7. Whether the Revisional authority had assumed valid jurisdiction under section 57 of the Bombay Sales Tax Act, 1959 when the impugned assessment order was passed under section 33(2) of the Bombay Sales Tax Act, 1959 ?

Held:— The initiation of jurisdiction under section 57 and issuance of notice in Form 36 was with a view to make fishing enquiry which is not permissible in the eye of law.

The assessments of the appellant for the period 1994-95 under the Bombay Sales Tax Act, 1959 and Central Sales Tax Act, 1956 were completed under section 33(2) of the Act, which resulted in refund of Rs. 81,669/- under the Bombay Sales Tax Act and a demand of Rs. 81,853/- under the Central Act..

Thereafter the Assistant Commissioner of Sales Tax (Administration) 52, Thane issued a notice in Form 36 directing the appellant to produce the books of account for the period in question. The appellant informed the Assistant Commissioner that the orders in question have been passed under section 33(2) of the Act and there is no question of reopening of the assessment. The Assistant Commissioner thereafter issued Form 40 along with a gist of the order and proposed to disallow the labour charges, resale claim etc. under the local Act and for want of production of C forms the outside State sales would be taxed at 10 per cent. Consequently, the orders were revised and an additional demand of Rs. 22,923/- and Rs. 15,56,749/- were created under the Bombay Sales Tax Act and Central Sales Tax Act respectively.

The submission of the appellant before the Tribunal was that once the assessment has been completed under section 33(2) by accepting the returns, there is absolutely no scope for revision. There is neither legality nor propriety to direct the appellant to produce the books of account and then to issue notice in Form 40 on the basis of the scrutiny of the books of account. The appellant relied upon the judgments of the Tribunal in Veena Laboratories (S.A.1776 and 1776(A) of 2000 dated 19-6-2002, Satyanand Sales Corporation (Appeal No. 19 of 1995 dated 21-4-2001. The submission of the revenue was that the revisional powers under section 57 of the Bombay Sales Tax Act, 1959 are wide and the revising authority can investigate into the matter if prima facie any impropriety is noticed. Under the Central Act, without production of Form C, rate of tax cannot be restricted to 4% and according to it there is no question of acceptance of inter-State sales under section 33(2) without production of C forms.

The Tribunal referred to the decision of the Bombay High Court in the case of Champaklal Nanabhai vs. Commissioner of Sales tax, Maharashtra State, Bombay (99 STC 191) and quoted the observations of the High Court:

"The power of revision conferred by section 57 of the Bombay Sales Tax Act, 1959, is wide and is not hedged in by any condition or limitation. Initiation of proceedings for suo motu revision under this section by the revisional authority therefore, cannot be challenged on the ground of non-existence of any condition precedent. Exercise of power under this section can be challenged only on the ground that it arbitrary or mala fide or for extraneous considerations or with a view to making a fishing enquiry in the completed assessments or proceedings without any basis or justification emanating from examination of the records of the order."

The Tribunal in the light of the above yardstick examined the facts of the case and observed that the assessment under section 33(2) can be completed if the assessing officer is satisfied that the returns furnished in respect of the concerned period are correct and complete. If the assessing officer is not satisfied with the returns furnished in respect of any period as correct and complete then he has to initiate action under section 33(3). The material available before the assessing authority while completing the assessment under section 33(2) is the "returns" only. There is no question of verifying the books of account and other documents as the assessing officer is satisfied with the correctness of the returns. It was further observed that the only material on the basis of which the assessment order was passed under section 33(2) of the Bombay Act is the returns. It is therefore, clear that there was no material before the revising authority to assume any incorrectness or impropriety in the assessment order particularly as regards the claim of labour charges, resale claim and exemption on the basis of C forms. If any discrepancy would have been noticed in the returns, in that case, the revising authority would have been justified to issue notice in Form 36. The Tribunal further observed that the assessment under the Bombay Act has resulted in refund the learned Assistant Commissioner issued notice in Form 36 with a view of making fishing inquiry in the completed assessment without any basis or justification emanating from the examination of record of the orders; i.e., examination of the returns.

Rejecting the submission of the revenue in regard to Central Act, the Tribunal observed that notice in Form 40 has not been issued in the context of Central Act. Only the proposed revision as regards the Central has been mentioned along with the gist of Bombay Act appended to the notice in Form 40. Tribunal held that both the orders are passed under section 33(2) by accepting the returns. It therefore concluded that there was absolutely no material before the revisional authority to invoke the jurisdiction under section 57 and issuance of notice in Form 36 was with a view to make fishing inquiry, which is not permissible in the eye of law. The revision is ab inito void.

(Midas Equipments vs. The State of Maharashtra – Second Appeal Nos. 120/121 of 2002 dated 19th January, 2007. The judgment is delivered at the First Bench by the Hon’ble President Shri G. D. Parekh. The appellant was rep[resented by Mr. D. V. Shintre, Sales Tax Practitioner.)

8. Whether the partnership firm is liable to pay profession tax under Entry 20 of Schedule I appended to the Profession Tax Act, when profession tax is levied on and is paid by partners of the same firm under Entry 19 of Schedule I ?

Held: Firm is not liable to pay profession tax.

The period involved is prior to 1-4-1999; i.e., before deletion of Entry 20 with effect from 1-4-1999.

The applicant is a partnership firm carrying on the business in Nashik. The firm comprises of 2 partners, and holding Enrolment Certificate and are paying taxes regularly. The Profession Tax Officer, Malegaon was of the opinion that the firm also is liable to pay profession tax under Entry 20 of the Act and he passed the order for the periods from 1994-95 to 1998-99. In addition to the tax he also imposed penalty under section 20. Appeal filed against the said order was dismissed. Aggrieved by the appeal order the applicant preferred Ist Revision before the Deputy Commissioner of Sales Tax (Appeals) and on hearing the applicant the petition was dismissed.

Before the Tribunal the applicant placed reliance on the judgment of the Bombay High Court in State of Maharashtra vs. Mangal Metal Corporation (Writ Petition No. 63 and 1758 of 1986 dated 29-4-1987) wherein the Tribunal’s judgment in Appeal No. 55 of 1985 was confirmed. The main argument of the applicant was that the firm has no independent existence apart from the partners and when the partners are taxed the firm is not liable to pay tax. However, the revenue pleaded that during the period under revision both entries Nos. 19 and 20 of Schedule I appended to the Act were in existence and therefore as per the entries the firm as well as the partners are liable to pay tax.

The Tribunal examined the issue involved in Mangal Metal Corporation (cited supra) in respect of Entry No. 8 vis-à-vis Entry 19 of Schedule I appended to the Act. In the said case the partners of the firm aggrieved by the determination order passed by the Additional Commissioner of Sales Tax had filed appeal before the Tribunal. The Tribunal after considering the legal position came to the conclusion that the Registered Firm of which the appellants were partners, would not be liable to pay profession tax under Entry No. 8 of Schedule I as the partners of the firm are made liable to pay profession tax under Entry 19 of Schedule. Aggrieved by the said decision the Commissioner filed Writ Petition before the Bombay High Court. The High Court upheld the view expressed by the Tribunal in the said case.

Though the decision of the High Court was Entry No. 8 vis-à-vis Entry 19, the Tribunal after reproducing relevant entries observed that under Entry 8, the registered dealer was made liable to pay profession tax and as per entry 19, the firm was liable to pay profession tax. In that case the firm was also registered as a dealer and therefore with the amendment to Entry 19, the partners were also made liable to profession tax. However, as per the then prevailing statute, the maximum limit of profession tax per annum was Rs. 250/- and in the case referred to above because of the levy of profession tax on the firm as well as its partners the ceiling of Rs. 250/- was exceeded.. In the light of this particular legal position, the Tribunal as well as the High Court observed that the firm registered as dealer under the Bombay Act cannot be taxed under Entry 8, when each partner of the firm is also obliged by Entry 19 of Schedule I to pay maximum amount of tax levied under the Act. It was in the above background the High Court held that there was a breach of maximum limit of tax of Rs. 250/- imposed by the Article 276 of the Constitution of India, the levy of tax on the firm has to be deleted.

The Tribunal further observed that the Hon.’ble High Court had also examined the case of Mangal Metal Corporation from different angle. According to it, it is likely a person would be covered by more than one of the entries in the Schedule and the solution provided is to render him liable to pay the highest prescribed under the different entries. The Tribunal therefore observed that the levy of tax on the firm under entry 20 is in fact a levy of tax on all its partners collectively and therefore, it is the partners who are legally liable to pay this tax under the entry 20 in addition to that payable by them individually under entry 19. The natural corollary is that each partner of the firm is liable to pay tax under both the entries 19 as well as 20 and therefore the explanation given at the end of Schedule I will come into play which says: "Notwithstanding anything contained in this schedule, where a person is covered by more than one entry in this schedule, the highest rate of tax specified under any of those entries shall be applicable in his case".

According to the Tribunal entry 19 and entry 20 were subsisting with effect from 1-5-1994 to 15-5-1997. In the background of the legal position and the view of the Hon.’ble High Court referred to above, the partner of the registered firm who is covered by both the entries 19 and 20 would be liable to pay tax only under entry 19, since his liability under the said entry is more than that under entry 20. This hardship has also been removed by the legislature by deleting entry No. 20 with effect
1-4-1999. The revision allowed and tax levied on the firm set aside.

M/s Habde Cloth Stores vs. The State of Maharashtra – Revision Application No. 4 of 2001 dated 23rd February 2007 – The judgment of the case was delivered at the Third Bench of the Maharashtra Sales Tax Tribunal by Shri S. G. Tambe, Member. The applicant was represented by Shri P. V. Surte, Advocate.

9. Sales of magazines like "Femina" and "Filmfare" whether tax free under Schedule Entry A-3(2).