CIVIL WRIT JURISDICTION CASE No.5999 OF 2006 (Against the order dated 18.07.2005 passed by the Commercial Taxes Tribunal, Bihar Patna in revision Case No. PT-518 to 531/ 1998) -WITH- CWJC No.6082 or 2006 M/S INDIAN OIL CORPORATION LTD, A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 HAVING ITS REGIONAL OFFICE AT G-9, ALI YAVAR JUNG MARG, BANDRA (EAST), MUMBAI-400 051 AND ALSO HAVING STATE OFFICE AT 5TH FLOOR, JAI PRAKASH BHAWAN, FRASER ROAD, P.S. KOTWALI, TOWN & DISTRICT-PATNA THROUGH ITS CONSTITUTED ATTORNEY, SUBRATO CHOUDHURY, S/O SHRI P.K. CHOUDHARI, RESIDENT OF NISHIKUNJ BUILDING, BORING ROAD, P.S. SHREE KRISHNA PURI, TOWN & DISTRICT-PATNA. ------- APPELLANT (in both cases) Versus 1. THE STATE OF BIHAR THROUGH THE SECRETARY-CUM- COMMISSIONER OF COMMERCIAL TAXES, VIKASH BHAWAN, BAILEY ROAD, PATNA. 2. THE COMMERCIAL TAXES TRIBUNAL, BIHAR, OLD SECRETARIAT BARRACK, PATNA THROUGH ITS SECRETARY. 3. THE JOINT COMMISSIONER OF COMMERCIAL TAXES [ APPEAL], CENTRAL DIVISION, PANT BHAWAN, BAILEY ROAD, PATNA. 4. THE DY. COMMISSIONER OF COMMERCIAL TAXES, SPECIAL CIRCLE, OFFICE OF THE JOINT COMMISSIONER OF COMMERCIAL TAXES [ADMN.] JUGES COURT ROAD, PATNA. ………RESPONDENTS(in both cases) For The Petitioner : ( i) Dr. Debi Pal, Sr. Adv ( ii) Mr. S.D. Sanjay, Adv. (iii) Mr. Amar Nath Sen, Adv. (iv) Mrs. Sushila Agrawal, Adv. (v) Mr. Gautam Kejriwal, Adv. (vi) Mr. Akash Chaturvedi, Adv. (vii) Mr. Gopal Prasad Gupta, Adv. (in both cases) For The Respondent Mr. Purnendu Singh (in both cases) 2 P R E S E N T THE HON'BLE MR. JUSTICE SHIVA KIRTI SINGH THE HON'BLE MR. JUSTICE HEMANT KUMAR SRIVASTAVA Shiva Kirti Singh, Hemant Kumar Srivastava,JJ. These writ petitions are directed against the order dated 18.07.2005 contained in Annexure-3 passed by the Commercial Taxes Tribunal, Bihar, Patna in Revision Case No. PT-518/1998 to 521/98 relating to years, 1991-92 and 1992-93. The petitioner also challenges the appellate order dated 20th August, 1998 contained in Annexure-2 and the assessment order dated 15.03.1997 contained in Annexure- 1. Although the order of the Commercial Taxes Tribunal relates to two assessment years but the writ petitions are confined to assessment year 1992-93 and particularly in respect of the following:- ( I ) the imposition of tax on export sales of Petroleum products to Nepal to the tune of Rs 21,53,46,467.66 paises which is said to be contrary to Article 286 of the Constitution of India; and ( ii ) enhancement in gross turnover by 2 per cent as per order of the Tribunal. Such enhancement was 5 per cent as per the assessment order which was reduced to 4 per 3 cent by the appellate authority. 2. The petitioner is a government company incorporated under the provisions of the Companies Act, 1956. 3. There is no dispute that the petitioner is engaged in refining of crude oil as well as in sale and distribution of petroleum products throughout the country through a chain of dealers. For that purpose, it has set up sale depot/terminals/bottling/plants/other sale points all over the country including Bihar. It has set up refineries also at different places including one at Barauni in Bihar. 4. The petitioner-company is registered under the provisions of the Bihar Finance Act, 1981 & also under the Central Sales Tax Act, 1956. For the period, 1992-93, the petitioner submitted its monthly extract of sales statement, quarterly returns and annual return disclosing its sale figures and the gross turnover as Rs 13052785207.81 paise. At the time of hearing, the petitioner filed a revised statement before the assessing officer disclosing gross turnover of Rs 12789735674.71 paise. The assessment order under section 17 (3) of the Bihar Finance Act, 1981 shows that the Assessing Officer was surprised as to why a different figure was shown as gross turnover in the revised return. The counsel for the assesse explained that due to voluminous nature of the business of the petitioner, the difference between monthly return figures, quarterly return 4 figures, annual return figures require revision after receipt of actual figures from different places and hence, there was necessity of submitting revised return figures. The assessing officer was not convinced that reconciliation of figures in the present era of computers would take so much time. For that reason and largely on account of not being satisfied with the method of maintaining the books which in the opinion of the assessing officer amounted to inaccuracy and inadequacy of accounts, the Assessing Officer held that the so called accounts maintained by the dealer, is incomplete, unreliable and untrustworthy. For that reason, best judgment assessment was resorted to and the gross turnover was enhanced by 5 per cent. 5. The second aspect of controversy between the parties relates to a claim by the dealer/petitioner that goods exported to Nepal Oil Corporation, Nepal for an amount of Rs 1,53,81,89,054.75 paise should be excluded from gross turnover in view of section 7(i) (c) of Bihar Finance Act, 1981, read with Article 286 of Constitution of India entitling the petitioner to exemption of tax on goods exported outside the country. 6. On the issue of exemption on account of export outside the country, the petitioner satisfied the assessing authority that there was an agreement with Nepal Government as per treaty between the two countries; India and Nepal. Supply of petroleum oil was being made 5 continuously as per provisions in rule 13(2) under the Central Excise Rules after providing for bonded warehouses. Certificate of export by Custom Officer, India was also available but exemption was refused on the ground of non-production of bills of export. 7. We are spared of the trouble of deciding the aforesaid controversy in view of the same being settled by a Division Bench of this court through a recent judgment in the case of same parties reported in 2010(3) PLJR 527. The same dispute had arisen in that case between the same parties for the assessment year, 1995-96. In that judgment, all the relevant aspects including the circumstance under which copies of substituted bills of export not being available with the petitioner, have been discussed in detail for coming to the conclusion that it was not just and reasonable for the authorities under the Bihar Finance Act to insist on production of substituted bills of export and considering the entire facts including value of the exported goods received from Nepal through account payee cheques, there was no doubt that the sale, as claimed was in course of export. Adopting the same reasoning, the claim of the petitioner for exemption of value of goods exported to Nepal has to be accepted. For that reason, the matter requires to be remitted back to the authorities for recalculating the tax liability of the petitioner. 8. So far as the issue relating to increase of gross 6 turnover by 2 per cent is concerned, it has been submitted on behalf of the petitioner that such enhancement is without any material and is based upon mere guess and surmises. It was highlighted that had there been any material, the appellate authority could not have reduced the enhancement from 5 per cent to 4 per cent and the Tribunal would not have reduced it further to 2 per cent. On behalf of the petitioner, reliance has been placed upon judgments of the Apex Court in the case of M/S Brij Bhushan Lal vs CIT Hariyana AIR 1979 SC 209 to highlight the well established principle that an assessment in order to be best judgment assessment must be based upon a fair estimate of the proper figures of assessment with due consideration of relevant materials. From the discussions made in paragraphs-6 & 7 of that judgment, it is well established that a best judgment assessment must make an honest and fair estimate of the income of the assessee (in case of sales tax turnover of the assessee) and the estimate must not be capricious but should have a reasonable nexus to the available material and the circumstances of the case. It will be useful to extract a passage from another judgment of the Supreme Coujrt on this issue in the case of Raghubar Mandal, Harihar Mandal vs State of Bihar, AIR 1957 SC 810, which their Lordships of the Supreme Court have also extracted in paragraph-6 of the judgment in the case of M/S Brij Bhushan Lal: 7 “ No doubt it is true that when the returns of the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make guess, but the estimate must be related to some evidence or material and it must be something more than mere suspicion.” 9. The aforesaid passage has been also quoted in a Division Bench judgment of this court in the case of Standard Merchantile Company vs the State of Bihar Vol. 29 (STC) 675. That was a case relating to sales tax and it was held that even for the purpose of determination of the gross turnover, the best judgment assessment must have some relation with the materials on the record. If the determination of the turnover is without any material, it would amount to a erroneous determination in law and will no longer be a question of fact only. 10. No doubt, the assessing officer has rejected the books of account of the petitioner as incomplete, unreliable and untrustworthy but our attention was drawn to the impugned order of tribunal contained in Annexure-3 wherein the tribunal in paragraph-18 has given due credence to books of account of the petitioner and has disagreed with the reasons given by the assessing officer on various grounds. Further the tribunal has held that “ it is also worth mentioning that the assessing officer has not brought on records any figures which have not been 8 included in their GTO’s by the petitioner and it is clear that he has based his best judgment assessment on guess, surmises and presumption also which cannot be said to be just and proper.” 11. Initially, we were somewhat impressed by the reasoning of the assessing officer that in the present era of computers reconciliation of sales figures should not take any time so as to require filing of revised figures of gross turnover. But it was pointed out that the case relates to the year, 1992-93. According to learned senior counsel for the petitioner, the computerization in the offices of the petitioner was not complete during those times and, therefore, reconciliation of figures used to take time. We were also taken through the relevant extract of the journal to show that it was being maintained in a proper manner and had sufficient heads to permit verification of the sales figures and the gross turnover. From the order sheet of the Assessment Proceeding, a copy of which has been brought on the record through a supplementary affidavit, it was shown that on 18.02.1997, the assessing officer examined the invoices-cum-challan of sales. The GTO and TTO figures were also verified from daily sale register on the next date. 12. In view of aforesaid facts and discussions particularly the findings given by the learned tribunal, we find substance in the submission advanced on behalf of the 9 petitioner that enhancement in gross turnover is without any basis or material. In fact, from the findings of the tribunal extracted above, it is evident that there was no material to doubt the gross turnover disclosed by the petitioner and hence the sine qua non for indulging in best judgment assessment is found to be absent in this case. In any case, it must be held that the enhancement of petitioner’s GTO even by 2 per cent ordered by the learned tribunal is contrary to law and hence that part of the order is also set aside. On this ground also, the matter is required to be remitted back for recalculating the tax liability of the petitioner for the year in question. We order accordingly. 13. The writ petitions are allowed to the aforesaid extent. In the facts and circumstances of the case, there shall be no order as to costs. Patna High Court, Dated/ the 17th day of September, 2010 AFR/ AKV/- (Shiva Kirti Singh,J.) ( Hemant Kumar Srivastava, J.)