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1960 Supreme(Ori) 61
IN THE HIGH COURT OF ORISSA AT CUTTACK
G.C. Das, R.L. Narasimham, JJ.
NETRANANDA
Versus
COMMISSIONER OF SALES TAX, ORISSA
Special Jurisdiction Case No. 2 of 1958
Decided On: Decided On : 13-07-1960
R. Mohanty and J. K. Mohanty, for the petitioner.
G. K. Misra, for the opposite party.
The liability to pay sales tax on the part of the purchasing dealer arises out of the provisions of section 5(2)(a)(ii) of the Orissa Sales Tax Act and the proviso to that sub-clause, and rule 27(2) of the Orissa Sales Tax Rules is only a rule of evidence which is not meant to be exhaustive.
Headnote:
SALES TAX - Exemption - Sale of jute to registered dealer - Declaration in writing not obtained - Liability to pay sales tax - Rule 27(2) of Orissa Sales Tax Rules - Ultra vires - Letter of Assistant Sales Tax Officer directing non-realisation of sales tax - Effect.
Fact of the Case:
The petitioner, a registered dealer in jute, sold jute to two firms, namely Messrs Sinclair Murray & Co. and Messrs Banamali Sahu and Dibakar Sahu (who were also registered dealers) during the said period, but omitted to obtain from them the declaration mentioned in rule 27(2) of the Orissa Sales Tax Rules. Notwithstanding the absence of such declaration he claimed execution from sales tax in respect of these sales. His claim for exemption was disallowed both by the Sales Tax Officer and the Assistant Collector of Sales Tax. The Member, Sales Tax Tribunal, also disallowed his claim for exemption.
Finding of the Court:
The court held that the petitioner was liable to pay sales tax as he had not obtained a declaration in writing from the purchasing dealers, even though the purchase and resale was admitted by the purchasing dealer. The court also held that rule 27(2) of the Orissa Sales Tax Rules was not ultra vires of the Orissa Sales Tax Act. Further, the court held that the letter of the Assistant Sales Tax Officer directing non-realisation of sales tax from Sinclair Murrary & Co. did not absolve the petitioner from liability to pay sales tax.
Issues: (a) Whether a registered dealer who has admittedly sold jute to another registered dealer in Orissa is liable to pay sales tax, simply because the former has not obtained a declaration in writing, even though the purchase and resale is admitted by the purchasing dealer. (b) Whether rule 27(2) made under the Orissa Sales Tax Act is ultra vires of the rule-making authority conferred under section 29 of the Orissa Sales Tax Act. (c) Whether in the circumstances of this case the Sales Tax Department having sent a letter, in No. 7(b) of 2nd January, 1950, directing non-realisation of sales tax from Sinclair Murray & Co. from 12th December, 1949, the petitioner is liable to pay tax. (d) Whether in view of the provisions of law as laid down in section 5(2)(a)(ii) of the Orissa Sales Tax Act as it stood at the relevant time when the purchase and resale by the purchasing dealer are admitted, it is obligatory to produce any declaration in writing.
Ratio Decidendi: The court held that the substantive right to claim exemption and the liability to pay sales tax on the part of the purchasing dealer arise out of the provisions of section 5(2)(a)(ii) of the Act and the proviso to that sub-clause, and that rule 27(2) of the Orissa Sales Tax Rules is only a rule of evidence which is not meant to be exhaustive, and which is intended for the benefit of the selling dealer; and it is open to all parties to adduce other evidence with a view to bring the transactions within the scope of section 5(2)(a)(ii) of the Act, even though the declaration mentioned in rule 27(2) may not be forthcoming.
Final Decision: The court answered the questions referred to it as follows: (a) The liability of the registered dealer to sales tax will arise if the facts necessary to establish exemption under section 5(2)(a)(ii) are not found - irrespective of whether a declaration was obtained under rule 27(2) of the Orissa Sales Tax Rules. (b) Rule 27(2) of the Orissa Sales Tax Rules is not ultra vires of the Orissa Sales Tax Act. (c) The letter of the Assistant Sales Tax Officer dated 2nd January 1950, will not absolve the petitioner from liability to pay sales tax if he is otherwise liable, under the law, to pay the same. (d) A declaration under rule 27(2) of the Orissa Sales Tax Rules is not always obligatory on the part of the selling dealer. It is open to him to claim exemption by adducing other evidence so as to bring the transaction within the scope of section 5(2)(a)(ii) of the Orissa Sales Tax Act.
JUDGMENT
NARASIMHAM, C.J. - The following questions of law have been referred to this Court for opinion, by the Member, Sales Tax Tribunal, Orissa, under section 24(1) of the Orissa Sales Tax Act.
"(a) Whether a registered dealer who has admittedly sold jute to another registered dealer in Orissa is liable to pay sales tax, simply because the former has not obtained a declaration in writing, even though the purchase and resale is admitted by the purchasing dealer.
(b) Whether rule 27(2) made under the Orissa Sales Tax Act is ultra vires of the rule-making authority conferred under section 29 of the Orissa Sales Tax Act.
(c) Whether in the circumstances of this case the Sales Tax Department having sent a letter, in No. 7(b) of 2nd January, 1950, directing non-realisation of sales tax from Sinclair Murray & Co. from 12th December, 1949, the petitioner is liable to pay tax.
(d) Whether in view of the provisions of law as laid down in section 5(2)(a)(ii) of the Orissa Sales Tax Act as it stood at the relevant time when the purchase and resale by the purchasing dealer are admitted, it is obligatory to produce any declaration in writing.
2. The facts found and admitted are as follows : The petitioner was a registered dealer in jute for the period in question (1949-50). He sold jute to two firms, namely Messrs Sinclair Murray & Co. and Messrs Banamali Sahu and Dibakar Sahu (who were also registered dealers) during the said period, but omitted to obtain from them the declaration mentioned in rule 27(2) of the Orissa Sales Tax Rules. Notwithstanding the absence of such declaration he claimed execution from sales tax in respect of these sales. His claim for exemption was disallowed both by the Sales Tax Officer and the Assistant Collector of Sales Tax. The Member, Sales Tax Tribunal, also disallowed his claim for exemption. It was admitted before him that the aforesaid two purchasing dealers bought jute from the petitioner for resale outside Orissa. It was further admitted that on 2nd January, 1950, the Assistant Sales Tax Officer wrote a letter to the petitioner [No. 7(b)] directing him not to collect sales tax in respect of jute sold to Sinclair Murrary & Co. because the latter had become a registered dealer in Orissa since the 12th December, 1949. The petitioner alleged that it was on the strength of this letter of the Assistant Sales Tax Officer that he did not collect sales tax from the purchasing dealer (Messrs Sinclair Murrary & Co.) and that having directed the petitioner not to realise sales tax from the purchasing dealer, it was not open to the department now to ask him to pay sales tax in respect of those transactions.
3. The main points of law involved in questions (a), (b) and (d) have already been answered by me in S.J.C. No. 4 of 1958 (Since reported as Member, Sales Tax Tribunal, Orissa v. S. Lal & Co. [1961] 12 S.T.C. 25), where the implications of section 5(2)(a)(ii) of the Orissa Sales Tax Act and of rule 27(2) of the Orissa Sales Tax Rules have been fully discussed. There I have pointed that the substantive right to claim exemption and the liability to pay sales tax on the part of the purchasing dealer arise out of the provisions of section 5(2)(a)(ii) of the Act and the proviso to that sub-clause, and that rule 27(2) of the Orissa Sales Tax Rules is only a rule of evidence which is not meant to be exhaustive, and which is intended for the benefit of the selling dealer; and it is open to all parties to adduce other evidence with a view to bring the transactions within the scope of section 5(2)(a)(ii) of the Act, even though the declaration mentioned in rule 27(2) may not be forthcoming. For the reasons given in the judgment in S.J.C. No. 4 of 1958 (Since reported as Member, Sales Tax Tribunal, Orissa v. S. Lal & Co. [1961] 12 S.T.C. 25), there will be no difficulty in answering these questions.
4. Question (b) refers to the ultra vires nature of rule 27(2) but I see nothing ultra vires in the said rule. When the Act
