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Judgment Summary (Dua, J.) — Petition concerning issuance of notices under the Punjab General Sales Tax Act

Factual and Procedural Background

The petitioner is a partnership firm (partners: Shri Kishan Chand and Shri Ram Parkash) engaged in the sale and purchase of Banaspati oils and was a registered dealer with the Assessing Authority at Amritsar. For the years ending 31 March 1962, 31 March 1963 and 31 March 1964, the petitioner filed monthly returns with the Assessing Authority, Amritsar, and paid the tax under section 10 of the Punjab General Sales Tax Act as required. Historically, assessments up to 1960–61 had been made by the Assessing Authority, Amritsar (an order for 1960–61 passed 28 February 1962).

On 19 February 1964 Shri S.K. Jain (Excise and Taxation Officer, Finance Department, Assessing Authority, Punjab, Chandigarh) issued notices in Form S.T. XIV for the years 1961–62 and 1962–63 under the Punjab General Sales Tax Act and the Central Sales Tax Act, requiring the petitioner to appear on 3 March 1964. The petitioner challenged such notices in Civil Writ No. 382 of 1964 (later reported as Kishan Chand & Co. v. S.K. Jain [1965] 16 S.T.C. 521), and proceedings in that matter were stayed by the admitting Bench.

Separately, on 10 August 1964 Shri K.K. Opal (Excise and Taxation Officer (Enforcement), Amritsar) required production of books of account for 1961–62 and 1962–63 and for 1963–64, together with declaration forms and evidence of deliveries, warning of adverse inference and legal action for failure to produce documents. These notices (said to be under section 14 and section 10(7) of the Act) form the subject-matter of the present writ petition.

Legal Issues Presented

  1. Whether an Assessing Officer other than the Assessing Authority with whom the dealer has filed returns can validly issue notices under section 14 (and related provisions) in the absence of a formal order transferring the assessment proceedings.
  2. Whether the officer issuing a notice under section 10(7) (penalty inquiry for false or incorrect accounts) may proceed without a transfer where the same Assessing Authority that will ultimately assess the dealer had the returns filed with it.
  3. Whether the petitioner should be directed to pursue available departmental remedies (revision or transfer requests under the statute) rather than seek immediate relief under Article 226 of the Constitution.

Arguments of the Parties

Petitioner's Arguments (as represented by Shri Bhagirath Dass)

  • The notices issued under section 14 (and related notices) are bad in law because the Assessing Authority at Amritsar — with whom the petitioner had filed returns — is the competent authority; in the absence of an order of transfer, the impugned notices are invalid.
  • It is conceded that Shri Opal does not lack inherent jurisdiction; the objection is the lack of an order effecting transfer of proceedings.

Respondent's Arguments (as represented by Shri Nehra)

  • The petitioner has remedies under the statute: he can apply for revision to the Commissioner under section 21(1) who can call for records and examine legality or propriety of proceedings.
  • Alternatively, the petitioner can approach the officer who issued the notice and rely on the prior Bench decision to request that the officer not proceed; the officer could then seek a formal order of transfer from higher authorities.
  • Reliance on the reported decision in Kishan Chand & Co. v. S.K. Jain: the court there observed that inherent jurisdiction was not absent and assessments made in such circumstances would not be struck down merely for want of inherent jurisdiction.
  • Cited an unreported Single Judge decision (Shri Maya Ram Bhatia v. Shri K.K. Upal, C.W. 2198 of 1964) where the court declined to exercise extraordinary writ powers under Article 226 because the dealer had not exhausted statutory remedies and his conduct was noted; urged this Court to similarly direct exhaustion of departmental remedies before invoking writ jurisdiction.
  • Represented that, following the earlier Bench decision, the department had begun passing proper orders of transfer in pending assessments prior to requiring a dealer to appear before a different Assessing Authority, and that the impugned notices in this case preceded that practice; counsel agreed to obtain appropriate transfer orders in these cases.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Kishan Chand and Company v. S.K. Jain [1965] 16 S.T.C. 521 Observed that inherent jurisdiction was not wanting in the officer and addressed the validity of assessments where transfer orders were absent; indicated that action by an officer at Chandigarh without proper transfer could operate to the serious prejudice of the assessee and justified restraint in that case. The Court treated that Bench decision as correct and as a guiding precedent: it noted that without a proper order transferring proceedings in their entirety, the action of another officer could prejudice the assessee and therefore directed transfer in the present case to avoid injustice and multiplicity of authorities acting on the same questions.
Shri Maya Ram Bhatia v. Shri K.K. Upal (C.W. 2198 of 1964, unreported; Single Judge) Illustrated a refusal by a Single Judge to exercise Article 226 because (i) the dealer's conduct gave rise to suspicion and (ii) the dealer had not exhausted statutory/departmental remedies; relied upon an earlier Bench decision (Khem Chand Vijay Kumar). The respondent relied on this decision to urge that the petitioner should first pursue departmental remedies rather than invoke writ jurisdiction. The Court considered this line of authority but did not simply dismiss the petition; instead it directed that transfer orders be secured before further proceedings.
Khem Chand Vijay Kumar v. Shri J.S. Malhotra Authority cited in Maya Ram Bhatia for the proposition that extraordinary writ jurisdiction should not be exercised where alternative statutory remedies were available and not exhausted. Cited as persuasive support for the respondent's submission that departmental remedies should be pursued; the Court took note of the principle but ultimately directed an administrative step (transfer) and did not summarily insist on denial of relief under Article 226.

Court's Reasoning and Analysis

The Court proceeded by balancing two considerations: (a) the existence of inherent jurisdiction in officers such as Shri Opal and Shri Jain, and (b) the potential prejudice and inconvenience to the assessee if more than one authority applies its mind at different stages of the same assessment without a formal transfer.

Key steps in the Court's analysis:

  1. The Court acknowledged that inherent jurisdiction is available to the officers complained of and that earlier decisions observed that lack of inherent jurisdiction would not, by itself, invalidate assessments.
  2. However, the Court emphasized that it had not been shown that the proceedings pending before the Assessing Authority at Amritsar had been completely transferred to the respondent's record; in the absence of such a transfer, requiring the petitioner to attend before a different officer could cause serious prejudice and inconvenience.
  3. The Court distinguished the two types of notices: the section 14 notice is a preliminary step for production/inspection of accounts toward assessment; the section 10(7) notice is an inquiry into possible falsity or concealment with a view to imposing penalty. In both contexts, the Court considered it undesirable for two different authorities to apply their minds separately at different stages without hearing the party affected.
  4. The Court accepted the respondent's concession (through counsel Shri Nehra) that since the prior Bench decision the department had adopted the practice of issuing proper orders of transfer before an enforcement officer proceeded in cases where returns were filed with another officer; counsel also agreed to have proper orders of transfer made in the present cases.
  5. On that basis, and in order to secure fairness and accord with natural justice, the Court directed that the respondent proceed further on the impugned notices only after securing the necessary orders of transfer.
  6. The Court exercised equitable supervisory jurisdiction to require the administrative step (transfer) rather than immediately striking down the notices or ordering the department to stop exercising inherent jurisdiction altogether.

Holding and Implications

Holding: The Court directed that the respondent should proceed further on the impugned notices only after securing necessary orders of transfer of the assessment proceedings.

Implications and immediate consequences:

  • The respondent is required to obtain formal transfer orders before taking further action in respect of the notices at issue; the petitioner should be given an opportunity to be heard in support of any objection to such transfer.
  • The Court recognized the officers' inherent jurisdiction but sought to prevent the practical prejudice and inconvenience that may arise from multiple authorities separately adjudicating aspects of the same assessment.
  • There was no order as to costs.
  • The Court's directive operates as a case-specific administrative remedy to ensure fairness; the opinion does not purport to set a broad new legal principle beyond applying established considerations (including prior decisions) to the facts of this case.

Ordered accordingly. (Narula, J. agreed.)

    Kishan Chand & Co. v. K.K Opal, Excise & Taxation Officer (Enforcement), Amritsar

    Dua, J.:— The petitioner in this case is a partnership concern with Shri Kishan Chand and Shri Ram Parkash as partners carrying on the business of sale and purchase of Banaspati oils. The firm is a registered dealer with the Assessing Authority, Amritsar. For the years 1961-62 and 1962-63, ending 31st March, 1962, and 31st March, 1963, respectively, the petitioner-firm filed monthly returns as required under the rules and paid under section 10 of the Punjab General Sales Tax Act (hereinafter called the Act) the amount of sales tax in accordance with the returns. All the returns were filed with the Assessing Authority, Amritsar, which was the competent authority for assessing the petitioner-firm in accordance with the requisite notification, dated 30th March, 1949. Similarly, for the year 1963-64 ending 31st March, 1964, all the monthly returns were filed in time with the same Assessing Authority and the amount of tax was paid as required under section 10 of the Act. Up to the year 1960-61, the Assessing Authority, Amritsar, assessed the petitioner-firm and for the said year the order was passed on 28th February, 1962, and the amount of tax assessed was paid. On 19th February, 1964, Shri S.K Jain, the Excise and Taxation Officer, Finance Department, the Assessing Authority, Punjab, Chandigarh, sent notices in Form S.T XIV for the years 1961-62 and 1962-63, under the Punjab General Sales Tax Act, as also under the Central Sales Tax Act. The petitioner-firm was required to appear before the said Authority on 3rd March, 1964. Shri Jain, according to the averments, was seeking to exercise jurisdiction under a notification, dated 11th June, 1963, authorising him to make assessments for the entire State of Punjab. The Divisional Enforcement Officers, Excise and Taxation, were, by means of a notification, dated 25th January, 1963 (annexure ‘A’ to the writ petition), authorised to assist the Excise and Taxation Commissioner and were further authorised to make an assessment under the Act within the entire State of Punjab. Shri K.K Opal, Excise and Taxation Officer (Enforcement), Amritsar, is one of such officers. The notices issued by Shri Jain were challenged in this Court by means of a writ petition in Civil Writ No. 382 of 1964, in which the admitting Bench stayed proceedings before Shri Jain. Here, I may point out that the said writ petition has since been decided and is reported as Kishan Chand and Company v. S.K Jain [1965] 16 S.T.C 521, though when the present writ petition was filed arguments in the earlier one had been heard and orders reserved. On 10th August, 1964, the respondent Shri K.K Opal required the petitioner-firm to produce certain books of account for the years 1961-62 and 1962-63 along with the declaration forms as also list of sales made to Messrs Araar Nath Shiv Kumar of Amritsar, warning the petitioner-firm that failure to produce the accounts and documents would justify an adverse inference and necessary legal action would be taken against the petitioner-firm. A memorandum, dated 9th September, 1964, also required the petitioner-firm to produce account books for the year 1963-64 along with the declaration forms and also evidence relating to actual delivery of goods during that year, again warning that failure to produce such documents would justify adverse inference. This, according to the averments in the writ petition, is in furtherance of the show cause notice under section 10(7) of the Act.

    2. It is these notices, which are the subject-matter of the present writ petition, and it is pleaded that when the matter was pending before Shri Jain for the assessment of the years 1961-62 and 19.62-63, which was also the subject-matter of Civil Writ No. 382 of 1964, there was no justification nor any authority in law for issuing any notice to the petitioner-firm under section 14 of the Act. It is only the Assessing Authority at Amritsar, who is competent to deal with the petitioner-firm and issue the notices. For the year 1963-64 as well, all the returns were filed before the Assessing Authority, Amritsar, which was the competent authority under the Act to deal with the petitioner-firm's case. It is argued that in the absence of an order of transfer, the impugned notice under section 14 of the Act, which is annexure ‘B’ to the writ petition, is bad. It is, of course, conceded by Shri Bhagirath Dass that Shri Opal does not lack inherent jurisdiction to deal with the matter.

    3. On behalf of the respondent, Shri Nehra has, to begin with, submitted that in so far as notice under section 10(7) of the Act (annexure ‘C’ to the writ petition) is concerned, it is open to the petitioner to take the matter on revision to the Commissioner under section 21(1) of the Act because the said officer can call for the record of any proceedings which are pending before, or have been disposed of by, any Assessing or Appellate Authority for the purpose of satisfying himself as to the legality or propriety of the proceedings or of an order made therein. The counsel has in the alternative also submitted that the petitioner can in any case go to the officer who has issued notice and tell him that by virtue of the Bench decision of this Court he should not proceed with the case and that in that event, the officer would try to secure the order of transfer from the proper quarters. In regard to the notice embodied in annexure ‘B’ also, Shri Nehra has laid emphasis on the observation of the earlier Bench decision of this Court that inherent jurisdiction is not wanting in Shri Opal and that it is only a matter of the manner in which he is seized of the matter. He has drawn our attention to the judgment in the earlier case, Kishan Chand and Co. v. S.K Jain, where it is expressly observed that the assessments made in such circumstances would not be struck down as invalid for want of inherent Jurisdiction. This, indeed, as observed earlier, is not contested by Shri Bhagirath Dass. Shri Nehra has also drawn our attention to an unreported decision by a learned Single Judge of this Court in Shri Maya Ram Bhatia v. Shri K.K Upal, C.W 2198 of 1964 decided on 16th December, 1964, in which Shri K.K Upal had issued a notice under section 10(7) of the Act requiring the dealer to show cause why a penalty should not be imposed in terms of that sub-section. According to that notice, the dealer Was required to appear on 15th September, 1964. On 14th September, 1964, a telegram was sent by the dealer from Delhi for adjournment of the case. He returned to Amritsar by the night train and on 15th September, 1964, Shri Arjan Singh, Assistant Excise and Taxation Officer visited the dealer's shop in the afternoon and found him there. On 15th September, 1964, an order was made imposing on the dealer a penalty for Rs. 25,000 and it was this order which was assailed in this Court under Article 226 of the Constitution. In the impugned order, suspicion was expressed about the correctness of the telegram and in order to verify the facts, a constable in plain clothes was sent to the dealer's shop to see if Shri Maya Ram Bhatia was present on 15th September, 1964. After confirming that Shri Maya Ram Bhatia was actually sitting in his shop in Islamabad along with his sons, a gazetted officer, Shri Arjan Singh, Assistant Excise and Taxation Officer, was deputed to confirm the facts and to examine the accounts. Shri Bhatia, however, failed to produce the accounts and his statement was recorded by the Assessing Authority. While the statement was being recorded, Shri Maya Ram insisted on the Assessing Authority to record that Shri Bhatia had just returned from Delhi. After noticing his behaviour, the Assessing Authority proceeded to observe that the dealer should have made all possible arrangements for his representation when called specially and when sufficient notice had been given for the purpose. The learned Single Judge, keeping in view the conduct of the dealer and also the fact that he had not exhausted the alternative remedies available to him under the Act, declined to exercise the extraordinary powers under Article 226 of the Constitution. For this course, he relied on a Bench decision of this Court in Khem Chand Vijay Kumar v. Shri J.S Mal˜ hotra. Shri Nehra has very strongly urged that this Court should adopt the same course and direct the petitioner to take the matter to the departmental hierarchy under the statute and seek relief there and not rush to this Court in the first instance.

    4. Shri Bhagirath Dass has on the contrary submitted that the decision in Maya Ram Bhatia's case proceeds on its own facts as indeed the final order had been passed in that case.

    5. I may at the outset observe that on behalf of the respondent, the correctness of the reported Bench decision in the case of Kishan Chand and Co. has not been challenged. There it was, of course, made clear that we were dealing with that particular case when we observed that without a proper order transferring assessment proceedings completely from the file of the appropriate Assessing Authority actually seized of the assessment proceedings at Amritsar, to the record of the respondent at Chandigarh, on a proper consideration of both the exigencies of tax collection and inconvenience to be caused to the assessee, the action of the officer at Chandigarh operated to the serious prejudice of the assessee and that the Chandigarh Officer should accordingly be restrained from so acting. It is true that in the case before us, both the officers are at Amritsar, but it has not been made clear in this Court that the proceedings pending before the officer with whom the present petitioner has already filed his returns, have been completely transferred to the record of the present respondent. I am not unmindful of the difficulties of the revenue in making assessment and realising taxes from those dealers who do not frankly and honestly co-operate with the Assessing Authorities. I am, however, also conscious of genuine inconvenience to which a dealer may be put, when he is called upon to appear before one officer today and before another tomorrow in respect of the same assessment proceedings, even though both the officers may be possessed of inherent jurisdiction. Somewhat similar situation arose in C.W No. 272 of 1964 which was decided along with the case of Kishan Chand and Co. v. S.K Jain though in that case, the two officers had their respective headquarters at Amritsar and Chandigarh. On considering all the facts and circumstances of the present case, therefore, in my opinion, it would be more in consonance with the true dictates of justice and would also better accord with the rules of natural justice if the assessment proceedings are transferred in their entirety to the respondent and the petitioner is heard in support of any objection that he may have to such transfer. In so far as the notice under section 14 is concerned, it is not disputed that this is a preliminary step to the assessment being made and it is for this very purpose that production and inspection of accounts and documents is being sought. In regard to the notice under section 10(7), however, the purpose seems to be to enquire into the fact whether the dealer has maintained false or incorrect accounts with a view to suppress his sales, purchases or stock of goods or has concealed any particulars of his sales or purchases or has furnished to or produced before any authority under this Act or the rules made thereunder any account, return or information which is false or incorrect in any material particulars, and then to impose a penalty, in addition to the tax to which he is assessed or is liable to be assessed, the amount being not less than ten per cent. but not exceeding one and a half times such tax. Here again, the authority with whom the returns have already been filed and who will ultimately assess the dealer may also have to apply its mind to the falsity or incorrectness of the accounts from the point of view of section 10(7), unless the object of both the impugned notices is to have the entire assessment proceedings practically transferred to the respondent. It would in the circumstances be also desirable that two different authorities should not apply their mind to the same question at different stages which may entail different conclusions without hearing the party affected.

    6. In fairness to the respondent's counsel, I must state that Shri Nehra has very frankly submitted that after the previous decision, the department has been passing proper orders of transfer before the Excise and Taxation Officer (Enforcement) takes up a case in which a dealer has filed his returns with some other officer. In the case in hand, he has pointed out that the impugned notices were issued in August and September, 1964, which was two or three months prior to the actual decision by the Bench in Kishan Chand and Company v. S.K Jain. It seems that the department apparently thought that in the reported case, the present petitioner was mainly aggrieved by the demand for (he production of his books at Chandigarh and that if he was to be required to produce the same at Amritsar, there would be no inconvenience to him and it is perhaps for this reason that the impugned notices in the present case were issued. Now the policy of the department, as suggested by Shri Nehra, is to-pass orders of transfer in all pending assessments before a dealer is required to appear before another Assessing Authority. Shri Nehra, who has plainly stated that the petitioner-assessee was suspected by the department to be taking steps to evade legitimate taxes and that is why the impugned notices were issued, has also agreed that he would have proper orders of transfer made in these cases. It would in the circumstances serve the ends of justice if we direct the respondent to proceed further on these notices only after securing necessary orders of transfer, and we direct accordingly. In the circumstances of this case, there would be no order as to costs.

    Narula, J.:— I agree.

    7. Ordered accordingly.

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    Kishan Chand & Co. v. K.K Opal, Excise & Taxation Officer (Enforcement), Amritsar
    (May 25, 1965)