I.T.A. NOS. 80/KB TO 84/KB OF 1980-81, DECIDED ON 24TH JUNE 1984. Versus I.T.A. NOS. 80/KB TO 84/KB OF 1980-81, DECIDED ON 24TH JUNE 1984.

ORDER

FARHAT ALI KHAN (MEMBER) ‑‑There are five departmental appeals directed against the order of the learned Appellate Assistant Commissioner, recorded by him on 22‑2‑81 in Sales Tax Appeal No AAC(D) 3058, 3059, 3060, 3061 & 3096 regarding assessment years 1972‑73. 1973‑74, 1976‑77 1977‑78 and 1978‑79.

2. From perusal of the assessment as well as the impugned orders it appears that the respondent is manufacturer of iron chains. It also appears that the respondent was, originally assessed under section 10(3) of the Sales Tax Act for the assessment year 1972‑73. However, the assessment order was $et aside by the learned Appellate Assistant Commissioner by his order dated 26th June, 1975. It further appears the on remand the Sales Tax Officer re‑assessed the respondent on 27th pay, 1976 and held that the products of respondent were exempt from levy of sales tax as they were products of hammer work. Reliance was placed on the orders of this Tribunal recorded in STA No.4 of 1971‑72. Similarly the assessment for the year 1973‑74 was also completed on the same date and to the same effect. It also emerges out from the record that on 27‑6‑1978 the Sales Tax Officer issued notice for re opening of the assessment for the assessment years 1972‑73 and 1973‑74 under section 28 of the Sales Tax Act, which was served on the respondent on 28th June 1978 for compliance by 25th July 1978: Mr. G... the learned representative for the respondent, admitted that on 25th July 1978 the compliance was made. However, on 28th June 1980 the Sales Tax Officer completed his assessment He held that the iron chains manufactured by the respondent were not agricultural implements, hence not exempt from sales tax under Notification 9. He accordingly assessed tt4e respondent to sales tax for both the assessment years.

3. In the assessment years 1976‑77, .1977‑78 and 1978‑79 the respondent took the same plea, namely'. that his products were exempt from sales tax being agricultural implements. The sales tax Officer, however, did not accept the contention of the respondent and assessed it to sales tax for these assessment years also.

4. The respondent went up in appeal and directed two‑fold attack against the order of the Sales Tax Officer. Regarding assessment years 1972‑73 and 3973‑74 it was contended that the entire proceedings under section 2$ of the Sales‑tax Act were void ab initio, as the notice purported to have been issued under that section did not give statutory time of 35 clear days. In this connection reliance was' placed on the judgment of this Tribunal recorded in STA No. 85, dated 5th June, 1974, STA No.141, dated 26th October, 1972 and STA Nos. 170 and 171, dated 25th January, 1971, for the assessment years 1972‑73, 1971‑72 'and 1967‑68, respectively. Secondly, it was argued that the assessment proceedings completed on 28th June, 1980 were time‑barred.

5. Regarding assessment years 1976‑77, 1977‑78 and 1978‑79, it was urged before the learned Assistant Commissioner that iron chains were agricultural implements, hence exempted from sales tax. The Learned Appellate Assistant Commissioner allowed all the appeals.

6. Mr. A...A....appearing for the Department argued that in view of CST v. Shaikh Inayatullah 1966 P T D 287 the notice under section 28 was . not mandatory, hence any defect . in it was not fatal. I n this connection he also cited a Full Bench Decision of this Tribunal, reported in (1983)‑48‑Tax‑62 wherein it has been held that Form SST‑15 is not a statutory form hence the period of 35 days prescribed therein was not a statutory period. According to Mr. A...,.E....A... the cases cited by learned Appellate Assistant Commissioner were no more good law. His order, therefore, the learned Departmental Representative concluded, was liable to be set aside.

7. Regarding the point about limitation Mr. A .E A .argued that the proceedings were not time‑barred at all. He argued that the first assessment was completed on 27th May, 1976 and the notice was served on 28th June, 1978. According to him the re‑assessment was completed on 28th June, 1980. Relying upon section 21(3)(b) of the Sales‑tax Act the learned Departmental Representative argued that the notice was issued within 3 years of the last assessment year and assessment was completed within two years. Mr. A...E...A... concluded that the assessment for all the relevant years was well within time.

8. Regarding the claim of the respondent that the iron chains were exempt from sales tax, Mr. A E A argued that they can be used for many purposes including, of course, agricultural purposes. His argument was that iron chains were not basically agricultural implements hence not exempt from sales tax. In this connection he invited our attention to the Letter head of the respondent wherein the respondent had described itself as ship‑chain and hardware manu facturers. The cable address given in the Letter head was "SHIPCHAIN". On the left side of the Letter‑head a picture of a ship and crane was printed showing the use of a chain as anchor by the ship and by crane for lifting heavy weights. Mr. A...E...A... argued that the iron chains were not, in fact, agricultural implements as claimed by the respondent and the Sales Tax Officer was right in levying sales tax thereon. He prayed that the order of the learned Appellate Assistant Commissioner be set aside.

9. Mr. G appearing for the respondent, relied upon a decision of Sind High Court reported 'in Commissioner of Sales Tax v. Chaudhary Farzand Ali 1983 P T D 271. The argument was that in view of the ruling cited above, the respondent was entitled to a notice of clear 35 days. As this period was not given to him, the appeal was rightly allowed by the learned Appellate Assistant Commissioner. According to the learned counsel, he had, taken up this plea in all the appeals but the learned Appellate Assistant Commissioner mentioned it in his order regarding assessment years 1972‑73 and 1973‑74 only.

10. Turning to the other point Mr. G...., the learned representative of the respondent, contended that the iron chains produced by the respondent were agricultural implements. According to the learned representative the product of the respondent is sold to the upcountry customers who in turn sell them to the farmers limitation Mr. G... argued that except assessment year 1978‑79 the assessment proceedings in rest of the years were barred by limitation and the learned Appellate Assistant Commissioner rightly proceedings regarding assessment years 1972‑73 and 1973‑74 and void ab initio. Regarding assessment years 1976‑77 submitted that the learned Appellate Assistant not recording the finding on point of limitation. PTD 438 N.P.Saraswatni Ammali and others Mr. was entitled to take up a new plea of law before the Tribunal justifying the order of the learned Appellate Assistant Commissioner‑ He therefore concluded that the departmental appeals were devoid of any merit and were liable to be rejected.

11 We, have heard Mr. A E A and Mr. G at length and have also perused the assessment orders as well as the impugned order. We have also carefully 'gone through the case‑law cited at par. To start with we propose to deal with point of limitation first. For better appreciation of this point it is necessary to reproduce the relevant law on this point. Clauses (a) and (b) of subsection (1) of section of the Sales‑tax Act are relevant for our purposes. We, therefore, 'f reproduce them as under:

"28. Tax not assessed.‑‑G) If for any reason in any year tax has escaped assessment or has been under assessed or assessed at a rate lower than that provided under this Act, or excessive relief or refund has been allowed, the Sales Tax Officer may,‑‑

(a) where a return for the relevant quarter, quarters or year has not been filed, serve a notice at any time on the assessee and after making such enquiry as he considers necessary make the assessment at any time within two years from the end of the year in which such notice was served, and

(b) in other case, serve a notice at any time within three years from the end of the year in which the assessment was first made or excessive relief was allowed or the order for refund 1 was first passed, and after making such enquiry as he considers necessary, re‑assess, at any time within two years from the end of the year in which such notice is served, the tax payable, or relief or refund allowed. and the provisions of subsections (2), (3), (4), (5) and (ti) of section 10 shall, so far as may be apply accordingly.

Proviso .."

From bare perusal of clauses (a) and (b), it is clear that in those cases, where return has not been filed a period of limitation prescribed is two years within which the proceedings under section 28 of the Sales‑tax Act can be started. Such period of limitation commences to run from the end of the year in which notice under section 28 is served. However, in other cases, or to be more precise, in those cases where return is filed, a, period of limitation prescribed is three years. It commences to run from the end of the year in which the assessment was .firstly made or excessive relief etc. was allowed. Similarly, the assessment is to be completed within two years from the end of the year in which such notice is served. Now reverting to the facts of the case it appears that the assessment for the‑year ?972‑73 was completed on 27th May, 1976, whereas the notice under section 28 was served on 28th June 1978. Thus; the notice has been served well within prescribed period of three years. As far as the framing of the re‑assessment is concerned, it is again well within time as it was framed on 28th June. 1980 and the notice was served on 28th June, 1978. The period of limitation as pointed out earlier, started to june from the end of the year in which such notice was served. In other words, it started running from the Ist July, 1978, as the year in which such notice was served ended on 30th June, 1978 Even otherwise if it is held that period of limitation is to commence from the end of the year it would start running from 30th June, 1978. Thus, whatever view is taken, the re‑assessment framed on 28th June 1980 is within time. Since the assessments have been framed for the assessment years 1972‑73, 1973‑74, 1976‑77 and 1977‑78 on 28th June, 1978, therefore all of them are also within time. the point of limitation has not been involved, as submitted by Mr. G in the assessment year 1978‑79. This takes us to the next issue as to whether the iron chains produced by the respondent are agricultural implements.

12. The argument of Mr. G. the learned representative for the respondent regarding the iron chains is based on two points. Firstly, he has argued that the iron chains are agricultural implements as they are mostly sold to upcountry customers who in turn sell them to cultiva tors. Secondly, he has based his submission on the letter of Deputy Director (Engineering) of Directorate of Industries and Mineral Develop ments Sind, K .... dated 4th October, 1978, wherein the following observation has been made;

"M/s.M H I K are engaged in the manufacture of various sizes of iron chains and these varieties can also be used in Tractors and Halls etc."

In our view both the submissions of Mr. G are devoid of any merit. As far as the first point is concerned, there is no conclusive evidence on record to show that the iron chains are sold ultimately to the cultivators and none else. As far as the second point is concerned, the certificate of the Deputy Director has mentioned that iron chains can also be used in tractors and "Hulls" etc. The words "can also be used" indicate the possibility of 'their being used in tractors and Hells etc., also, in addition to other possible uses. There can be no two opinions regarding the multipurpose use of iron chains and indeed one of them may be for agricultural purposes also. But basically the iron chains are not implements of agriculture. Moreover, the letter‑head of the respondent goes a long way in completely demolishing its case. It shows the respondent as ship, chain and hardware manufacturer. The pictures printed on the letter‑head are that of ship and crane. There is no indication any where that they are, manufacturing chains for agriculture purposes. The plea therefore, appears to be purely an afterthought taken up to escape the tax liability. It is, therefore, rejected.

13. Now we turn to most important aspect of the matter. This is regarding the notice sent to the respondent in prescribed from SST‑15. It has been argued that the period prescribed by this notice is 35 days, whereas in case of respondent, he was asked to file his return by 27th Day. The learned Appellate Assistant Commissioner relying upon several decisions of this Tribunal came to the conclusion that curtailment of the period of 35 days was fatal to the case of the Department. He, therefore, cancelled the assessments for the years 1972‑73 and 1973‑74. Mr. A....e...A.... however, relied upon the latest Full Bench case of the Tribunal as mentioned above. He also relied upon the case of Shaikh Inayatullah (supra). On the other hand, Mr. G . .. . the learned representative of the respondent, cited before us a Division Bench case of Sind High Court [please see the case of Chaudhary Farzand Ali (supra)]. We have carefully gone through all the case‑law cited at Bar. In the Full Bench case of the Tribunal the w notice served on the respondent was on Form SST‑24 instead of Form SST‑25. The Full Bench of the Tribunal came to the conclusion, after considering all relevant case law that no prejudice was caused to the assessee, hence the proceedings under section 28 were not illegal. It was further held by the Full Bench of the Tribunal that Form SST‑15, to Form SST‑25 were issued by the Central Board of Revenue for `general guidance and they were not covered by any provision of either the Sales Tax Act, or Rules framed thereunder, as was the case of Forms SST‑1 to SST‑14. Relying upon the case of Shaikh Inayatulla (supra), the >; ull Bench of the Tribunal also held that form SST‑15 was not mandatory in nature.

14. From perusal of Chaudhary Farzand Ali's case (Supra) it appears that the Sales Tax Officer served notice in Form SST‑15 on the assessee wherefrom the portion of the notice which provided that the return could be filed within 35 days of the receipt of the notice was omitted. Moreover, the notice directed the assessee to file the returns of sales tax for the assessment years from 1955‑56 to 1957‑58, almost after 10 (ten) years, only within three days. The learned Division Bench of the High Court held that the Form SST‑15 prescribed by Central Board of Revenue was binding on the Sales‑tax Officer by virtue of section 5(3) of the Sales Tax Act. The learned Bench further held that in the absence of a provision in the Act and Rules framed thereunder providing for filing a return of sales tax in response to a notice under section 28 of the Act, the assessee should be allowed at least that period for filing the returns which he would be entitled to under the Act for filing quarterly return, namely 30 days. The learned Bench of. Sind High Court has also considered Shaikh Inayat Ullah's (supra). However, with due respect to the learned Bench of the Sind High Court we are of the view that Chaudhary Farzand Ali's case revolves round its own facts and is distinguishable from the facts and circumstances of the case before us. In Ch. Farzand Ali's case the notice in Form SST‑15 was sent in mutilated‑shape without mentioning the period of 35 days, within which the return was to be filed. In that case .the Sales Tax Officer wanted the assessee to file the return within only 3 days after a period of ten years, which elapsed between the date of the notice and the last year of assessment. Consequently the assessee has failed to file his returns. But, on the contrary, a period of 27 days was given to the assessee in the case before us to file his return, which he filed without seeking any adjournment. He, however contested the matter on two grounds, namely, that of limitation and exemption from Sales‑tax. It appears from perusal of the case of Chaudhary Farzand Ali, that their Lordships considered the period of 3 days highly unreasonable. Their Lordships addressed themselves in that case to the question as to whether the deletion of 35 days period provided in Form SST‑15 by Sales‑tax Officer and requiring the assessee to file the return within three days of receipt of the notice was valid or not? (please see page‑78) With reference to the question mentioned above, their Lordships made the following observation:

"It is true that in the absence of any specific prejudice caused to the assessee each and every departure from the form of notice prescribed by the authorities may not have the effect of rendering the assessment void but where the time allowed to the assessee under the prescribed form to file the return in response to a notice under section 28 of the Act is sought to be curtailed to the prejudice and disadvantage, of an assessee it does not remain merely the question of departure from the prescribed form. In the case before us the Sales Tax officer had allowed only three days time to the assessee to file the returns of Sales‑tax in response to the notice issued under section 28 of the Act for a period which was ten years earlier to the date of issue of such notice. Could this be considered as a reasonable period for filing the returns in the absence of a provision it‑, the Act in this behalf ?" (Please see p.82).

It is clear from the observation quoted above, that, their Lordship; had in mind cases where no prejudice might have been or is caused to the assessee. Their Lordships, therefore, observed that in such c:9 ‑s the assessment proceedings might not be void. The case before r.3 i, such type of a case where no prejudice has been caused to the assess( and he has not only filed his return but contested the matter merits as discussed. above. We, therefore, are of the considered view that Chaudhary Farzand Ali's case (supra) does not lay down th , proposition of law as propounded by the learned representative of tht; respondent. The case of Shaikh Inayatullah (supra) in our view is still holding the field and, with due respect, we are very much inclined to follow it. As pointed out earlier in this case it has been laid down that, the Form SST‑15 was directory and not mandatory.

15. Thus, in view of Shaikh Inayatullah's case (supra), Chaudhary Farzand Ali's case (supra) and the Full Bench's decision of this Tribunal, as cited above, the legal position boils down to the following effect:

(1) That Forms SST‑15 to SST‑25 have been issued by the Central Board of Revenue for general guidance but they are not covered by the Sales‑tax Act or Rules framed thereunder.

(2) That, in view of well-established departmental practice of issuing notice in Form SST‑15, the departure from it is not ordinarily; permissible. '

(3) That, in any case, in view of section 5(3) of the Sales‑tax Act,! Form SST‑15 was ordinarily binding on the Sales‑tax Officer..

(4) That, nevertheless, notice in Form SST‑15 is directory in nature and not mandatory.

(5) That, in any case, reasonable period is to be provided to the assessee which, in the absence of any period prescribed by the Act or the Rules, should be taken to be 30 days.

(6) That if a period of 30 days is not provided for any reason, some prejudice must be shown to have been caused to the assessee, failing which the assessment proceedings may not have the effect to rendering the assessment void.

16. The upshot of the entire discussion is that no prejudice has been caused to the respondent in this case. Hence, the proceedings under section 28 of the Sales‑tax Act are not illegal and void ab initio, as alleged. The order of the learned Appellate Assistant Commissioner, therefore, is not sustainable in law on this ground also.

17. Mr. G...., the learned representative of the respondent, has also made submission regarding taking up legal plea for the first time before the Tribunal. In that connection he cited the case of Saraswatni Ammal (supra). Since the plea was regarding the limitation about the appeals for the assessment years 1976‑77 and 1977‑78, we do not propose to dilate upon it any more as we have dealt earlier with the plea in details.

18. To conclude the departmental appeals are allowed. The order of the learned Appellate Assistant Commissioner is set aside and the order of the sales tax officer is restored regarding all relevant assessment years.

19. All the five appeals stand disposed of accordingly.

M. B. A. Appeal allowed.