http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: REGIONAL ASSISTANT COMMISSIONER OF SALES TAX,INDORE

       Vs.

RESPONDENT: MALWA VANASPATI & CHEMICAL COMPANY LTD.

DATE OF JUDGMENT: 24/11/1967

BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V. BHARGAVA, VISHISHTHA

CITATION:  1968 AIR  894            1968 SCR  (2) 431  CITATOR INFO :  R          1977 SC 540  (10)

ACT: Madhya  Bharat Sales Tax Act (30 of 1950), ss. 8(2) and  10- Returns  filed  by registered dealer-Notice  under  s.  8(2) after 3 years from year of assessment-Assessment if barred.

HEADNOTE: The  respondent  was  a registered  dealer.   For  the  four quarters  of 1958-59, it submitted returns of turnover  from its  inter-State sale transactions.  Though the  proceedings relate to levy of Central sales tax the tax was liable to be assessed and recovered in the present case, under the Madhya Bharat Sales Tax Act, 1950.  The Assessing Authority  issued a  notice  on September 17, 1962 under s. 8(2) of  the  Act, calling   upon,  the  respondent  to  show  cause  why   the transactions  should  not be taxed at the  full  rate.   The respondent  then  filed a wait petition in  the  High  Court contending that since the assessment was not completed with- in  three years from the last day of the year of  assessment as provided by s. 10 of the Act, the Authority had no  power to  continue  the proceeding.  The High  Court  allowed  the petition. In appeal to this Court, HELD  :  Where a dealer has not the prescribed return  0  is turnover  at all, it would be a case of ’escaped assessment’ and  the  proceeding  for assessment must  be  commenced  in respect  of that, turnover within the period of three  years prescribed  by  s.  10.   Similarly,  if  a  proceeding  for assessment  was  completed and it was then  found  that  any turnover had escaped assessment the proceeding for  bringing to  tax that turnover must be  commenced within three  years next  succeeding,  the yew to which the tax  relates.   But, where  a return has been filed by the dealer under s. 7,  as in the present case the proceeding for assessment  commences and remains pending until it is determined by a final  order of assessment.  Therefore, a notice under a. 8 (2) is only a step in the proceeding for completing the assessment.  Since the  Act contains no provision that the proceeding shall  be completed  within any fixed period, the Assessing  Authority is   entitled  to  complete  the  proceeding   without   any

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

restriction as to time and the bar of s. 10 is not attracted to the proceedings. [435 437 H] Ghanshyam  Das v. Regional Assistant Commissioner  of  Sales Tax, [1964], 4 S.C.R. 436, explained and followed.. Malwa  Vanaspati  &  Chemical  Co.  Ltd.  v.  The   Regional Assistant Commissioner of Sales Tax Indore, Misc.   Petition No. 356 of 1963 (High Court of M.P.) overruled. Firm    Jagmohandas   Vijayakumar   v.   Addl.     Assistant Commissioner of Sales Tax, Indore, Misc.  Petition No. 37 of 1963 (High Court of M.P.) referred to. 432

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 770 1966. Appeal  by special leave from the judgment and  order  dated March  31,  1964 of the Madhya Pradesh High Court  in  Misc. Petition No. 355 of 1963. I.N. Shroff, for ’the appellant. A. K. Sen, G. M. Chaphekar, H. K. Puri and K. L. Arora,  for the respondent. The Judgment of the Court was delivered by Shah,  J.  The  Malwa Vanaspati  &  Chemical  Company  Ltd.- hereafter called ’the respondent is a public limited company Which  carries on the business of manufacturing and  selling hydrogenated  oil  and is registered as a dealer  under  the Madhya  Bharat  Sales  Tax Act, 1950,  and  also  under  the Central Sales Tax Act, 1956.  For the four quarters of 1958- 59  the  respondent submitted returns of turnover  from  its inter-State sale transactions.  The Madhya Bharat Sales  Tax Act,  1950, was repealed with effect, from April 1, 1959  by the  Madhya Pradesh General Sales Tax Act 2 of 1959, but  it is common ground that assessment in this case is governed by the provisions of the Madhya Bharat Sales Tax Act, 1950.  After certain infructuous attempts made to tax the turnover of  the  respondent  under Act 2  of  1959,  the  Additional Assistant  Commissioner  of  Sales Tax,  Indore  Region,  by notice dated September 17, 1962, called.upon the  respondent to  show cause why the transactions included in the  taxable turnover  of the respondent be not taxed at the  full  rate. The respondent then presenited a. petition under Art. 226 of the Constitution in the High Court of Madhya Pradesh for  an order  quashing the proceeding for  assessment,  contending, inter  alia,  that since the assessment  was  not  completed within  three  years  from  the last  day  of  the  year  of assessment  as provided by S. 10 of the Madhya Bharat  Sales Tax  Act, 1950, the Sales Tax Officer had no power  to  con- tinue  the  proceeding.  Following their judgment  in  Malwa Vanaspati  &  Chemical Co. Ltd. v.  The  Regional  Assistant Commissioner of Sales Tax, Indore(1), the High Court quashed the proceeding for assessment and directed the appellant  to forbear  from proceeding with the assessment.  With  special leave, the appellant has appealed to this Court. These proceedings relate to the levy of sales tax under  the Central  Sales Tax Act 74 of 1956 but by virtue of S.  9  of that Act,,. Central, sales tax is liable to be assessed  and recovered in (1)  Misc.  Petition No. 356 of 1963. 433 the  manner provided by the law of the State from which  the movement of the goods commences.  The relevant provisions of the Madhya Bharat Sales Tax Act, 1950, may first be read :                s. 7(1) Every dealer liable to pay tax  shall

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

             furnish  returns  of  his  turnover  for   the               prescribed periods in the ,prescribed form, in               the   prescribed   manner   and   within   the               prescribed  time, to such an authority as  may               be prescribed.                (2)                (3)                s.   8 (1) (a) Assessment of taxable turnover               and  determination  of tax due for  any  year,               shall  be made after the returns for  all  the               periods of that year have .become due                Provided                (b)  Notwithstanding  anything  contained  in               clause (a) if  any dealer fails to   submit  a               return  under section 7(1) for the  prescribed               period   within  the  prescribed   time,   the               assessing  authority shall, after making  such               enquiry  as he considers necessary  and  after               giving the dealer a reasonable opportunity  of               being  heard  determine the  turnover  of  the               dealer for the said period to the best of  his               judgment  and  assess  the tax  on  the  basis               thereof.   This  assessment  subject  to   the               provisions of section 10 and to such orders as               may be passed in appeal or revision, shalt  be               final for the period.                Provided                (c)  If  the assessing authority, after  such               enquiry,   as  he  considers   necessary,   is               satisfied  that  the returns  furnished  by  a               dealer  are  correct  and  complete  he  shall               assess the tax on the basis thereof.                (2)  If   the  assessing  authority  is   not               satisfied  without requiring the  presence  of               the  person  who  made  the  returns  or   the               production  of evidence that the  returns  are               correct  and complete, he shall serve on  such               person a notice requiring on a date and  place               to be therein specified-                (i)  to appear in person, or by an agent duly               authorised in writing; or                (ii) to produce or cause to be produced,  any               evidence  on  which such person may  rely,  in               support of the returns; or               434                (iii)     to produce or cause to be  produced               such  accounts or documents pertaining to  the               assessment  year and to three years  preceding               as the assessing authority may require.                (3)  On the day specified in the notice under               sub.section  (2) or as soon afterwards as  may               be, the assessing authority after hearing such               evidence  as such person may produce and  such               other evidence as the assessing authority  may               require  on  specified points,  shall,  by  an               order in writing, assess the taxable  turnover               and determine the tax payable on basis of such               assessment.                (4)  If a dealer-                (a)  having furnished returns fails to comply               with  all the terms of a notice  issued  under               subsection (2); or                (b)  has not regularly employed any method of               accounting, or, if the method employed is such               that,   in  the  opinion  of   the   assessing

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

             authority, assessment cannot properly be  made               on the basis thereof, the assessing authority shall assess the dealer to the  best -of his judgment and determine the tax payable on the  basis of such assessment.                (5)                s.   10  If for any reason the whole  or  any               part of the turnover of  business of a  dealer               has  escaped assessment to the tax, or if  the               licence fee, registration fee or exemption fee               has  escaped levy or has been assessed at  too               low   a  rate  in  any  year,  the   assessing               authority at any time within a period of three                             years next succeeding that to which th e tax  or               the  licence  fee,  registration  fee  or  the               exemption fee relates, assess the tax  payable               on  the turnover which has escaped  assessment               or  levy  the correct amount of  licence  fee,               registration  fee  or  exemption  fee,   after               issuing  a  notice  to the  dealer  and  after               making   such   enquiry   as   he   considers.               necessary." The High Court quashed the proceeding for assessment on  the ground  that  the sales tax authority is  not  competent  to issue  a  notice under sub-s. (2) of s. 8  after  expiry  of three  years  prescribed  by s. 10.  In  their  view,  if  a proceeding  for  assessment of tax under the  Madhya  Bharat Sales  Tax Act, 1950, is not completed within,. three  years from the last day of the year of assessment, the turnover is deemed to have escaped assessment to tax                             435 within the meaning of s 10, and no step may after the expiry of  the’ period be taken under sub-s. (2) of S. 8  to  bring the turnover to tax.  In so holding the High Court  followed their  judgment in Malwa Vanaspati & Chemical  Co’s  case(1) which, in its turn, was based upon the judgment of the  same Court  in  Firm  Jagmohandas Vijaykumar  v.  The  Additional Assistant   Commissioner   of  Sales-tax,   Indore   Region, Indore(2).   It  may  at once be observed that  it  was  not brought  to  the  notice  of the High  Court  that  in  Firm Jagmohandas Vijaykumar’s case (2) no returns at all had been filed, and the case was clearly one in which the turnover of the  dealer  had -’escaped assessment.  It may  be  recalled that  returns. for all the four quarters had been  filed  by the respondent. and the respondent had even paid the advance tax   according   to  the  Rules.    In   Firm   Jagmohandas Vijaykumar’s Case(2) the High Court observed that the period of  limitation prescribed by S.. 10 should be imported  into S. 8 and that since the assessment under S. 8 (1) (b) had to be  made  within three years from the end, of  the  year  of assessment and if that "was not done it could not be done at all". There  is no doubt that where the dealer has not  filed  the prescribed  return of his turnover, the case is clearly  one of ,,escaped assessment," and the proceeding for  assessment must commence in respect of that turnover within the  period prescribed  by s. 10.  Where however a return is filed by  a dealer  under S. 7, a proceeding for  assessment  commences, and  a  notice  under subs. (2) of S. 8 is  a  step  in  the proceeding for completing the assessment.  The Act  contains no  provision that the proceeding shall be completed  within any  fixed  period : the assessing  authority  is  therefore entitled  to  complete  the  proceeding  properly  commenced without  any restriction as to time.  If a  proceeding  ,for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

assessment  is completed, and it is found that any  turnover has  escaped assessment the proceeding for bringing  to  tax that  turnover  must be commenced within  three  years  next succeeding the year to which the tax relates.  Since in  the present  case  the  proceeding for  assessment  had  already commenced  When  the  respondent  filed  the  return,   that proceeding could be completed by the assessing authority  at any time, and the issue of a notice under sub-S. (2) of S. 8 does, not, in our judgment, attract the bar of s. 10 of  the Madhya Bharat Sales Tax Act, 1950. But counsel for the respondent contended that this Court in Ghanshyam  Das v. Regional Assistant Commr. of Sales  Tax(3) in.  interpreting the provisions of the C.P. &  Berar  Sales Tax  Act,  1947, of which the scheme is  substantially,  the same  as that of the Madhya Bharat Sales Tax Act, 1950,  has taken a different (1)  Misc.  Petition No. 356 of 1963.   (2) Misc.   Petition No. 37 of 1963. (3) [1964] 4 S.C.R. 436. 436 view.   According to counsel in Ghanshyam Das’s  case(1)  it was  held that every step taken for the purpose of  bringing the  turnover  which has escaped assessment to tax  must  be taken  within  the  period  prescribed  under  the  Act  for commencing the proceeding for bringing to tax turnover which has  escaped assessment and therefore a notice issued  under sub-s.  (2) of S. 11 of the C.P. & Berar Sales Tax Act  more than  three  years  after  the  last  day  of  the  year  of assessment  is unauthorised, and no further  proceeding  for assessment  may  thereafter be had even in  respect  of  the return  duly submitted by the dealer.  In our view the  con- tention is wholly misconceived.  In Ghanshyam Das’s case(,-) the Court was dealing with a proceeding for assessment under the  C.P.  &  Berar  Sales  Tax  Act,  1947,  the   relevant provisions whereof relating to assessment and  re-assessment are  similar to, but not identical with, the  provisions  of the  Madhya Bharat Sales Tax Act, 1950.  This Court held  in that  case  that a proceeding for assessment  of  sales  tax remains pending from the time when it is initiated until  it is  determined  by  a final order  of  assessment,  and  the turnover  or  any part thereof of a dealer has  not  escaped assessment  so  long  as the assessment  proceeding  is  not completed; that a proceeding of assessment commences against a registered dealer when he files his return, and against an unregistered dealer when the Commissioner calls upon him  to file  the  return  of his turnover-.  and  that  where  the’ registered  dealer  has not filed a  return  the  proceeding commences when the Commissioner issues a notice either under s.  10 (3) or under s. 11 (4) of the C.P. & Berar Sales  Tax Act,  and not till then.  Under s. 11-A of the C.P. &  Berar Sales  Tax  Act, 1947, the Commissioner is entitled  to  re- assess  or assess the turnover within three years  from  the expiry  of  the  period for which the tax  is  due  and  the turnover  has either escaped assessment or has  been  under- assessed.   This Court in Ghanshyam Das Case(1)  in  dealing with the case of a registered dealer under the C.P. &  Berar Sales  Tax Act, 1947, decided that the Sales  Tax  Authority had  no jurisdiction to issue a notice of  assessment  after the  expiry of three years in respect of the  quarter  other than  that covered by the return made by the dealer,  or  in respect of the quarters beyond three years from the date  of the  issue of the notice where no return had been  filed  by the  dealer.  There is nothing in the judgment in  Ghanshyam Das’s case(1) which supports the view that if the dealer has made  a return of his turnover, the assessing  authority  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

incompetent  to proceed to assess the turnover by issuing  a notice  calling  upon  the dealer  to  produce  evidence  to explain  or  support  the return, after the  expiry  of  the period  prescribed under s. 11 -A of the C.P. & Berar  Sales Tax Act. (1) [1964] 4 S.C.R. 436. 437 The following observation on which counsel relied                "It  is  manifest  that  in  the  case  of  a               registered  dealer the proceedings before  the               Commissioner starts factually when a return is               made or when a notice is issued to him  either               under s. 10(3) or under s. 11(2) of the Act" is  the result of a typographical error.  Section  10(3)  of the C.P. & Berar Sales Tax Act in so far as it relates to  a registered  dealer authorises the Commissioner  to_impose  a penalty  upon the dealer who has failed to furnish a  return as  required  by  s.  10(1).   Section  11(2)  of  that  Act authorises the Commissioner to call upon a dealer registered or unregistered, by notice to appear in person or by  agent, and to produce evidence in support -of his return.   Section 11 (4) authorises the Commissioner after giving notice to  a registered dealer to record a "best judgment’ assessment, if the dealer has failed to submit a return, or having filed  a return has failed to comply with a notice under s. 11 (2) or has  not regularly employed any method of accounting or  the method of accounting is such that assessment cannot properly be made on the basis thereof.  Reading ss. 10(1), 10(3)  and 11(2) and 11 (4) of the C.P. & Berar Sales Tax Act together, it is clear that against a registered dealer the  proceeding for assessment commences when he submits a return, and if he does  not  submit  a return the  proceeding  for  assessment commences when a notice under s. 10(3) or under s. 11(4)  is issued.   In our view, the words "s. 10 (3) or under  s.  11 (2)  "  in the judgment in Ghanshyam Das’s case  (1)  should have been "s. 10 (3) or under s. 11 (4) (a) ". This is  made clear in the earlier paragraph where Subba Rao, J., observed :                "Even  in  a case where no  return  has  been               made,    but   the   Commissioner    initiated               proceedings  by  issuing  a  relevant   notice               either  under s. 10(3) or under s. 11(4),  the               proceedings will be pending thereafter  before               the Commissioner till the final assessment  is               made." There is nothing in the judgment in Ghanshyam Das’s  case(1) which supports the contention that a proceeding already com- menced  by  the filing of a return by  a  registered  dealer under S. 10(1) commences afresh when a notice under s. 11(2) of  the  C.P. & Berar Sales Tax Act, 1947, is  issued.   The notice under s. ll.(2) is only a step in the proceeding  for assessment  and  does  not disturb  the  continuity  of  the proceeding.   Therefore when the Sales Tax Officer issued  a notice  against the respondent under s. 8(2) of  the  Madhya Bharat Sales Tax Act, 1950, (1)  [1964] 4 S.C.R. 436. 438 a  fresh  proceeding to assess turnover which  has  ’escaped assessment  was not commenced, and s. 10 of the Act was  not attracted thereto. The  order passed by the High Court is therefore set  aside. The appeal is allowed.  The petition filed by the respondent is dismissed with costs in this Court and in the High Court. V.P.S.                          Appeal allowed. 439

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7