 1974-75 and 1975-76 under the Orissa Sales-tax Act (O.S.T.) and the Central Sales-tax Act (C.S.T.). The petitioner is a joint stock public limited company (a paper mill at Choudwar, Orissa) which filed returns for those years; the Sales-tax Department rejected the returns (and certain supporting materials, including a number of 'C' forms in the C.S.T. assessments) and made best judgment assessments increasing taxable turnover and levying additional tax demands. The petitioner sought quashing of those assessments and also sought stays of realisation; the Department responded by issuing notices for payment, a penalty-show-cause notice, and notices under section 13A(1) of the Orissa Sales-tax Act to banks. The petitions were heard together because they involved the same assessee, similar grounds and identical periods.

The opinion records the assessed figures and additional demands for each year under both Acts, describes the rejection of varying numbers of 'C' forms in the C.S.T. assessments, and notes appeals and stay applications filed by the petitioner before departmental authorities prior to approaching the High Court.

Legal Issues Presented

Whether the assessing authority lawfully exercised jurisdiction in making best-judgment assessments under section 12(4) (and related provisions) of the Orissa Sales-tax Act when returns were rejected or partly late, or whether the assessments were without jurisdiction and therefore nullities.
Whether the assessing authority violated principles of natural justice (for example, by failing to give adequate opportunity or by relying on material not put to the assessee) so as to vitiate the assessments.
Whether the assessing officer could require production of manufacturing-related accounts (purchases of raw materials, consumption of power and chemicals) for ascertaining production and turnover, or whether the assessee was required to produce only sales accounts under section 15.
Whether extraneous observations (allegations that the company was a habitual law-breaker or fined by other authorities) influenced the assessments so as to render them invalid.
Whether the rejection of numerous 'C' forms in the C.S.T. assessments (and the time given to rectify defects) was justified, and whether the Revenue should be required to afford further opportunity to produce valid C forms.
Whether writ relief under Article 226 was maintainable in light of alternative statutory remedies and whether Article 226 restrictions (as asserted in the counter) barred relief.

Arguments of the Parties

Petitioner’s Arguments

The assessment orders were without jurisdiction and therefore void ab initio; the assessing officer purported to act under sections (including section 12(4) and section 15) which, the petitioner contended, did not confer the power used.
The proceedings were quasi-judicial and breached principles of natural justice; therefore the assessment orders were vitiated and not amenable to departmental appeal as they were void.
The petitioner, being a manufacturer and seller of paper, was only required to keep sales accounts; the assessing officer had no competence to demand manufacturing/purchase accounts (bamboo, caustic soda, power consumption) and any such materials produced were out of apprehension rather than legal obligation and should not prejudice the petitioner.
The petitioner alleged it was not given opportunity to explain anomalies or to rebut the materials used to discard its returns; specifically, the petitioner claimed it was not informed of what material the assessing officer would use against it.
Extraneous considerations (that the company was a habitual law-breaker, penalties by River Board/Forest Department) improperly moulded the assessment.
On C.S.T., the petitioner argued that many 'C' forms were rejected whimsically and it was not given sufficient time to rectify defects in those forms.

Opposite Parties’ (Revenue) Arguments

The counter denied the alleged illegalities; asserted the petitioner produced books of account and actively participated in prolonged assessment proceedings (from 8.9.1976 to 20.1.1977) during which materials used were put to the petitioner and statements were taken on oath.
The assessing authority issued proper notices under section 12(2) and followed rule 28 (fixing dates to produce accounts and consider objections); ample opportunity was afforded and therefore the contention of denial of opportunity was false.
The assessments were rightly completed under section 12(4) after rejection of returns and supporting materials; actions were bona fide, lawful and in accordance with natural justice.
The petitioner failed to pay the demanded taxes or produce proof of payment, so statutory remedies such as penalty notices under subsection (5) of section 13 were properly invoked.
Writ petitions were not maintainable because alternative statutory remedies existed and Article 226 restrictions were invoked in the counter as a bar to relief.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
I.T.R. Vol. 63, p. 252	Illustration that mistaken citation of a particular section or label is not determinative if power exists under another provision.	The court relied on this principle to hold that a wrong mention of a section in an assessment does not invalidate it where the authority possessed power to proceed under some provision; thus, mislabelling did not render the assessment void.
I.T.R. Vol. 101, p. 450	To substantiate writ or prohibition, there must be total absence of jurisdiction; wrong statutory citation alone is insufficient if power exists under another provision.	The court applied this to reject the petitioner's contention of total usurpation of jurisdiction, holding that there was no total absence of jurisdiction by the assessing officer.
G.K. Padmaraju v. Commissioner of Income Tax, Hyderabad, I.T.R. Vol. 37, p. 365	Addresses whether material relied upon by assessing authority must be put to the assessee so that he can rebut it.	The court distinguished the present facts: here the authority relied on the assessee's own books and the assessee had opportunities and failed to explain; thus the rule did not require setting aside the assessment in this case.
Homi Jehangir Gheesta v. Commissioner of Income Tax, Bombay, I.T.R. Vol. 41, p. 135	Orders must be read as a whole to see whether material for and against the assessee was fairly considered; minor lapses do not automatically vitiate an order.	The court quoted this passage to assess whether extraneous remarks influenced the assessment and concluded that reading the order as a whole showed the extraneous remarks did not affect the final assessment conclusion.
Dhirajlal Giridharilal v. Commissioner of Income-tax, (1954) 26 I.T.R. 736	Supports that tribunal orders need not be examined microscopically for minor lapses; overall fairness is the test.	The court relied on the same line of reasoning (together with Omar Salay Mohamed Sait) to reject the contention that small or incautious observations necessarily void the assessment.
Omar Salay Mohamed Sait v. Commissioner of Income Tax, Madras, (1959) 37 I.T.R. 151	Similar principle that orders should not be invalidated by searching for minor errors; consider probabilities and avoid conjecture.	The court used this principle in evaluating whether the assessing officer's incidental remarks affected the fairness of the assessment; concluded they did not.
New Orissa Traders, Sambalpur v. State of Orissa, 35 S.T.C. 335	Guidelines for best-judgment assessment.	The assessing officer referred to these guidelines in estimating turnover; the High Court reviewed the use of those principles and found certain observations unnecessary though the general approach to best-judgment assessment was acceptable.

Court's Reasoning and Analysis

The court considered the challenged contentions under labeled points (A) through (E) and applied statutory provisions, procedural rules and the facts recorded in the assessment orders.

On jurisdiction and label of section(s) (Point A)

The court examined section 12 (assessment) and section 15 (accounts) of the O.S.T. Act and noted that best-judgment assessment arises when returns are not filed or are unacceptable. Notices under section 12(2) and rule 28 (Form VIII) require fixation of dates for production of accounts and for consideration of objections; here the assessing officer gave such opportunity, heard representatives, recorded statements on oath, and, upon failure to reconcile anomalies, made assessment under section 12(4). The court held that a mistaken label of the statutory provision is not fatal if power to proceed existed under some provision; total absence of jurisdiction must be shown to invalidate the officer's proceedings. On that basis the court found no arbitrary usurpation of jurisdiction and rejected the contention that the assessments were invalid for want of jurisdiction.

On requirement to produce manufacturing/purchase accounts (Point B)

The court rejected the petitioner's argument that only sales accounts were required. It reasoned that for a manufacturer the accounts of raw materials, chemical consumption and power are relevant to judge the quantum of production and therefore the correctness of declared sales/turnover. If such accounts are not maintained or, when produced, appear unintelligible or disproportionate, the assessing officer may legitimately reject them and proceed to best-judgment assessment. The court found it unreasonable to say a manufacturer need keep only sales accounts.

On opportunity to rebut (Point C)

The court addressed whether materials used to discard the returns were de hors (outside) the accounts produced and therefore required to be put to the assessee for rebuttal. It held that if the assessing officer relies on external material, the assessee must be given a chance to rebut; however, in this case the officer relied on the books and supporting accounts produced by the assessee and, after cross-examination and requests for explanation, found them unintelligible. Thus, the assessing officer did not act on secret or external material; the petitioner had opportunity but failed to explain anomalies, so there was no breach of natural justice on this point.

On alleged extraneous considerations (Point D)

The court acknowledged that the assessing officer made references to matters like alleged environmental and forest penalties but examined whether these influenced the assessment. Citing Supreme Court authority, the court stated that an order must be read as a whole to decide whether it was coloured by irrelevant considerations. After reviewing extracts from the assessment orders (discrepancies in bamboo receipt/consumption, production ratios, power and chemical consumption, and findings that company representatives could not explain inconsistencies), the court concluded the extraneous remarks did not influence the assessment outcome, though such remarks should have been omitted.

On natural justice and writ relief (Point E)

The court accepted that quasi-judicial proceedings must observe natural justice and that extraordinary remedies (certiorari, writ) lie where jurisdiction is absent or proceedings are vitiated. Applying the law to the facts—ample opportunity, the assessing officer's reliance on the assessee's own books, and detailed findings of unintelligible accounts—the court concluded there was no usurpation of jurisdiction or breach of natural justice sufficient to invoke interference under Article 226 for the O.S.T. assessments.

On C.S.T. assessments and rejected 'C' forms

The court accepted the practical difficulty an assessee may face in obtaining or rectifying numerous 'C' forms within a short time and was reluctant to assume the forms were bogus. While upholding the assessing officer's authority to reject defective forms, the court directed that, given the passage of over two years, the Revenue should give the petitioner one more opportunity to produce valid 'C' forms and then finalise assessment according to law. Accordingly, the C.S.T. assessments were quashed and remanded for reassessment in the indicated manner.

Holding and Implications

Holding:

The High Court divided its orders by statute:

O.S.T. assessments: O.J.C. Nos. 198, 199, 200, 201, 202 and 203 of 1977 were dismissed — the assessments under the Orissa Sales-tax Act were held not to be vitiated so as to justify interference under Article 226.
C.S.T. assessments: O.J.C. Nos. 195, 196, 197, 204 (noting the opinion prints a typographical entry "£04"), 205 and 206 of 1977 were allowed — the assessments and demands arising out of the Central Sales-tax assessments were quashed and remanded for reassessment, with a direction that the Revenue afford the petitioner an additional opportunity to produce valid 'C' forms and then finalise assessment according to law.

Implications:

Direct consequences: the Orissa Sales-tax assessments challenged were upheld (petitions dismissed) and the Central Sales-tax assessments challenged were quashed and remanded for reassessment with a specific direction to afford the petitioner another chance to tender valid 'C' forms. The court directed that parties bear their own costs. The opinion does not announce any novel legal doctrine; it applies established principles (jurisdictional threshold for writs, natural justice requirements, and assessment practice) to the facts and remanded the C.S.T. matters as a pragmatic remedy.

Show all summary ...

K.B Panda, J.:— O.J.C Nos. 198, 202 and 203 of 1977 are in respect of Orissa Sales Tax assessments for the financial years 1973-74, 1974-75 and 1975-76 whereas O.J.C Nos. 195, 196 and 197 of 1977 are in respect of Central Sales-tax assessments for the same period which the assessee petitioner seeks to quash. O.J.C Nos. 204, 205, 206, 199, 200 and 201 of 1977 are for stay of realisation of the tax demand for the above period under both the Acts.

2. The petitioner is a Joint Stock Public Limited Company governed by the Companies Act (Act 1 of 1956) having its registered office at Calcutta. It has a Paper Mill at Choudwar, in Orissa, where it manufactures paper and allied products. Opposite party No. 1 is the State of Orissa, and opposite party Nos. 2, 3, 4 and 5 are the officers of Orissa Sales-tax Department. The petitioner is a registered dealer under the Orissa Sales tax Act and adopts merchantile method of accounting commencing from 1st April and ending on 31st March as its accounting year-The returns filed by the petitioner for the above periods were not accepted by the Department. The assessee was asked to furnish evidence in support of the returns and the petitioner's officers failing to satisfy the assessing officer, he resorted to best judgment assessment in which the taxable return was enhanced and hence the petitions for quashing them. Hereinbelow are given the figures of the respective years:

1973-74

Disclosed turnover Rs. 41,40,298.24 Assessed gross turnover Rs. 81,91,698.24 The taxable turnover Rs. 48,64,920.85 Additional tax demand Rs. 3,10,400.54

1974-75

Disclosed turnover Rs. 54,18,344.31 Assessed gross turnover Rs. 1,05,39,344.31 Assessed taxable turnover Rs. 63,75,365.46 Additional tax demand Rs. 3,98,428.89

1975-76

Disclosed turnover Rs. 51,36,120.49 Assessed gross turnover Rs. 1,04,47,780.69 Assessed taxable turnover Rs. 58,17,149.79 Additional tax demand Rs. 3,87,589.85

The grounds for rejecting the returns are virtually the same and so too the grounds of attack.

The figures relating to the Central Sales-tax assessments for the years referred to above are:

1973-74

Disclosed turnover Rs. 3,54,33,894.03 Assessed gross turnover Rs. 3,54,33,894.05 Net assessed turnover Rs. 3,39,52,311.02 Additional tax demand Rs. 57,053.84

1974-75

Disclosed turnover Rs. 5,76,09,199.04 Assessed gross turnover Rs. 6,84,45,399.02 Net assessed turnover Rs. 6,58,57,985.11 Additional tax demand Rs. 16,92,608.74

1975-76

Disclosed turnover Rs. 5,53,06,088.18 Assessed gross turnover Rs. 7,18,69,488.9 Net assessed turnover Rs. 6,92,32,550.26 Additional tax demand Rs. 21,48,532.89

3. In the above C.S.T assessments 55 ‘C’ forms, 126 ‘C’ forms and 25 ‘C’ forms respectively were rejected and additional tax demand made and hence the prayer for quashing them. As these assessments relate to be same assessee but only for different periods and further they being on identical grounds as well as the challenge to the same, they were heard analogously and this judgment will dispose of all the twelve O.J Cs.

4. It is alleged in the petition that ever since the petitioner commenced operation of the Paper Mill at Choudwar in 1960, it did not experience such collosal difference between the returns filed by it from year to year and the assessments made by the Sales-tax administration of the State. According to the petitioner, the tax demand for the financial year 1973-74 was followed in very quick succession by two other demands within 7 to 8 days with a huge total tax demand of nearly 50 lakhs under both the Acts. It preferred appeals against there assessments before the Assistant Commissioner of Sales. Tax on the ground that the impugned assessments were inherently without jurisdiction, without the authority of law and as such, abinitio null and void; that the assessment orders were vitiated by violation of principles of natural justice and, as such, invalid. Also it filed petitions before the Commissioner of Sales-tax (opposite party No. 2) for extending the date of payment of the demand until disposal of the said appeals. The stay petition was rejected and the petitioner was served with a notice to show cause why penalty should not be levied for default in payment of the tax demands. As on 7th March, 1977, opposite party No. 5 issued a notice under section 13. A (1) of the Orissa Sales-tax Act, 1947, on the Indian Bank, Choudwar, Cuttack and other banks, with whom the petitioner has accounts, seeking to freeze the balance as may be due and payable by such banks to the petitioner and to pay over such balance to the Government treasury, these O.J.Cs were filed to quash the assessments and the tax demands. Though the assessments and the tax demand have been challenged on various grounds, as mentioned in the petition, they need not be referred to, by and large repetitions as they are. Substantially they are to the effect that:

(i) the proceedings before the assessing authority being a quasi-judicial proceedings, the taxing authority is bound to follow the principles of natural justice, rule of law and violation of the same render the order abinitio void and hence a nullity;

(ii) Tax demands based on such void orders are nonest and there is no obligation to file any appeal against such void orders or demands; and

(iii) there has been an erroneous usurpation of jurisdiction and such, as a writ of certiorari can lie.

5. In the counter filed on behalf of the opposite partiers, the various alleged illegalities in the petition were specifically denied. It was asserted that the petitioner produced its books of account from time to time, participated in the assessment proceedings during which all materials utilised against the petitioner were put to the representatives of the petitioner for clarification and their statement taken on oath. So, the allegation that sufficient opportunity was granted to the petitioner and the assessments were concluded hastily is untrue and incorrect. In fact, there was a prolonged assessment proceedings starting from 8.9.1976 when the notice of assessment was issued till the last hearing on 20-1-1977. During this period ample opportunity was afforded to the petitioner for submission of evidence and clarification of different anomalies found in the books of accounts and on due consideration of the explanation offered by the employees of the assesses, the opposite party No. 4 passed the assessment orders rightly under section 12(4) of the Orissa Sales-Tax Act on 31-1-1977.

6. The petitioner was required to pay the taxes in accordance with the terras of the demand notices served on it within 30 days from the date of service thereof and to produce proof of payment within 7 days there from before the collecting authorities, i.e opposite party No. 5. As the petitioner failed to comply with the above requirements of law, a notice to show cause against levy of penalty, as envisaged under sub-section (5) of section 13 of the Orissa Sales-tax Act, was issued by the opposite party No. 5 to the petitioner. It was further asserted that all the actions of the opposite parties were bona fide, lawful and in accordance with the principles of natural justice and the charge that the action of the authorities was hostile, capricious and illegal was strongly denied. It was specifically asserted m the counter that the writ petitions are not maintainable in law as the petitioner has alternative remedy open under the Statute. Article 226(3) of the Constitution prohibits any redress of any injury referred to in Article 226(i)(b) or sub-clause (c) and hence, dismissal of the petitions was urged.

7. It was contended on behalf of the petitioner that:—

(i) the assessing officer has assumed jurisdiction under sections 15 and 12(4) of the Act but they do not confer on him any such jurisdiction;

(ii) as a manufacturer qua seller of paper, the petitioner is only required to keep the accounts of its sales and nothing more. If that is produced and the assessing authority has no information or evidence that any particular sale has been suppressed or omitted, he is bound to accept it, and if any such evidence is there, then an opportunity has to be given to the assessee to explain it and thereafter assessment made;

(iii) the petitioner-company is not bound to keep accounts of its purchase or bamboos, caustic soda and consumption of electrical energy etc. The Taxing Officer is also not competent to ask of the petitioner these accounts and even if the petitioner has done so, it is out of fear and not out of any obligation under law and, therefore, should not be considered to the petitioner's prejudice;

(iv) the petitioner was not given any opportunity to explain the alleged anomaly in the proposed ultimate assessment;

(v) Extraneous, incorrect and irrelevant considerations such as-“the dealer company is a habitual law-breaker for which they are penalized from time to time repeatedly visited with penalty by the River Board for polluting the water of river Mahanadi, Forest Department imposing penalty for over felling and illicit felling of bamboos “have moulded the assessment and as such they cannot stand; and

(vi) on the above grounds there has been violation of natural justice and the assessment is violative of Article 265 of the Constitution.

8. We would now proceed to examine the tenability of these contentions.

(A) Point No. (i):

9. Section 12 of the Orissa Sales tax Act speaks of assessment of tax and section 15 speaks of how a dealer is to maintain accounts. According to the petitioner these assessments cannot be under section 12(4) and section 15, which the order envisages and the assessing authority has clutched jurisdiction under these provisions of the Act which do not confer on him any such power and; therefore, the assessment order is without jurisdiction and a nullity. Under the scheme of the Act, best judgment assessment can be made in two circumstances, namely, (i) if a registered dealer does not file any return or (ii) if the return filed is not acceptable. Here, evidently some of the returns have been filed in time and some beyond time The Taxing Officer has not been satisfied with the returns furnished and so issued notice under section 12(2) of the Act. The notices required under subsection (2) or (4) of section 12 are identical as per rule 28 and they shall be in Form No. VIII In these notices the assessing authority as per rule 28 “shall fix a date for the production of such accounts and documents as he may require and for considering any objection which the dealer may prefer”. Here, the assessing authority has given that chance to the assessee; has heard the representatives of the assessee has taken their statements on oath and on their admitted failure to reconcile the anomalies, assessed the petitioner under section 12(4) of the Act. Section 12(4) postulates a case where a dealer has not furnished the return within the prescribed date. In these cases, as already said, some of the returns are within the prescribed date and some beyond the date and so they offer a mixedcase. Yet the fact remains that he has given notice to the assessee to clarify and support the returns and after hearing the assessee, he has discarded the returns and has resorted to best judgment assessment. We find nothing wrong in it. This is also an appropriate circumstance where best judgment assessment has to be resorted to. Section 12(3) and section 12(4) are not invariably mutually exclusive, so that if it will be an assessment under section 12(4), it cannot be under section 12(3). In other words, in certain circumstances and to certain extent i.e, when the returns have been filed beyond the prescribed date and yet the assessing authority takes them into consideration for which there is no express provision under section 12 of the Act, they overlap. The crucial point is if a situation for ‘best judgment assessment’ has arisen or not. In the instant case with the rejection of the returns consequent upon the rejection of the supporting materials, such a situation did emerge. So, there is nothing to quarrel about the assessment made under section 12(4). Besides, whether it is an assessment under sections 12(3) or 12(4), if the assessing authority has power to do so and there is no inherent lack of jurisdiction, under that section he has made the assessment is immaterial. Rightly it has been said that the mistaken mention of a particular section or the label or the nomenclature used is not determinative of the validity of an assessment (see I.T.R Vol. 63, 252). “In order to substantiate a right to retain a writ of prohibition from the High Court or from the Supreme Court, an application has to demonstrate total absence of jurisdiction to proceed on the part of the officer or authority complained against. It is not enough if a wrong section or provision of law is cited in a notice or order if the power to proceed is actually there under another provision (I.T.R Vol. 101, 450). So, we dismiss the contention that the assessing authority in these cases has arbitrarily usurped jurisdiction and power and, therefore, the assessments are invalid.

(B) Point Nos. (ii) & (iii):—

10. The contention on behalf of the petitioner company is that the petitioner company being a manufacturer_qua_seller”, the approach of the assessing officer has not been proper. According to the petitioner, section 15 which provides:—

“Every registered dealer shall keep a true account of the value of goods bought and sold by him.”

11. Postulates only that a dealer has to keep accounts of the goods bought and sold. Here, the petitioner assessee not being a purchaser of paper but manufacturer thereof, it is only required to keep the accounts of its sales to different parties and if there is no suppression in it, the assessing officer has no right to go beyond and ask the petitioner to produce other accounts in support of the returns. Elaborating on this point, it was argued that the company was under no obligation to produce its books of accounts regarding the purchase of bamboos, custic soda and consumption of electricity etc. and under the Statute, the Taxing Officer was not competent to ask the petitioner any other accounts excepting the account of sales. Even if the petitioner has produced any such accounts, it is out of an apprehension and not of an obligation under any law and, therefore, any anomaly found in those accounts, cannot be construed to the petitioner's prejudice. In this case, admittedly, the petitioner has been asked to produce its accounts regarding purchase of bamboos, soft woods, power consumed and incidental manufacturing accounts of the dealer over paper produced from year to year. The assessing officer found that the accounts kept by the dealer over these raw materials were unintelligible for they were disproportionate to the production of paper actually made. According to the petitioner the assessing officer went wrong first in asking for those supporting materials of manufacturer and secondly in discarding the returns on the basis of those irrelevant account books on manufacture. That the assessee is not bound to keep the accounts regarding purchase of bamboos, soft wood, consumption of electricity etc. we are unable to accept. These are raw materials used by the company in the production of paper. If no accounts of those raw materials are maintained and when demanded produced, the quantum of paper manufactured cannot be judged. It would be puerile to say that a manufacturer like the assessee is only to keep the accounts of its sales and nothing beyond that. If that be so, there would be no scope for checking the same and anything produced by the assessee is bound to be accepted unless the assessing officer has some credible information or material that some sale or sales have been suppressed which is extremely difficult to get. So, we are not impressed with this argument.

12. It was contended that the assessee has not been given an opportunity to give evidence in rebuttal to the finding and in fart, petitioner was not at all made known what the assessing officer was going to utilise against it. In this context, reliance was placed on the case of G.K Padmaraju v. Commissioner of Income Tax, Hyderabad . I.T.R Vol. 37, P. 365..

13. What evidence or material is utilised in making the assessment and whether that evidence or material has to be put to the assessee to give evidence in rebuttal is a question of fact likely to vary from case to case. If any assessing officer during the course of the discharge of his duty receives some or any material de hors the accounts produced, on the basis of which he is going to discard the accounts of an assessee, it is in such circumstance only that the assessee should be given an opportunity to establish that the information is incorrect, the material has no basis and the assessing officer has been misinformed or misguided. But that is not the case here. The assessing officer, in this case, has not proceeded on any such information or material. He has examined the supporting books of accounts produced by the assessee and by a thorough cross-check has come to the positive finding that they are not acceptable. Nothing else than the books of account produced has been utilised and that too when the representatives of the assessee have failed to explain them. So, this point is barren of substance.

(D) Point No. (v):—

14. It was contended that extraneous, incorrect and irrelevant matters, such as, “the dealer company is a habitual law breaker for which they are fined from time to time, repeatedly visited with penalty by the River Board for polluting the water of river Mahanadi; forest department imposing penalty for overfelling and illicit felling of bamboos” have moulded the assessment and as such, they cannot stand. True, the learned assessing officer has referred to these factors but it needs no effect to see that these considerations have not in the least influenced the assessment. The law on the point as laid down by the Supreme Court in Homi Jehangir Gheesta v. Commissioner Of Income Tax, Bombay . I.T.R Vol. 41 P. 135., runs thus:—

“……the Court must read the order of the tribunal as a whole to determine whether every material fact, for and against the assessee has been considered fairly and with due care; whether the evidence pro and con has been considered in reaching the final conclusion; and whether the conclusion reached by the tribunal has been coloured by irrelevant considerations or matters of prejudice.

The decision of the Supreme Court in Dhirajlal Giridharilal v. Commissioner of Income-tax, (1954) 26 I.T.R 736 and Omar Salay Mohamed Sait v. Commissioner Of Income Tax, Madras , (1959) 37 I.T.R 151 do not, however, require that the order of the tribunal must be examined sentence by sentence, through a miscroscope as it were, so as to discover a minor lapse here or an incautious opinion there to be used as a peg on which to hang an issue of law. In considering probabilities properly arising from the facts alleged or proved, the tribunal does not indulge in conjectures, surmises or suspicions”.

15. Thus, the sole point for consideration is whether the observations quoted above, viz., that the assessee is a habitual law breaker etc. have influenced the assessment. To this question our answer is in the negative as would be clear from the elaborate assessment orders now impugned. In support of our view on this point as well as on other factual aspect of the matter some relevant extracts from the assessment orders on O.S.T are quoted hereunder:

“In response to the notice under section 12(2) of the O.S.T Act, the Accounts Executive of the Company Shri A.K Mitra, the Mill %??? Accountant, Shri B.C Sahoo, Sri Samiran Chakraborti and Sri Tarapad Roy, both of them Assistants working in the Head Office of the Company. Sri Y. Subba Rao, General Assistant working in the Mill, Sri Khetramohanf Baral and Sri Sidheswar Swain, Assistants in Raw Materials and Costing Sections, Sri M.M Misra, Forest Supervisor and Sri Gangadhar Das, Accounts Assistant have appeared from time to time and produced books of accounts as per memo of appearance filed. The books of accounts have been carefully examined and several defects have been noticed which are discussed below”,

xxxxxxxxx

“This was confronted to the representative of the dealer company on 13-1-1977 who stated that the reasons of the above discrepancy cannot be explained by him. Similar discrepancies were noticed for 74.75 and 75.76, also. The representative of the dealer company who appeared on 13.1-1977 stated that competent officers of the company would explain the above discrepancies on 14-1-1977. But on 14.1.1977 no explanation was filed in this regard. On 15-1.1977, the representative of the Mill who appeared and produced the books of accounts was asked to explain about the above discrepancies. But he said that he was not able to explain anything as he was working in the Accounts Section. Thus it will be seen that inspite of sufficient opportunity having been offered to the dealer company to explain the discrepancy between the total quantity of bamboo despatched to the Mill as per the figures furnished by the Forest Officer of the Company and the total quantity received in the Mill as per the Mills account, no explanation has been advanced. Therefore, I am constrained to conclude that the dealer has no explanation to offer in the matter. Therefore, it is concluded that the above bamboos have been utilised for clandestine production of papers.”

16. The learned assessing officer concludes in paragraph 11 by saying:—

“Including 12,717 M.T of wood, the total quantity of basic raw materials consumed comes to 52701. At 25 : 1 recovery ratio, the total quantity of paper produced would come to 21080 MT against 18603 MT shown in accounts”

17. At the end of the 14th and 15th paragraphs, he concludes thus:

“Thus it is established that the percentage of moisture deducted from the gross weight of bamboo before they are taken to the bamboo stock register is not faithfully recorded in regular course of business, x x x x x x x This is as per the books of accounts of the dealer company themselves. But allowing only 20% moisture on bamboo and 30% on wood following the above technical opinion, 45872 MT and 3170 MT of bamboo and wood were put into the manufacturing process during the year under assessment. Applying 250: 1 production ratio the total quantity of paper that was produced from the above bamboo and wood consumed comes to 19616 M.T whereas the dealer company has shown the total production at 18603 M.T”.

18. While examining the proportion of power consumed and paper produced from year to year he detected wide discrepancies and when the representative of the company was confronted with this, he could not offer any reasonable explanation and so the assessing officer observed:—

“On being asked to prove his statement with reference to the actual production of different variety of paper from time to time, Shri Mitra stated that it was very difficult to do. Therefore, the books of account of the dealer-company are held as unintelligible so far as the proportion of consumption and production of paper is concerned”.

19. In respect of the various chemicals used in the manufacturing process, he came to the further finding that the dealer company's manufacturing account with reference to use of bleaching material which is one of the important chemicals used in paper making industries is not reliable.

20. While discussing the use of sizing materials, he found immense variation and the representative of the company Sri A.K Mitra stated that it was very difficult to explain the same. On this score, the assessing officer concluded thus:

“The ratio obtained in 73-74 is also very much different from the ratio exhibited in the other years. If 72-73 is taken as base, the total production of paper comes to 19 600 M.T instead of 18425 M.T in books of account. Sri A.K Mitra, the Accounts Executive in his statement dated 11.1.1977 was asked to explain the reasons of this difference. He stated that the more is the thicknes of paper produced the less will be the quantity of loading materials used and that for producing cheaper variety of paper more of loading materials ate consumed, x x x But Shri Mitra could not prove that the same with the help of accounts. Rather he expressed his inability to do this. There is no point to keep accounts which do not stand to reason.”

21. Finally the assessing officer held:

“On examination of the above registers it was found that during 73.74, the dealer company produced 19,122.6C0??? M.T of paper as per machine weight i.e as per actual weighment made as soon as paper comes out of the machine, whereas, as per the actual weight of the reams after finishing, the total production is shown at 18,567.426 M.T”

22. Examining the accounts from different angles, i.e, purchase of raw materials, the assessing officer came to the following conclusion:

“The discussion so far made makes it abundantly clear that the books of accounts of the dealer-company are not recorded in a true and intelligible manner, as required under provisions of section 15 of the O.S.T Act. Therefore, the books of accounts of the dealer are rejected and assessment is being completed on best of judgment.”

23. Thereafter while making an estimate of the turnover of the Company, he has referred to some guidelines for best judgment assessment mentioned in a decision of this Court New Orissa Traders, Sambalpur v. State Of Orissa . 35 S.T.C 335. But in following the principles laid down therein, evidently he has overshot the mark and made certain observations which are irrelevant for making an honest assessment of the turnover of the Company. The observation that the dealer-company enjoys a semi-monopoly position in the market, the dealer company has taken vast forest contract of bamboo on royality from which basic raw materials, i.e, bamboo is extracted and utilised in the Mill for production of paper ate very much germane; but not that the company is an habitual law breaker or that it has been repeatedly visited with penalty to the tune of several lakhs by the River Board for polluting the water of river Mahanadi or that the forest department are imposing penalty for overfelling or illicit felling. We may add here that the estimate of production of the company at 20,000 M.T has already been arrived at by the assessing officer at different stages earlier. So, on a scrutiny of the assessment order as a whole, we are unable to accept the contention that these extraneous and irrelevant matters have in any way influenced the judgment although we agree that it would have been proper if those observations were not there. Accordingly, this point is also decided against the assessee.

(E) Point No. (vi):

24. It was argued with great elaborateness that the proceeding before the assessing officer is a quasi judicial proceeding in which the principles of natural justice should be adhered to; violation thereof would render the initial order null and void which cannot be cured subsequently if other remedies are open, that will not bar a petitioner to seek relief under Article 226 of the Constitution and where there has been erroneous usurpation of jurisdiction a writ of certiorari would lie and acquiescence or participation in such a proceeding would not debar an aggrieved party from challenging it in a proper writ. All these are well settled propositions of law. So we do not feel inclined to refer to the several citations made on this score. The moot point is if the impugned orders suffer from any of those vices.

25. Keeping the law in view as well as the facts of the instant case, as discussed here before, we are unable to agree with the learned counsel for the petitioner that the order passed in this case is a nullity because the assessing officer has usurpt jurisdiction, or that he has violated the principles of natural justice or rule of law.

26. Therefore, the assessments made under the O.S.T cases are in no way vitiated justifying interference in exercise of our extraordinary jurisdiction under Article 226 of the Constitution. Consequently, O.J.C Nos. 198, 199, 200, 201, 202 and 203 of 1977 fail and are dismissed.

27. So far as the C.S.T cases are concerned, the additional feature argued is that as many as 56 ‘C’ forms for the financial year 73.74, 120 ‘C’ forms for 74-75 and 25, C’ forms for 75-76 were whimsically rejected. It was contended on behalf of the petitioner that sufficient time was not given to the petitioner in rectifying the defects in those ‘C’ forms. In this context, the observation of the assessing officer is thus:

“However, several of these ‘C’ forms were found defective as noted against each in the statement enclosed with this order. Therefore, the same are rejected and on sales amounting to Rs. 26,57,902.81 covered under these defective ‘C’ forms tax is being charged @ 10% ‘C’ form for balance sales shown to registered dealers have not been produced inspite of opportunities given.”

28. While not accepting the contention that no opportunity was given, we take into consideration the practical difficulty of the assessee in obtaining proper ‘C’ forms or rectifying the defects in them within a short time. We hesitate to believe prima facie that a dealer like the assessee has furnished bogus ‘C’ forms. Given reasonable opportunity we believe, it would rectify the defects in them. If none appeared on behalf of the assessee on the due date fixed for it, we think it is not because the forms were spurious but because they were unable to rectify the defects within that time. Accordingly, we would interfere in the C.S.T cases and direct that the Revenue should give another chance to the petitioner to claim deduction under valid ‘C’ forms. Since in the meanwhile more than two years have passed, the learned assessing officer would do well to give one more chance to the assessee to produce valid ‘C’ forms and then finalise the assessment according to law. Accordingly, O.J.C Nos. 195, 196, 197, 205, £04 and 206 of 1977 are allowed, the assessment and demands quashed and cases remanded for reassessment in the lines indicated above.

29. O.J.Cs arising out of O.S.T assessments are rejected and O.J.Cs arising out of C.S.T assessments are allowed as indicated in the order. Parties to bear their own costs in the circumstances of the cases.

J.K Mohanty, J.:— I agree.

30. Ordered accordingly.