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PETITIONER: FAG PRECISION BEARING

       Vs.

RESPONDENT: SAES TAX OFFICER (I) & ANR.

DATE OF JUDGMENT:       09/12/1996

BENCH: S.P. BHARUCHA, S.C. SEN

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T      BHARUCHA, J.      The respondents have been served but have not <??>.      The Judgment  and order  under appeal  was passed  by a Division Bench  of the high Court of Gujarat. It dismissed a writ petition filed by the appellant.      The appellant  carries on  the business  of manufacture and sale  of ball and railer bearing at Vadodara in Gujarat. It is  registered as  a dealer  under the  Central Sales Tex Act. 1956.  and the  Gujarat Sales  Tex Act.  1969. the writ petition  was  filed  to  ouash  the  order  of  the  Deauty Commissioner of  Sales Tax  dates 31st  August. 1987, passed under Section  42(1) of  the Gujarat  Sales Tax Act and Rule 37-A of  the rules  thereunder staving  until  31st  August. 1988.  the   appellant’s  assessments  for  the  oeridd  1st September. 1976.  to 31st  August. 1984. and to restrain the Sales Tex  officer from  making any  assessment and  penalty orders for the said period and for consequential relief.      The order  of the Deauty Commissioner date 31st August. 1987. so far as is relevant. stated:      "since same more time will be taken      and the  assessment oreceedings are      not likely  to be  committed within      the  orescribed   time.   and   the      assessment for  the period 1.9.1976      to 31.3.19844 far the paid assessee      cannot  be  completed  within  time      limit  ore  scribed  under  Section      42(1) of the Gujarat Sales Tax Act.      1969. Hence it is considered proper      to stay  the assessment in the case      of   the    said   assessee    upto      31.8.1988. and in this respect show      cause Notice  was given vice letter      No. Jaorut/sk/Anve/Ch/5.42/87-88/JA      Nil dated  Nil as  to the  <??>  of      assessment should  not be extended.      In response to the said notice. the      assessee has  remained present  her      did  be   make  any   reforestation

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    either by  post or  in person.  The      assessee  has  made  representation      vide letter  dated  Nil.  Accenting      the    representations    of    the      assessee.  I  under  the  authority      conferred on  me under Section 9(2)      of the  Central Sales Tac Act. 1956      read with  Rule 37-A of the Gujarat      Sales Tex  Rules 1969  hereby order      that the  assessment in  respect of      M/s.   Precision    Bearing   India      Limited. Baroda  who is  registered      vide Registration  No. 40602801/Gui      9 B  81 under  Local-Central  sales      Tax  Acts  and  who  is  under  the      jurisdiction of  Sales Tax  Officer      (1) Div.  (6)  Enforcement.  Baroda      for   the    period   1.9.1976   to      31.8.1984    by     stayed     upto      31.8.1988."      On behalf  of the appellant it was contended before the High  Court  that  no  order  for  stay  of  the  assessment oreceedings had in fact been passed on 31st August. 1987 and . thus.  the assessment  proceedings had become time barred: that the   order dated 31st August. 1987. ("the said order") was null  and vic  inasmuch as  no show cause notice in that penal had  been given  to the appellant nor had it been near before the said order did not justify its passing.      The High  Court held against the appellant on the first contention and  , that  being a  ringing of  fact, we do not concern  ourselves   therewith.  insofar   as   the   second contention was  concerned. the High Court considered whether the  power  of  staying  assessment  proceeding  was  quasi- judicial in  nature. the  High Court noted that prior to 6th May.  1970.   there  was  no  provision  in  the  State  Act prescribing a time limit within which assessment aroceedings were required to be completed. A Sales Tax Enquiry committee had been  appointed by  the State Government and it gave its report in  1967. This  showed that  the position of cases of assessment lingering for vears was unsatisfactory as dealers had to  preserve account  books for long periods of time and is became  difficult for  them to  produce evidence  at late stages to  support their  claims to  set off. exemptions and the like:  also. Because  recoveries  became  difficult  and Government revenues  were reobardised.  It was then that the period of  three vears  for  the  completion  of  assessment oroceedings had  been orescribad  in the  State Act. In 1979 this period was resect of stay of assessments was introduced into the  State Act.  The High  Court found  no merit in the case of  the appellant  that. as  the assessee  right. to be assessed  within   the  period  of  limitation  and  not  be subjected  to   any  liability   thereafter.  was  adversely affected by an order  of stay of assessment. the function of granting the  stay should  be regrade  as quasi-judicial. It was of  the opinion  that. while  passing the order of stay. neither the  State Government  nor the Commissioner of Sales Tax was  under an  obligation to issue a prior notice to the assessee of  to give  him the  opportunity of a hearing. the State Government.  or the  Commissioner. had  to record  the reasons for  passing of  such order and that order had to be served upon  the assessee:  that was the only requirement of the principles  of natural  justice which could be read into the provision.  the third contention does not appear to have been dealt  with separately  by the  High Court  but in  the course of  the discussion  of the  second contention, it was

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observed assessment  proceedings might  be  required  to  be staved not  only because  of any  difficulty  in  completing assessment proceedings  individually. a  war or  a strike by the offerers of the Sales Tex Department. for example. might make it  impossible  or  difficult  to  complete  assessment oroceedings within  the period of limitation. In such cases. in order  to see  that  the  revenues  did  not  suffer  the Government or the commissioner Might be required to stay all assessment proceedings.  Again. if an important point of law was pending  consideration by  a  higher  court.  assessment proceedings where  such question  was involved might have to be stayed.      While the  writ petition  was pencing  before the  High Court. there  was a  stay  of  assessments  for  the  period covered by  the said  order. When  leave was granted by this Court. stay  was refused. Consequently assessment orders are stated to  have been  passed.  Necessarily,  their  validity depends upon the validity of the said order. Section 42  of the  State Act. as it then stood so far as it is relevant. reads:      "Section   42.   Time   limit   for      completion of assessments.- (1) (a)      No order  of assessment  for a year      or part  of a  year shall  be  made      under sub-section  (3)  or  (4)  of      section 41  at any time of the year      in   which    the   last    monthly      quarterly, or  as the  case may be.      annual return is filed.      Provided that  for the  purpose  of      this section  if it  is  considered      necessary  so   to  co.  the  State      Government as  it may seem fit, and      the  Commissioner  may  subject  to      such   conditions    as   may    be      prescribed. dv a general or special      order. stay.  either  penerally  or      for   a   specified   period.   the      assessment proceedings  of a dealer      of class of dealers.      Rule 37-A  sets out the conditions subject to which the Commissioner may grant stay. It reads thus:      Rule 37-A.  Conditions  subject  to      which Commissioner  may grant stay.      -   Conditions    to   which    the      Commissioner may.  under the  first      proviso to  sub-section of a dealer      or a  class of dealers. shall be as      follows namely.      1. no  assessment proceeding  shall      be stayed by the Commissioner for a      period more  than five vears at any      time.      2. the Commissioner shall reduce in      writing     the     reasons     and      circumstance necessitating  stay of      any  proceeding  in  respect  of  a      dealer or a class of dealer."      Under the terms of Rule 37-A, the Commissioner must out the  reasons   and  circumstances   necessitating  stay   of assessment proceedings in writhing. In the instant case. the reasons and  circumstances necessitating  stay are  that the assessment was in progress and "since some more time will be taken and  the assessment  proceedings are  not likely to be completed  within   the  ore   scribed  time..........it  is

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considered proper  to stay  the assessment......". To accent the aforesaid  as good reason to stay assessment proceedings is to  hold that  the Commissioner. or the State Government, can give  a go-by to the statutory provision prescribing the period during which assessment proceeding shall be completed only because  the Sales  tax authorities  have not completed the assessment  proceedings within  the stimulated  time. we cannot accent this as a good reason. The aftertaste power to stay assessment  proceed ions  can be exercised only in stay assessment   proceedings    can   be   exercised   only   in extraordinary circumstance and for supervising reasons which cannot be  attributed to  the  default  or  failure  of  the assessing authorities  It would  be a  valid exercise of the power to  stay assessment  proceedings of  a class  of asses sees, for  example.  when  a  point  of  law  inclosed  such assessments in  pending decision is a higher court. It would availed exercise  of such power in an individual case where, for example,  search and  seizure of the assessee’s premises has unearthed  material which  requires  to  be  sifted  and analyses before  a  satisfactory  assessment  order  can  be passed. It is not enough that the order should state. as has been  done   in  the   present  case.  That  the  assessment proceeding were pending and would take "some more time".      Under the  terms of  Rule  37-A.  the  commissioner  is required to  put in  writing the "reasons and circumstances" that necessitate  the  stay  of  proceedings.  The  stay  of assessment proceedings  has consequences  of a  civil nature upon as  assessee. which  the High  Court has  as aforesaid. noted. The  more the time that elapses the more difficult it sis for  the assessee  to power  his accounts  and claim set off, exemptions  and the like. We take the view that. in the circumstances.  the   power  under  Rule  37-A  may  not  be exercised by  the Commissioner  without first  giving to the assessee notice to show cause why his assessment proceedings should not  be saved  for a stared period. The notice should set out  what  the  reasons  and  circumstances  are  which. according to  the Commissioner necessitate such stay so that the assessee  his opportunity of meeting the same. This is a requirement of  natural justice  that having  regard to  the scope of Rule 37-A requires to be read into it.      The said order states that notice to show cause why the assessments should not be stayed was given to the appellant. The number of the notice is mentioned and its date is stated to be  "Nil". the  writ petition averred that no such notice had been  served upon  the appellant. The affidavit in reply to the writ petition did not counter the averment: it stated that no nearing was necessary. The High Court proceeded upon the basis  that the  notice had  not been serve. and it held that a  notice was not required. As set out above, we do not agree.      In the  oremisis. the impupned order must be set aside. Consequently. all  proceedings taken  and assessment  orders passed on  the strength  thereof must also be set aside. The Commissioner of  Sales Tex shall be entitled. if so advised. to issue  to the  appellant  a  notice  to  show  cause  why assessments for  the period  its September.  1976.  to  31st August, 1964.  should not  be stayed for a stated period for the reasons  and in the circumstances to be out therein. and he may  proceed thereafter  in the  manner laid  down above. This notice be must, issue. if so minded within 16 weeks. If this is  not done  within 16 weeks. all amounts collected as and by way of sales tack for the period 1st September. 1976. to 31st  March. 1984.  shall forthwith  be refunded  to  the appellant.      The appeal  is allowed  accordingly. There  shall be no

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order as to costs.