Case Law Details
Johnson Matthey Chemicals India Private Limited Vs Commissioner of Commercial Tax, UP (Allahabad High Court)
The Hon’ble Allahabad High Court in M/s Johnson Matthey Chemicals India Private Limited v. Commissioner of Commercial Tax [Sales/Trade Tax Revision No. 360 and 361 of 2022 dated December 22, 2022] set aside the order passed by the Commercial Tax Tribunal (“the Tribunal”) remanding the matter to the Assessing officer. Held that, the Tribunal was incorrect in remanding back the matter, when all the material was before it thus, it should have dealt with each of the material and decided the same.
Facts:
M/s Johnson Matthey Chemicals India Private Limited (“the Revisionist”) is a dealer engaged in the manufacturing of reaction initiators, reaction accelerators, and catalyst preparation. During the Assessment Year 2014-15, a survey was made by the Special Investigation Branch (“the SIB”) and a report was forwarded to the Assessing Authority (“A.A.”) who made assessment on the basis of the best judgement assessment and a demand of INR 60,10,077/- under the Central Sales Act, 1956 was made from the Revisionist.
The order of the A.A. was challenged before the first appellate authority, which vide order dated November 30, 2018 while allowing the appeal remanded back the matter to A.A. with certain directions to pass fresh order.
Thereafter, a Show Cause Notice (“SCN”) was issued to the Revisionist wherein, the A.A. made an assessment and raised a demand of INR 3,07,89,620/- against the Revisionist and capital goods credit was denied on ground that Revisionist was not a manufacturer. This order was challenged before the Assistant Commissioner (Appeals), which was dismissed. Thereafter, a second appeal was filed before the Tribunal in which the matter was remanded back to the A.A. and thus, was dismissed vide order dated August 8, 2022 (“the Impugned Order”). Hence, this revision has been filed.
Issue:
Whether the Tribunal has erred in remanding back the matter to the A.A. when all the materials for deciding the case were available on record?
Held:
The Hon’ble Allahabad High Court in Sales/Trade Tax Revision No.- 360 and 361 of 2022 held as under:
- Stated that, the principle envisaged under Rule 23, 23A, 24 and 25 of Order 41 Civil Procedure Code, 1908 is of great relevance and has to be considered by the all the authorities, Tribunals and courts while exercising the power of remand.
- Noted that, the Tribunal did not record any finding to the effect that the A.A. has failed to deal any issue or has not considered the same which was essential for the right decision of the suit. Further, the Tribunal had only required the Revisionist to place certain documents on the basis of which the A.A. was to arrive at the finding.
- Further noted that, the documents which were required to be considered by the Tribunal were already on record which the Tribunal being the last fact finding authority has not considered and only to escape from deciding the matter on merits had taken a shortcut and remanded back the matter to the A.A.
- Stated that, the Tribunal is also not adhering to Rule 63(5) of the Uttar Pradesh Value Added Tax Rules, 2008 (“P. VAT Rules”) by not framing the point of determination and adjudicating the same.
- Held that, the Tribunal was incorrect in remanding back the matter to the A.A. when all the material was before it and it should have dealt with each of the material and decided the same.
- Set aside the Impugned Order and remitted back the matter to decide both the appeals of the Revisionist in accordance with law on the material available on record.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. These two revisions filed under Section 58 of Uttar Pradesh Value Added Tax Act, 2008 (hereinafter called as ‘Act of 2008’) assail the order dated 08.08.2022 passed by the Commercial Tax Tribunal, Kanpur Bench-IV, Kanpur in Second Appeal No. 16 of 2022 (Assessment Year- 2014-15) (U.P.) and Second Appeal No. 17 of 2022 (Assessment Year- 2014-15) (Central).
2. Both the revisions have been filed raising following question of law:-
“I. Whether, the Tribunal, being a last fact finding authority and empowered to examine and adjudicate the factual and legal issues, has erred in remanding the appeal back to the Assessing Authority when all the material for deciding the case were available on record?”
3. Facts in nutshell, are that revisionist is a company incorporated under the provisions of Companies Act, 1956 having its registered office at Raigad, Maharastra, having its principal place of business at Kanpur Nagar. The revisionist/assessee is a registered dealer both under the Act of 2008 and under the Central Sales Tax Act, 1956 (hereinafter called ‘CST Act’).
4. The dealer is engaged in the manufacture of reaction initiators, reaction accellerators and catalyst preparation. It purchased business of catalyst from M/s. ICI India Ltd., now known as M/s. AKZO Nobel India Ltd. (“AKZO Nobel”) in the year 2002 through Business Transfer Agreement. The land of manufacturing unit could not be transferred to purchaser company. The dealer entered into a Toll Conversion Agreement (TCA) dated 02.12.2022 with M/s. AKZO Nobel for processing and manufacturing of finished goods, for the raw material and capital goods purchased and supplied by revisionist. AKZO Nobel was restricted from using plant and machinery and raw material for any other purpose other than manufacturing the products for revisionist. The liability of VAT was discharged by revisionist, and the excise invoices for the transactions issued by AKZO Nobel, clearly mentioned that it was on account of the revisionist-company.
5. The dispute relates to the Assessment Year 2014-15. In the said year, a total sale of Rs.416 crores was made from sale of catalyst and scrap. Out of the said sale, a sale of Rs.25.82 lacs of catalyst scrap was made within the State of U.P. of which VAT liability was discharged by the assessee. A survey was made by the Special Investigation Branch (SIB) on 12.02.2015 on the warehouses of the dealer. Out of five warehouses, only one warehouse namely Colt Warehouse was searched. The SIB had forwarded its report to the assessing authority, which made assessment on 28.09.2017 on the basis of best judgment assessment. A demand of Rs.60,10,077/- under the Act was made from the dealer. The order of the assessing authority was challenged before the first appellate authority, which vide order dated 30.11.2018 while allowing the appeal remanded back the matter to assessing authority with certain directions to pass fresh order. Post remand, a show-cause notice was issued to the dealer on 14.02.2020, which was replied on 12.03.2020. On 31.03.2020, the assessing authority made assessment and raised a demand of Rs.3,07,89,620/- against the revisionist and capital goods credit was denied on ground that dealer was not manufacturer, and it was AKZO Nobel which was manufacturing and excise invoice was issued by it. The order was challenged through appeal before Additional Commissioner Grade-II (Appeals)-V, Kanpur under Section 55 of the Act of 2008. The first appellate authority on 29.12.2021 dismissed the appeal upholding the assessment order. Against the said order, a second appeal was preferred before the Tribunal by the assessee under Section 57 of the Act of 2008 which has been dismissed vide order dated 08.08.2022. Hence, the present revision.
6. Sri Suyash Agarwal, learned counsel for the revisionist submitted that the Tribunal was not justified in remanding back the matter to the assessing authority when all the material was before the Tribunal. He contended that earlier the first appellate authority had remanded back the matter to the assessing authority with certain directions. Consequent to which, a show-cause notice was issued on 14.02.2020 wherein Point No.3 of the notice had required information as to the invoice of the company AKZO Nobel which was doing the job work for the revisionist and all the documents therein. According to him, on 12.03.2020, reply was submitted along with the documents furnishing entire information. According to him, in para No.2 of the reply, the details of the information sought was given and the documents such as stock register, finished goods register, purchase register, production register, excise register of raw material and finished goods, sale book, purchase and sale bills and vouchers were placed.
7. According to learned counsel, the assessing authority in cryptic manner while deciding the third issue had taken note of the fact that explanation was furnished but it was not dealt with and assessment was made. He then submitted in the appeal filed by the assessee, specific ground was taken but the first appellate authority has also not considered the same. He then invited the attention of the Court to the grounds taken before the Tribunal wherein also the assessee had brought to the notice about the documents submitted before the assessing authority as well as the first appellate authority. According to him, Tribunal was not justified in remanding back the matter to the assessing authority when all the material was already on record.
8. According to assessee counsel, by remanding back the matter to the assessing authority the litigation has been prolonged by the Tribunal and it being the last fact finding court should have decided the issue itself when all the material was before it. He further contended that Rule 63 of the Uttar Pradesh Value Added Rules categorically provides that Tribunal has to frame point of determination and decision taken thereon while deciding the appeal, which in the present case the Tribunal has not done so. Reliance has been placed upon the decision of Apex Court in case of Shivakumar and others vs. Sharanabasappa and others, (2021) 11 SCC 277; Bachahan Devi and others vs. Nagar Nigam Gorakhpur (2008) 12 SCC 373; and judgment of this Court in case of Radha Rani Trading Company vs. C.C.T., STR No. 156 of 2021, decided on 02.09.2021.
9. Sri Rishi Kumar, learned Standing counsel appearing for the State submitted that Tribunal had rightly remanded back the matter to the assessing authority after formulating issue to be decided and the material which has to be brought on record by the assessee. He then contended that the Tribunal has set aside the finding recorded by the assessing authority as well as the first appellate authority and held that after the documents as mentioned in the judgment was provided by the assessee the assessment was to be made afresh by the assessing authority. He is relied upon the decision of Andhra Pradesh High Court in case of Sri Krishna Salt Works vs. State of A.P., AIR 2004 AP 66; judgment of Hon’ble Supreme Court in cases of Sathyanath and another vs. Sarojmani, Civil Appeal No. 3680 of 2022, decided on 06.05.2022; and Karedla Parthasaradhi vs. Gangula Ramanamma and others, Civil Appeal No. 3872 of 2009, decided on 04.12.2014.
10. I have heard learned counsel for the parties and perused the material on the record.
11. Through the present revisions, the assessee has tried to raise a question of law that whether the Tribunal which is the last fact finding court and empowered to examine and adjudicate the factual and legal issue, has erred in remanding back the matter to the assessing authority when all the materials for deciding the case was available on record. The matter of remand by various authorities, Tribunals and courts have been under active consideration of this Court and also of the Hon’ble Apex Court for quite a long time.
12. The concept of remanding back the issue finds place in Order 41 Rule 23, 23-A and 25 of the Code of Civil Procedure, 1908 (hereinafter called as ‘CPC’). Order 41 of CPC deals with appeals from original decrees. Rule 23, 23-A, 24 and 25 deal with the matter of remand by the appellate authority. The relevant rules are extracted here as under:-
“23. Remand of case by Appellate Court.- Where the Court from whose decree an appeal is preferred has disposed of the suit upon a preliminary point and the decree is reversed in appeal, the Appellate Court may, if it thinks fit, by order remand the case, and may further direct what issue or issues shall be tried in the case so remanded, and shall send a copy of its judgment and order to the Court from whose decree the appeal is preferred, with directions to re-admit the suit under its original number in the register of civil suits, and proceed to determine the suit; and the evidence (if any) recorded during the original trial shall, subject to all just exceptions, be evidence during the trial after remand.
23A. Remand in other cases.- Where the Court from whose decree an appeal is preferred has disposed of the case otherwise than on a preliminary point, and the decree is reversed in appeal and a retrial is considered necessary, the Appellate Court shall have the same powers as it has under Rule 23.
24. Where evidence on record sufficient, Appellate Court may determine case finally.- Where the evidence upon the record is sufficient to enable the Appellate Court to pronounce judgment, the Appellate Court may, after resettling the issues, if necessary, finally determine the suit, notwithstanding that the judgment of the Court from whose decree the appeal is preferred has proceeded wholly upon some ground other than that on which the Appellate Court proceeds.
25. Where Appellate Court may frame issues and refer them for trial to Court whose decree appealed from.- Where the Court from whose decree the appeal is preferred has omitted to frame or try any issue, or to determine any question of fact, which appears to the Appellate Court essential to the right decision of the suit upon the merits, the Appellate Court may, if necessary, frame issues, and refer the same for trial to the Court from whose decree the appeal is preferred, and in such case shall direct such Court to take the additional evidence required; and such Court shall proceed to try such issues, and shall return the evidence to the Appellate Court together with its findings thereon and the reasons therefor [within such time as may be fixed by the Appellate Court or extended by it from time to time].”
13. The conjoint reading of Rule 23, 23A and 25 of Order 41 brings forth the scope as also contours the power of remand. Rule 23 envisages the situation where the Court has disposed of a suit upon preliminary point and a decree is reversed in appeal, the appellate court may if it thinks fit may remand the case and may also direct what issue or issues shall be tried in the case so remanded. Rule 23A which was added by amendment in the year 1976 made in Code of Civil Procedure provides that where appeal is preferred against a decree and case has been disposed of otherwise than on a preliminary point, and decree is reversed in appeal, the appellate court if considers necessary may remand for re-trial.
14. Rule 24 on the other hand provides that where the evidence on record is sufficient to enable the appellate court to pronounce judgment it may after resettling the issues determine the suit. Thus, Rule 24 restricts the power of remand in those cases where the evidence and material is on record and the appellate court is bound to decide considering the same after resettling the issues, if necessary.
15. Rule 25 envisages a situation that where the court from whose decree the appeal is preferred has omitted to frame or try any issue or to determine any question of fact which appears to the appellate court essential for determination may remand back the matter and if necessary frame issue and refer the same to the trial court.
16. The principle envisaged under Rule 23, 23A, 24 and 25 of Order 41 CPC is of great relevance and has to be considered by the all the authorities, Tribunals and courts while exercising the power of remand.
17. It has been often noticed that under the taxing statute the various authorities who have been clothed with the power of appeal, deal in a very cursory manner and without following the principles of law shift on the burden to its subordinate authorities by remanding the matter instead of deciding the same on merits.
18. This is a case which was before the Commercial Tax Tribunal which is the last fact finding court and clothed with both power of deciding the appeal on law and fact, had remanded back the matter to the assessing authority setting aside both orders of the assessment as well as of the first appellate authority.
19. Sub-rule (5) of Rule 63 of the U.P. Value Added Tax Rules provides that judgment in appeal which is rendered by appellate authority or the Tribunal shall be in writing, which shall state-
(a) The point for determination,
(b) The decision thereon, and
(c) The reasons for such decisions.
20. In the present case, the Tribunal which was deciding the second appeal was required to frame the point of determination and thereupon records its finding and the decision taken by it, but only after noting the arguments of both the parties, the Tribunal remanded back the matter to the assessing authority to consider certain documents and make fresh assessment. The Hon’ble Apex Court in Shivakumar (supra) while considering the scope of remand had held “order of remand is not to be passed in a routine manner because an unwarranted order of remand merely elongates the life of the litigation without serving the cause of justice. An order of remand only on the ground that the points touching the appreciation of evidence were not dealt with by the trial court may not be considered proper in a given case because the first appellate court itself is possessed of jurisdiction to enter into facts and appreciate the evidence.”
21. In Syeda Rahimunnisa vs. Malan BI (Dead) and another (2016) 10 SCC 315, the Apex Court held as under:-
“36. It is a settled principle of law that in order to claim remand of the case to the trial court, it is necessary for the appellant to first raise such plea and then make out a case of remand on facts. The power of the appellate court to remand the case to the subordinate court is contained in Order 41 Rules 23, 23-A and 25 CPC. It is, therefore, obligatory upon the appellant to bring the case under any of these provisions before claiming a remand. The appellate court is required to record reasons as to why it has taken recourse to any one out of the three Rules of Order 41 CPC for remanding the case to the trial court. In the absence of any ground taken by the respondents (the appellants before the first appellate court and the High Court) before the first appellate court and the High Court as to why the remand order in these cases is called for and if so under which Rule of Order 41 CPC and further in the absence of any finding, there was no justification on the part of the High Court to remand the case to the trial court. The High Court instead should have decided the appeals on merits. We, however, do not consider it proper to remand the case to the High Court for deciding the appeals on merits and instead examine the merits of the case in these appeals.”
22. Rule 25 of Order 41 gives the power to the appellate authority to remand a matter to the trial court only when it has omitted to frame or try an issue or to determine any question of fact which appears to the appellate court essential to the right decision of the suit on merits, it may if necessary, frame issue and refer the same for trial court.
23. In the present case, the Tribunal has not recorded any finding to the effect that the assessing authority has failed to deal any issue or has not considered the same which was essential for the right decision of the suit. The Tribunal had only required the revisionist-Company to place certain documents before the assessing authority on the basis of which the assessing authority was to arrive at the finding. The documents mentioned in the judgment was already brought to the notice of the assessing authority through the reply submitted by the assessee on show-cause notice on 12.03.2020 and the same was dealt with by the assessing authority in its assessment order.
24. Moreover, the documents which were required to be considered by the assessing authority by the Tribunal were already on record which the Tribunal being the last fact finding authority himself has not considered and only to escape from deciding the matter on merits had taken a shortcut and remanded back the matter to the assessing authority.
25. The action of the Tribunal has only prolonged the litigation. The Tribunal should refrain itself from such practice of avoiding to decide the issues before it being the last fact finding court and when all the evidence and material are before it, decision should be taken either way. It has come to the notice of the Court that for a quite long time, it has become a practice by the Tribunal of remanding the matters either to the first appellate authority or to the assessing authority without taking pain in deciding the matters itself.
26. The Tribunal is also not adhering to sub-rule (5) of Rule 63 of the U.P. Value Added Tax Rules by not framing the point of determination and adjudicating the same. In the present case, no point of determination as mandated in the Rule has been framed by the Tribunal while deciding both the appeals.
27. The order of remand has to be seen within the parameters of Rule 23, 23A and 25 of and not beyond that. Apart from Order 41 of CPC, there is no other provision which provides for the concept of remand. It is a borrowed provision by the taxing authorities from Code of Civil Procedure, 1908. The taxing authorities as well as the Tribunal should first understand the concept of remand before applying it. It should not be in a casual manner. Long litigation in commercial and business matter only spoils the image of the State and its functionaries and cause great loss to business world.
28. The officials and the members of the Tribunal who are dealing with the tax matters should be sensitive of the fact that business matter should be dealt and tried with strictly in accordance with law, at the earliest. Delay only leads to more litigation and loss to the revenue.
29. Reliance placed upon decisions by the State counsel on Order 41 Rule 25 CPC does not in any way help him as all the judgments placed before the Court by the State in fact reflect that order of remand should not be passed as a matter of routine. In fact, it helps the assessee.
30. Considering the facts and circumstances of the case, I find that Tribunal was not correct in remanding back the matter to the assessing authority when all the material was before it and should have dealt with each of the material and decided the same.
31. In the result, the order dated 08.08.2022 passed by the Tribunal is hereby set aside and the matter is remitted back to the Tribunal to decide both the appeals of the assessee in accordance with law on the material available on record, as expeditiously as possible.
32. Both the revisions stands partly allowed.
In view of said fact, the question of law raised above stands decided in favour of the assessee and against the revenue.
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