M/s Steel Authority of India Ltd. vs Sales Tax Officer, Rourkela-I Circle and others

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

2 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

3 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

4 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

5 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

6 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

7 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

8 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

9 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."

10 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

11 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

12 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

13