Mishri Lal Jain Vs State of Jharkhand (Jharkhand High Court)
Jharkhand High Court held that it is mandatory to record reasons for initiation of proceedings under Section 35(7) of the Jharkhand Value Added Tax Act (JVAT Act). Non-recording of the same makes the proceedings untenable in law.
Facts- The instant writ petition has been preferred against the order passed by the learned Commercial Taxes Tribunal, whereby the revision petition and review petition of the petitioner have been rejected and the determination of sale price of Iron Ore sold by the petitioner on the basis of average rate of neighbouring mines in exercise of the powers under Section 35(7) read with Section 30(4) of the Jharkhand Value Added Tax Act, 2005 (JVAT Act) has been upheld.
The petitioner is engaged in the business of mining and trading of iron ore, and Iron ore extracted from mines is known as “Run of Mines (ROM)” which requires further processing and screening. Petitioner’s premise does not have processing and screening facility and thus, only ROM was being sold by the petitioner.
The Assessment proceeding of the petitioner was completed wherein, in alleged exercise of power u/s 35(7) r/w Section 30(4) of the JVAT Act, tax and interest has been imposed upon the petitioner on the alleged ground that petitioner has concealed its Gross Turn Over (for short GTO). The assessing officer despite taking actual figure of sale price, has taken the value of goods sold on the basis of average sale price of nearby mines i.e., M/s. Rungta Mines Ltd.
Conclusion- It is only after recording of reasons for initiation of proceedings under Section 35(7) the exercise for determination of value of goods at the time of sale and assessment of tax on such price is to be done by giving the dealer an opportunity of being heard.
At this stage it is further appropriate to observe that the condition of recording satisfaction under proviso to Section 35 (7) is a prerequisite before initiation of proceedings and cannot be dispensed with by the AO. In other words, the assessing officer is duty bound to record his reasons before initiating any proceeding. It appears that the petitioner had also specifically raised this plea before the AO before passing of the revised assessment order and also before the appellate authority thereafter at the second instance.
It is reiterated that recording of satisfaction is sine qua non before proceeding to impose tax and penalty upon the assessee under Section 35(7) of the JVAT Act. Any such satisfaction is to be based on tangible materials as are found by the AO as the provisions are penal in nature where an assessee is found to be indulging in tax evasion by suppression or concealment of actual sales or turnover by selling goods at a higher price than shown by him. Learned Tribunal has completely failed to consider that the requirement of law for initiating a proceeding under Section 35(7) by recording reasons has not been fulfilled by the Assessing Officer.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
The instant writ petition has been preferred against the order dated 25th February, 2020 & 5th May, 2022 passed by the learned Commercial Taxes Tribunal, Jharkhand, Ranchi in Revision Case No. JR 40 of 2013, as well as Review Case No. JR 04 of 2021, respectively; whereby the revision petition and review petition of the petitioner have been rejected and the determination of sale price of Iron Ore sold by the petitioner on the basis of average rate of neighbouring mines in exercise of the powers under Section 35(7) read with Section 30(4) of the JVAT Act has been upheld.
2. The brief facts of the case as pleaded by the petitioner is that the petitioner is engaged in the business of mining & trading of iron ore, and Iron ore extracted from mines is known as “Run of Mines (ROM)” which requires further processing and screening. Petitioner’s premise does not have processing and screening facility and thus, only ROM was being sold by the petitioner. ROM includes Fines & Lumps and the grade of minerals found in petitioner’s premises was between 50-65% Fe content, which would be evident from survey report as contained in Annexure- 1.
The Assessment proceeding of the petitioner was completed wherein, in alleged exercise of power u/s 35(7) r/w Section 30(4) of the JVAT Act, tax and interest has been imposed upon the petitioner on the alleged ground that petitioner has concealed its Gross Turn Over (for short GTO). The assessing officer despite taking actual figure of sale price, has taken the value of goods sold on the basis of average sale price of nearby mines i.e., M/s. Rungta Mines Ltd.
3. Being aggrieved by the assessment order, petitioner filed appeal before the JCCT (Appeal) being Appeal Case No. CB-VAT-A-09/2011-12. However, the learned appellate court rejected the appeal of the petitioner. Thereafter, the petitioner filed a revision petition being JR 40 of 2013 before the Commercial Taxes Tribunal, Jharkhand at Ranchi which was dismissed on 25th February, 2020 and thereafter, petitioner also filed Review Case No. JR 04 of 2021 before the learned Tribunal. The learned Tribunal also rejected the review petition preferred by the petitioner; hence this application.
4. Learned counsel for the petitioner has taken us through the relevant provisions of JVAT Act, 2005 including Section 2 (xlvii) Sale and 2 (xlviii) sale price definition and in particular Section 35(7) and Section 40 relating to turn over escaping assessment. Learned counsel for the petitioner has, inter alia, questioned the impugned findings on two-fold legal issues:
