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Hormusji Hirjibhoy and Co. Vs. Commercial Tax Officer, Circle Ii, Hubli - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition No. 97 of 1961
Judge
Reported in[1962]13STC773(Kar)
ActsConstitution of India - Articles 226 and 227; Central Sales Tax Act, 1956 - Sections 5(1) and 15
AppellantHormusji Hirjibhoy and Co.
RespondentCommercial Tax Officer, Circle Ii, Hubli
Appellant AdvocateG.S. Ullal, Adv.
Respondent AdvocateD.M. Chandrasekhar, High Court Government Pleader
Excerpt:
.....15 which forbade levy of sales tax on declared goods at more than one stage infringed - only purchase turnover of petitioner during assessment year on which petitioner called upon to pay tax was price paid by him for purchase of groundnuts which he did not sell during assessment year but part of which sold subsequently - part of section 15 which forbade levy of sales tax not transgressed. - constitution of india article 226; [anand byrareddy, j] establishment of petrol bunk prescription of distance of 300 meters between two adjacent fuel stations held, the prescription is in respect of fuel filling stations situated adjacent to each other and not to stations which are on opposite sides of road. there is no minimum distance between such stations on opposite sides of road,..........year commencing on 1st april, 1958, and ending on 31st march, 1959, under the provisions of the mysore sales tax act, 1957. the commercial tax officer determined the taxable turnover of the petitioner to be rs. 6,27,902-49 np. and called upon the petitioner to pay a tax of rs. 12,558-04 np. 2. the turnover which was determined in that way related to the transactions of the petitioner in cotton seeds and groundnuts. the correctness of the determination of the turnover by the commercial tax officer is not questioned by the petitioner. but what is contended on his behalf by his learned advocate, mr. ullal, is that to the extent of rs. 1,60,706-38 np., which represented the sum of money for which the petitioner sold certain quantity of groundnuts after 31st march, 1959, the turnover was.....
Judgment:
ORDER

Somnath Iyer, J.

1. The petitioner before us who is a dealer in cotton seeds and groundnuts in Hubli, questions the correctness and validity of the assessment made by the Commercial Tax Officer, Circle 2, Hubli, in respect of his turnover for the year commencing on 1st April, 1958, and ending on 31st March, 1959, under the provisions of the Mysore Sales Tax Act, 1957. The Commercial Tax Officer determined the taxable turnover of the petitioner to be Rs. 6,27,902-49 nP. and called upon the petitioner to pay a tax of Rs. 12,558-04 nP.

2. The turnover which was determined in that way related to the transactions of the petitioner in cotton seeds and groundnuts. The correctness of the determination of the turnover by the Commercial Tax Officer is not questioned by the petitioner. But what is contended on his behalf by his learned Advocate, Mr. Ullal, is that to the extent of Rs. 1,60,706-38 nP., which represented the sum of money for which the petitioner sold certain quantity of groundnuts after 31st March, 1959, the turnover was not taxable.

3. Now, this sum of Rs. 1,60,706-38 nP., was the price realised by the petitioner in respect of the sales of groundnuts made by him after 31st March, 1959. Mr. Ullal says that, since groundnuts were 'declared goods' not only within the meaning of that expression occurring in the Mysore Sales Tax Act but were also goods declared to be of special importance in inter-State trade or commerce within the meaning of that expression occurring in Article 286 of the Constitution the imposition of sales tax under the Mysore Sales Tax Act was subject to the restrictions and conditions imposed upon such levy by a law made by Parliament. The Central Sales Tax Act, 1956, according to Mr. Ullal, imposed a restriction on the imposition of such tax, and that restriction is, according to him, what is contained in section 15 of that Act.

4. Now, under the Mysore Sales Tax Act, as provided by section 5(4) of that Act, in the case of goods mentioned in column 2 of the Fourth Schedule to that Act, sales tax can be levied only in the case of the last purchase of those goods. Since groundnuts are goods mentioned in column 2 of the Fourth Schedule it is obvious that sales tax under the Mysore Act can be levied only in the case of the last purchase of groundnuts.

5. Section 15 of the Central Sales Tax Act reads :-

'15. Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :-

(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed two per cent. of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;

....................'

6. Article 286(3) of the Constitution directs that a State law in so far as it imposes or authorises the imposition of a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, shall be subject to such restriction and condition in regard to the system of levy, rates and other incidence of the tax as Parliament may by law specify.

7. Now, the Central Sales Tax Act is one such law and the 14th section of that law declares oil seeds to be of special importance in inter-State trade or commerce. Since it is not disputed, and in my opinion rightly, that groundnuts are oil seeds, it is obvious that the Mysore Sales Tax Act in so far as it imposes sales tax on the sales or purchases of groundnuts is subject to the restrictions and conditions imposed on the levy of such tax by the Central Sales Tax Act.

8. Section 15 of the Central Sales Tax Act states that in respect of goods declared to be of special importance in inter-State trade or commerce, the sales tax imposed by a State law shall be subject to two conditions. The first of them is that the tax shall not exceed 2% of the sale or purchase price and the second is that the tax shall not be levied at more than one stage.

9. The Fourth Schedule to the Mysore Act imposes sales tax only at 2% of the turnover relating to groundnuts and, therefore, the first condition specified in section 15 of the Central Act is not violated. The only question is, whether the provision contained in section 15, which forbids the levy of sales tax on declared goods at more than one stage, has been infringed in this case.

10. The Commercial Tax Officer's finding was that during the assessment year the petitioner was the last purchaser of groundnuts on the purchase of which the petitioner has been called upon to pay sales tax. The petitioner stated to the Commercial Tax Officer that he sold part of the groundnuts purchased by him during the assessment year to another dealer, and, that part of the purchase turnover of the petitioner during the assessment year has not been subjected to any tax. The only purchase turnover of the petitioner during the assessment year on which the petitioner has been called upon to pay sales tax is the price paid by him for the purchase of groundnuts which he did not sell during the assessment year but part of which was sold by him only subsequently.

11. It is not the petitioner's case that any sales tax has been levied by the Sales Tax Authorities in respect of any part of the turnover of the petitioner at more than one stage, although the petitioner's contention is that some part of the groundnuts purchased by him during the assessment year has been subsequently sold by him. It is not alleged that the person to whom the groundnuts were sold has been called upon to pay sales tax in respect of the purchase made by him. It is thus clear that that part of the 15th section of the Central Sales Tax Act which forbids the levy of sales tax in respect of transactions relating to declared goods at more than one stage, has not to any extent been transgressed.

12. But Mr. Ullal however contends that even so the assessment made by the Commercial Tax Officer is not permitted by section 5(4) of the Mysore Act. Now section 5(1) of the Mysore Act reads :-

'5. Levy of tax on sale or purchase of goods. - (1) Every dealer shall pay for each year tax on his total turnover at the rate of 2% of such turnover : * * * *'

13. Then section 5(4) reads -

'(4) Notwithstanding anything contained in sub-section (1) a tax under this Act shall be levied in respect of the sale or purchase of any of the declared goods mentioned in column (2) of the Fourth Schedule at the rate and only at the point specified in the corresponding entries of columns (4) and (3) of the said Schedule on the dealer liable to tax under this Act on his turnover of sales or purchases in each year relating to such goods : * * * *'

14. This was how the sub-section read during the relevant assessment year. It is not disputed that during the assessment year the petitioner was the last purchaser of the goods involved in the turnover which has now been taxed by the Commercial Tax Officer. It is also not disputed that the rate at which the tax has been imposed is that specified in the Fourth Schedule to the Mysore Act. But what is urged on behalf of the petitioner is that, since section 5(4) of the Mysore Act imposes sales tax only on the last purchase of the goods specified in the Fourth Schedule and since the petitioner is not the person who made the last purchase since admittedly after having made the purchase during the assessment year he sold part of the goods so purchased by him to another dealer after the expiry of the assessment year, it was not possible for the Commercial Tax Officer to call upon the petitioner to pay any tax on the purchases of those goods by him during the assessment year.

15. In other words, the argument is that the incidence of tax is not on the last purchase in the assessment year, but only the last purchase in the chain of transactions after which there is no sale of the goods.

16. If this contention is correct, it follows that to the extent of Rs. 1,60,706-38 nP. which was the price realised by the petitioner by the sale of groundnuts after the assessment year, the turnover in the case of the petitioner would not form part of the taxable quantum. The question therefore whether Mr. Ullal is right in contending that the last purchase which is taxable under section 5(4) of the Mysore Act is not the last purchase in the assessment year but the last purchase by one who after purchasing the goods does not again sell them.

17. In my opinion, section 5(4) speaks of the last purchase of a dealer in the assessment year. The words 'on his turnover of purchases in each year relating to such goods' occurring in section 5(4) make it plain that that is the correct construction to be placed upon section 5(4).

18. The word 'year' occurring in that sub-section is defined by section 2(x) which reads -

''Year' means the financial year commencing on the 1st day of April, but, for purposes of assessment a dealer may at his option declare that he will adopt the year for which the accounts of that dealer are ordinarily maintained in his books and where no such declaration is made the year commencing on the 1st of April and ending on the 31st March shall be reckoned as the assessment year.'

19. The petitioner admittedly did not declare that he would adopt any other accounting period, with the result that the assessment year in this case was the year commencing on the 1st of April, 1958, and ending on the 31st March, 1959. That being so, if, on a correct construction of section 5(4) of the Mysore Act the tax can be levied in the case of the last purchase in the assessment year, it becomes obvious that the petitioner being the last purchaser of the goods in the assessment year, the Commercial Tax Officer was right in assessing the purchase turnover in his hands.

20. In my opinion, section 5(4) makes it clear that if a dealer is the last purchaser of the goods in the assessment year, he is clearly liable to pay the tax in respect of that purchase turnover even if he, in his turn, sells those goods to another dealer after the expiry of the assessment year. Section 5(4) does not concern itself with a purchase other than that made in the assessment year provided the goods are not again sold by the purchaser during that year. The liability to pay the tax referred to in that section which arises by reason of the purchase being the last purchase in the assessment year does not disappear if the goods are not again sold during that year but only subsequently.

21. Although Mr. Ullal suggested that this construction which I am disposed to place on section 5(4) is not justified by the language to section 5(4), it does not appear to me that the criticism is substantial. In my opinion, section 5(4) has to be read as hereunder :

Notwithstanding anything contained in sub-section (1), on his turnover of purchases in each year relating to such goods, the tax under this Act shall be levied in the case of the last purchase of any of the declared goods mentioned in column (2) of the Fourth Schedule at the rate specified in the corresponding entry of column (3) of the said schedule on the dealer liable to tax under the Act.

22. The words 'last purchase' occurring in this sub-section refers to the last purchase, the price paid for which is included in the 'turnover of purchasers in each year' to which the concluding part of that sub-section refers.

23. Any other construction would lead to the incongruous result that every dealer who is the last purchaser in his assessment could by making a subsequent sale during the next year pass on the liability to his purchaser who could in his turn do the same thing making the levy of tax impossible until a purchaser is found who makes no further sale himself. A construction lending to such consequences should, in my opinion, not commend itself to us.

24. The view that I have taken in this case receives support from the pronouncement of their Lordships of the High Court of Bombay in Kishinchand Chellaram v. Commissioner of Income-tax ([1956] 29 I.T.R. 993), wherein Chagla, C.J., observed at page 1,000 :

'It is difficult to understand on what principle of taxation law can an assessee rely on a subsequent event in order to escape taxation which he is properly liable to pay as far as the assessment year itself is concerned.'

25. The same view was taken by their Lordships of the High Court of Kerala in Abdulsalam Rowther v. State of Kerala ([1962] 12 S.T.C. 98), in which it was pointed out that under the provision of an enactment similar to that of the Mysore Sales Tax Act, an assessee who was the last purchaser during the assessment year, was liable to pay tax on his purchase turnover even if he had subsequently sold the goods after the expiry of the assessment year.

26. In my opinion, the assessment made by the Commercial Tax Officer in this case is not open to the criticism that any part of the turnover in the hands of the petitioner was not part of the taxable turnover.

27. Mr. Ullal prays that in respect of the turnover of Rs. 1,60,706-38 nP. the petitioner would be entitled to a refund, if sales tax on that part of the turnover had been collected from the dealer to whom the petitioner has subsequently sold the groundnuts. Whether the petitioner is entitled to such refund is a question on which we should not, in my opinion, express any opinion in this case. It would be for the petitioner to work out his rights in that regard independently.

28. This writ petition, therefore, fails and is dismissed. No costs.

Iqbal Hussain, J.

29. I agree.

30. Petition dismissed.


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