Dismissed

M/S Elis Export v. State of Haryana & Anr.

Punjab & Haryana HC20 Jul 2015VATAP/13/2013

Case brief

AI extract

What is this about?

This High Court dismissed the appeal against a Special Bench holding that a revision under Section 40 of the Haryana General Sales Tax Act was justified where the assessing authority erred on a matter of law. The Court distinguished reassessment under Section 31 from revision under Section 40, holding that the Tribunal correctly found the earlier assessment order suffered from mistake of law.

What did the court decide?

The appeal was dismissed, affirming the Special Bench's view that the impugned orders were valid.

M/S Elis Export Vs State of Haryana & Anr. — Property and Title | Punjab & Haryana HC (2015)

¶1

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

¶2

VATAP No.13of2013(O&M)
DATE OF DECISION: 20.07.2015

¶3

M/s Elis Exports

¶4

…..Appellant

¶5

versus

¶6

The State of Haryana and another

¶7

 .....Respondents

¶8

CORAM:- HON'BLE MR.JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICE
 HON’BLE MR. JUSTICE G.S.SANDHAWALIA

¶9

Present: Mr. Rohit Gupta, Advocate for the appellant

¶10

Ms. Mamta Singla Talawar, AAG, Haryana

¶11

S.J. VAZIFDAR, ACTING CHIEF JUSTICE :

¶12

1. This is an appeal under Section 36 of the Haryana Value
Added Tax Act, 2003, against the order of the Special Bench of the
Haryana Tax Tribunal dated 17.11.2009.

¶13

The Special Bench was constituted as the members of the
Division Bench had differed on the question as to whether the
revisional authority had jurisdiction under Section 40 of the
Haryana General Sales Tax Act, 1973 (hereafter to be referred to as
‘the HGST Act’). The Special Bench held that the revisional
jurisdiction had rightly been invoked by the revisional authority.
The appellant contends that assuming that the case on merits is
well founded, it was a case for re-assessment under Section 31 by
the assessing authority and not one for revision under Section 40.

¶14

2. Sections 31 and 40 of the HGST Act read as under:-

¶15

“31. Reassessment of tax - If in consequence of
definite information which has come into his

¶16

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶17

VATAP-13-2013

¶18

- 2 -

¶19

possession, the assessing authority discovers that
the turnover of the business of a dealer has been
under assessed, or has escaped assessment in any
year, the assessing authority may, at any time
within three years from the date of final
assessment order and after giving the dealer a
reasonable opportunity, in the prescribed manner,
of being heard, proceed to reassess the tax
payable on the turnover which has been under
assessed or has escaped assessment.”

¶20

“40. Revision- (1) The Commissioner may on his own
motion call for the record of any case pending
before, or disposed of by, any officer appointed
under sub-section (1) of section 3 of the Act to
assist him or any Assessing Authority or Appellate
Authority, other than the Tribunal, for the
purposes of satisfying himself as to the legality
or to propriety of any proceedings or of any order
made therein and may pass such order in relation
thereto as he may think fit:

¶21

Provided that no order, shall be so revised
after the expiry of a period of five years from
the date of the order:

¶22

Provided further that the aforesaid
limitation of period shall not apply where the
order in a similar case is revised as a result of
the decision of the Tribunal or any court of law:

¶23

Provided further that the assessee or any
other person shall have no right to invoke the
revisional powers under this sub-section.

¶24

(2) The State Government may, by
notification, confer on any officer the powers of
the Commissioner under sub-section (1) to be
exercised subject to such conditions and in
respect of such areas as may be specified in the
notification.

¶25

(3) No order shall be passed under this
section which adversely affects any person unless
such person has been given a reasonable
opportunity of being heard.”

¶26

3. The appellant contends that the following substantial
question of law arises in this appeal:-

¶27

“Whether on the facts and circumstances of the
case, it was a case fit for revision under Section
40 of the Haryana General Sales Tax Act, 1973 or a
case fit for reassessment under Section 31 of the
said Act.”

¶28

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶29

VATAP-13-2013

¶30

- 3 -

¶31

4. The appellant carries on business inter alia of the
export of medicines. The appellant returned an aggregate turn over
of about Rs.7.25 crores for the year 1998-99 in the quarterly
returns filed with the Assessing Authority. At the time of
assessment, the assessee contended that its true turnover as per
books of accounts was only Rs.4.94 crores. The appellant furnished
the balance-sheet along with a reconciliation statement which was
accepted by the Assessing Authority. The assessing authority
accepted the gross turnover to be Rs.4.94 crores as per the books.
As the entire turnover of Rs.4.94 crores related to exports, the
same was exempted from tax.

¶32

It is important to note a few aspects regarding the
assessment order made by the ETO-cum-AssessingAuthority under the
HGST Act for the assessment year 1999-2000. The order inter alia
states that the dealer had filed his returns assessing the gross
turnover to be towards export out of India and accordingly had not
deposited any tax. The order further states as follows. Being not
satisfied with the returned sale version, a statutory notice was
issued under Section 28(2) of the HGST Act. In response to the
notice, the appellant produced the books of accounts and other
relevant documents. It is important to note that the order expressly
states that these books and relevant documents had been examined in
detail and found to be maintained in the normal course of business. It is
also important to note that the order states that there was some
difference in sales in the return filed and in the books produced and
that the appellant had furnished a reconciliation statement for the
purpose of assessment. It is equally important to note that the
Assessing Authority expressly stated that the account books of the dealer
had been examined in detail and that the assessment order was passed

¶33

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶34

VATAP-13-2013

¶35

- 4 -

¶36

keeping in view the same. The case was filed with a ‘nil’ demand as
the Assessing Officer found the gross turnover to be almost
entirely in respect of the exports.

¶37

A similar order was passed by the Assessing Authority
under the Central Sales Tax Act, 1956. The order records that after
allowing for the export claim no taxable turnover was left for the
purpose of assessment and the case was filed ending in ‘nil’
demand.

¶38

5. This brings us to the disputed action initiated and
taken by the Deputy Excise Taxation Commissioner under Section 40
of the HGST Act. By a notice dated 20.02.2003, addressed to the
appellant, the revisional authority stated that he had examined and
inspected the record for the said assessment year for the purpose
of satisfying himself as to the legality and propriety of the
assessment order. He recorded that he had observed that the
assessment order suffered from the following illegalities and

¶39

improprieties:-

¶40

“1. Sale of Duty Entitlement Pass Book Licence to
exporters worth Rs.53,05,167/- has escaped assessment as
per information and Rs.2278165 as per balance sheet.”

¶41

The notice stated that the assessment order, therefore, needed to
be revised. By the notice, the appellant was given an opportunity
to explain as to why the order be not revised.

¶42

6. The appellant filed a reply to the above notice. For the
purpose of this appeal, it is necessary only to note the
appellant’s contention that the revisional authority had no
jurisdiction to invoke the provisions of Section 40 of the HGST
Act.

¶43

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶44

VATAP-13-2013

¶45

- 5 -

¶46

7. The revisional authority by an order dated 28.04.2004
held that this was a fit case under Section 40. On merits, it was
held that the appellant was liable to tax on account of sale of
Duty Entitlement Pass Book (DEPB) license to exporters. The
revisional authority accordingly sent the matter back to the
Assessing Authority for determining the tax liability on account
of sale of DEPB by the appellant.

¶47

 8. The appellant filed an appeal before the Tribunal. As
we mentioned earlier, the members of the Division Bench of the
Tribunal differed on the question as to whether the jurisdiction
under Section 40 was rightly invoked or not. The matter was,
therefore, referred to a special bench, which answered the
question in the affirmative.

¶48

9. As noted by the Tribunal, when the assessment order was
passed, it was a contentious issue. The DEPB was held to be goods
by a Division Bench judgment of the Delhi High Court dated
24.07.2001 in Philco Exports vs. Sales Tax Officer and others,
[2001] 124 STC 503 (Delhi). A similar view was taken by this Court
in Liberty Enterprises vs. State of Haryana and another, [2007] 5
VST 12 (P&H), by the Bombay High Court in Jindal Drugs Limited and
another vs. State of Maharashtra and another [2008 of 17 VST 164
(Bom)] and finally by the Supreme Court in Yasha Overseas vs.
Commissioner of Sales Tax & Ors., (2008) 8 Supreme Court Cases
681. As we noted earlier, the assessment order was passed for the
year 1998-99 on 18.05.2000 and for 1999-2000 on 27.4.2001 and for
2000-01 on 10.06.2002. The assessment orders in respect of the
first two years were passed even before the judgment of the Delhi
High Court. The Tribunal noted that while passing the assessment

¶49

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶50

VATAP-13-2013

¶51

- 6 -

¶52

order dated 10.6.2002 for the assessment year 2000-01, the
Assessing Officer had obviously not noted the above judgments.

¶53

On merits, it was admitted that in view of the judgment

¶54

of the Supreme Court, which we will shortly refer to, the
appellant was liable to pay tax in respect of the sale of DEPB.
The only question urged before us was that even so it was, at the
highest, a case for re-assessment under Section 31 and not for
revision under Section 40.

¶55

10. Mr. Gupta, however, submitted that there is a clear
demarcation between the powers under Section 31 and Section 40 of
the HGST Act. In this regard, he relied upon a judgment of this
Court in Haryana Agro Industries Corporation Limited vs. State of
Haryana and others, [2002] 125 Sales Tax Cases 18 (P&H). The
Division Bench held:-

¶56

“8. A conjoint reading of the provisions quoted
above shows that while section 31 speaks of
reassessment of tax, section 40 provides for revision.
Under section 31, the Assessing Authority can reassess
the tax payable on the turnover which has been under-
assessed or has escaped assessment. This power can be
exercised within three years from the date of
finalisation of assessment and subject to the giving of
notice and reasonable opportunity of hearing to the
dealer. Section 40(1) empowers the Commissioner to suo
motu call for the record of the case pending before, or
disposed of by, any officer appointed under section
3(1) to assist him or any Assessing Authority or
Appellate Authority for the purposes of satisfying
himself as to the legality or to propriety of any
proceedings or of any order made therein and pass such
order in relation to said proceedings or order as he
may think fit. The period of limitation prescribed for
exercise of power under this sub-section is five years
from the date of the order. Sub-section (2) of section
40 empowers the State Government to issue notification
conferring on any officer the powers of the
Commissioner under sub-section (1). Sub-section (3) of
section 40 represents embodiment of the rule of
hearing. It provides that no order under section 40
can be passed adversely affecting any person unless
such person is given a reasonable opportunity of being
heard.

¶57

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶58

VATAP-13-2013

¶59

- 7 -

¶60

9. The above analysis of sections 31 and 40
shows that the Legislature has conferred powers upon
the Assessing Authority and the Commissioner to deal
with different types of cases and has prescribed
different periods of limitation for exercise of powers
under the two sections. While the Assessing Authority
can undertake the exercise for reassessment if it
discovers that the turnover of the business of a dealer
has been under-assessed or escaped assessment, the
Commissioner has been vested with the power to call for
the record of pending as well as decided cases to
satisfy himself as to the legality and/or propriety of
any proceedings or of any order and then pass
appropriate order. In our opinion, the use of different
phraseology in the two sections is clearly indicative
of the Legislature’s intention to confer powers upon
different authorities to deal with different situation
and, therefore, the power exercisable by one authority
cannot be exercised by another authority. In other
words, the power vested in the Commissioner to suo motu
call for the record of pending proceedings or decided
cases to satisfy himself as to the legality and/or
propriety of the pending proceedings or final order
cannot be used for dealing with a case of escaped
assessment which is the exclusive preserve of the
Assessing Authority. In view of this, we are inclined
to agree with Shri Sawhney that the notices issued by
respondent No.2 under section 40 of the Act were ultra
vires of the powers of the said respondent and on that
ground alone the impugned orders are liable to be
quashed.

¶61

13. In Bidar Sahakar Sakkare Karkhane Ltd. v.
State of Karnataka [1985] 58 STC 65, a division the
Bench of Karnataka High Court interpreted sections 12-A
and 21(2) of the Karnataka Sales Tax Act, 1957 and held
as under:

¶62

“The revisional power cannot be exercised in
respect of a matter which falls within the power to
reassess escaped turnover. The revising authority, in
other words, should not trench upon the powers which
are expressly reserved to the assessing authority under
section 12-A of the Karnataka Sales Tax Act, 1957. the
Deputy Commissioner, in exercise of his revisional
jurisdiction, should not ignore that limitation. It is
clear from the provisions of section 12-A of the Act
that the reason for the turnover escaping assessment is
immaterial. It might be by oversight, mistake or by
design. If the record reveals no application of mind by
the assessing authority in respect of a part of the
turnover, then it must be deemed to have escaped
assessment. It would therefore be a clear case falling
within the exclusive jurisdiction of the assessing
authority for reassessment, no matter whether that part
of the turnover was in or outside the record of
assessment. If, on the other hand, the assessing
authority has applied his mind and erroneously excluded
any part of the turnover, then certainly it would be a
case for the revisional authority to revise the
assessment.

¶63

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶64

VATAP-13-2013

¶65

- 8 -

¶66

Where the assessee, a co-operative institution
having a sugarcane factory, included harvesting charges
incurred in the purchase of sugarcane to the factory,
the assessing authority without applying his mind
omitted to include those expenses in the taxable
turnover, and the Deputy Commissioner in exercise of
his powers under section 21(2) of the Karnataka Sales
Tax Act set aside the assessment and directed the
assessing authority to redo the assessment by including
in the purchase turnover, the harvesting charges
incurred by the assessee.

¶67

Held, that since the assessing authority did not
apply his mind to the disputed turnover, the revising
authority could not have invoked the powers under
section 21(2) of the Act.”

¶68

The argument of Shri Jaswant Singh that the
expression “legality or propriety” used in section
40(1) of the Act should be liberally construed so as to
include a case of escaped assessment sounds attractive
but having regard to the scheme of the Act, we are
unable to accept the same. If the Legislature intended
to invest the revisional authority with the
jurisdiction and power to deal with all types of cases,
then it would have incorporated a non obstante clause
in section 40. In the absence of such clause, we are
unable to interpret section 40(1) as empowering the
Commissioner or other designated officer to exercise
power conferred upon the Assessing Authority under
section 31.

¶69

15. We are further of the view that the
expression “legality or propriety” would take within
its folds all types of illegalities and improprieties
which may have crept in the proceedings pending before
the Assessing Authority or which may have affected the
final adjudication, but it cannot take within its
sweep, the cases of escaped assessment because in such
cases there is no assessment/adjudication by the
Assessing Authority or Appellate Authority."

¶70

Mr. Gupta also relied upon the notice in that case,
which was extracted in the judgment, and contended that the
wording thereof was similar to the wording of the notice in the
present case dated 20.02.2003. He relied upon paragraph-17 of the
Division Bench judgment where the Division Bench held that notice
did not even advert to the relevant provisions of the Act else it
would have indicated that the proposed action was being taken on
account of a particular illegality or impropriety.

¶71

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶72

VATAP-13-2013

¶73

- 9 -

¶74

11. The question whether the assessment order suffers from
any illegality or impropriety in the present case at least is one
of fact. The Tribunal construed the assessment order in detail and
came to a positive finding that the assessment order was passed on
account of a mistake of law and that the Assessing Authority had,
in fact, considered the entire record and had not brought to tax
the sale proceeds on account of the sale of DEPB in view of the

¶75

legal position as he perceived it to be. We were, in fact,
informed that prior to the assessment order, the proceeds for the
sale of DEPB were not brought to tax in the case of most of the
assessees. The point was first decided by the Delhi High Court and
thereafter by several other High Courts and finally by the Supreme
Court.

¶76

12. We are unable to say that the finding of the Tribunal
that the Assessing Authority had taken the case into consideration
is perverse, unreasonable or totally unsustainable. The Tribunal
has taken the relevant facts in this regard into consideration.
For instance, as we noted earlier, the assessment order was passed
pursuant to the notice issued under Section 28(2) on account of
the Assessing Authority not being satisfied with the returned sale
version. Pursuant thereto, the appellant produced the account

¶77

books and other relevant documents. The order expressly states
that the same had been “examined in detail and found to be
maintained in normal course of business”. The issue, therefore,
did not escape the Assessing Authority. The balance-sheet,
admittedly, was also produced. The balance-sheet had attached to
it the trading, profit and loss account for the year ending as on
31.03.2000. There is a specific entry regarding the sales of the

¶78

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

¶79

VATAP-13-2013

¶80

- 10 -

¶81

DEPB. The balance-sheet was also examined by the Assessing
Authority. Considering all the facts and circumstances of the
case, the Tribunal’s view cannot be said to be an impossible one.

¶82

13. The appeal, therefore, does not raise a substantial
question of law.

¶83

14. The appeal is dismissed.

¶84

(S.J. VAZIFDAR) ACTING CHIEF JUSTICE

¶85

20.07.2015 (G.S.SANDHAWALIA)
parkash*JUDGE

¶86

PARKASH CHAND 2015.07.20 16:57 I attest to the accuracy and authenticity of this document

M/S Elis Export v. State of Haryana & Anr.

Case brief

What is this about?

What did the court decide?

M/S Elis Export v. State of Haryana & Anr.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

M/S Ind Swift Ltd. Th Himanshu Jain Vs Commissioner of Income Tax

Commissioner Central Excise Commissionerate, Gurgaon Vs M/S Bellsonica Auto Components India, Gurgaon

M/S the Jai Hind Coop Land C Society Vs State of Punjab and Ors.

Commissioner Central Excise Commissionerate Chd Vs M/S Confederation of Indian Industries Chd

Commissioner Central Excise Commissionerate Vs M/S Pb. Ex-Serviceman Corp.

Commissioner Central Excise Commissionerate Chandigarh Vs M/S Confederation of Indian Industries