Bharat Steel Tubes Ltd. & Anr. v. State of Haryana & Anr.
RANGANATH MISRA, J. These are applications under Article
32 of. the Constitution. and challenge in these proceedings is to the
validity of notice issued by the Excise arid T"!'ation Officer-cum
Assessing Authority, Respondent no. 2, under the Haryana General
Sales Tax Act, 1973 (hereinafter referred to .as 'the Haryana Act'). G
~ Such notice is said to have been issued on 18th of December, 1980 .
. · The relevant periods are 1968-69 to '1974-75 and each of the writ peti
tions relates to one of these years. As common questions of fact and
law arise in these petitions and. a· common set of arguments has been
advanced at the Bar, we proceed to dispose of all these writ petitions
by a common judgl\lent. · ' H
A The petitioner No. l, a Public Limited Company, has its factory
at Ganaur within the District of Sonepat in Haryana State and
petitioner No. 2 is its General Manager (Legal) and duly constituted
Attorney. Petitioner No. 1 .a manufacturer of electric resistence,
welded steel tubes and pipes, is a dealer registered under the Haryana
Act as also under the Central Sales Tax Act. It filed returns for all the
quarters covered within the period indicated above as prescribed by
the Punjab General Sales Tax Act, 1948 (hereinafter referred to as
'the Punjab Act') till 31.3.1973 and under the Haryana Act for the
quarters of the remained years in question. as the Haryana Act came
into force with effect from 5th May, 1973. On the receipt of notice
relating to assessment years 1968-69, 1969-70, 1970-71, 1971-72, 1972-
73 and 1973-74 in the prescribed form ST-XIV under section 14(2) of
the Punjab General Sales Tax Act and in the prescribed form ST-25
under section 28(2) of the Act relating to year 1974-75, the petitioner
company appeared before the respondent No. 2 and complied with the
requirements of such notice by production of documents, books and
other papers. While the matter was thus proceeding, the second
respondent again issued a notice on 24.9.1982 requiring the petitioner
company to produce certain further records and documents. The
petitioner has ch~llenged that notice as also the vires of section 28A of
the H aryana A ct.
Section 11 of the Punjab Act lays down the procedure of assess-
E ment which broadly corresponds to section 28 of the Haryana Act.
Though a major part of the period involved in these proceedings would
be covered by the Punjab Act, it would be sufficient to refer for con
venience to the corresponding provisions of the Haryana Act. Sec
tion 25 of the Haryana Act obliges every registered dealer to furnish its
return in the manner prescribed and the relevant rules require returns
F to be submitted on quarterly basis. Sub-section (1) of section 28 enti
tles the assessing authority to accept the returns and assess the amount
of tax due from the dealer on the basis of such returns when he is
satisfied without requiring the presence of the dealer or the production
by him of any evidence that the returns furnished are correct and
complete. Sub-section (2) requires the assessing authority, where·he is
G not satisfied without requiring the presence of the dealer or production
of evidence in support of the return to serve on such dealer a notice in
the prescribed manner requiring him to attend in person or to produce
or cause to be produced such evidence.as he may rely upon in support
of the return. Under sub-section (3), where the dealer responds to the
notice under sub-section (2), the assessing authority after hearing such
H evidence as the dealer may produce and such other evidence as the
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)... BHARAT STEEL TUBES v. STATE OF HARYANA [MISRA, J,j 899
assessing authority may require on specified points, has to assess the
tax. Sub-section (4) authorises the assessing authority in the event of
default of compliance with the terms of notice issued under sub-section
(2) to proceed to assess, to the best of his judgment, the amount of tax
due from the dealer. Sub-section (5) deals with the situation where
returns are not furnished and provides a period of five years after the
expiry of such period to which the returns, if filed, would be related as
the outer limit for completing the assessment to the best of the asses
sing authority's judgment. The five sub-sections of section 28 thus deal
with four different situations:
Sub-section( 1) authorises the making of assessment on the basis
of returning without anything more:
Sub-sections (2) and (3) deal with one particular situation,
namely, when the assessing authority looks for evidence and support
ing material, he calls upon the dealer to appear and produce his
accounts and on the basis of such material' he is to complete the
assessment;
Sub-section ( 4) deals with the situation where there is failure of
compliance with the notice under sub-section (2) -and this provision
enjoins upon the assessing authority to complete the· assessment,
according to the best of his judgment, within a period of five years;
Sub-section (5) deals with the situation where no return is filed.
For each of these years Under consideration, that i~, either under
section 11(2) of the Punjab Act or under section 28(2) of the Haryana
Act, notice has been issued by the assessing officer. The assessing
officer in his affidavit has made it clear that assessments for these years
_....._ were intended to be completed following the procedure in sub-sections
· r (2) and (3) of either of the sections in the two Acts. It has, therefore, F
been contended, relying on judgments of this Court that there is no
prescribed limitation for completing such assessments. In course of
argument, learned counsel for the State has further indicated \hat
action under section 28A of the Haryana Act was not intended to be
taken. In that view of the matter, it is indeed unnecessary to ·refer to
tl\e provisions of section 28A of the Haryana Act and deal With several
~· contentions advanced at the Bar with reference to that provision. Equally
unnecessary would be to find oui tl)e exact meaning of "proceed to
assess to ,the best of his judgment" appearing.in sub-section (4) of
section 28 of the Haryana Act.
In Ghanshyamdas v. Regional Assistant Commissioner of Sales
Tax, Nagpur & Ors., 14 STC 976 a five'Judge bench of ihis Court was· H
A actually dealing with a case of assessment of escaped tum-over and for
that purpose had to· find out whether there was any escapement of tax
if proceedings in respect of the first assessment itself was still pending
and no final order of assessment had been made. Dealing with this
aspect, this Court held:
"it is manifest that in the case of a registered dealer, the
proceedings before the Commissioner start factually when
a return is made or when a notice is issued to him either
under section 10(3) or under section 11(2) of the Act. The
acceptance of the contention that statutory obligation to
file a return initiates the proceeding is to invoke a fiction
not sanctioned by the Act. The obligation can be enforced
by taking a suitable action under the Act. Taking of such an
action may have the effect of initiating proceedings against
the defaulter. The default may be the occasion for initiating
the proceedings but the default itself proprio vigore cannot
initiate proceedings. Proceedings in respect of the assess
ment of the tum-over for the relevant period cannot, there
fore, be said to be pending before the Commissioner ....
. . . . . . For the foregoing reasons, we hold that a statutory
obligation to make a return within a prescribed time does
not proprio vigore initiate the assessment proceedings
before the Commissioner; but the proceedings would com
mence after the return was submitted and would continue
tin a final order of assessment is made in regard to the said
return."
On the basis of this authority, it would follow that notices under
sub-section (2) of either section 11 or section 28 of the relevant Acts,
having already issued and final orders of assessment having not been
made, assessment proceedings are still pending.
In Madan Lal Arora v. Excise and Taxation Officer, Amritsar, 12
STC 387 a five-Judge Bench was examining the question of limitation
in respect of a best judgment assessment. At that time, section 11 of
the Punjab Act had a time limit of three years within which the best
judgment assessment had to be completed. Now that period of limita
tion in section 28(4) is of five years. In view of what we have already
noted, consideration of the procedure for best judgment assessment is
not relevant.
H Nor are we concerned with the examination of the view taken by
BHARAT STEEL TUBES v. STATE OF HARYANA !MISRA, J.J 901
the Full Bench of the Punjab and Haryana High Court in Jagat Ram
Om Prakash v. Excise and Taxation Officer, Amritsar, 16 STC 107.
Therein, the examination was with reference to the provisions in
section 11(4) of the East Punjab General Sales Tax Act, 1948 and the
question of the time limit for completion of a best judgment asssss
ment was in issue. The Court pointed out that as to at what point of
time the assessing officer did actually proceed to so assess would have
to be determined on the facts and circumstances of each case and it is
not possible to lay down any definite and clear-cut test applicable to all
cases. It was, however, pointed out that there must be some definite
act or step taken from which it can be clearly perceptible that from that
point of time the assessing officer has proceeded to access to the best
of its judgment and the commencement of this process must be within
the period of three years, as provided in section 11(4) of that Act.
In Indian Aluminium Cables Ltd. & Anr. v. Excise and Taxation
Officer & Anr., 11977) 1 SCR 716 a three-Judge Bench of this Court
was considering the procedure of assessment laid down under section
11 of the Punjab Act. This Court observed: · D
"On a correct interpretation of the provision aforesaid,
what emerges is as follows:
(i) That the assessing authority shall hear the evi
dence produced by the dealer on the day specified in E
the notice issued under sub-section (2).
(ii) It can adjourn the hearing to some other day and
hear the evidence produced by the dealer on the
adjourned day or days.
' (iii) The assessing authority may require the dealer
to produce further evidence on specified points on
the adjourned day or days.
(iv) The assessing authority should assess the amount
of tax due from the dealer, that is to say, pass the
order of assessment, on the day on which the hearing
of the evidence is completed as soon afterwards as
may be."
There can be no opposition to the position as summarised with
reference to section 11(2) and (3) of the Punjab Act corresponding to
section 28(2) and (3) of the Haryana Act.
902
SUPREME COURT REPORTS [19881 3 S.C.R. -'
The Court proceeded to state:
"Sub-section (4) of section 11 is attracted in a case
where a dealer having furnished a return in respect of a
period fails to comply with the terms of a notice issued
under sub-section (2). In such a case, the assessing autho
rity has to take some effective step, such as issuance of a
notice to the assessee ntimating to him that he is proceeding
to access to the best of his judgment the amount of tax due
from the dealer. On failure of a dealer to furnish a return in
respect any period by the prescribed date the assessing
authority after giving the dealer a reasonable opportunity
of being heard can proceed to access to the best of his
judgment the amount of tax, if any, due from the dealer. In
such a case, also an effective step such as issuance of a
notice to the dealer concerned showing that the assessing
authority is proceeding to access has got to be taken within
five years of the expiry of the period concerned. Sub
section ( 6) is attracted in the case of a dealer who being
liable to pay tax under the act has failed to apply for regis
tration. Similar steps as the ones to be taken under sub
section (5) are to be taken under sub-section ( 6) within a
period of five years after the expiry of the concerned
period. But the Legislature advisedly did not fix any period
of limitation for taking up of the steps or the passing of the
assessment order under any of the sub-sections (1), (2) or
(3). The reason is obvious. Best judgment assessments in
the circumstances mentioned in any of the sub-sections ( 4),
(5) or (6) could not be allowed to be made after the expiry
of a certain reasonable time which the Legislature thought
was three years previously but.made it five years by Punjab
Act 28 of 1965. But where a registered dealer has filed the
return, the assessing authority can pass the assessment
order under sub-section (1) and accept the return filed by
the dealer as correct and complete. In such a case the for
mality of passing an order of assessment is to be completed
without any further demand of tax from the dealer. For the
issuance of a notice under sub-section (2) no time limit has
been fixed, but the assessing authority must remain on its
guard of taking the steps and completing the assessment as
soon as it may be possible to do so. Otherwise, the risk
involved may just be pointed out. Take a case where a
notice under sub-section (2) is issued after the expiry or
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BHARAT STEEL TUBES v. STATE OF HARYANA [MISRA, J.[ 903
just on the verge of expiry of the period of five years and
the dealer fails to comply with the terms of the notice. In
such a case, the assessing authority may have to proceed to
make the best judgment assessment under sub-section (4)
attracting the bar of limitation of five years. But, of course,
there may be a case where in spite of the failure of the
dealer to comply with the terms of the notice a suit under
sub-section (2) the assessing authority may be in a position
to complete the assessment under sub-section (3) treating
the alleged failure of the dealer as not a real failure on his
part."
Section 11(4) of the Punjab Act which has been considered in
this case no where requires a notice to be given to the. dealer by the
assessing authority of the fact that he was going to assess to the best of
his judgment. Where it is not possible fonhe assessing authority to
complete the assessment on the basis of the return and a notice under
sub-section (2) has l!een issued, the assessee appears before the asses
sing authority and respond to the notice .. Once the assessee is
before the authority and the documents and evidence produced by the
assessee are examined, the assessee would certainly know which way
the assessment proceeding is heading. It is quite possible that in course /
of examination of the papers produced by the assessee in answer to the/
notice, the assessing authority would indicate his dissatisfaction with
the compliance. It may be that in a given case the original notice under
section 11(2) or a subsequent order requiring production of some more
material on specific points is not complied with. Non-compliance with
the notice under section 11(2)' of the Act leads to a situation where a
best judgment assessment can be complied. It is true that this Court in
Indian Aluminiuim case (supra) has indicated that a further notice has
to be given. The question that fell for determination before the Court
did not require examination as to whether such a notice was necessary.
In view of the position as has emerged in the matter before us, we alsu
do not think it necessary to finally indicate as to whether such a notice
has to be issued and failure to issue such a notice would prevent the
assessing officer from making a best judgment assessment. Though we
are of the opinion that such a notice is not a statutory prescription, we
do not intend to say anything more about it as judicial propriety would
require a larger bench of the Court to examine the correctness of the
view in the Indian Aluminium case. On an appropriate occasion, we
hope the question as to whether such a notice is a condition precedent
to .completion of assessment would be examined.
'C
In Indian Aluminium case (supra) this Court has approved the
earlier-decision in Gurbax Singh v. Union of India, [1976] 3 SCR 247.
The ratio in Gurbax Singh's case is that in the absence of a period
provided by statute for completion of assessment, an order of assess
ment made with some delay would not be without jurisdiction. Even in
Indian Aluminium case (supra), where the statute requires assessment
to be completed within a reasonable time, the Court indicated that the
argument of the learned counsel that the assessment had to be comp
leted within a reasonable time in order to be sustainable was not
acceptable as a sound one.
The short question that really falls for examination in this case is
whether an order of assessment under sub-section (3) of section 11 of
the Punjab Act or section 28(3) of the Haryana Act can now be comp
leted or would that be barred by limitation. Undoubtedly, the assess
ment proceedings have been very delayed. As the material placed
before us shows, the assessee had gone before different courts from
time to time to ask for injunction against the completion of assessment
but that trial appears be 'have started in December, 1980 when a suit
was filed and injunction was obtained. Though notices were issued
under sections 11{2) of the Punjab Act or 28(2) of the Haryana Act
within a reasonable period from the filing of returns for the respective
quarters in the assessment years under consideration, further action
has not been taken by the assessing officer to complete the assess
ments. But as we have said above, in the absence of any prescribed
period of limitation, the assessment has to be completed within a
reasonable period. What such reasonable period would be, would
depend upon facts of each case. One view can be that it should be a
period not exceeding five years as the Legislature has fixed the limita
tion of five years for completing assessments in case of escaped tum-
over. Unless then be an assessment made soon after the period to
which such assessment relates, the question of consideration of escape
ment would indeed become difficult to consider and examine. We, are,
however, not inclined to extend into a situation like the one before us,
a period of limitation for completion of assessments under sections
11{3) or 28(3) of the respective Acts. The assessee has made returns
for all the quarters and must have paid its admitted tax. Now that the
assessing authority intends to complete assessments under section
11(3) of the Act, we see no prejudice to the assessee if the assessing
authority is permitted to complete the assessment now. On the other
hand, if no assessment is made an anomalous situation might arise and
even though the assessee has collected the sales tax on its sale turn
over, it might raise a claim for refund of it in the absence of an assess-
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BHARAT STEEL TUBES v. STATE OF HARYANA [MISRA, J.J 905
ment. We do not propose to create such a situation. It would suffice to
say that in the situation which has arisen it the matter before us, it
would be appropriate to call upon the assessing authority to complete
all these pending assessments within a total period of four months
from today on the basis of available material in the record before him
and such other material as the authority may obtain. We, however,
make it clear that such assessment has to be only under section 11(3) of
the Act.
Before we part with the case, we would like to indicate that
assessment of tax should be completed with expedition. It involves the
revenue to the state. In the case of a registered dealer who collects
sales-tax on behalf of the State, there is no justification for him to
withhold the payment of the tax so collected. If a timely assessment is
completed, the dues of the State can be conveniently ascertained and
collected. Delay in completion of assessment often creates problems.
The assessee would be required to keep up all the evidence in support
of his transactions. Where evidence is necessary, with the lapse of
time, there is scope for its being lost. Oral evidence as and when
required to be produced by the assessing authority may not be avail
able if a long period intervenes between the transactions and the con
sideration of the matter by the assessing authority. Long delay thus is
not in the interest of either the assessee or the State. In view of the fact
that a period of limitation has been prescribed for bringing the escaped
tum-over into the net of taxation, such an eventuality cannot be grap
pled with appropriately unless timely assessment is completed. In
several taxing statutes, even in a situation like this, where assessment
under sections 11(3) or 28(3) of the respective Acts is contemplated, a
period of limitation is provided. Until by statute, such a limitation is
provided, it is proper for the State Governments to require, bystatutory
· rules or appropriate instructions, to ensure completion of assessments
with expedition and reasonable haste but subject to rules of natural
justice.
We would like to clarify the position that we have not dealt with
the vires of section 28A of the Haryana Act nor have we found any
necessity to deal with the requirement of notice before the assessing
authority proceeds to complete the assessment according to the best of G
his judgment. These questions ate left open.
Each of the writ petitions is, therefore, dismissed. Parties are
directed to bear the respective costs.
N.V.K. Petitions dismissed. H