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1978 Supreme(Cal) 450
High Court Of Calcutta
Jyotirmoyee Nag
BHOLANATH SREEMANY - Appellant
Versus
ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES - Respondent
Civilrevision Case 1243 Of 1973
Decided On : 07/13/1978
AMAL KR.DUTTA, GOPAL CHAKRAVARTHI, Narayan Chandra Bhattacharya
The determination of liability to pay tax under the Bengal Finance (Sales Tax) Act, 1941, must be based on a proper assessment of the gross turnover and should follow the procedure prescribed under Section 11(2) of the Act.
Headnote:
BENGAL FINANCE (SALES TAX) ACT, 1941 - SECTION 4(2), 4(5), 11(2) - MANUFACTURER - LIABILITY TO PAY TAX - ASSESSMENT OF GROSS TURNOVER - JURISDICTION OF COMMERCIAL TAX OFFICER.
Fact of the Case:
The petitioner, a proprietor of an optical store, challenged the orders of the Assistant Commissioner and Additional Commissioner of Commercial Taxes, which held him liable to pay tax as a manufacturing dealer under the Bengal Finance (Sales Tax) Act, 1941. The petitioner contended that he was not a manufacturer but a reseller of frames and glasses, and that his liability should be determined based on a gross turnover of Rs. 50,000, not Rs. 10,000.
Finding of the Court:
The court held that the petitioner was not a manufacturer of spectacles as he merely assembled frames and fitted glasses according to prescriptions, which did not result in a new and different article. Therefore, his liability should be determined based on a gross turnover of Rs. 50,000 under Section 4(5)(c) of the Act.
Issues: 1. Whether the petitioner was a manufacturer of spectacles under the Bengal Finance (Sales Tax) Act, 1941? 2. Whether the assessment of the petitioner's liability to pay tax was valid without completing the assessment under Section 11(2) of the Act?
Ratio Decidendi: 1. The court applied the test laid down in Sudhir Ch. Mukherjee v. Additional Commissioner, Commercial Taxes, holding that "manufacture" implies a transformation of raw material into a new and different article with a distinctive name, character, or use. The mere assembly of frames and fitting of glasses did not meet this definition. 2. The court held that the assessment of the petitioner's liability to pay tax under Section 4(2) of the Act was invalid because it was done without completing the assessment under Section 11(2), which required the Commissioner to give the petitioner a reasonable opportunity to be heard.
Final Decision: The court set aside the impugned order of the Additional Commissioner of Commercial Taxes and directed that the petitioner's liability be determined based on a gross turnover of Rs. 50,000 under Section 4(5)(c) of the Act, subject to completion of the assessment under Section 11(2).
( 1 ) THIS rule is directed against an order dated 14th January, 1971, passed by the Assistant Commissioner of Commercial Taxes, Calcutta 'c' Circle, in Revision Case No. RVN-8-70-71 and also against an order dated 31st July, 1972, passed by the Additional Commissioner of Commercial Taxes, West Bengal, in Revision Case No. 433 (Misc.) of 1970-71. It is the case of the petitioner that he is carrying on a business as proprietor under the name and style of M/s. Sreemany Optician at 96b, Shyama Prosad Mukerji Road, Calcutta-26. Since March, 1957, the petitioner has been carrying on the business of purchase and sale of optical frames and glasses and items incidental thereto. The petitioner claims that he is not a manufacturer or importer of goods sold by him and the petitioner maintains primary books of account of his business. The petitioner states that in the course of his business, a customer comes to him with a prescription from a doctor, selects a particular frame, settles the price thereof and the frame is then appropriated to the contract of sale within the meaning of explanation 2 (a) to Section 2 (g) of the Bengal Finance (Sales Tax) Act, 1941. The petitioner then fixes the glasses, according to prescription, to the frame which has already become the chattel of the customer. There are thus two distinct sales-one of frame and the other of the glasses-and it is the case of the petitioner that he does not charge anything for fitting. It is alleged that the Commercial Tax Officer, Alipore, who examined the petitioner's books of account, records and documents under Section 14 (1) of the Act, completely misunderstood the nature of the transaction and the legal implication thereof and by an order dated 7th April, 1970, held that the petitioner manufactures spectacles from parts of spectacles purchased by him and sells such spectacles to customers. According to the said officer, the petitioner is a manufacturing dealer whose liability under the Act would arise upon the taxable quantum of Rs. 10,000 within a year or part thereof. The Commercial Tax Officer estimated that the gross turnover of the petitioner as a manufacturing dealer exceeded that taxable quantum on 31st October, 1966 and, accordingly, the petitioner was liable under Section 4 (2) of the said Act to pay taxes from 1st January, 1967. Being aggrieved by this order, the petitioner moved a petition for revision under Section 20 (3) of the said Act to the Assistant Commissioner of Commercial Taxes who, by his order dated 14th January, 1971, rejected the petitioner's contention that there were really two distinct resales one in respect of the frames and the other, in point of time, of the glasses. The Assistant Commissioner held by the said order that there was only one contract for sale of manufactured spectacles as has been held by the learned Commercial Tax Officer and estimated that the petitioner's turnover really exceeded the taxable turnover of Rs. 10,000 on 30th April, 1965, with liability to pay tax commencing from 30th June, 1965. The petitioner moved the Commissioner of Commercial Taxes, West Bengal, against the said order passed by the Assistant Commissioner. The learned Additional Commissioner of Commercial Taxes by his order dated 31st July, 1972, modified the order of the learned Assistant Commissioner but maintained the order of the Commercial Tax Officer. The Additional Commissioner rejected the contention of the petitioner that he is not a manufacturer of spectacles and that his liability arises not on the taxable turnover of Rs. 10,000 but on Rs. 50,000.
( 2 ) THE learned Advocate appearing for the petitioner submits that Section 4 of the Act provides that every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after the date so notified. It is necessary under the provisions of Section 4 of the s
