JUDGMENT Satish Chandra, J.
1. The question is whether a person who carries on the business of sale of country liquor under an annual licence can be said to have commenced business during the course of an assessment year.
2. The petitioners are dealers registered under the U.P. Sales Tax Act. They do the business of selling country liquor under a licence granted to them by the excise authorities. The licence runs for a year commencing from 1st April and ending on the following 31st March. The petitioners took the requisite licence commencing from the 1st April, 1969 and continuing up to the 31st March, 1970. On the 17th June, 1969, the Sales Tax Officer, Hardoi, passed an ex fiarte provisional assessment order for the month of April, 1969. He also passed a similar order for the months of May and June, 1969, on the 20 th of August, 1969. The petitioners in due course submitted their return for the first quarter of the assessment year 1969-70 on the 11th July, 1969. In it they denied their liability to pay sales tax on the ground that country liquor was not liable to sales tax. In the present writ petition the monthly provisional assessment orders have been challenged on the ground that they are without jurisdiction.
3. The impugned assessment orders purport to have been passed under Rule 41(3) of the U.P. Sales Tax Rules. Under that provision if no return is submitted in respect of any quarter or month, as the case may be, within the prescribed period, the Sales Tax Officer can determine the turnover to the best of his judgment and provisionally assess the tax payable for the quarter or the month, as the case may be. According to the learned Standing Counsel, the impugned assessment order has been passed under Section 18(2), U.P. Sales Tax Act. Section 18 is headed as "assessment of reconstituted or new firms and change of partnership". Sub-section (1) of Section 18.deals with the situation where the dealer discontinues the business during the course of assessment year. In that event he is required to file a return within fifteen days from the date of such discontinuance and within the same period give notice of the fact of discontinuance to the assessing authority. Under the explanation the dissolution or reconstitution of a firm or association of persons or partition of a joint Hindu family or transfer by a dealer of his business shall be deemed to be discontinuance of business within the meaning of this Sub-section. Sub-section (2) deals with the commencement of the business during the course of the assessment year. It says "every dealer commencing business during the course of an assessment year...shall, within 30 days from the expiry of the month in which business was commenced, give notice of the fact to the assessing authority and shall submit a statement of his turnover at such intervals, within such period, in such form and verified in such manner as may be prescribed." The relevant rule is Rule 41 which provides :
Every dealer who is liable to pay tax under the Act shall, before the last day of July, October, January and April, submit to the Sales Tax Officer a return of his gross turnover for the quarters ending June 30, September 30, December 31 and March 31, respectively in Form IV:
Provided that a dealer to whom Sub-section (1) of Section 18 applies shall submit the return for the quarter in which business is discontinued within thirty days of the date of such discontinuance:
Provided further that every dealer to whom Sub-section (2) of Section 18 applies shall submit such returns within thirty days of the expiry of each month during the year in which the business is commenced.
4. It will be seen that dealers are generally liable to file quarterly returns, but a dealer who commences business during the course of an assessment year, has to, in view of Section 18(2) of the Act and the second proviso to Rule 41, file monthly returns.
5. Learned counsel for the petitioner urged that Section 18(2) applies to a dealer who commences business during the course of an assessment year. The expression "during" would, in law, exclude the point of time when the assessment year begins ; and so, if a dealer commences business from the very first moment of the beginning of the assessment year, he cannot be said to have commenced the business "during" the course of that year. In S.T.R. No. 1634 of 1956 decided on the 17th August, 1963, a Bench of this court did not accept a similar contention. It was observed:
I also cannot accept the contention that 'in the course of an assessment year' means after the first day of the assessment year. Even if a business is commenced on the 1st of April it is a business commenced in the course of the assessment year beginning with that date. The assessment year began at the first moment of the 1st of April and even if the business commenced with that moment it would be a business commenced in the course of that assessment year.
6. This view is fortified by the meaning of the word "during" in the Shorter Oxford English Dictionary, Volume I, at page 574. There this expression has been defined to mean, "throughout the whole continuance of". Thus, the entire year without excluding any point of time, would be the relevant period. In Words and Phrases, Permanent Edition, Volume 13, at page 682, it has been stated that the word "during" meant to designate time for the performance of an act as during a certain term of court would be an apt expression of an intention to include the whole term. It has also been said there that "during" is defined as "throughout the continuance of". It is, thus, evident that during the course of an assessment year would mean the whole of that year. If the business is commenced at any point of time in that year, it will be covered by Section 18(2). A business commenced from 1st April will not be outside the purview of Section 18(2).
7. In the next place, it was urged that in the context of the scheme of the Act, Section 18(2) made a special provision for persons who become dealers by commencing business for the first time. It does not cover existing or continuing dealers who may already be liable to tax. Section 18(1) deals with the discontinuance of a business. Under the explanation the dissolution or reconstitution of a firm or association of persons or partition of a joint Hindu family or transfer by a dealer of his business shall be deemed discontinuance of business. In the light of this explanation, the recommencement of the business by the reconstituted firm or after partition or transfer of business, will be by a different firm or person and so by a person who was not a dealer till then. Such commencement may be within Section 18(2) of the Act.
8. Section 7 provides that every dealer who is liable to pay tax under the Act shall submit a return of his turnover at the prescribed intervals. We have seen above that under Rule 41 a dealer has to submit quarterly returns. His liability to tax arises at the end of the quarter. Section 18(2) provides for an exceptional case and creates for it a liability at the end of each month. It points to a dealer who commences business and specifies the procedure for assessment for the first year. In our opinion "commencement" of business would not mean expansion of business by an existing dealer, for instance by commencing sale of a new commodity or product, in addition to or substitution of his pre-existing business. Section 18(2) would come into play when entirely a new business is set up by a person or persons who as such become a dealer for the first time. If Section 18(2) is interpreted to cover the case of an existing dealer who commences a new line of business, then Section 18(2) would come in conflict with the scheme of the Act. A dealer may become liable to file a return every month and also quarterly. That will create confusion.
9. Section 8-A provides for registration of dealers. Under Clause (d) of this section every dealer "commencing business during the course of an assessment year" has to apply for registration to the assessing authority. The application may be moved for the assessment year, or, at the option of the dealer, for a longer period, but not exceeding three years at a time. So a dealer has the option for registration for a longer period, say for three years. Take the case of a dealer who soon after registration for three years, starts trading in a new commodity, like country liquor, by obtaining an annual licence for a particular year. If the contention raised on behalf of the department is accepted, such a dealer will have to apply for registration again in view of Clause (d). His existing registration for three years would not suffice. Section 8-A of the Sales Tax Act does not contemplate that a dealer should be registered more than once for the same period of time.
10. If a dealer opens a branch of his business at another place and conducts business there under an annual licence, according to the case of the department, he would be treated as commencing business at that place during that assessment year. On that basis he would be liable to be assessed by the Sales Tax Officer of that place. But if the principal place of business of the dealer is elsewhere, that cannot be. Rule 6(b) of the Sales Tax Rules provides that if a dealer carries on business within the limits of jurisdiction of more than one Sales Tax Officer, the officer within whose jurisdiction the declared principal place of business is situate, shall be the assessing authority in respect of such dealer. The Sales Tax Act contemplates that each dealer would be within the jurisdiction of one assessing authority only. He would be registered and assessed by him alone. This would be so irrespective of the nature of business, the particulars of the commodities he may be doing business in and equally irrespective of the discontinuance or commencement of trading activities in one commodity or the other. So the mere fact that a particular dealer by acquiring an annual licence for selling country liquor enters into that trade either recurringly and for the first time, would not, in law, mean that he has commenced business within meaning of Section 18(2) of the Act, if he was already carrying on business in taxable commodities and was an existing dealer as defined by the Act.
11. Most of the trades and businesses require a licence or permit to enable an individual person to carry on business in it. The licences are generally annual. In some cases they are granted afresh each year, while in other cases they are renewable. Even in a case in which the licence is renewable, the right to carry on business lapses with the lapse of the licence, even though the licensee may have some preferential right to renewal. But does he "commence" business again after renewal ? Take the case of a dealer whose licence is not renewed at first; but after some time he is able to obtain renewal, but with a break in its continuity. According to the department's contention, he would be covered by Section 18(2). If this situation repeats itself the next year he would again be governed by Section 18(2). The curious result would be that the same dealer will be treated to have commenced business afresh repeatedly simply because of the fortuitous circumstance that the licence was annual. That seems going too far.
12. Section 18(2) should be construed in the context of Section 18(1). The explanation to Section 18(1) provides for cases where a dealer will be deemed to have discontinued the business. It does not include a case where the business is carried on under an annual licence. If a business does not stand discontinued in any assessment year on the lapse of an annual licence, it cannot be treated to have commenced afresh in the same or next year on renewal or a fresh grant. Section 18(2) will not apply to those existing dealers who do not fall within the explanation to Section 18(1), i.e., who do not transfer or partition the business or whose firm is not dissolved or reconstituted.
13. In our opinion, the Sales Tax Act contemplates that a person who sets up business for the first time would be governed by Section 18(2) for the first assessment year; subsequently, he would be dealt with under Section 7. He will be entitled to file quarterly returns and be liable to be taxed at the end of each quarter and not before. The fact that a particular trade is being carried on under a licence granted afresh each year, is not decisive to bring the case within the purview of Section 18(2).
14. For the revenue, Mr. Sapru urged that in the present case the petitioners have given no facts to indicate that they were pre-existing dealers. They have not even stated as to when were they registered under Section (sic) U.P. Sales Tax Act. Even so, the infirmity in the assessment orders would not stand cured.
15. Rule 41(3) entitles the Sales Tax Officer to make an assessment to the best of his judgment. If an assessing authority wants to take an ex parte action on the basis that Section 18(2) applies, it has to satisfy itself and if challenged, to prove that the case is covered by Section 18(2). In the present case the impugned assessment orders were passed ex parte. The Sales Tax Officer was hence obliged to find that the petitioners were fresh dealers.
16. In the assessment order the only facts mentioned are that the dealer is a contractor of country liquor and on the basis of information available he had taken a contract for Rs. 46,020. He has not deposited any sales tax nor filed any return. Therefore, proceedings under Rule 41(3) of the U.P. Sales Tax Rules have been taken. These facts are not sufficient to bring the case within Section 18(2). There is no finding that the petitioners were new dealers or that they had commenced business for the first time. Without applying the mind and recording a finding to that effect, the Sales Tax Officer could not legitimately have taken action under Rule 41(3) on the basis that Section 18(2) was applicable. Since the Sales Tax Officer was taking action ex parte, the burden was upon him to bring the case within Section 18(2).
17. In this connection the learned Standing Counsel invited our attention to the U.P. Ordinance No. 2 of 1970. Section 6 of this Ordinance introduces Section 12-A in the U.P. Sales Tax Act with retrospective effect. Section 12-A states that in any assessment proceedings, when any fact is specially within the knowledge of the assessee, the burden of proving that fact shall lie upon him. On the basis of this provision, it was urged for the department that the fact whether the assessee was a new business man lay specially within his knowledge and he ought to have satisfied the assessing authority on the point. Section 12-A would apply only when the assessee had been associated with an enquiry and given an opportunity to explain the fact within his special knowledge. Section 12-A cannot possibly be utilised in an ex parle proceeding. The assessing authority cannot presume the fact, without any notice or opportunity to the assessee. On the contrary, Section 12-A by placing the burden of proof on the assessee, would imply that whenever such a question arises in the course of an assessment proceeding, the assessee must be associated with the proceeding and given an opportunity to prove the fact.
18. In our opinion, the impugned provisional monthly assessment orders disclose a manifest error of law apparent on their face.
19. The learned Standing Counsel relied on State of Punjab v. Sant Singh (1970) 1 S.C.C. 101. There the Supreme Court held that though the Punjab General Sales Tax Act, 1948, imposed an yearly sales tax, yet since it provided for the filing of periodical returns and payment of tax periodically, periodical assessments could validly be made. The case is inapplicable. There is no dispute here that quarterly assessment cannot be made. The question before us is if the provisions of the U.P. Sales Tax Act provide for monthly returns or assessments for old dealers. No such problem arose before the Supreme Court.
20. In the result, the petitions succeed and are allowed. The impugned provisional monthly assessment orders are quashed. The petitioners would be entitled to their costs.