PETITIONER:
INDIAN ALUMINIUM CABLES LTD. & ANR.
Vs.
RESPONDENT:
EXCISE AND TAXATION OFFICER & ANR.
DATE OF JUDGMENT23/09/1976
BENCH:
UNTWALIA, N.L.
KHANNA, HANS RAJ
SINGH, JASWANT
CITATION:
1977 AIR 540 1977 SCR (1) 716
1977 SCC (1) 120
ACT
Punjab General Sales Tax Act (Punjab Act 46 of 1948),
s. 11(2)--Notice’ under--Whether should be issued within a
particular period.
HEADNOTE
The appellant is an inter-State dealer. In respect of
all the eight quarters of the years 1969-70 and 1970-71, the
appellant filed returns in time. In respect of the four
quarters of 1969-70 the Assessing Authority did not accept
the returns and issued notices under s. 11(2) of the Punjab
General Sales Tax Act, 1948, requiring the appellant to
produce evidence in support of the returns. Since the
question of the appellant’s liability to pay central sales
tax for an earlier assessment year (1962-63) was pending
before the High Court, the matter was not pursued by the
Assessing Authority and was kept pending. After the High
Court gave its decision against the appellant, and while the
matter was pending appeal in this Court, the Assessing
Authority took up the matter of assessment’ for the year
1969-70 by the issue of notice in September 1975. The
appellant thereupon filed writ petitions in the High Court
to quash the proceedings. In respect of the four quarters
of the year 1970-71 notices under s. 11(2) were issued by
the Assessing Authority on January 30, 1976, and the appel-
lant filed writ petitions in the High Court for quashing
those proceedings also. All the’ writ petitions were dis-
missed by the High Court,
In appeal to this Court, in view of the decision of
this Court in appeal. the appellant did not agitate the
question of its tax liability under the Central Sales’ Tax
Act. but contended that, (i) the Assessing Authority could
not assess the tax payable by the appellant on the expiry of
the period of 5 years from the end of each quarter--in
relation to the year 1970-71 the same contention was raised
even though notice under s. 11(2) was within time apropos
the last’ quarter; and (2) the notice under s. 11(2) and
assessment under s. 11(3) had to be completed within a
reasonable time.
Dismissing the appeals,
HELD: (1) Under s. 10 of the Act read along with Rules
framed thereunder, the return has to be filed by a dealer
for each quarter by the last day of the following month of
the quarter and admitted sales tax as per the return has
also got to be deposited. Where a registered dealer has
filed the return the Assessing Authority can accept the
return as correct and pass the assessment order under s.
11(1) If the Assessing Authority does not accept the
return he may issue notice under s. 11(2) asking the asses-
see to produce evidence in support of the return. In such
a. case the, Assessing Authority shall hear the evidence
produced by the dealer on the day specified in the notice
issued under sub-s. (2), or adjourn the hearing to some
other day and hear the evidence produced by the dealer on
the adjourned day.. or days. or may require the dealer to
produce further evidence on specified points on the ad-
journed day, or days. The Assessing Authority should under
s. 11 (3), on the day on which the hearing of the evidence
is completed or ’as soon afterwards as may be’, assess the
amount of tax due from the dealer, that is, pass the order
of assessment. [720 E-H]
Section 11(4) is attracted in a case. where a dealer
having furnished a return fails to comply with the terms of
a notice issued .under s. 11 (2). In such a case, the
Assessing Authority has to take some effective steps, such
as issuance of a notice to the assessee, within 5 years of
the expiry of the period concerned, intimating to him that
he is proceeding to assess the tax due from the dealer to
the best of his judgment. Under s. 11(5), on failure of a
dealer to furnish a return in respect of any period by the
prescribed date the Assessing Authority, after giving the
dealer a reasonable opportunity of being heard can, within 5
717
years after the expiry of the concerned period proceed to
assess to the best of his judgment the amount of tax, if
any, due from the dealer. Sub-section (6) is attracted in
the case of a dealer who, being liable to pay tax under the
Act, had failed to apply for registration. Similar steps as
the ones under sub-s. (5) are to be taken under sub-s. (6)
within a period of 5 years after the expiry of the concerned
period. It is thus seen that for taking action under sub-
ss. (4), (5) and (6) of s. 11 a time limit of 5 years has
been fixed by the legislature. The reason is that best
judgment assessments in the circumstances mentioned in any
of the sub-ss. (4), (5) oF (6) are fresh proceedings and
could not be allowed to be taken after the expiry of a
certain reasonable time which the legislature has fixed at 5
years. But the legislature advisedly did not fix any period
of time for taking steps or the passing of the assessment
order under any of the sub-ss. (1), (2) or (3). Where a
dealer files a return the proceeding under the Act commences
and the issue of a notice under s. 11(2) does not initiate
any fresh proceedings. A notice under s. 11(2) requiring
the dealer to produce evidence can therefore be issued at
any time after the filing of the return. because, when once
a return is duly made, the assessment could be made at any
time unless the statute prescribes a time limit. The ex-
pectancy of taking steps without any undue delay and within
a reasonable time is an expectancy of prudence, because,
where a notice under sub-s. (2) is issued when 5 years are
about to expire and the dealer fails to comply with the
terms of the notice the Assessing Authority may have to
proceed to make the best judgment assessment under sub-s.
(4) and he may not be able to do so if the period of 5 years
had expired by then. [722 A-G]
Bisesar House v. State of Bombay & Others. 9 S.T.C. 654,
and Rameshwar Lal Sarup Chand v. U.S. Nanrath Excise &
Taxation Officer, Assessing Authority, Amritsar and Another
15 S.T.C. 932 overruled.
Ghanshyamdas v. Regional Assistant Commissioner of Sales
Tax, Nagpur & Others 14 S.T.C. 976, The State of Panjab &
Others v. Tara Chand Lajpat Rai 19 S.T.C. 493, The State
of Punjab and another v. Murlidhar Mahabir Prasad 21 S.T.C.
29, Madhya Pradesh Industries Ltd. v. State of Maharashtra
and Others 22 S.T.C. 400 and Madan Lal Arora v. The Excise
and Taxation Officer, Amritsar 12 S.T.C. 387 followed.
(2) The case of Gurbux Singh v. Union of India [1967] 3
SCR 247 is not an authority for the contention of the appel-
lant that the issue of the notice under s. 11(2) and comple-
tion of assessment under s. 11(3) should be within a reason-
able time. In that case it was pointed out that since the
legislature had not provided any period of limitation within
which an order was to be made by an Appellate or Revisional
Authority, the period of limitation prescribed in other
sections could not be imported for the exercise of such
power. It was not stated in that case that the exercise of
the revisional power suo moto could not be made even after
an undue long delay. It was merely found as a fact in that
case that there was no undue delay in the exercise of the
power. [727 A---D]
[Obiter. The phrase as soon afterwards as may be’ in s.
11(3) may suggest that where assessment order under s. 11(3)
of the Act was passed after under delay after the completion
of the hearing of the evidence produced ’by the dealer, the
order of assessment may not be valid. But that question
does not arise in the present case. because, the appellant
has not yet produced any evidence].
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 415 and
962 of 1976.
(Appeals by Special Leave from the Judgment and Orders
dated 2-3-1976 and 21-7-1976 of the Punjab & Haryana High
Court in Civil Writ Petition Nos. 561 and 1961 of 1976
respectively).
S.T. Desai, Talat Ansari and Shri Narain for J.B. Dadac-
hanji, for the Appellants (in both appeals).
718
M.C. Bhandare and R.N. Sachthey, for the Respondents (in
both appeals).
The Judgment of the Court was delivered by
UNTWALIA, J. In these two appeals by special leave a
common question of law falls for our determination, hence,
they have been heard together and are being disposed of by
this judgment.
The Indian Aluminium Cables Ltd., appellant No. 1 in
both the appeals has got its factory at Faridabad in the
State of Haryana. It sells and supplies aluminium cables
to several State Electricity Undertakings or Boards situated
in the various States. In respect of the assessment year
1962-63, the Company raised a dispute that it was not liable
to pay Central Sales Tax under the Central Sales Tax Act,
1956, as it claimed to be exempt from inter-State tax on the
sales of its products to the various State Undertakings or
Boards by reason of the provisions contained in section 5
(2)(a)(iv) of the Punjab General Sales Tax Act,
1948--hereinafter referred to as the Act. The Tribunal
decided the matter in favour of the assessee Company but the
High Court of Punjab and Haryana answered the Sales Tax
Reference made at the instance of the Revenue against the
assessee. The decision of the High Court is reported in The
State v. Indian Aluminium Cable Ltd., Faridabad(1). The
matter was brought to this Court in appeal and by a decision
given on April 2, 1976 the view of the High Court was af-
firmed and it was held that the sales were not exempt from
tax generally within the meaning of section 8(2A) of the
Central Act read with section 5(2)(a)(iv) of the Punjab Act.
The decision of this Court is reported in Indian Aluminium
Cables Ltd. and another v. State of Haryana(2).
The period of assessment concerning the appellant is
each quarter of the year. In respect of.all the 8 quarters
of the years 1969-70 and. 1970-71, Returns were filed by the
Company in time, i.e. on or before the last day of the month
following the quarter concerned. The Assessing Authority
did not accept the Returns and issued notices on May 22,
1970 under section 11 (2) of the Act in respect of the 4
quarters of 1969-70 requiring the assessee Company to pro-
duce evidence in support of the Returns. Since the ques-
tion of assessee’s liability to pay Central Sales Tax was
pending in reference before the High Court the matter was
not pursued by the Assessing Authority and as per the re-
quest of the asses.see it was kept pending. Even though the
High Court decision was given on November 5, 1973, the
matter became subjudice in appeal filed in this Court. It
appears that the matter of assessment in respect of the year
1969-70 was taken up by the Assessing Authority again by
issuance of a notice on September 15, 1975. Thereupon, the
Company filed Civil Writ Petition No. 561/1976 in the High
Court on January 27, 1976 to quash the notice dated Septem-
ber 15, 1975 and to re.strain the State. of Haryana and
its Officer--the Excise and Taxation Officer, Faridabad,
from proceeding with the assessment. It is said that in
respect of the 4 quarters of the (2) 38 S.T.C. 108.
719
year 1970-71 notices under section 11(2) of the Act were
issued for the first time by the assessing authority on
January 30, 1976. Thereupon, the Company filed in the High
Court Civil Writ Petition No. 1961/1976 for reliefs simi-
lar to the ones asked for in the other writ petition.
According to the appellant, in the first writ petition
were raised before the High Court the two main questions in
the following terms:
"(i) Whether the assessment proceedings with
regard to assessment year 1969-70 could be proceed-
ed with and whether assessment order could be
passed beyond a period of 5 years after the expiry
of the period to which the assessment relates. In
other words, whether the Sales Tax Officer had
jurisdiction to make assessment for the assessment
year 1969-70 which had become time barred;
(ii) Whether Central Sales Tax was payable in
respect of sale of electric cables manufactured and
sold by the petitioner Company to State Electricity
Boards in view of the exemption granted generally
under section 8(2A) of the Central Sales Tax Act
read with section 5 (2) (a) (iv) of the Punjab
General Sales Tax Act, 1948".
This writ petition was dismissed in limine by a Bench of
the High Court stating "Reply has been filed. The matter
is covered in favour of the respondent by 33 STC 152.
Dismissed". It appears by the time the second writ petition
came to be filed the appellant’s liability to pay Central
Sales Tax was decided by this Court in the case referred to
above. Therefore, in the second writ petition, in the main,
the question raised was one of limitation as in the other
writ petition. Another Bench of the High Court dismissed
this writ petition in limine on July 21, 1976. In substance
and in effect, in spite of the Full Bench decision (by the
majority) of the High Court in the case of Rameshwar Lal
Sarup Chand v. Shri U.S. Naurath, Excise & Taxation Officer,
Assessing Authority, Amritsar and Another(1), on which
Mr. S.T. Desai, learned counsel for the appellant heavily
relied upon before us, neither Bench found any substance in
the point of limitation raised by the Company and dismissed
the two writ petitions in limine. In our opinion the High
Court was right, for the reasons to be stated hereinafter in
this judgment, in not entertaining the point of limitation
in spite of the full Bench decision aforesaid, as, the said
decision in view of many pronouncements of this Court to be
alluded to hereinafter is no longer good law.
In face of the decision of this Court in Indian Alumini-
um Cables Ltd. & Anr. v. State of Haryana (supra) the ques-
tion of the appellant’s tax liability under the Central
Sales Tax Act was not reagitated before
(1) 15 S.T.C. 932.
720
US. Learned counsel for the appellant, however, strenuously
urged that the assessing authority could not assess the tax
payable by the appellant on expiry of the period of 5
years from the end of each quarter. The 4th quarter of
the year 1969-70 expired on March 31, 1970 and the period of
5 years having expired on March 31, 1975 no assessment could
be made thereafter. In relation to the year 1970-71 even
the notice for the first time was issued under section 11
(2) of the Act after the expiry of the period of 5 years in
relation to the first three quarters, although it was within
time apropos the last quarter. The period of the last quar-
ter expired on March 31, 1971; but no assessment could be
made, according to the appellant’s counsel, even in
regard to the assessment year 1970-71 in respect of any
quarter on the expiry of the 5 years’ period reckoning from
the last date of the quarter. Mr. M.C. Bhandare, learned
counsel for the respondents submitted that although a time
limit had been’ fixed in sub-sections (4), (5) ,and (6) of
section 11 of the Act, no time limit was fixed by the Legis-
lature for actions and orders to be taken and passed under
sub- ’ sections ( 1 ), ( 2 ) and ( 3 ). Counsel, therefore,
urged that neither the issuance of any notice under section
11 (2) of the Act was beyond any period of time nor was the
assessing authority under any disability of any period of
limitation in passing the final order of assessment in
respect of any of the quarters in question. The alternative
submission of Mr. Desai that in any view of the matter
notice had to be issued under section 11 (2) and assessments
had to be completed under section 11 (3) within a reasonable
time was also refuted by Mr. Bhandare.
It is beyond any dispute and debate that under section
10 of the Act read along with the Rules framed thereunder,
Return has to be filed by a dealer for each quarter by the
last day of the following month of the quarter and admitted
sales tax as per the Return has also got to ’be deposited
and challan filed along with the Return. It will be seen
hereinafter from the authoritative pronouncements of this
Court that the mere statutory liability of a dealer to file
the Return or to pay the tax has not the effect of commence-
ment of any proceeding under the Act. If a dealer does not
file a Return being liable to pay tax, then action under
sub-section (5) or sub-section (6), as the case may be, has
to be taken by the Assessing Authority within the period of
5 years prescribed therein. The expression "proceed to
assess" in those two sub-sections as also in sub-section (4)
means taking some effective step towards proceeding to make
the best judgment assessment in accordance with the sub-
section which may be applicable. In a given case action may
be taken under section 11-A (1 ) of the Act treating the
case as a case of escaped assessment within the meaning of
said section. But the assessing authority has got to. pro-
ceed to assess or reassess within 5 years following the
close of the year for which the turnover is proposed to be
assessed or reassessed. But in a case where the assessee
has filed the Return the proceeding under the Act commences
on the filing of the Return. "If the Assessing Authority is
satisfied without requiring the presence of dealer or the
production by him of any evidence that the returns furnished
in respect of any period are correct and complete, he
shall assess the amount of tax due from the dealer on the
basis of such returns" as provided for in section 11 (1 ).
The assessment under sub-section(1) can be made at any time
even
721
according to the Full Bench decision of the Bombay High
Court in Bisesar House v. State of Bombay and Others(1),
followed in Rameshwar Lal Sarup Chand(3). But the view of
the Bombay High Court on a consideration of the similar
provisions of the other State Statutes that a notice under
sub-section (2) must be issued within the period of limita-
tion mentioned in other sub-sections of section 11 or sec-
tion 11-A no longer holds good. A notice under sub-section
(2) requiring the dealer to produce evidence can be issued
at any time after the filing of the Return. The expectancy
of taking steps without any undue delay and within a
reasonable time is an expectancy of prudence. But legally
the action cannot be nullified merely on the ground of delay
in the issuance of the notice under section 11 (2). Sub-
section (3) of section 11 says :--
"On the day specified in the notice or as
soon afterwards as may be, the Assessing Authority
shall, after hearing such evidence as the dealer
may produce, and such other evidence as the Assess-
ing Authority may require on specified points,
assess the amount of tax due from the dealer".
On a correct interpretation of the provision afore-
said what emerges as follows :--
(i) That the Assessing Authority shall hear the
evidence produced by the dealer on the day speci-
fied in the notice issued under sub-section (2).
(ii) It can adjourn the hearing to some other
day and hear the evidence produced by the dealer on
the adjourned day or days.
(iii) The Assessing Authority may require the
dealer to produce further evidence on specified
points on the adjourned day or days.
(iv) The Assessing Authority should assess the
amount of tax due from the dealer, that is to say,
pass the order of assessment, on the day on which
the. hearing ,of the evidence is completed or "as
soon afterwards as may be".
"the last phrase is absent in some of the similar
statutes. It, therefor may be open to argument
whether the assessment order passed under section
11(3) of the Act after undue delay of the comple-
tion of the hearing of the evidence produced or
required to be produced by the dealer is valid or
not. But we are not concerned with the said ques
tion in this case as on the facts and in the cir-
cumstances appearing relation to the assessment
proceedings of either of the two years to produc-
tion of evidence by the assessee could not and has
not start as yet because of the filing of the writ
petitions and the appeals in the Court. It goes
without saying that the assessing authority will be
well advised to complete the assessment proceedings
in question as soon as it may be possible to do so
after the delivery of this judgment.
(1) 9 S.T.C. 654. (2) 15
S.T.C, 932.
722
Sub-section (4) of section 11 is attracted in a
case where a dealer having furnished a Return in
respect of a period fails to comply with the terms
of a notice issued under sub-section (2). In such
a case the Assessing Authority has to take some
effective step, such as issuance of a notice to the
assessee intimating to him that he is proceeding to
assess to the best of his judgment the amount of
tax due from the dealer. On failure of a dealer to
furnish a Return in respect of any period by the
prescribed date the Assessing Authority after
giving the dealer a reasonable opportunity of being
heard can proceed to assess to the best of his
judgment the amount of tax, if any, due from the
dealer. In such a case also an effective Step such
as issuance of a notice to the dealer concerned
showing that the Assessing. Authority is proceeding
to assess has got to be taken within 5 years of the
expiry of the period concerned. Sub-section (6) is
attracted in the case of a dealer who being liable
to pay tax under the Act has failed to apply for
registration. Similar steps as the ones to be
taken under subsection (5),are to be taken under
sub-section (6) within a period of 5 years after
the expiry of the concerned period. But the Legis-
lature advisedly did not fix any period of limita-
tion for taking up of the steps or the passing of
the assessment order under any of the sub-sections
(1), (2) or (3). The reason is obvious. Best
judgment assessments in the circumstances mentioned
in any of the sub-sections (4), (5) or (6) could
not be allowed to be made after the expiry of a
certain reasonable time which the Legislature
thought was three years previously but made it five
years by Punjab Act 28 of 1965. But where a regis-
tered dealer has filed the Return the assessing
authority can pass the assessment order under sub-
section (1 ) and accept the Return filed by the
dealer as correct and complete. In such a case the
formality of passing an order of assessment is to
be completed without any further demand of tax from
the dealer. For the issuance of a notice under
subsection (2) no time limit has been fixed, but
the assessing authority must remain on its guard
of taking the steps and completing the assessment
as soon as it may be possible to do so. Other-
wise, the risk involved may just be pointed out.
Take a case where a notice under sub-section (2) is
issued after the expiry or just on the verge of
expiry of the period of 5 years and the dealer
fails to comply with the terms of the notice. In
such a case the assessing authority may have to
proceed to make the best judgment assessment under
sub-section (4) attracting the bar of limitation of
5 years. But, of course, there may be a case where
in spite of the failure of the dealer to comply
with the terms of a notice issued under sub-section
(2) the assessing authority may be in a position to
complete the assessment under sub-section (3),
treating the alleged failure of the dealer as not a
real failure on his part.
We now proceed to discuss some of the relevant decisions
on the points at issue.
In Bisesar House case (supra), Chagla, C.J. delivering
the judgment of a Full Bench of the Bombay High Court on a
consideration of the similar provisions of section 11 of the
C.P. and Berar Sales Tax Act, 1947 applied the ratio of his
decision in Commissioner of Income tax, Bombay City v.
Natsee Nagsee & Co.(1), to a case covered by
(1) 31. I.T.R. 164.
723
section 11 (2) of the Sales Tax Act. With respect to the
learned Chief Justice we say that he was not right when he
said at page 669: "Section 11 (2) is in the substantial
sense an initiation of fresh proceedings by the Commission-
er. It is open to the Commissioner to be satisfied with
what the assessee has done and pass an order under section
11 (1). But if he is not satisfied, then he initiates fresh
proceedings under-section 11(2) by issuing a notice. That
undoubtedly is putting the assessee to the peril of the
apprehension that as a result of the notice his tax might be
enhanced. If the principle we have laid down in Narsee
Nagsee’s case--31 I.T.R. 164 is correct, then that princi-
ple would undoubtedly apply to the issuing of a notice
under section 11(2)".
As held by this Court in the case of Ghanshyamdas v.
Regional Assistant Commissioner of Sales Tax, Nagpur &
others(1), even the filing of a Return by a dealer is
tantamount to initiation or commencement of a proceeding
under the Sales Tax Act. The decision of the Bombay High
Court in Narsee Nagsee’s case Was affirmed by a Division
Bench (by majority) of this Court in Commissioner of
Income-tax, Bombay City Iv. Narsee Nagsee & Co. (2).
Subba Rao, J. as he then was, delivering the majority
opinion of a Constitution Bench of this Court in Ghanshyam-
das’s case (supra) referring to the decision of the Privy
Council in Rajendranath Mukherjee v. Income-tax Commission-
er(1), said at page 983 of 14 S.T.C. "This decision is a
clear authority for the position that if a return was duly
made, the assessment could be made at any time unless the
statute prescribed a time limit. This can only be for the
reason that the proceedings duly initiated in time will be
pending and can, therefore, be completed without time
limit". At page 987 says the learned Judge: "It is manifest
that in the case of a registered dealer the proceedings
before the Commissioner start factually when a return is
made or when a notice is issued to him either under section
10(3) or under section 11(2) of the Act". As rightly point-
ed out by Shah, J. as he then was, at page 436, if we may
say so with respect, in the case of Regional Assistant
Commissioner of Sales Tax, Indore v. Malwa Vanaspati and
Chemical Co. Ltd.(4), section 11 (2) is a typographical
error in the sentence extracted above. In disapproval of
the view of the Full Bench expressed in Bisesar House case
(supra) it was reiterated at page 989 in Ghanshyamdas’s case
"AS we have held that the submission of a statutory return
would initiate the proceedings and that the proceedings
would be pending till a final order of assessment was made
on the said return, no question of limitation would
arise ........... For the foregoing reason we hold that a
statutory obligation to make a return within a prescribed
time does not proprio vigore initiate the assessment
proceedings before the Commissioner; but the proceedings
would commence after the return was submitted and would
continue till a final order of assessment was made in regard
to the said return".
(1) 14 S.T.C. 976 .... (2) 40 I.T.R. 307.
(3) 2 I.T.R. 71. (4) 21 S.T.C. 431.
724
In Narsee Nagsee’s case (supra) it has been pointed out
by the majority of the Bench that a notice under section
11(1) of the Business Profits Tax Act, 1947 "must be given
within the financial year which commences next after the
expiry of the accounting period or the previous year which
is by itself or includes the chargeable accounting period
in question". (vide page 317 of 40 I.T.R.). It was also
pointed out in that case that the words "profits escaping
assessment"’ in section 14 of the Business Profits Tax
Act applied equally to cases where notice had been given but
had resulted in no assessment and to cases where due to
inadvertence, oversight or any other reason no notice was
given and therefore no assessment was made.
This Court in The State of Punjab & Others v. Tara Chand
Lajpatt Rai(1), reversed the decision of the Punjab High
Court in Civil Writ No. 1088/61 and following the decision
of this Court in Ghanshyamdas’s case (supra) stated at page
501:
"This decision is, therefore, a clear authority
for the proposition that assessment proceedings
commence in the case of a registered dealer either
when he furnishes a return or when a notice is
issued to him under section 11(2) of the present
Act, and that if such proceedings are taken within
the prescribed time though the assessment is fina-
lised subsequently, even after the expiry of the
prescribed period, no question of limitation would
arise".
In the case of Tarachand Lajpat Rai (supra) the
dealer had filed the Returns after the expiry of 30
days from the relevant date but they were not
rejected by the Department on that ground. Notice
under section 11 (2) of the Act was issued and that
also was done before the expiry of period of 3
years’ as the period of limitation stood then in
the other sub-sections. On the authority of Ghan-
shyamdas’s case it was held "the assessment pro-
ceedings commenced either when the respondent-firm
filed the returns or in any event from the date of
the said notice. Both the events, therefore, were
within the prescribed time." The decision of the
Full Bench of the Punjab High Court in the case of
Rameshwar Lal Sarup Chand (supra) was merely
distinguished on the ground that the question
decided in Ghanshyamdas’s case did not come up for
consideration in Rameshwar Lal’s case. But we
think it is high time that the decision of the Full
Bench of the High Court in Rameshwar Lal’s case
should be clearly and expressly over-ruled now. An
identical view had been expressed by his Court
reversing the decision of the Punjab High Court in
Letters Patent Appeal No. 319/63 in the case of The
State of Punjab and another v. Murlidhar Mahabir
prasad(2). The challenge before this Court in the
case of Madhya Pradesh Industries Ltd. v. State of
Maharashtra and Others(3), was whether sub-section
(3) of section 11A of the C.P. and Berar Sales Tax
Act, 1947 was violative of Article 14 of the
Constitution. The argument was repelled and it was
stated at page 402 by Hegde, J.
(1) 19 S.T C:. 493 (2) 21
S.T.C. 29.
(3) 22 S.T.C. 400.
725
delevering the judgment on behalf of himself,
Wanchoo, C.J. and Mitter,J.:
"This Court in Ghanshyamdas’s case specifically
overruled the decision of the Bombay High Court in
Bisesar House case. Therein this Court held that
while s.11 (2) deals with pending proceedings,
section 11A concerns itself with matters which are
not pending. This Court .further ruled that in the
case of pending proceedings the Act has not pre-
scribed any period of limitation. That decision
proceeds on the basis that section 11 (2) and
section 11A cover different fields and that they do
not overlap".
Bachawat, J. speaking for himself and Ramaswami, J.
went a step further and in their concurring judg-
ment stated at page 403:
"There is no limitation for the issue of a
notice under section 11 (2). This follows from a
plain, reading of section 11(2) independently of
section 11A(3). Neither section 11(2) nor sec-
tion 11A(3) is violative of Article 14. A notice
under section 11 (2) is issued in a pending pro-
ceeding, whereas a notice under section 1 I A( 1
) initiates a new proceeding. There is a reasona-
ble basis for classification and differential
treatment of the notices under sections 11(2) and
11A(1) for the purposes of limitation."
The majority opinion of the Full Bench of the Punjab High
Court was delivered by two judges in the case of Rameshwar-
lal Sarupchandra (Supra) Pandit J ave a dissenting opin-
ion. It is wrong to say, as stated by the majority, that
the expression "proceed to assess" and the word "assess"
connote the same meaning. The ratio of the majority
opinion is chiefly based upon the decision of the Full Bench
of the Bombay High Court in Bisesar House’s case which
decision was not approved by this Court and must be deemed
to have been overruled. The majority we may also point out
with respect, committed a mistake in appreciating the deci-
sion of this Court in the case of Madan Lal Arora v. The
Excise and Taxation Officer’, Amritsar(1) Sarkar, J., as he
then was, delivering the judgment on behalf of a Constitu-
tion Bench of this Court adverted to the facts of the case
and stated that the registered dealer under the Punjab
General Sales Tax Act had filed returns for the 4 quarters
of the financial year ending on March 31, 1955 as also for
the 4 quarters for the financial year ending on March 31,
1956. In respect of each year the Sales Tax Assessing
Officer served three successive notices on the dealer one on
March 7, 1958, the other on April 4, 1958, and the third on
August 18, 1959. The first two notices were merely under
section 11(2) of the Act. But in the last notice which was
issued after the expiry of 3 years it was stated that on the
dealer’s failure to produce the docu-ments and other evi-
dence mentioned in the notice, the case would be decided on
best judgment assessment basis. The dealer did not
comply with any of the notices and challenged with success
by a petition under Article 32 of the Constitution the
right of the authorities to, make a best judgment assess-
ment. In that connection it was
(1) 12 S.T.C. 387
726
pointed out that the period of 3 years mentioned in sub-
section (4) of section 11 of the Act had to be counted from
the expiry of the period in relation to which the returns
had been filed and on expiry of the said period the author-
ities could not proceed to make the best judgment assess-
ment. The third and the last notice given on August 18,
1959 was taken to be a notice to the dealer that the as-
sessing authority was proceeding to make the best judgment
assessment and since this was done more than 3 years after
expiry of all the 8 quarters’ in respect of the two years it
was held to be without jurisdiction and the respondent was
restrained from making any best judgment assessment on the
petitioner for sales tax for any quarter of the financial
years 1954-55 and 1955-56. The decision of this Court in
Madan Lal Arora’s(1) case justifies our apprehension which
we have mentioned in the beginning of our judgment to the
effect that if a dealer fails to comply with the notice
issued under section 11 (2) of the Act, then in such a case,
even though there may not be any time limit for issuance of
a notice, but on the dealer’s failure to comply with it the
assessing authority may be obliged to take recourse to sub-
section (4) attracting the bar of limitation of 5 years for
proceeding to assess on the best judgment basis. The
majority, however, was wrong when they said at page 949 of
15 S.T.C. with reference to Madan Lal Arora’s case:
"In the case before the Supreme Court,
two notices were within three years and the third
notice was beyond three years and their Lord’-
ships held that the third notice beyond three
years, the Assessing Authority had no jurisdiction
to make the assessment. If the phrase "proceed to
assess" bears the meaning which the learned counsel
for the State contends for, namely, that only a
step towards assessment has to be taken and the
assessment can be made at any time after the period
of three years, their Lordships would on the basis
of the two notices within the period of limitation,
have come to a different conclusion and that is not
what has been done."
This was, it appears to us, clearly a mistaken reading
of the judgment of this Court. The majority in our opin-
ion, was also wrong in importing the period of limitation
provided in sub-sections (4), (5) and (6) of section 11 of
the Act into sub-section (3) and in holding, therefore, that
an assessment under sub-section (3) must also be completed
within 3 years from the last date on which the return should
be filed under the Act. We are again constrained to point
out that the majority of the Full Bench committed a mistake
in thinking that, this Court had held in Madan Lal Arora’s
case that the period of 3 years had to be counted from the
last date on which the return should be filed. The deci-
sion of the Full Bench of the Punjab High Court in the case
of Ramashwar Lal’s case (supra) is clearly erroneous and
must be over-ruled. Pandit, J. in his dissenting opinion
had, by and large, taken a correct view in favour of the
Revenue.
(1) 12 S.T.C. 387.
727
Lastly, we may also make a reference to a recent deci-
sion of this Court delivered by one of us (Untwalia, J.) in
the case of Gurbaksh Singh v. Union of India & Others(1) An
argument quite similar to the one advanced before us was
advanced on behalf of the assessee appellant in that case
before this Court. It was argued that the period of 4
years of limitation prescribed under sub-section (2a) of
section 11 of the Bengal Finance (Sales Tax) Act, 1941 as
extended to the Union Territory of Delhi, should be imported
into the revisional and the appellate power of the authori-
ties conferred on them under section 20. This argument was
repelled and it was pointed out that .the legislature had
not provided any period within which an order was to be made
by an Appellate or Revisional authority; no such period
should be imported in the exercise of the power on the
basis of section 11 (2a). Mr. Desai relied upon the penal-
timate paragraph of this decision in support of his conten-
tion that in any view of the matter notice under section 11
(2) had to be issued and the assessment completed within a
reasonable time. We do not accept this contention to be
sound. The argument as presented cannot be accepted to be
correct. In Gurbaksh Singh’s case it was not stated that
the exercise of the revisional power suo moto could not be
made after an undue long delay. On such an assumption it
was merely found as a fact that there was no undue delay in
the suo moto exercise of the power.
In the result we do not find any merit in the appeals.
They are dismissed with costs. Hearing fee one set only.
V.P.S. Appeals
dismissed.
(1) [1976] 3 S.C.R. 247.
728