M/S P.P.G. ASIAN PAINTS PVT. LTD. V. DEPUTY COMMISSIONER COMMERCIAL TAX AND ANOTHER

WTAX/447/2016

AI Insights

The case involves M/S P.P.G. Asian Paints Pvt. Ltd. challenging the assessment order and rectification order passed by the Deputy Commissioner, Commercial Tax, Ghaziabad, which treated stock transfers as sales based on a survey conducted in 2004. The petitioner argued that the transactions were covered by Form-F and should be considered stock transfers, not sales. The respondent contended that the petitioner had an effective remedy of appeal and that the survey indicated a pattern of evading tax. The court ruled in favor of the petitioner, stating that the survey was not relevant for the assessment year 2012-13 and that the burden of proof lies with the Assessing Authority to establish that the transactions were sales.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 692144 (HC-UTTAR_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 11-09-2017
• Assessment Year: misc
• Other Referred Cases: Tata Engineering and Locomotive Company Limited Vs. Assistant Commissioner of Commercial Tax 1970 UPTC 265, Commissioner of Income Tax Vs. Excel Industries and another, (2013) 358 ITR 295 (SC), Prashuram Pottery Works Co. Ltd. Vs. ITO (1977) 106 ITR 1 (SC), Income Tax Officer Vs. Murlidhar Bhagwan Das AIR 1965 (5) 342, Bharat Sanchar Nigam Limited Vs. Union of India AIR 2006 SC 1383
• Laws Referred To: Central Sales Tax Act, 1956
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: C S C
• Assessee Lawyers: SUYASH AGARWAL; RAKESH RANJAN AGARWAL
• Keywords: Assessment Order; Form F; Sale; Stock Transfer; Survey report; Tax; Writ jurisdiction
• Section: 9(2); 6(A)

Judgement Text

"1 Court No. - 3 Case :- WRIT TAX No. - 447 of 2016 Petitioner :- M/S P.P.G. Asian Paints Pvt. Ltd. Respondent :- Deputy Commissioner, Commercial Tax And Another Counsel for Petitioner :- Suyash Agarwal, Rakesh Ranjan Agarwal Counsel for Respondent :- C.S.C. Hon'ble Pankaj Mithal, J. Hon'ble Umesh Chandra Tripathi, J. The petitioner has invoked the writ jurisdiction of this Court for quashing of the assessment order dated 31.03.2016 passed by the Deputy Commissioner, Commercial Tax, Sector 1, Ghaziabad under Section 9(2) of the Central Sales Tax Act, 1956 and order of the rectification dated 25.05.2016 with regard to the assessment year 2012-13 (central). The Assessing Authority in passing the impugned assessment order has treated the transactions of stock transfer as claimed by the petitioner as sale on the basis of prior contracts on the basis of survey report dated 10th September, 2004. The Supreme Court in the case of Tata Engineering and Locomotive Company Limited Vs. Assistant Commissioner of Commercial Tax 1970 UPTC 265 has clearly laid down that to make a sale to be exigible under the Act, it must be shown to have occasioned the movement of goods or articles from one State to another and the movement must be the result of a covenant or incident of contract of sale. However, where the goods move from the manufacturing plant in one State to the manufacturer's own stock-yards in other States, which are operated upon by the manufacturer's personnel for more effective distribution of goods, the movement cannot be said to have been the result of a covenant or incident of a contract of sale and as such, would be a stock transfer on which no tax under the Act would be levied. 2 The petitioner contends that all the goods claimed to have been transferred by way of stock transfer were in the nature of movement of goods to the branch offices for the purposes of sale and that the said transfer was not in pursuance to any pre- existing contract of sale. All these transfers were covered by Form- F and that the Assessing Authority has not cared to examine them independently for recording any finding that the movement was not actually covered by those Forms but simply on the basis of survey dated 10.09.2004 treated the transactions to be sale. The survey dated 10.09.2004 is not material for the assessment year 2012-13. On the basis of said survey, assessments for seven years starting from 2005-06 to 2011-12 were made and the matters were remanded by the Tribunal with the finding that the said survey was not material for those assessment years, therefore the Assessing Authority may examine the matter and pass fresh orders ignoring the said survey. Thereafter, the transactions covered by the Forms-F were individually examined and most of the transactions were held to be stock transfers and in respect thereof benefit of exemption in levying of tax was granted to the petitioners. Since, the Assessing Authority itself for several years in a similar situation has accepted the same kind of transactions to be stock transfers and outside the ambit of sale, it is not appropriate for it to have treated the similar transactions covered by Forms-F for the assessment year 2012-13 as a sale and to impose tax thereof. On the other hand, Sri C.B. Tripathi, learned special counsel, has argued that as the petitioner has a remedy of appeal against the order of assessment, he is not entitled to any relief in exercise of jurisdiction under Article 226 of the Constitution of India. Even if the writ petition has been entertained earlier, it is not necessary for the Court to hear it merits when there is an effective remedy of appeal. The question whether a particular 3 transaction is a stock transfer or a sale is a pure question of fact or at best can be a mixed question of fact and law and as such, it is not proper to examine it in exercise of writ jurisdiction. He further submits that survey dated 10.09.2004 shows a particular pattern, which is being followed by the petitioner and as such even if the survey itself is not relevant, the pattern reflected therein is material for making the assessment. The principles of res judicata are not applicable to cases of assessment under the taxing statutes and that each year assessment has to be independent upon its own facts. The notice received by the petitioner dated 11.03.2016 for the assessment year 2012-13 and the order of assessment dated 31st March, 2016 clearly reveals that the Assessing Authority intended to treat the transactions of stock transfers as claimed by the petitioners to be sale and on the basis of the survey dated 10.09.2004, the same have been treated to be the transactions of sale and have been taxed accordingly. A perusal of the impugned assessment order further reveals that though the said transactions were said to be covered by Form-F, the Assessing Authority had not examined the each transaction individually and has not recorded any finding that the transactions are not covered by the said Form-F or that they are not genuine documents/transactions. Section 6-A of the Central Sales Tax Act, 1956 places the burden of proof upon the dealer to prove the nature of the transactions, if it is not a sale, failing which, the movement of goods shall be deemed to be result of sale. The aforesaid presumption under Section 6-A of the Act is a rebuttable presumption and once the dealer has produced Form-F in relation to the transactions claiming otherwise than by way of sale or stock transfers, the burden shifts upon the Assessing Authority to lead evidence to establish that the transactions were actually of sale and not by way of stock transfers. 4 There is apparently no material on record which could justify that the transactions claimed to be stock transfers were actually sale. They have been held to be sale transactions only on the basis of the survey dated 10.09.2004. The aforesaid survey is not relevant for any other year except in which the survey was conducted. It cannot be a factor for making assessment for the subsequent years i.e. 2005-06 or thereafter. This aspect of the matter has been accepted by the Assessing Authority itself in the assessment years 2005-06 to 2011-12. The argument that the aforesaid survey may not be relevant but the pattern shown by it indicates that the modus oprendi of the petitioner intended to evade the tax by taking shelter of stock transfer. The said argument does not cut any ice in favour of the Assessing Authority. A particular pattern followed by the assessee or a dealer in a particular year cannot be taken as the basis for the subsequent years, unless a finding is returned on some material that the assessee or the dealer is continuously following the same modus oprendi so as evade the tax. In the absence of any such finding, the survey dated 10.09.2004 or the pattern revealed therein is of no significance for making the assessment in the subsequent years much less in the assessment year 2012-13. It is well settled that under the taxing statutes, the principles of res judicata as envisaged under Section 11 CPC may not be strictly applicable and each year assessment has to be independent. In Commissioner of Income Tax Vs. Excel Industries and another, (2013) 358 ITR 295 (SC), it has been observed by the Apex Court that a consistent view, which has been taken in favour of the assessee on the question raised and the benefits given to him is not supposed to be deviated from in the subsequent years, unless they are very convincing reasons for 5 the same. The aforesaid observation was made by the Supreme Court to avoid fresh litigation on the same lines, on which the dispute has already been settled earlier and has attained finality. In Prashuram Pottery Works Co. Ltd. Vs. ITO (1977) 106 ITR 1 (SC) in this connection observed as under :- “We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.” Thus, in view of the above, as the Court found that there was no material change justifying the revenue to take a different view in the matter, the Supreme Court concluded that the question should not have been re-opened. The decision in the case of Income Tax Officer Vs. Murlidhar Bhagwan Das AIR 1965 (5) 342 relied upon by Sri Tripathi in this regard also states that the decision of Income Tax Officer given a particular year does not operate a res judicata in the matter of assessment of the subsequent years but there is also no dispute to the ratio as laid down above but of the fact that the stand, which has been taken consistently for several years, the same cannot be permitted to be altered, unless they are strong reason to take a different view. Similar is the position with regard to the observation of the Supreme Court in the case of Bharat Sanchar Nigam Limited Vs. Union of India AIR 2006 SC 1383, wherein it has been noted that the petitions filed under Article 32 were subject to the general principles of res judicata and if the principle could be 6 applied to tax cases, when the earlier decision was in respect of different period. The Supreme Court held that the liability to pay the tax from year to year is a separate and distinctive liability based upon different cause of action accruing yearly basis and if any point of fact and law is considered in determining the liability in given year, they can generally be deemed to have been considered and decided in a collateral and independently. The aforesaid authority as such does not completely oust the Assessing Authority from following the same view, which it had taken in respect of the previous year on the point of fact or law. Again, unless there are exceptional circumstances to take a different view. In these circumstances, we do not find that in the absence of any strong or convincing reason on the part of the Assessing Authority to deviate from the stand which it had taken regarding the transactions relating to transfers of stocks, it was open for it to have taken altogether a different position in the concerned assessment year. Accordingly, the impugned orders are quashed and the petition is allowed. Order Date :- 11.09.2017 Nadim "