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B.S. Guddad and Sons Vs. the State of Mysore - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberS.T.R.P. Nos. 93 and 94 of 1973
Judge
Reported inILR1975KAR255; 1974(2)KarLJ406; [1974]34STC421(Kar)
ActsKarnataka Sales Tax Act, 1957 - Sections 2(1), 5, 5(1), 5(5) and 6; Tamilnadu General Sales Tax Act, 1959 - Sections 5, 6, 7 and 7A
AppellantB.S. Guddad and Sons
RespondentThe State of Mysore
Appellant AdvocateB.V. Katageri, Adv.
Respondent AdvocateM.P. Chandrakantaraj Urs, Government Adv.
Excerpt:
- limitation act (36 of 1963)section 5: [n.k.patil,j] order rejecting application for re-grant of inam property appeal against was filed after inordinate delay of 23 years explained by petitioners saying that they came to know about impugned order only after 23 years however, no statement made as to their source of information held, explanation offered by petitioners does not inspire confidence of court. petitioners duty bound to explain delay satisfactorily by assigning cogent reason and showing bona fide. delay not condoned. - the assessing authority as well as the appellate authorities have not bestowed their attention to the determination of the question whether the sellers were selling paddy exclusively grown by them on their land......in s.t.r.p. no. 93 of 1973, that the assessee is a dealer who manufactures beaten rice from the paddy purchased from agriculturists or non-registered dealers and that section 6 of the act is not attracted where the seller is not a dealer or where he is a dealer his total turnover is less than rs. 25,000. 5. sri chandrakantaraj urs, senior high court government advocate appearing for the state, argued that the view taken by the tribunal that firewood is not consumed in the manufacture of beaten rice is erroneous. he relied upon the decision of the supreme court in ganesh prasad dixit v. commissioner of sales tax : [1969]3scr490 . 6. the questions for determination in these revision petitions are : (1) whether the purchase turnover of paddy from agriculturists or non-registered dealers,.....
Judgment:
ORDER

Govinda Bhat, C.J.

1. These sales tax revision petitions - one by the assessee and the other by the State - are directed against the order of the Karnataka Sales Tax Appellate Tribunal, Bangalore, made in S.T.A. No. 597 of 1972 on 19th April, 1973.

2. The assessee is a dealer under the Karnataka Sales Tax Act, 1957 (hereinafter called the Act). For the year 1969-70, the assessee returned a total and taxable turnover of Rs. 6,24,686.67. But the Additional Commercial Tax Officer, III Circle, Hubli, who is the assessing authority, determined the total and taxable turnover at Rs. 8,85,407.09, which included a turnover of Rs. 2,40,223.84 relating to the purchase of paddy, and a sum of Rs. 10,183.25 relating to the purchase of firewood. The assessee contended that purchases of paddy were made from agriculturists or non-registered dealers and, as such, are not liable to be taxed under section 6 of the Act. The said contention was rejected by the Deputy Commissioner of Commercial Taxes, Dharwar, in the appeal preferred by the assessee. On second appeal to the Sales Tax Appellate Tribunal, Bangalore, it was held that the purchase turnover relating to firewood is not taxable, but the purchase turnover relating to paddy is liable to tax.

3. The assessee's revision petition relates to the levy of tax on the purchase turnover of paddy. The revision petition by the State relates to the exclusion of the turnover of Rs. 10,000 and odd relating to the firewood purchase.

4. It was urged by Sri B. V. Katageri, the learned counsel for the petitioner in S.T.R.P. No. 93 of 1973, that the assessee is a dealer who manufactures beaten rice from the paddy purchased from agriculturists or non-registered dealers and that section 6 of the Act is not attracted where the seller is not a dealer or where he is a dealer his total turnover is less than Rs. 25,000.

5. Sri Chandrakantaraj Urs, Senior High Court Government Advocate appearing for the State, argued that the view taken by the Tribunal that firewood is not consumed in the manufacture of beaten rice is erroneous. He relied upon the decision of the Supreme Court in Ganesh Prasad Dixit v. Commissioner of Sales Tax : [1969]3SCR490 .

6. The questions for determination in these revision petitions are : (1) whether the purchase turnover of paddy from agriculturists or non-registered dealers, whose turnover is less than Rs. 25,000, is not liable to be brought to tax under section 6 of the Act, and (2) whether the view taken by the Tribunal that the purchase turnover relating to firewood is not taxable under section 6 of the Act is right.

7. Paddy is one of the goods, the sale of which is taxable under section 5(1) of the Act. The charge to tax is made under section 5. Sub-sections (1) and (5)(a) of section 5 of the Act which are relevant for the purpose read thus :

'5. (1) Every dealer shall pay for each year tax on his taxable turnover at the rate of three per cent of such turnover :

Provided that if and when to the extent to which such turnover relates to ....... paddy, rice including parched rice and beaten rice and bran ........ the tax shall be calculated at the rate of one and a half per cent of such turnover .......

(5)(a) A dealer whose total turnover in any year is less than twenty-five thousand rupees shall not be liable to pay tax for that year.'

8. Section 6, which was introduced by Mysore Act 9 of 1970, reads thus :

'6. Levy of purchase tax under certain circumstances. - Subject to the provisions of sub-section (5) of section 5, every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods and, ....... shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under section 5 ...............'

9. The language of section 6 is rather involved and the meaning of the same is not at all clear.

10. Section 7 of the Madhya Pradesh General Sales Tax Act, 1958, which is in pari materia with section 6 of the Act came up for consideration before the Supreme Court in Ganesh Prasad Dixit's case : [1969]3SCR490 . In the said case, the assessee was a firm of building contractors who purchased building materials and used them in the course of their business. The dealers who sold the building materials were exempt from payment of tax. Question arose as to whether the contractor who had purchased the building materials was liable to be assessed in respect of the turnover relating to purchase of building materials under section 7 of the Madhya Pradesh General Sales Tax Act, 1958, which reads :

'Every dealer who in the course of his business purchases any taxable goods, in circumstances in which no tax under section 6 is payable on the sale price of such goods and either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State or despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under section 6 ...............'

11. Shah, J. (as he then was), dealing with the contention that the disputed turnover was not liable to tax under section 7 of the Madhya Pradesh General Sales Tax Act, 1958, stated thus :

'The phraseology used in that section is somewhat involved, but the meaning of the section is fairly plain. Where no sales tax is payable under section 6 on the sale price of the goods, purchase tax is payable by a dealer who buys taxable goods in the course of his business, and (1) either consumes such goods in the manufacture of other goods for sale, or (2) consumes such goods otherwise, or (3) disposes of such goods in any manner other than by way of sale in the State, or (4) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce. The assessees are registered as dealer and they have purchased building materials in the course of their business; the building materials are taxable under the Act, and the appellants have consumed the materials otherwise than in the manufacture of goods for sale and for a profit-motive. On the plain words of section 7 the purchase price is taxable.'

12. Section 6 in the Madhya Pradesh General Sales Tax Act, 1958, corresponds to section 5 in the Act. The sellers of the building materials were not liable to tax under section 6 and, therefore, it was held that the purchaser became liable under section 7.

13. The learned High Court Government Advocate submitted that the ratio of the decision in Ganesh Prasad Dixit's case : [1969]3SCR490 is equally applicable to the instant case and, therefore, the purchase turnover relating to paddy is taxable under the Act.

14. Sri Katageri relied on the decision of the Madras High Court in M. K. Kandaswami v. State of Tamil Nadu ([1971] 28 S.T.C. 227), wherein it was held that sales tax cannot be levied at the purchase point of sales inasmuch as the transactions were not liable to tax at all under the Act. The language of section 7-A of the Tamil Nadu General Sales Tax Act, 1959, is not in pari materia with the language of section 6 of the Act whereas section 6 of the Act is in pari materia with section 7 of the Madhya Pradesh General Sales Tax Act, 1958. In view of the decision of the Supreme Court in Ganesh Prasad Dixit's case : [1969]3SCR490 it cannot be contended any longer that if the sellers are not taxable because their individual turnovers were less than Rs. 25,000, the purchaser cannot be brought to charge under section 6.

15. The meaning of section 6 of the Act which is not at all clear appears to us to be this : where the sale attracts the charge to tax under section 5(1) of the Act, but on account of other provisions contained in the Act the transaction is exempt from tax, such sales though not taxable in the hands of the seller, are taxable at the purchase point under section 6. In order to attract the charge to tax under section 5(1) of the Act it must be shown that there is a sale by a dealer. If the sale is not by a dealer there is no initial charge at all under section 5(1) of the Act.

16. The word 'dealer' has been defined under section 2(1)(k) of the Act thus :

'2. (1)(k) 'Dealer' means any person who carries on the business of buying, selling supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration, and includes ...............

Exception. - An agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally shall not be deemed to be a dealer within the meaning of this clause.'

17. According to the above section a person who carries on the business of buying, selling, etc., is a dealer; but an agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally shall not be deemed to be a dealer within the meaning of clause (k) of sub-section (1) of section 2 of the Act. If the assessee has purchased paddy from an agriculturist who has grown the paddy on the land cultivated by him personally, he is not to be deemed to be a dealer. It is not enough if the seller is an agriculturist. The seller may be selling paddy grown on the land cultivated by a tenant or he may sell paddy purchased from others. If the seller exclusively sells the paddy grown on the land cultivated by him personally, then he is not a dealer and, in such an event, there is no charge to tax at all under sub-section (1) of section 5 of the Act. In such cases, the department cannot invoke the provisions of section 6 of the Act to levy tax at the purchase point.

18. In the instant case, the assessee has merely stated that he purchased paddy from agriculturists or non-registered dealers. The assessing authority as well as the appellate authorities have not bestowed their attention to the determination of the question whether the sellers were selling paddy exclusively grown by them on their land. All that is stated is that the sellers are agriculturists or non-registered dealers. The matter, therefore, requires further investigation and fresh adjudication.

19. So far as the turnover relating to firewood is concerned, the Tribunal is not right in the view it has taken that firewood is used for generating energy and, therefore, it is not consumed for the manufacture of beaten rice. The Supreme Court in State of Andhra Pradesh v. H. Abdul Bakshi & Bros. : [1964]7SCR664 has held that tanning bark purchased by the dealer and used in the process of tanning is liable to tax as tanning bark is brought for consumption in manufacturing an article for sale. In view of the said decision, it is clear that the view taken by the Tribunal in regard to the purchase of firewood cannot be sustained.

20. As already stated, since neither the assessing authority nor the appellate authorities have given any finding as to whether the sellers are dealers as defined under section 2(1)(k) of the Act, we are of the opinion that the matter has to be remitted to the assessing authority for fresh investigation and assessment in the light of this order. Accordingly, these revision petitions are allowed and the matter is remitted to the assessing authority for a fresh assessment in accordance with law in the light of this order.

21. Parties will bear their own costs.

22. Ordered accordingly.


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