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1990 Supreme(Kar) 539
K B Navadgi, M P Chandrakantaraj JJ.
DATTARAM ADVERTISING PRIVATE LTD. AND ANOTHER
Versus
STATE OF KARNATAKA.
Sales Tax Revision Petitions Nos. 23, 53, 54, 55, 56, 57 and 58 of 1985
Decided On: Decided On : 11-10-1990
K. P. Kumar for M/s. King and Partridge, for the petitioners in all the cases.
H. L. Dattu, High Court Government Pleader, for the respondent in all the cases.
The main legal point established in the judgment is the interpretation of the definition of 'dealer' under section 2(k) of the Karnataka Sales Tax Act and the determination of whether the activities of supplying blocks and printed materials constituted sales, influencing the court's decision on the petitioner's liability to pay tax and the limitation period for assessment.
Headnote:
Karnataka Sales Tax Act - Definition of 'dealer' - Sections 2(k), 12-A - The court held that the petitioner was a dealer under section 2(k) of the Act as it carried on the business of supplying goods directly or otherwise, and that the activities of supplying blocks and printed materials to advertisers amounted to sales. The court rejected the contention that the petitioner was only acting as a commission agent and concluded that the petitioner was liable to pay tax. The court also ruled that the proceedings commenced for assessment were beyond the specified period of five years.
Fact of the Case:
The petitioner, a company running an advertising and consulting agency, was assessed for the turnover of various assessment years under the Karnataka Sales Tax Act. The assessing authority proposed to assess the turnovers based on the books of accounts produced by the petitioner, leading to appeals and further appeals before the Karnataka Appellate Tribunal.
Finding of the Court:
The court found that the petitioner was a dealer under the Act and that the activities of supplying blocks and printed materials to advertisers amounted to sales, making the petitioner liable to pay tax. The court also ruled that the proceedings commenced for assessment were beyond the specified period of five years.
Issues: The issues included whether the petitioner's supply of blocks and printed materials to its advertisers amounted to sales, whether the petitioner was a dealer under section 2(k) of the Act, and whether the assessment was barred by the statutory period of five years.
Ratio Decidendi: The court held that the petitioner was a dealer under section 2(k) of the Act as it carried on the business of supplying goods directly or otherwise, and that the activities of supplying blocks and printed materials to advertisers amounted to sales. The court rejected the contention that the petitioner was only acting as a commission agent and concluded that the petitioner was liable to pay tax. The court also ruled that the proceedings commenced for assessment were beyond the specified period of five years.
Final Decision: The court allowed one petition on the ground of being barred by limitation while dismissing the remaining revision petitions.
M. P. CHANDRAKANTHARAJ URS, J. - There petitions are disposed of by this common order, as all of them raise the same questions of law which are required to be decided by us under section 23(3) of the Karnataka Sales Tax Act, 1957.
2. Though the assessees and the assessment years vary, for purposes of convenience, the facts stated in S.T.R.P. No. 23 of 1985 are narrated in order to answer the questions which are common to all, except that in S.T.R.P. No. 23 of 1985 an additional question regarding limitation also falls for consideration by us.
3. The facts leading to these petitions may be stated briefly and they are as follows :
The petitioner, Dattaram Advertising Private Ltd., is a company incorporated under the Companies Act, inter alia, carries on the business of running an advertising and consulting agency covering a variety of media for effective publicity depending on the customers and their advertising requirements. The petitioner-company prepares designs for advertisement in newspapers, magazines, periodicals and also undertakes to get blocks manufactured in that behalf from the block-markers.
The company was carrying 10,000 copies of brochures to Hindustan Aeronautics Ltd., and the same was checked by the Check-post Officer. The matter was referred to the intelligence Wing for needful action. The company got printed 10,000 copies of booklets for an amount of Rs. 57,750 from M/s. B.N.K. Press, Madras, and the same had been sold to Hindustan Aeronautics Ltd. for a sum or Rs. 63,000. As such activities involved the element of "purchase" and "sale" by the petitioner-company, the assessing authority issued notice to produce the books of accounts for the previous years i.e., from 1969-70 to 1974-75. On verification of such books of accounts which were produced, the assessing authority, namely, the Commercial Tax Officer, IV Circle, Bangalore-9, noticed that the company was doing the business of selling printed materials and blocks and bills raised clearly showed that the contract for art and design was distinct from the contract for sale of printed materials and blocks. The assessing authority, therefore, proposed to assess the turnovers for the assessment years 1969-70 to 1974-75 in various sums determined on the basis of the books. Such determination in tabular form was as follows :
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Year Taxable turnover Tax assessed
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1969-70 Rs. 2,03,799.99 Rs. 6,114.00
1970-71 Rs. 1,37,445.52 Rs. 4,123.37
1971-72 Rs. 1,74,526.94 Rs. 5,235.80
1972-73 Rs. 97,245.90 Rs. 3,281.14
1973-74 Rs. 2,65,124.71 Rs. 9,279.36
1974-75 Rs. 1,95,672.85 Rs. 6,848.55
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4. However, the assessee before the assessing authority contended as is evident from the reply issued to the show cause notice, dated November 12, 1975, through its lawyers that the company was only preparing art work, booking the space in various newspapers, periodicals, getting estimates from various agents and block makers and such acts were done on behalf of the advertiser-customer and absolutely there was no element of sale in the business. However, having regard to the decision of the High Court of Bombay in the case of Commissioner of Sales Tax v. Durga Khote Productions [1975] 36 STC 77 and the decision of the Madras High Court in the case of State of Madras v. Bomas Limited [1965] 16 STC 819, the assessee authority came to the conclusion that the business carried on by the assessee though appeared to be on the face of it a works contract, in reality it involved sales and as such the turnover was liable to tax. In the result, the proceeding commenced under section 12-A (1) of t
