REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.               OF 2008 (Arising out of S.L.P. (C) No.16781 of 2006)  

M/s Steel Authority of India Ltd.   ....Appellant

Versus

Sales Tax Officer, Rourkela-I Circle & Ors. ....Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT, J.  

1. 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.  2001-02, an order was

earlier passed by this Court on 31.03.2006.   

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  &  Steel  and

Chemical  Fertiliser  as  its  finished  product  and  bi-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 of the country. For the assessment

year  2001-02,  notice  was  issued  under  Rule 12(5)  of  the

Central  Sales  Tax  (Orissa), Rules,  1957  (in  short  ‘Central

Rules') for the purpose of assessment under Central Sales Tax

Act, 1956 (in short the ‘Act’).  After examination of the books

of accounts produced, an extra demand of Rs.19,25,41,763.00

was raised.  The  appellant-Company  had  disclosed  net  sale

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and transfer  of  goods  during the year under  assessment  in

question as follows:

1. Sales U/s 8(l)(a)(b) Rs.714,18,82,639.06

2. Sales U/s 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

_____________________________

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 (M0U), which were treated as

Bank transfers are in fact, sales made in course of inter-state

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trade  and  commerce  and,  therefore,  are  subject  to  tax.

Accordingly tax was levied.

Questioning  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-

87/05-06 directed payment of Rs.10.00 Crores. A Writ Petition

was filed before the High Court pointing out that the decision

of this Court in Ashok Leyland Ltd. Vs. State of Tamil Nadu &

Anr. (2004 (3) SCC 1) had full application. A Division Bench of

the High Court, by order dated 15.02.2006 directed deposit of

Rs.2.00  Crores.  The  said  order  was  questioned  in  S.L.P.(C)

No.5314/2006.  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

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territories.  This  Court  passed  the  following  order  on

31.03.2006:  

“Issue notice.

There  shall  be  interim  stay  in  the

meanwhile.

Any payment already made in compliance

of  the  High  Court's  order  shall  be  without

prejudice to the claims involved."

A  few  days  thereafter,  on  19.04.2006,  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. By order

dated  14.08.2006,  the  Commissioner  directed  deposit  of

Rs.15.00  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

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any  opinion  on  merits  but  observing  that  the  matter  was

under examination by this Court.

4. 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.

5. 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 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, 1950 (in

short the ‘Constitution’). It is also pointed out that the ratio of

the decision of this Court  in Ashok Leyland Limited v.  Union

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of India & Ors. (1997 (9) SCC 10) has not been kept in view. 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 6A 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

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Additional Secretary, who is an expert in sales

tax matter.

(2A)  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 245-0 of the Income  Tax  Act, 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."

6. It  is  pointed  out that ultimately  the Central  Sales  Tax

Appellate Authority can decide the matter after the Tribunal in

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the concerned State decides the matter.  It is the stand of the

appellant that the Forum provided under the Statute is being

rendered un-effective by the casual disposal of the appeal.

7. 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.

8. In  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 pages 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 paragraph (2), the observations

of the assessing officer are noted and in paragraph 3, starting

from pages 39 to 41, different stands of  the appellant have

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been  noted.  In  paragraph  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 evidences  regarding  refund  of  tax  to  such bidders  from  whom  tax  was  collected.  In absence  of  such documentary evidences,  the claim of the appellant is not credible.

On the second point of dispute regarding levy  of  tax  on  the  sale  turnover  of Rs,1,21,03375.18  due  to  non  furnishing  of declarations  in  forms.  Hence,  there  is  no interference  from  this  forum  on  the observation  of  the  learned  S.T.O.,  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 S.T.O. on due verification and proper examination  of  the  material  evidences  has rightly  taken  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."

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9. 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  by  the  first

appellate authority.  

10. 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)

11. Even in respect of administrative orders Lord Denning,

M.R. in  Breen v.  Amalgamated Engg. Union (1971) 1 All ER

1148, observed:  “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

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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 reason 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.

12. 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

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dealing  with  all  the  points  of  challenge  highlighted  by  the

appellant.

13. We make it clear that we have not expressed any opinion

on the merits of the case.  

14. 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.

15. The appeal is allowed to the aforesaid extent without any

order as to costs.

………………………….J. (Dr. ARIJIT PASAYAT)

…………….……………J. (P. SATHASIVAM)

New Delhi,  July 10, 2008

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