Crompton Greaves Lim... v. Assistant Commission...

Kalyan Jyoti Sengupta, A.C.J:— The above appeal has been directed against the judgment and order of the learned Tribunal dated July 26, 2011 (Crompton Greaves Ltd. v. A.C.C.T, Corporate Division)1 by which an application under section 8 was dismissed and thereby order passed by the revising authority was upheld.

2. The short undisputed fact leading to filing application before learned Tribunal is as follows:

The petitioner/assessee filed returns of sale of four quarters ending with March 31, 1997, wherein the appellant claimed deduction of Rs. 2,92,42,976 towards issue of credit notes and submitted details thereof. Out of the said credit notes an amount of Rs. 2,74,90,912 was claimed under the States Act and Rs. 17,52,063.79 was claimed under the Central Act. The petitioner while submitting returns could not adjust the aforesaid amount of credit notes, as such the petitioner collected sales tax on the basis of invoice from purchasers/dealers/sub-dealers of goods. Subsequently, the said credit notes were issued by petitioner No. 1 to purchasers/dealers/sub-dealers as trade discount and/or incentive giving them credit for this tax charged on such incentive. Since actual tax payable at the stage of transfer of the goods was collected and later on the credit notes were issued and returns were filed on the basis of actual collection of tax after the said tax was deposited. However at the time of assessment the credit notes were produced seeking deduction on account of tax. The assessing officer by his order dated June 30, 1999 accepted the said claim of deduction on account of credit notes with observation that there was no irregularity, involving higher collection of tax is involved. However the claim for deduction on account of return of the goods for a sum of Rs. 2,97,012.50 was disallowed along with the aforesaid claim of deduction, a sum of Rs. 9,67,873 was also disallowed.

3. The petitioner/assessee being aggrieved by the aforesaid portion of dis-allowance of the order dated June 30, 1999, preferred appeal under the old Act of 1994 and under the Act 1956 before the Deputy Commissioner of Commercial Taxes; Corporate Division. Both the appeals under section 9 of the Central Sales Tax Act, 1956 and section 79 of 1994 Act were disposed of by common judgment and (order dated June 26, 2002, and thereby disallowance of the credit notes amounting to Rs. 2,97,102.50. was affirmed with the findings recorded therein. The appellate authority however set aside some of the findings of the assessing officer on other points, and remanded the matter to the assessing officer for fresh assessment in the light of the discussion as recorded in the appellate order allowing the dealer reasonable opportunity of being heard. The Assistant Commissioner of Commercial Taxes passed order of reassessment on March 22, 2004 and issued a notice under form No. 30 under the WBST Rules, 1995 showing excess payment of tax of Rs. 15,29,138 under the Act, 1994 and notice in form No. 4A showing excess payment of Rs. 95,048 under the Act, 1956. On 2nd March, 2007, the Assistant Commissioner, Commercial Taxes, Corporate Division, issued two letters calling upon the petitioner to produce necessary evidence in support of the petitioner's claim for refund of Rs. 15,29,138 and Rs. 95,048, respectively. Thereafter the petitioner made repeated representation for refund of the excess amount of sales tax. Instead of refunding the petitioner was served with a notice in form 55 by the Senior Joint Commissioner, Commercial Taxes, Corporate Division dated September 15, 2009, under rules 245, 249 and 264 of the West Bengal Sales Tax Rules, 1995. The alleged deduction of a sum of Rs. 2,89,45,873 being credit notes issued for additional discount allowed by the Assistant Commissioner, Commercial Taxes, Corporate Division, was not allowable as per section 2(31) and section 2(40) of the WBST Act, 1994 resulting in excess payment. Therefore by the said notice it was proposed to levy tax on the said amount modifying the impugned order of assessment as per provisions of the law. The petitioner accordingly raised objection to the said notice, objection was overruled by the Senior Joint Commissioner of Commercial Taxes and passed an order in exercise of power of suo motu revision/review and the earlier order of assessing officer was recalled. Before the learned Tribunal basically two points were urged in the said application under section 8 that the suo motu power of revision/review was time-barred as order dated June 30, 1999 has reached finality as no appeal was preferred there from and in fact with the passing of the appellate order earlier the first order has merged with the same. In any event on merit allowance of discount, by way of a credit notes after sale is effected is accepted by the various pronouncement of the Supreme Court decision and there is nothing wrong.

4. Mr. Joydeep Kar, learned advocate appearing for the petitioner, reiterated the point taken before the appellate authority. He submitted on the question of limitation that under rule 244 of the West Bengal Sales Tax Rules, 1995 (hereinafter referred to rule 95) an authority can revise assessment order within a period of six years from the date of the assessment order. The original order of assessment was passed on June 30, 1999. Under-this order, trade discount by way of credit note was allowed to the extent of Rs. 2,89,45,873.50 paise out of which Rs. 2,74,90,912 was under the Sales Tax Act and Rs. 17,52,063 was under the Central Act.

5. The petitioner herein preferred appeal against a portion of the said original order of assessment which does not relate to the trade discount but relate to some other claim. The appeal was allowed and the matter was remanded on limited point on some other ground, not on the point of trade discount. Truly there has been no appeal on the point of trade discount as it was decided finally on June 30, 1999. Following the remand order there has been order of reassessment dated March 22, 2004 and the said remand order clearly recorded that claim of all other sales remained unaltered. Hence the issue of trade discount has been finally decided by the first assessment order dated June 30, 1999 consequently it could not be reopened by the Senior Joint Commissioner it is clearly barred under the aforesaid Rules.

6. On the merit he submits that trade discount is dependent on the accepted trade practice. The assessing officer had satisfied himself about the said trade practice and he was also satisfied that there was no unjust enrichment as the credit notes returned proportionate tax and surcharge to the customers. He has drawn our attention to the tax on sale under section 2(30) of the said Act and also sale price as has been defined under section 2(31), turnover of sales as tax under section 2(40) and taxable turnover of sales has been defined under section 17(3)(xi). The aforesaid provision cannot be read in restricted manner to come to the conclusion that trade discount allowed subsequently to be presented is not permissible under the statute. In this connection he has referred to a decision of the Supreme Court in case of Ifb Industries Limited v. State Of Kerala, [2012] 49 VST 1 (SC).

7. In any event suo motu order of revision is unsustainable in law as it is passed solely relying on the judgment of the West Bengal Taxation Tribunal passed in RN. 26 of 2003 (DCCT, Corporate Division v. M.R.F Ltd., [2008] 14 VST 124 (WBTT)). The said judgment ought not to have been relied as it was delivered by the West Bengal Taxation Tribunal on July 11, 2006, subsequent to the order of reassessment dated March 22, 2004. ‘Subsequent pronouncement cannot be a basis for reversing the earlier decision on the same point. Besides the Senior Joint Commissioner has wrongly exercised jurisdiction in passing the impugned order dated February 9, 2010 as the suo motu power has been exercised by the revisional authority as being an appellate authority not as revisional authority. Actually the Senior Joint Commissioner was reviewing the order of the, Deputy Commissioner holding the same rank and position. Learned Tribunal unfortunately did not decide the above points correctly. Therefore the order of the learned Tribunal as well as the revising authority should be set aside.

8. Mr. Abhratosh Majumdar, learned advocate appearing for the State, submits that on fact it will appear from the records that the issue of allowance of trade discount in the form of credit note was admittedly considered in the reassessment order dated March 22, 2004. Therefore the period of limitation has to be calculated from the date of reassessment order not from the original assessment order. In support of his submission on the question of limitation he has referred to the decision of the Supreme Court in case of Deputy Commissioner Of Commercial Taxes v. H.R Sri Ramulu reported in [1977] 39 STC 177 (SC); (1977) 1 SCC 703 when revised assessment is made on remand pursuant to the appellate order the revisional power can be exercised to revise the reassessment order passed by the assessing officer hence the period of limitation from the date of passing of the assessment order.

9. On merit he contends that factually trade discount was not made known to the purchaser at the time of sale. The invoices and sales account also do not reflect any trade discount at the time of final returns. The full price has been realized with tax and surcharge at the time of issuance of invoice. He submits once tax and surcharge has been realised, any discount if given to the assessee would result unjust enrichment as the assessee would claim return of tax deposit from State exchequer. Hence the judgment and order of the learned Tribunal is absolutely preferred and justified and no interference is called for.

10. We have heard the learned counsel for the parties and we have gone through the impugned judgment and order of the learned Tribunal we have also considered all the orders passed by various authorities previously. It appears that following two points are for consideration in this matter:

(i) Whether suo motu power has been exercised within the period of limitation or not?

(ii) If so whether on merit the learned Tribunal is justified in upholding the order passed by the revising authority in ignorance of doctrine of merger.

11. Therefore it is obvious if the first point succeeds second point need not be decided by this Court. First’ question undoubtedly is mixed question of fact and law. Rule 245 of the West Bengal Sales Tax Rules; 1995 prescribed the procedure for exercise of power of suo motu revision by the revising authority. The said provision is set out hereunder:

“245. Proceedings for suo motu revision by the revisional authorities.—(1) Where it appears to the revisional authority referred to in sub-rule (3) of rule 244 that an assessment order or any other order passed by an authority subordinate to him under the Act and Rules made thereunder is required to be revised by him, on its own motion, under section 80, such revisional authority shall serve upon a notice in form 55 with a gist of the proposed order directing him to appear before him and show cause on the date and at the time and place specified in such notice as to why the order referred to therein shall not be revised:

Provided that no assessment order or any other order shall be revised by the revisional authority, on his own motion—

(a) if the time for presenting an appeal from such assessment order or the application for revision of such order has not expired, or

(b) if the assessment order or any other order has been passed six years before the date of revision

12. Thus six years is the maximum period within which the power can be exercised against assessment order. The learned Tribunal found on fact and so also viewed by the revising authority indisputably the impugned order sought to be revised was of dated March 22, 2004 and it was revised on February 9, 2010. Thus going by above recording it must be held that the exercise of power is within the period of limitation.

13. But before we conclude finally either way it has to be examined whether the issue involved herein, namely, disallowance or allowance of trade discount under the law was the subject-matter of the order of reassessment dated March 22, 2004 or not. To elucidate this aspect it has to be examined as contended by Mr. Kar the order of reassessment on remand dated March 22, 2004 does not relate to the issue of trade discount as this was not the subject-matter to be reassessed. According to him this issue of allowance of trade discount has been decided finally by the initial order of assessment in 1999, and appeal was preferred not in relation to the aforesaid issue; The appellate authority has remanded the matter for fresh hearing on the some other issues. Taking note of this contention we have seen the order of the first appellate authority dated June 26, 2002. We find by this order that the appellate authority recording the grounds taken in the appeal, has set aside the entire order of assessment, and remanded back to the file of the assessing officer for fresh assessment. We are of the view that when entire order is set aside, nothing remains in the original assessment order dated June 30, 1999.

14. The decision of the honourable Supreme Court in Deputy Commissioner Of Commercial Taxes v. H.R Sri Ramulu reported in [1977] 39 STC 177 (SC); (1977) 1 SCC 703, supports what we have discussed above. In paragraph 7 of the said report it is held as follows (page 180 in 39 STC):

“… The reason for that is that once an assessment is reopened, the initial order for assessment ceases to be operative. The effect of re-opening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment. The initial order for reassessment cannot be said to survive, even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order. The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment…”

15. It is immaterial what ground has been taken to prefer appeal but ordering portion is the relevant factor to examine this aspect. There has been no challenge to the said order of the appellate authority. It has now become final and binding. We appropriately quote the relevant portion of the ordering portion of two appeals as follows:

A-638.AW/99-00 under WBST Act 1994

“The dealer has no other point of dispute. Thus the order of assessment is ‘set aside’ and remanded back to the learned assessing officer for fresh assessment in view of the above discussion.”

A-639.AW/99-00 under CST Act 1956

“Finally the above two appeal cases disposed of as ‘set aside’ and remanded back to the learned assessing officer for fresh assessment in the light; of the above discussion allowing the dealer reasonable opportunity of being heard.”

16. Thus we are of the view disagreeing with the contention of Mr. Kar that original assessment order dated June 30, 1999 is the reckoning factor for the purpose of computation of period of limitation. We think that order passed on remand has to be taken into consideration for the purpose of limitation as this fresh order is deemed, to be initial order of assessment which is passed by the officer admittedly below the rank of revising authority.

17. Thus on remand the assessing officer by order dated March 22, 2004 has decided the matter afresh and after considering all contention did not alter the issue of trade discount. Therefore, we think that the assessing officer on remand has no doubt applied his mind while taking fresh decision and in the process did not recall earlier decision on the issue of trade discount. Thus we are unable to accept the contention of Mr. Kar that the aforesaid decision of the assessing officer on remand on the issue of trade discount can be said to be a revival of the earlier order dated June 30, 1999.

18. Our observation would be clear from the recording of the assessing officer on reassessment. It records as follows:

Original assessment order dated June 30, 1999 was set aside for fresh assessment.

19. We thus find considerable force in the submission of Mr. Majumdar that the power of revision cannot and could not be exercised in relation to order dated June 30, 1999 as it no longer subsists for taking any action because by the appellate authority's order entire thing was set aside. We therefore hold without any difficulty that the suo motu power of revision was exercised within the period of limitation. Thus question of hierarchy a fortiori the competence of the Joint Commissioner is of no consequence since the order of the assessing officer is sought to be revised not that of the appellate authority.

20. The doctrine of merger as contended by Mr. Kar would have been relevant in this matter, had not the appellate authority set aside the entire order including the portion forming issue of trade discount.

21. While looking into the merit of the case of trade discount as claimed by the petitioner, being additional discount by way of a credit notes is allowable in the facts and circumstances of the case or not. Both the Senior Joint Commissioner of Commercial Taxes and the learned Tribunal came to the’ fact-finding that at the time of removal of the goods full price with sales tax, surcharge were realized without any dispute, subsequently the prayer for additional discount in the form of credit notes was not sustainable. It is further on fact found that the petitioner herein had realized the full price with the sales tax and surcharge without any mention of discount being allowed in any manner whatsoever. It is not a discount, which was known and understood at the time of removal of the goods. There was no whisper in the invoices as to discount being allowed. No recurring credit scheme was also introduced tb allow the purchasers to get the discount through the credit notes. It was not turnover discount through issuance of credit note's to encourage turnover of sales.

22. The learned Tribunal has correctly applied the decision of the Supreme Court in case of Deputy Commissioner of Sales Tax (Law) v. Advani Oerlikon (P.) Ltd. reported in [1980] 45 STC 32 (SC); (1980) 1 SCC 360. Moreover the Division Bench of this court almost in identical issue in case of WPTT No. 793 of 2006 and other three matters (M.R.F Ltd. v. Assistant Commissioner, Commercial Taxes, Corporate Division) has held that as follows:

“The discount is available at the time of removal of the purchased goods. The discount amount was quantified at the end of the quarter and credit notes for the discount amount were being issued quarterly. As the amount of deduction is dependent on achievement of target it was not possible to quantify and to deduct the said discount at the time of sale.”

23. The decision cited by Mr. Kar in case of Ifb Industries Limited v. State Of Kerala reported in [2012] 49 VST 1 (SC) is distinguishable on fact that the Supreme Court in that case had the occasion to consider the provisions of the Kerala General Sales Tax Act and Rules. Unlike the WBST Act, Kerala Act and Rules provided for allowance of other discount. Section 2(31) is defined the “sales price” and section 2(xxvii) defines the “turnover” that recognizes discounts other than cash discount and provides that those other discounts too shall not be included in the turnover.

24. Another decision of the honourable Supreme Court reported in Deputy Commissioner of Sales Tax (Law), Board of Revenue (taxes), Emakulam v. Advani Oerlikon (P.) Ltd., [1980] 45 STC 32 (SC); (1980) 1 SCC 360, is also of no help in this case. This judgment was considered by the learned Tribunal and also by this honourable court in M.R.F Ltd. v. Assistant Commissioner, Commercial Taxes, Corporate Division WPTT No. 793 of 2006. We have already noted that the Division Bench of this court concluded that in so far as the provision, of WBST Act is concerned the trade discount in the form of credit notes cannot be allowed when such trade discount had not been allowed to the purchaser, nor reflected in the invoices at the time of sale. Thus we think that judgment and order of the learned Tribunal does not call for any interference and the writ petition is dismissed. There will be no order as to costs.

Asim Kumar Mondal, J.:— I agree.