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SUPREME COURT OF INDIA
20th September, 1960
S.K. DAS, M. HIDAYATULLAH, K.C. DAS GUPTA, J.C. SHAH, AND N. RAJAGOPALA AYYANGAR, JJ.
State of Orissa and another, Appellants
Versus
M/s. Chakobhai Ghelabhai and Co., Respondents.
Civil appeal No. 710 of 1957.
Advocates Appeared
Mr. N. C. Chatterjee, Senior Advocate, (M/s. H. J. Umrigar and T. M. Sen, Advocates, with him), for Appellants; Mr. J. M. Thakar, Advocate and Mr. J. B. Dadachanji, Advocate of M/s Rajinder Narain & Co. for Respondents; Mr. R. Gopalakrishnan, Advocate and Mr. J. B. Dadachanji, Advocate of M/s Rajinder Narain & Co., for Intervener. 285
SALES TAX - Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947) - Ss. 2(g), 12(5), 29(2)(s) - Rules 20, 59 - Sale of goods - Transfer of property in goods - Completion of sale in Orissa - Admission by assessee - Assessment - Validity - Fees on memorandum of appeal and revision application - Legality - Notice under S. 12(5) - Sufficiency.
Fact of the Case:
The respondent, a partnership firm, collected bidi leaves from forest areas in Orissa, made them into bundles, stored them in godowns in Orissa, and sold and despatched them to various destinations outside Orissa without registering as a dealer or paying sales tax under the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947). The assessing authority assessed the tax and imposed a penalty for wilful failure to register and submit a return of turnover. The respondent challenged the assessment, claiming that it was not a dealer in Orissa and that the sales were not completed in Orissa. The High Court allowed the respondent's writ petition and quashed the assessment orders, holding that the assessment orders were bad due to the repeal of the second proviso to S. 2(g) of the Act, that the levy of fees on a graded scale amounted to the imposition of a tax, and that the notice issued under S. 12(5) was not in accordance with law.
Finding of the Court:
The Supreme Court held that the High Court erred in its findings. It held that the admission made by the respondent that the sales were completed in Orissa brought the sales within the definition of "sale" under S. 2(g) of the Act and made them liable to tax. The Court also held that the fees levied on the memorandum of appeal and revision application were not taxes but were incidental to the disposal of appeals and applications for revision and were therefore legal. The Court further held that the notice issued under S. 12(5) was sufficient and that the assessment for the last three quarters was not bad as the respondent had been given an opportunity to produce its accounts.
Issues: 1. Whether the assessment orders were bad due to the repeal of the second proviso to S. 2(g) of the Act? 2. Whether the levy of fees on a graded scale amounted to the imposition of a tax? 3. Whether the notice issued under S. 12(5) was in accordance with law? 4. Whether the assessment for the last three quarters was bad?
Ratio Decidendi: 1. The admission made by the respondent that the sales were completed in Orissa brought the sales within the definition of "sale" under S. 2(g) of the Act and made them liable to tax. 2. The fees levied on the memorandum of appeal and revision application were not taxes but were incidental to the disposal of appeals and applications for revision and were therefore legal. 3. The notice issued under S. 12(5) was sufficient and complied with the requirements of the Act. 4. The assessment for the last three quarters was not bad as the respondent had been given an opportunity to produce its accounts.
Final Decision: The Supreme Court allowed the appeal, set aside the judgment and order of the High Court, and dismissed the respondent's writ petition.
Judgment
S. K. DAS, J. : This is an appeal on a certificate granted by the High Court of Orissa. The appellants are the State of Orissa and the Collector of Commercial Taxes, Orissa. The respondent is a partnership firm called Messrs. Chakobhai Ghelabhai and Company dealing in bidi leaves.
2. The short facts are these. The respondent firm has its headquarters in Bagbehera in Madhya Pradesh. During the years 1948 to 1951 it was engaged in collecting bide leaves from certain forest areas in Orissa. The leaves so collected were made up into bundles and stored in the respondent s godowns in Orissa. They were then sold and despatched to various destinations outside the State of Orissa. The respondent did not get itself registered as a dealer under the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947), hereinafter called the Act. On July 21, 1950, a notice was issued to the respondent by the Assistant Sales Tax Officer, Patna Circle, requiring it to submit a return in Form No. IV showing separately the particulars of its turn-over for each of the quarters commencing October, 1947, and upto June 30, 1950. The respondent was also asked to show cause why a penalty should not be imposed on it under S. 12(5) of the Act. To this notice the respondent sent a reply to the effect, substantially, that it carried on no selling business in Orissa and was, therefore, under no liability to register itself as a dealer in Orissa or to pay sales tax under the Act. Thereafter, the respondent took no part in the assessment proceedings and made no appearance before the assessing authority except on June 30, 1951, when one of its partners Narvaram Popatbhai appeared and said that the accounts were at Bagbehera and the despatches of bidi leaves from Orissa were mixed up with other despatches and, therefore, he was not in a position to give a correct account of the business in Orissa. It was admitted, however, that the bidi leaves were collected in Orissa, were processed and manufactured for sale and then stored in godowns in Orissa; they were then sold and despatched to different customers outside Orissa. The assessing authority held on the materials before it that the transfer of property in the bidi leaves sold and despatched to customers, as aforesaid was completed in Orissa and the respondent wilfully failed to get itself registered and to submit a return of its turn-over. The assessing authority then proceeded to assess the tax to the best of its judgment and determined the taxable turn-over to be Rs. 61,250/- for each of the twelve quarters, the first quarter ending on June 30, 1948, and the last quarter ending on March 31, 1951. It also imposed a penalty of Rs. 500/- for each quarter. The orders of assessment were made on two dates-on July,4, 1951, for four quarters and on August 29, 1951, for the remaining eight quarters. Against these orders of assessment the respondent went up in appeal to the Assistant Collector of Sales-tax, Sambalpur. One of the pleas taken before the appellate authority was that the respondent was not a dealer in Orissa inasmuch as the sales of bidi leaves were not effected in Orissa. In the course of the hearing of the appeal this plea was given up, and it was admitted by the respondent s pleader that "the sales were completed in Orissa". The appeal was then heard on the contentions that (1) the turnover determined was excessive, and (2) that no penalty should have been imposed. These contentions were rejected by the appellate authority. The respondent then moved in revision, but the revision petition having been filed out of time was rejected by the Collector of Commercial Taxes, Orissa.
3. The respondent then moved the High Court of Orissa by means of a writ petition in which it was contended that (1) the respondent was not a dealer in Orissa; (2) that the sales of the post-Constitution period were sales within the meaning of the Explanation to Art. (1) (a) as it then stood and Orissa could not tax them; (3) t
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