IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21 -04-2009 CORAM: THE HONOURABLE MR. JUSTICE V. RAMASUBRAMANIAN W.P.Nos.4709 to 4711 of 2009 And M.P.Nos.1,1 and 1 of 2009 Associated Cement Companies Ltd., Represented by its Joint Manager(Accounts) G.Venkob Rao, 96, Kamaraj Road, Coimbatore – 641 018. .. Petitioner in all WPs vs. 1.The Assistant Commissioner (CT)(FAC) R.G. Street Circle, Coimbatore – 641 018. 2.The State of Tamil Nadu, through its Secretary, Department of Commercial Taxes and Religious Endowments, Fort St. George, Chennai – 600 009. 3.State of Kerala, through its Secretary, Department of Finance, Government of India Secretariat, Trivandrum. 4.State of Karnataka, through its Secretary, Department of Finance, Vidhan Sudha, Bangalore – 560 001. 5.The Union Territory of Pondicherry, through its Secretary, Department of Finance, Government of Pondicherry, Pondicherry. 6.The Union of India, through its Secretary, Ministry of Finance, Department of Revenue, North Block, https://hcservices.ecourts.gov.in/hcservices/ Central Secretariat, New Delhi. .. Respondents in all WPs Writ petitions filed under Article 226 of the Constitution of India, praying for the issue of Writs of Certiorari, calling for the records on the files of the first respondent herein in CST/626504/2003-2004, CST/626504/2001-2002 and CST/626504/2002-2003 dated 9.3.2009, 11.3.2009 and 9.3.2009 respectively and to quash them. For Petitioner in all WPs : Mr.C.Natarajan, Senior Counsel for Mr.N.Inbarajan For Respondents-1&2 in all WPs : Mr.Haja Naziruddin, Special Government Pleader (Taxes) Assisted by Mr.R.Mahadevan, Additional Govt. Pleader. C O M M O N O R D E R The petitioner has come up with the present writ petitions, challenging the orders of assessment passed by the first respondent in all these writ petitions, under the Central Sales Tax Act, 1956, in respect of the assessment years 2001-2002, 2002-2003 and 2003- 2004. 2. I have heard Mr.C.Natarajan, learned Senior Counsel for the petitioner and Mr.Haja Naziruddin, learned Special Government Pleader (Taxes). Since the petitioner bracketed a portion of the turnover as branch transfer and claimed to have paid tax in other States, but the same was disallowed by the first respondent, the petitioner has also impleaded the States of Kerala and Karnataka apart from the Union Territory of Pondicherry and the Union of India, as parties to the writ petitions. However, notices to them have been dispensed with, in view of the nature of the disposal that I propose to give to the writ petitions. 3. Admittedly, the petitioner is a registered dealer, manufacturing cement and effecting both local sales as well as inter-State sales. They have a factory at Madukkarai in Coimbatore District. The petitioner claims that the cement manufactured at Madukkarai is despatched, by way of stock transfer, to their warehouses and depots located in the States of Kerala and Karnataka and also in the Union Territory of Pondicherry and that thereafter, it is sold in the respective States and Union Territory, after paying local sales tax in the respective States. 4. On the basis that the cement manufactured in Tamil Nadu is despatched to their warehouses and depots in other States and sold only thereafter, the petitioner made a claim for exemption on the turnover relating to branch/stock transfer. But suspecting the claim of the petitioner to be untrue and claiming that the petitioner was moving goods to other State buyers from the factory site itself to reach the ultimate buyers in other States, the first https://hcservices.ecourts.gov.in/hcservices/ respondent started issuing pre-assessment notices. Though the petitioner filed Form "F" declarations, together with proof of payment of taxes in other States, the first respondent proceeded to pass orders of assessment dated 11.3.2009, 9.3.2009 and 9.3.2009 in respect of the assessment years 2001-2002, 2002-2003 and 2003-2004 respectively on the ground that the petitioner failed to file the other statements and records as stipulated in Rule 4(3-A) of The Central Sales Tax (Tamil Nadu) Rules, 1957. Aggrieved by these assessment orders, the petitioner has come up with the present writ petitions, by-passing the alternative remedy of appeal. 5. Though several issues are raised in the writ petitions, it is not necessary or proper to go either into factual details or into the merits of the claim made on either side, in view of the admitted position that the petitioner has an alternative remedy of appeal before the Appellate Assistant Commissioner. If the petitioner is found to be not justified in by-passing the alternative remedy, then they should be directed to avail the same. If the petitioner is found to be justified in directly approaching this Court, the only remedy that could be granted to them is to send the matter back to the Assessing Officer. In either case, I need not go into the merits of the claim. Therefore, the only question that I propose to decide is as to whether there was sufficient justification for the petitioner to invoke Article 226 and if so, to what remedy, the petitioner would be entitled. 6. The petitioner seeks to justify the invocation of the writ jurisdiction of this Court, by-passing the alternative remedy, primarily on two grounds viz., (i) that there was violation of the principles of natural justice and (ii) that there was a failure to comply with the mandatory requirement of Section 6-A(2) of the Central Sales Tax Act, 1956. COMPLAINT OF VIOLATION OF PRINCIPLES OF NATURAL JUSTICE: 7. There is no quarrel with the proposition that the writ jurisdiction of this Court can be invoked without exhausting the alternative remedy, if there was a violation of the principles of natural justice. In Harbanslal Sahnia vs. Indian Oil Corporation {2003 (2) SCC 107}, the Supreme Court held as follows:- "The rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged." https://hcservices.ecourts.gov.in/hcservices/ The same principles are reiterated in Popcorn Entertainment vs. City Industrial Development Corporation {2007 (9) SCC 593} and in M.P. State Agro Industries Development Corporation Ltd vs. Jahan Khan {2007 (10) SCC 88}. 8. In Union of India vs. Hindalco Industries {2003 (5) SCC 194}, the Supreme Court held as follows:- "12. There can be no doubt that in matters of taxation, it is inappropriate for the High Court to interfere in exercise of jurisdiction under Article 226 of the Constitution either at the stage of the show-cause notice or at the stage of assessment where alternative remedy by way of filing a reply or appeal, as the case may be, is available but these are the limitations imposed by the Courts themselves in exercise of their jurisdiction and they are not matters of jurisdictional factors." 9. In State of Himachal Pradesh vs. Gujarat Ambuja Cement Ltd {2005 (6) SCC 499}, a three member Bench of the Supreme Court dealt extensively with the question regarding the exclusion of jurisdiction of Courts when alternative remedies are available. After pointing out that it is a rule of policy, convenience, discretion and self-imposed limitation and never a rule of law and after tracing the development of law on the issue, the Supreme Court held in paragraphs-22 and 23 as follows:- "There are two well-recognised exceptions to the doctrine of exhaustion of statutory remedies. First is when the proceedings are taken before the forum under a provision of law which is ultra vires, it is open to a party aggrieved thereby to move the High Court for quashing the proceedings on the ground that they are incompetent without a party being obliged to wait until those proceedings run their full course. Secondly, the doctrine has no application when the impugned order has been made in violation of the principles of natural justice. We may add that where the proceedings itself are an abuse of process of law the High Court in an appropriate case can entertain a writ petition. 23. Where under a statute there is an allegation of infringement of fundamental rights or when on the undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess can be the grounds on which the writ petitions can be entertained. But normally, the High Court should not entertain writ petitions unless it is shown https://hcservices.ecourts.gov.in/hcservices/ that there is something more in a case, something going to the root of the jurisdiction of the Officer, something which would show that it would be a case of palpable injustice to the writ petitioner to force him to adopt the remedies provided by the statute." 10. Again in L.K.Verma vs. H.M.T. Ltd {2006 (2) SCC 269}, the Supreme Court pointed out that despite the existence of an alternative remedy, a writ court may exercise its discretionary jurisdiction of judicial review inter alia in cases where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right or if there has been a violation of a principle of natural justice or where vires of the Act is in question. 11. The grievance of the petitioner is that without providing sufficient opportunity to produce the statements and records and without even an opportunity to show cause against the proposed penalty, the first respondent passed the impugned orders of assessment and that therefore there was violation of the principles of natural justice. 12. However, the first respondent has filed a counter affidavit, giving graphic details of the number of opportunities allegedly provided to the petitioner, in respect of each of these assessment years viz., 2001-2002, 2002-2003 and 2003-2004. Paragraph-8 of the common counter affidavit filed by the first respondent contains these details and they are extracted as follows:- Opportunities in respect of the assessment year 2001-2002: Date Details Remarks 5/16/03 Summons issued fixing the date of hearing on 29.5.2003. The petitioners requested short adjournment on 27.5.2003. 6/10/03 Summons issued fixing the date of hearing on 27.6.2003. No reply filed. 12/2/03 Summons issued fixing the date of hearing on 10.12.2003. By letter dated 9.12.2003, the petitioner sought for adjournment by one month. 2/3/04 Summons issued fixing the date of hearing on 13.2.2004. By letter dated 12.2.2004, the petitioner sought for adjournment by one month. https://hcservices.ecourts.gov.in/hcservices/ Date Details Remarks 10/10/06 Summons issued fixing the date of hearing on 26.10.2006. By letter dated 25.10.2006, the petitioner sought for one month's time. 8/10/07 Best judgment notice issued. On 11.9.2007, the petitioner filed letter requesting some more time. 10/17/07 Notice to produce accounts on 29.10.2007. Part of 'C' Forms filed. 8/6/08 Pre-assessment notice issued. The petitioner filed letter dated 26.8.2008 sought for 15 days time. 9/4/08 Notice giving time upto 10.9.2008. On 5.9.2008, the petitioner filed reply to the pre- assessment notice. 9/30/08 A notice was issued narrating all the previous notices. By letter dated 10.10.2008, the petitioner asked for copies of D7 records. 10/17/08 The petitioners were permitted to take copies of the D7 records on 24.10.2008. 1/13/09 Pre-assessment notice issued. Reply was filed on 27.1.2009. 1/28/09 Summons issued to produce accounts on 12.2.2009. Accounts books produced on 18.2.2009. 3/11/09 Final assessment orders passed. Opportunities in respect of the assessment year 2002-2003: Dated Details Remarks 4/16/04 Summons issued fixing the date of hearing on 26.4.2004. No reply. 10/10/06 Summons issued fixing the date of hearing on 10.11.2006. No reply. 1/25/07 Notice issued fixing the date of hearing on 28.2.2007. On 27.2.2007, the petitioners asked for more time. https://hcservices.ecourts.gov.in/hcservices/ Dated Details Remarks 8/10/07 Best judgment notice issued granting time upto 29.8.2007. On 20.8.2007, the petitioners produced part of records. On 5.9.2007, the petitioners produced some Form XVII, Form- F etc., and sought for further time to file Forms. On 11.9.2007, the petitioners sought for one month's time. On 12.10.2007, the petitioner filed reply and requested for personal hearing. 10/17/07 Notice issued to produce accounts on or before 29.10.2007. On 29.10.2007, part of account statements etc., were produced and they sought for short adjournment to file Form-F. 8/7/08 Pre-assessment notice issued. The notice was received by the petitioner on 10.8.2008 and they filed reply on 3.9.2008 requesting 15 days time. 9/4/08 Time limited upto 10.9.2008. On 8.9.2008, the petitioners requested time upto 18.9.2008. On 18.9.2008, the petitioners made a request for copies of D7 records. 9/24/08 A notice was issued narrating all the previous notices giving 15 days time. No reply. 10/17/08 The petitioners were permitted to take copies of D7 records on 24.10.2008. On 26.12.2008, the petitioners filed reply to the notice dated 7.8.2008. https://hcservices.ecourts.gov.in/hcservices/ Dated Details Remarks 1/30/09 Pre-assessment notice issued granting 15 days time. On 16.2.2009, the petitioner sought for 15 days time. On 2.3.2009, they sought for three weeks time to cross- examine the transporter. 3/9/09 Final assessment orders passed Opportunities in respect of the assessment year 2003-2004: Date Details Remarks 10/10/06 Summons issued fixing the hearing on 22.11.2006. On 21.11.2006, the petitioner sought for adjournment. 1/25/07 Summons issued fixing the hearing on 9.3.2007. No reply. 1/25/07 The petitioner was issued summons to bring the books of accounts on the following dates: 2001-2002 20.02.2007 2002-2003 28.02.2007 2003-2004 09.03.2007 The petitioners sought more time. 8/10/07 Best judgment notice issued granting time upto 31.8.2007. On 11.9.2007, the petitioner sought for one month's time. 10/17/07 Notice issued to produce accounts on 29.10.2007. Part of records produced on 29.10.2007. 8/7/08 Pre-assessment notice issued. On 5.9.2008, the petitioner sought one month's time. On 9.9.2008 asked for 15 days time. 9/18/08 On 18.9.2008, the petitioner asked for copies of D7 records. 9/24/08 A notice was issued narrating all the previous notices giving 15 days time. https://hcservices.ecourts.gov.in/hcservices/ Date Details Remarks 10/17/08 Opportunity granted to take copies of D7 records on 24.10.2008. The petitioner filed reply on 26.12.2008 for the notices issued on 7.8.2008 along with some declaration Forms. 1/30/09 Pre-assessment notice issued granting 15 days time. On 16.2.2009, the petitioner sought for 15 days time. On 2.3.2009 filed letter to cross- examine the transporter and further asked for 3 weeks time. 3/9/09 Final assessment order passed. 13. In response to the overwhelming details furnished by the first respondent, in paragraph-8 of the common counter, which is extracted above, the petitioner filed a common rejoinder contending as follows:- (i) As regards the CST assessment for 2001-2002, all the summons referred to in paragraph-8 of the counter were issued under the Tamil Nadu General Sales Tax Act and not under the Central Sales Tax Act. The only show cause notice issued for assessment of stock transfer to levy, under the Central Sales Tax Act, was the one dated 13.1.2009. This notice did not allege either non- cooperation or non-production of books. Therefore the notices issued under the State Act (Tamil Nadu General Sales Tax Act) cannot be taken to be sufficient opportunity provided for an assessment under the Central Act (Central Sales Tax Act). (ii) Even as regards 2002-2003, all the summons were only under the State Act. The first notice under the Central Act was dated 30.1.2009 and this notice did not allege non-production of records or books. It referred only to non-compliance with Rule-4(3- A) of the CST (Tamil Nadu) Rules, which is applicable to movement to a selling agent on behalf of a principal and not applicable to a case of stock transfer to one's own branch or warehouse. (iii) Similarly, all notices with regard to the assessment year 2003-2004, were also only under the State Act. But the show cause notice dated 7.8.2008, was under the Central Sales Tax Act, for the years 2001-2002, 2002-2003 and 2003-2004, seeking to delete the stock transfer items. There was no show cause notice issued till 30.1.2009 to assess the sales in other States under the Central Act. 14. In short, the contention of the petitioner is that under the Central Sales Tax Act, the first notice was issued only on https://hcservices.ecourts.gov.in/hcservices/ 13.1.2009 in respect of the year 2001-2002; the first notice was issued on 30.1.2009 in respect of the assessment year 2002-2003 and the first notice was issued on 30.1.2009 for the year 2003-2004. Therefore, according to the petitioner, the claim made in the counter affidavit, as though repeated opportunities were given for more than 5 years from 2003 onwards, is highly misleading and untrue. Moreover, the petitioner's grievance is that notice to levy penalty was issued only after the pre assessment notice, thereby depriving the petitioner of an opportunity to show cause against the penalty. 15. From the contents of paragraph-8 of the common counter affidavit of the first respondent and the contents of paragraphs-5 to 8 of the common rejoinder of the petitioner, it is seen that a fundamental dispute has arisen as to whether all the opportunities provided by the first respondent, related to the assessment under the Central Sales Tax or not. Therefore I directed the learned Special Government Pleader to produce the copies of the notices referred to in paragraph-8 of the common counter affidavit, so as to see whether they related to the assessment under the State Act or the Central Act and the learned Special Government Pleader produced the notices as well as the replies. 16. Interestingly, a majority of these notices, as rightly contended by the petitioner in the rejoinder, were only under the State Act and not under the Central Act. But the question of compliance with the principles of natural justice cannot be judged on the basis of the number of opportunities granted and the number of notices issued, but to be judged only on the basis of sufficiency of opportunity. Sufficiency of opportunity can be measured both from the circumstances and from the status of the person who complains of violation of natural justice. Tamed horses and wild horses react differently to the same command and hence the scales with which one would measure the sufficiency in both cases would differ. 17. Keeping the above principles in mind, if we look into the notices issued (referred to in paragraph 8 of the common counter affidavit), the picture that emerges can be projected in a tabular statement as follows:- For the assessment year 2001-2002 Summon dated 16-5-2003 Under TNGST Act, in Form XII. Summon dated 10-6-2003 Under TNGST Act, in Form XII Summon dated 2-12-2003 Under TNGST Act, in Form XII Summon dated 3-2-2004 Under TNGST Act, in Form XII Summon dated 10-10-2006 Under TNGST Act, in Form XII Summon dated 25-1-2007 Under TNGST Act, in Form XII https://hcservices.ecourts.gov.in/hcservices/ Best of judgment notice dated 10- 8-2007 Though this is also only under TNGST Act, it refers to the claim u/s 6A of CST Act. In this notice, there is a proposal to disallow the claim for exemption in the penultimate para. But it refers only to the inspection by the Enforcement wing on 14-3-2002 which revealed (i) lower rate of tax paid on discarded materials and on fly ash and (ii) purchase of hand gloves from unregistered dealers. Notice dated 17-10-2007 Under TNGST Act directing the petitioner to produce records, forms, declarations etc., on 29- 10-2007. In their reply dated 29-10-2007 to this notice, the petitioner points out in paragraph-5, that regarding stock transfer, they had already submitted F- Forms along with despatch details and tax paid certificates from other States and that they are willing to submit any other details. Pre assessment notice dated 6-8- 2008 It is under CST Act and is actually dated 7-8-2008 and not 6-8-2008. In internal page-2 of this notice, under Item 3, the A.O., says that the stock transfer is proposed to be assessed under TNGST Act in the absence of relevant declaration forms. Such a statement is made despite the earlier reply of the petitioner that Form F declarations already filed. Therefore a reply is sent on 4-9- 2008. Notice dated 4-9-2008 This is under CST Act, but calling the petitioner to file a reply to the pre assessment notice dated 7-8-2008. The reply dated 4-9-2008 and this notice had crossed each other. https://hcservices.ecourts.gov.in/hcservices/ Notice dated 30-9-2008 This is under CST Act calling upon the petitioner to produce the books of accounts within 15 days. In the meantime, writ petitions are filed in W.P.Nos. 23754 to 23759 of 2008 in which permission is granted to the petitioner to take photocopies of D-7 records, inspection reports and statements available with the department. Notice dated 17-10-2008 Permission to take copies as per the orders in the writ petitions Pre assessment notice dated 13-1- 2009 It is under CST Act. In this notice, in the 3rd last paragraph, it is stated that the petitioner had filed Form F and tax paid proof, but had not filed other statements and records as per Rule 4 (3)(A) of CST (Tamilnadu) Rules. This notice gives 15 days time, but on the 15th day viz., 28-1- 009, a notice to produce books on 12-2-2009 is issued. Notice dated 28-1-2009 to produce books on 12-2-2009 issued. Admittedly, a reply was sent by the petitioner on 27-1-2009 and the books were produced on 18-2- 2009 Notice dated 2-3-2009 By this notice a proposal to levy penalty under section 9(2) read with 12(3)(b) is made. The petitioner seeks time of 2 weeks to react to this proposal, but an order is passed on 11-3- 2009. For the year 2002-2003 Summon/notice dated 16-4-2004 Under TNGST Act, Form XII Summon/notice dated 10-10-2006 Under TNGST Act, Form XII Summon/notice dated 25-1-2007 Under TNGST Act, Form XII https://hcservices.ecourts.gov.in/hcservices/ Summon/notice dated 16-4-2004 Under TNGST Act, Form XII Best of judgment notice dated 10- 8-2007 Though it was captioned as one under TNGST Act, this notice specifically dealt with Branch transfer and the contention of the department that the goods moved from Madukkarai were not unloaded at Palakkad, but continued their journey in the same vehicle to the buyers under the control of the RMO and that the depot was acting only as a conduit. Therefore there was a proposal to disallow exemption on branch transfer and also to impose penalty Pre assessment notice dated 7-8- 2008 It is clearly under CST Act and specifically dealt with stock transfer Notice dated 4-9-2008 Under CST Act Notice dated 24-9-2008 Under CST Act Notice dated 17-10-2008 Under CST Act permitting the petitioner to take copies of D-7 records as per the order of this court in W.P.Nos. 23745 to 23759 of 2008 Pre assessment notice dated 30-1- 2009 Under CST Act Order dated 9-3-2009 For the year 2003-2004 Summon dated 10-10-2006 Under TNGST Act, Form XII Summon dated 25-1-2007 Under TNGST Act, Form XII Best of judgment notice dated 10- 8-2007 Though captioned under TNGST Act, it specifically dealt with branch transfer and section 6-A of CST Act and pointed out that the goods proceeded to the buyer without being unloaded at Palakkad and proposed to disallow the exemption claimed Summon dated 17- 10-2007 Under TNGST Act, Form XII Pre assessment notice dated 7-8- 2008 Under CST Act https://hcservices.ecourts.gov.in/hcservices/ Summon dated 10-10-2006 Under TNGST Act, Form XII Notice dated 5-9-2008 Under CST Act calling for a reply Notice dated 24-9-2008 Under CST Act referring to the request of the petitioner for copies of D-7 records Letter dated 17-10-2008 permitting the perusal of D-7 records as per High court orders Pre assessment notice dated 30-1- 2009 Under CST Act Order dated 9-3-2009 18. The above table discloses-- (a) that there was at least one best of judgment notice dated 10-8-2007 under the CST Act, in respect of each of the three assessment years; (b) that there were at least 2 pre assessment notices under the CST Act, in respect of each of the 3 assessment years (dated 6- 8-2008 and 13-1-2009 in respect of 2001-2002; dated 7-8-2008 and 30-1-2009 in respect of 2002-2003; and dated 7-8-2008 and 30-1-2009 in respect of 2003-2004); (c) that the petitioner had sufficient time to produce the records and also file a reply in response to the best of judgment notices and the pre assessment notices under the CST Act; and (d) that the