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Steel Authority Of India Limited v. Sales Tax Officer, Rourkela I Circle And Others
Factual and Procedural Background
The appellant, a public sector undertaking engaged in the manufacture and sale of iron, steel and chemical fertilisers, was assessed under the Central Sales Tax Act, 1956 for Assessment Year 2001-2002. The assessing officer raised an additional demand of Rs 19,25,41,763 after (i) treating certain branch transfers as inter-State sales and (ii) disallowing concessional tax treatment where Form-C declarations were missing.
The appellant challenged the assessment:
- First appeal before the Assistant Commissioner of Sales Tax, who dismissed the appeal and confirmed the demand through a brief order.
- Revision before the Commissioner: deposit of Rs 10 crores ordered.
- Writ proceedings in the High Court: deposit reduced to Rs 2 crores; Supreme Court granted interim stay on 31-3-2006.
- Second appeal filed before the Orissa Sales Tax Tribunal, accompanied by another stay petition.
- The Commissioner subsequently ordered deposit of Rs 15 crores; the High Court declined to decide the writ on merits, noting pendency before the Supreme Court.
Legal Issues Presented
- Whether the Assistant Commissioner’s dismissal of the statutory appeal, without a reasoned analysis, violated the obligation to give speaking orders in quasi-judicial proceedings.
- Whether the High Court was justified in disposing of the writ petition without examining the merits in view of the Supreme Court’s earlier interim order.
Arguments of the Parties
Appellant’s Arguments
- The first appellate order was cryptic and showed complete non-application of mind, defeating the statutory right of appeal.
- Treating branch transfers as inter-State sales caused double taxation, contravening Article 265 of the Constitution.
- Decisions in Ashok Leyland Ltd. v. State of T.N. (2004) and Ashok Leyland Ltd. v. Union of India (1997) were directly applicable but ignored.
- The newly introduced Section 19 creating a Central Sales Tax Appellate Authority would be rendered ineffective if lower appellate forums dispose of appeals casually.
Respondent State’s Arguments
- The assessee had already availed the complete statutory remedy; therefore, no interference by the Supreme Court was warranted at this stage.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ashok Leyland Ltd. v. State of T.N., (2004) 3 SCC 1 | Delineation between branch transfers and inter-State sales under the Central Sales Tax Act. | Relied upon by the appellant to contend that the impugned assessment resulted in double taxation; the Supreme Court did not examine the merits in view of remand. |
| Ashok Leyland Ltd. v. Union of India, (1997) 9 SCC 10 | Restrictions on State taxation powers and protection against double taxation. | Cited by the appellant; merits left open for reconsideration by the appellate authority. |
| Raj Kishore Jha v. State of Bihar, (2003) 11 SCC 519 | “Reason is the heartbeat of every conclusion”—necessity of reasoned orders. | Quoted with approval to underline that the Assistant Commissioner’s order lacked reasons and therefore could not stand. |
| Breen v. Amalgamated Engg. Union, (1971) 2 QB 175 | Giving of reasons is fundamental to good administration. | Reinforced the duty of quasi-judicial authorities to issue speaking orders. |
| Alexander Machinery (Dudley) Ltd. v. Crabtree, 1974 ICR 120 | Failure to give reasons amounts to denial of justice. | Cited to highlight the gravity of the Assistant Commissioner’s omission. |
Court's Reasoning and Analysis
The Supreme Court acknowledged that, ordinarily, it would refrain from examining assessment merits when statutory remedies are in play. However, it found the first appellate order “shocking” in its brevity and lack of analytical content. After reviewing the order—spanning barely a few pages and offering conclusory statements—the Court concluded that the Assistant Commissioner had:
- Failed to engage with the substantial legal questions raised, including double taxation and applicability of prior Supreme Court rulings.
- Provided no cogent reasons, thereby violating the foundational requirement that quasi-judicial orders be speaking and reasoned.
Drawing on Indian and comparative jurisprudence, the Court reiterated that recording reasons is indispensable for transparency, facilitates appellate review, and constitutes a facet of natural justice. Because the order displayed “complete non-application of mind,” it was unsustainable in law.
Holding and Implications
ORDER: The appeal is ALLOWED; the Assistant Commissioner’s appellate order is set aside and the matter is remitted for fresh consideration on merits within six months.
Implications: The decision affirms the judiciary’s intolerance for perfunctory disposal of statutory appeals. While no substantive tax issue was adjudicated, the ruling reinforces the duty of quasi-judicial authorities to issue reasoned orders, ensuring effective functioning of subsequent appellate forums. Direct consequences are limited to the parties, and the Supreme Court expressly left all questions of merit open for reconsideration.
Dr. Arijit Pasayat, J.— Leave granted.
2. Challenge in this appeal is to the order passed by a Division Bench of the Orissa High Court disposing of the writ petition without any decision on merits because in respect of the assessment year in question i.e 2001-2002, an order was earlier passed by this Court on 31-3-2006.
3. A brief reference to the factual aspects will be necessary. The appellant, a public sector undertaking carries on business in manufacture and sale of iron and steel and chemical fertiliser as its finished product and by-product, surplus and rejected articles, in course of inter-State trade and commerce and export. Apart from that, the appellant Company effects transfer of stock of goods to its branches located at various places in the country.
4. For Assessment Year 2001-2002, notice was issued under Rule 12(5) of the Central Sales Tax (Orissa) Rules, 1957 (in short “the Central Rules”) for the purpose of assessment under the Central Sales Tax Act, 1956 (in short “the Act”). After examination of the books of accounts produced, an extra demand of Rs 19,25,41,763 was raised.
5. The appellant Company had disclosed net sale and transfer of goods during the year under assessment in question as follows:
1. Sales under Sections 8(1)(a) and (b) Rs 714,18,82,639.06 2. Sales under Section 8(2)(b) Rs 10,37,23,857.45 3. Export sales Rs 10,95,977.00 4. Branch/stock transfer Rs 1130,24,48,338.61 Total Rs 1854,91,50,812.12
6. The assessing officer found that certain declaration forms in Form ‘C’ were not produced and, therefore, the differential tax was to be levied. With reference to clause (a) of Section 3, it was held that the sales made under the annual memorandum of understanding (MoU), which were treated as bank (sic branch) transfers are in fact, sales made in course of inter-State trade and commerce and, therefore, are subject to tax. Accordingly tax was levied.
7. Questioning the correctness of the assessment made, an appeal was preferred before the Assistant Commissioner of Sales Tax, Sundergarh Range, Rourkela. During the pendency of the appeal, an application for stay was filed. The Assistant Commissioner directed payment of part of the demand. An application for revision was filed before the Commissioner who, by order dated 28-12-2005 in Revision Case No. SU-87 of 2005-2006 directed payment of Rs 10 crores.
8. A writ petition was filed before the High Court pointing out that the decision of this Court in Ashok Leyland Ltd. v. State of T.N (2004) 3 SCC 1 had full application. A Division Bench of the High Court, by order dated 15-2-2006, directed deposit of Rs 2 crores. The said order was questioned in SLP (C) No. 5314 of 2006. In the said special leave petition, several States and Union Territories were impleaded as opposite parties because it was pointed out that requisite tax under the Act had already been paid in different States and Union Territories. This Court passed the following order on 31-3-2006:
“Issue notice.
There shall be interim stay in the meanwhile.
Any payment already made in compliance with the High Court's order shall be without prejudice to the claims involved.”
A few days thereafter, on 19-4-2006, the Assistant Commissioner disposed of the appeal filed dismissing the same and confirming the order of assessment. A second appeal was filed before the Orissa Sales Tax Tribunal (in short “the Tribunal”). An application for stay was also filed.
9. By order dated 14-8-2006, the Commissioner directed deposit of Rs 15 crores. The said order was challenged before the High Court and, as noted above, by the impugned order, the High Court disposed of the said petition without expressing any opinion on merits but observing that the matter was under examination by this Court.
10. Though various points were urged in respect of the appeal, learned counsel for the appellant submitted that even without examination of various issues raised, by a cryptic and practically non-reasoned order, the Assistant Commissioner has dismissed the appeal filed.
11. It is submitted that a statutory appeal should not be disposed of in such a casual manner. It is pointed out that notwithstanding the fact that tax has been paid in several States where the articles transferred to the branches have been sold, the State has erroneously treated the transactions to be inter-State sale and levied tax which in essence amounts to double taxation. It is submitted that this is nothing but an attempt to collect tax illegally. It is not legal and is in clear violation of Article 265 of the Constitution of India. It is also pointed out that the ratio of the decision of this Court in Ashok Leyland Ltd. v. Union of India (1997) 9 SCC 10 has not been kept in view.
12. It is submitted that an amendment to the Act has been made and Section 19 has been introduced which reads as follows:
“19. Central Sales Tax Appellate Authority.—(1) The Central Government shall constitute, by notification in the Official Gazette, an authority to settle inter-State disputes falling under Section 6-A read with Section 9 of this Act, to be known as ‘the Central Sales Tax Appellate Authority (hereinafter referred to as the Authority)’.
(2) The Authority shall consist of the following members appointed by the Central Government, namely:
(a) a Chairman, who is a retired Judge of the Supreme Court, or a retired Chief Justice of a High Court;
(b) an officer of the Indian Legal Service who is, or is qualified to be, an Additional Secretary to the Government of India; and
(c) an officer of a State Government not below the rank of Secretary or an officer of the Central Government not below the rank of Additional Secretary, who is an expert in sales tax matters.
(2-A) Notwithstanding anything contained in sub-section (2), the Chairman or a member holding a post as such in the Authority for Advance Rulings appointed under clause (a) or clause (c), as the case may be, of sub-section (2) of Section 245-O of the Income Tax Act, 1961 (43 of 1961) may, in addition to his being the Chairman or a member of that Authority, be appointed as the Chairman or a member, as the case may be, of the Authority under this Act.
(3) The salaries and allowances payable to, and the terms and conditions of service of, the Chairman and members shall be such as may be prescribed.
(4) The Central Government shall provide the Authority with such officers and staff as may be necessary for the efficient exercise of the powers of the Authority under this Act.”
13. It is pointed out that ultimately the Central Sales Tax Appellate Authority can decide the matter after the Tribunal in the State concerned decides the matter. It is the stand of the appellant that the forum provided under the statute is being rendered ineffective by the casual disposal of the appeal.
14. Learned counsel for the respondent State of Orissa, however, submitted that when the assessee has already availed the statutory remedy, no interference is called for.
15. In the normal course, we would not have entertained the plea relating to the merits of the assessment when a statutory remedy has been availed. But what shocks us is the casual manner in which the first appellate authority has disposed of the appeal. The appellate order covers pp. 36 to 42 in the paper book. The first page and a part of the second page deal with various data relating to the assessment order, the assessing officer, the registration number and the details of turnovers and the tax, etc. In Para 2, the observations of the assessing officer are noted and in Para 3, starting from pp. 39 to 41, different stands of the appellant have been noted.
16. In Para 4, the conclusions of the first appellate authority are noted. They read as follows:
“I have carefully gone through the impugned order of assessment, averments of the learned advocate and the materials available on record. On the first point of dispute regarding the claim of the appellant towards refund of tax of Rs 14,59,122.52 collected from the bidders, before this forum also the appellant failed to adduce any evidence regarding refund of tax to such bidders from whom tax was collected. In absence of such documentary evidence, the claim of the appellant is not credible.
On the second point of dispute regarding levy of tax on the sale turnover of Rs 1,21,03,375.18 due to non-furnishing of declarations in forms (sic). Hence, there is no interference from this forum on the observation of the learned STO, in levying tax under Section 8(2)(b) of the CST Act.
Lastly, on the point of rejection of the claim of the appellant towards branch transfer of goods valued at Rs 241,87,42,357.93, from the order of assessment it is found that the learned STO on due verification and proper examination of the material evidences has rightly taken (sic) by the learned counsel of the appellant Company and the decisions of the different courts cited are not applicable in the present case, the same is not considered.”
A bare reading of the order shows complete non-application of mind. As rightly pointed out by learned counsel for the appellant, this is not the way a statutory appeal is to be disposed of. Various important questions of law were raised. Unfortunately, even they were not dealt with by the first appellate authority.
17. “7. Reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same it becomes lifeless. (See Raj Kishore Jha v. State of Bihar (2003) 11 SCC 519.)
8. Even in respect of administrative orders, Lord Denning, M.R in Breen v. Amalgamated Engg. Union (1971) 2 QB 175, (1971) 2 WLR 742, (1971) 1 All ER 1148 (CA) observed (All ER p. 1154h): ‘The giving of reasons is one of the fundamentals of good administration.’ In Alexander Machinery (Dudley) Ltd. v. Crabtree 1974 ICR 120 (NIRC) it was observed:
‘Failure to give reasons amounts to denial of justice. Reasons are live links between the mind of the decision-taker to the controversy in question and the decision or conclusion arrived at.’
Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the ‘inscrutable face of the sphinx’, it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reasons is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking-out. The ‘inscrutable face of the sphinx’ is ordinarily incongruous with a judicial or quasi-judicial performance.”
18. Therefore, in terms of the observations made by this Court while issuing notice on 19-10-2006, we set aside the impugned order of the Assistant Commissioner and remit the matter to him for a fresh consideration of the appeal. Needless to say, he has to dispose of the appeal by a reasoned order dealing with all the points of challenge highlighted by the appellant.
19. We make it clear that we have not expressed any opinion on the merits of the case.
20. Considering the fact that similar disputes are a recurring feature, the first appellate authority would do well to dispose of the appeal within a period of six months from the date of receipt of copy of our order.
21. The appeal is allowed to the aforesaid extent without any order as to costs.
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