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Sundaram Industries Limited Vs. the Assistant Commissioner of Commercial Taxes (Assessment) I, Bangalore Division, Bangalore and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 498 to 500 of 1981 with I.A. II for modification
Judge
Reported in1982(2)KarLJ353; [1983]52STC214(Kar)
ActsConstitution of India Article - Article 226; Karnataka Sales Tax Act - Sections 6-B, 10(2), 21(2) and 25-A; Central Sales Tax Act - Sections 3
AppellantSundaram Industries Limited
RespondentThe Assistant Commissioner of Commercial Taxes (Assessment) I, Bangalore Division, Bangalore and anr
Appellant AdvocateA. Devanathan and ;E.R. Indrakumar, Advs.
Respondent AdvocateB.S. Keshava Iyengar, Advocate-General
Excerpt:
.....its registered office at madurai in the state of tamil nadu (hereinafter referred to as 'the asesses company') challenging the orders of the assistant commissioner of commercial taxes (assessment) i, bangalore division, bangalore, for the assessment years 1973-74, 1974-75 and 1976-77 relating to certain sales of bus bodies to the karnataka state road transport corporation, bangalore, (hereinafter referred to as 'the corporation'). the impugned assessment orders were challenged before the 2nd respondent, deputy commissioner of commercial taxes, bangalore city division, bangalore, in revision under section 21(2) of the karnataka sales tax act (hereinafter referred to as 'the act') but unsuccessfully. the tenders further provide for the payment of karnataka sales tax as well as the..........under a mistake of law treating such transactions as local sales while in fact the same were inter-state sales liable to tax under the central sales tax act in the state of tamil nadu where the bus bodies were built and sold to the corporation. 2. briefly stated, the facts leading to these writ petitions which involve common questions of law and fact are as follows : the asesses company is having its registered office at madurai and branches in other southern states, including the state of karnataka. in the year 1973-74 the asesses company supplied thirty bus bodies and in the year 1974-75 five bodies and in the year 1976-77 two bodies, totalling thirty-seven bodies, to the corporation. the corporation in the relevant years had invited tenders for the construction of bus bodies on their.....
Judgment:

Chandrakantaraj Urs, J.

1. These three writ petitions under article 226 of the Constitution of India are by Messrs. Sundaram Industries Limited having its registered office at Madurai in the State of Tamil Nadu (hereinafter referred to as 'the asesses company') challenging the orders of the Assistant Commissioner of Commercial Taxes (Assessment) I, Bangalore Division, Bangalore, for the assessment years 1973-74, 1974-75 and 1976-77 relating to certain sales of bus bodies to the Karnataka State Road Transport Corporation, Bangalore, (hereinafter referred to as 'the corporation'). The impugned assessment orders were challenged before the 2nd respondent, Deputy Commissioner of Commercial Taxes, Bangalore City Division, Bangalore, in revision under section 21(2) of the Karnataka Sales Tax Act (hereinafter referred to as 'the Act') but unsuccessfully. The impugned assessment orders for the relevant assessment years are produced as annexure K1 dated 28th July, 1975, annexure K2 dated 16th December, 1975, and annexure K3 dated 25th March, 1978. The assessment orders indicate that the assessment orders are concluded against the asesses company's branch at Bangalore where it is registered as a dealer in Karnataka State. The assessment orders in question are challenged on the sole ground that the asesses company got itself assessed for the relevant years and paid tax under the Act in respect of the supply and sale of bus bodies to the corporation under a mistake of law treating such transactions as local sales while in fact the same were inter-State sales liable to tax under the Central Sales Tax Act in the State of Tamil Nadu where the bus bodies were built and sold to the corporation.

2. Briefly stated, the facts leading to these writ petitions which involve common questions of law and fact are as follows :

The asesses company is having its registered office at Madurai and branches in other Southern States, including the State of Karnataka. In the year 1973-74 the asesses company supplied thirty bus bodies and in the year 1974-75 five bodies and in the year 1976-77 two bodies, totalling thirty-seven bodies, to the corporation. The corporation in the relevant years had invited tenders for the construction of bus bodies on their chassis. The asesses company was one of the tenderers. Its tenders came to be accepted. The invitations for tendering are produced at annexures A1, A2 and A3 to the petition. They are dated respectively 28th December, 1972, 15th March, 1973 and 28th November, 1975. The quotations of the asesses company in respect of each of the tender invitations are produced at annexures B1, B2 and B3. They are dated 12th January, 1973, 19th April, 1973, and 13th December, 1975, respectively. The significant feature in the tenders is that they are all submitted by the Bangalore branch of the asesses company and it is not specifically spelt out in the terms of the tenders as to where the bus bodies were to be built except the description that the asesses company's head office at Madurai is one of the largest bus body builders in India building about one thousand bodies per year. The tenders further provide for the payment of Karnataka sales tax as well as the surcharge thereon on delivery of the bus bodies at Bangalore. Nothing else in the tenders themselves in indicative of where the bodies would be built except to the extent indicated above by reference to the head office at Madurai being one of the largest body builders in India.

3. In accordance with the tender terms and conditions, in the return filed by the Bangalore branch of the asesses company under the Act, while claiming exemption in respect of its business turnover at Bangalore, the asesses company got itself assessed to Karnataka sales tax and having collected the same from the Road Transport Corporation, paid the tax for the relevant years to the Karnataka State. For the assessment year 1973-74 the total turnover returned was Rs. 63,41,323.95. The exemption was claimed in respect of turnover amounting to Rs. 52,80,640.22. Thus, the taxable turnover was Rs. 10,60,683.73. The tax paid was Rs. 1,49,467.60. In the assessment year 1974-75 the total turnover returned was Rs. 67,74,778.93. The exemption claimed was in respect of Rs. 64,33,190.18 together with Rs. 43,273.07. Thus the taxable turnover was Rs. 2,98,315.68. Similarly, for the assessment year 1976-77 the total turnover returned was Rs. 85,58,917.07 and the exemption claimed was in respect of Rs. 83,02,644.29 leaving a taxable turnover of Rs. 2,29,108.43. Having regard to the undisputed taxable turnovers of the three relevant assessment years the tax payable was determined together with surcharge under section 6-B of the Act for each of the years (sic). It is also recorded by the first respondent-assessing authority that the company had not effected any sales in the course of inter-State trade during the relevant year and therefore not assessable under the Central Sales Tax Act. It is necessary to point out that the asesses company accepted the assessment orders as correct till it came to know about the decision of the Supreme Court in the case of Union of India v. K. G. Khosla and Co. Ltd. : [1979]2SCR453 which was rendered on 6th March, 1979.

4. Having regard to the ratio decidendi of the aforementioned case, the asesses company preferred revision petitions under section 21(2) of the Act, inter alia, contending that bringing to tax the supply and sale of bodies under the Act treating such supplies and sales as intra-State or local sales was a mistake in law as the bodies were contracted to be built at Madurai and that they were actually built at Madurai and therefore, the sale to the corporation of the bus bodies caused the movement of the goods from Madurai in Tamil Nadu to Bangalore where it was delivered in Karnataka rendering the sales in question inter-State sales liable to tax under the Central Sales Tax Act by the concerned assessing authorities in Tamil Nadu and as such, the assessment orders were ab initio without jurisdiction and therefore illegal.

5. The second respondent-Deputy Commissioner by a composite order dismissed the revision petitions on the ground that he had jurisdiction under section 21(2) of the Act only in respect of cases where the assessment orders in question were prejudicial to the revenue and not otherwise. Aggrieved by such rejection, the asesses company has referred these writ petitions under article 226 of the Constitution of India placing reliance upon the decision of the Supreme Court in the case of Union of India v. K. G. Khosla & Co. Ltd. : [1979]2SCR453 and other cases.

6. The respondents have entered their appearance and filed their statement of objections. It is stated that the impugned assessments were concluded in accordance with the returns filed by the asesses company in the relevant assessment years and that the company was fully aware that it was liable to pay the Karnataka sales tax in accordance with the decision of the High Court of Karnataka in the case of Shankar Vittal Motor Company Limited v. State of Mysore [1964] 15 STC 771. The respondents have denied that the asesses company came to know of its mistake only after 6th March, 1979, when the Supreme Court rendered the decision in Khosla's case : [1979]2SCR453 . In fact, the contention is that the law as regards what constitutes inter-State sale had been declared by the Supreme Court in the case of Tata Iron and Steel Company v. S. R. Sarkar : [1961]1SCR379 and as such, the assessee company could not claim that it acquired knowledge that its sales to the corporation was really inter-State sales only after the Khosla's case : [1979]2SCR453 was decided in 1979. In this context, it is asserted for the respondents that the writ petitions are belated and therefore liable to be rejected by this Court.

7. It is further stated by the respondents that the petitioner-asesses company had not availed of the alternative remedy under the Act inasmuch as any apparent error of law could be rectified under section 25-A of the Act. It is further asserted for the respondents that the revision petitions preferred against the assessment orders under section 21(2) of the Act were correctly held as not maintainable inasmuch as the section had been amended with effect from 1st January, 1978, conferring the power of revision to assessment orders which were only prejudicial to the revenue.

8. It is further asserted that the transactions in question were intra-State sales having regard to the facts and circumstances in which the contracts or sales were concluded between the corporation and the asesses company at Bangalore. In that circumstance, the respondents have prayed that the petitions be rejected as the assessment orders in question were properly made and no refund of tax was due to be made to the petitioner-asesses company.

9. Apart from the above statement of objections, the learned Advocate-General appearing for the respondents, in the course of his arguments, raised a preliminary objection as to the maintainability of the writ petitions on the ground that the petitioner before this Court was the asesses company's branch office at Bangalore which alone had responded to the tenders invited by corporation and therefore now it could not be claimed by the head office that the contract was between the head office at Madurai and the corporation at Bangalore.

10. I do not think there is much force in this preliminary objection. It is not disputed that the petitioner as described in the cause title is a branch of the asesses company which has its registered office at Madurai. The branch at Bangalore is not a different and distinct entity from the asesses company. The branch office at Bangalore has been registered as a dealer in Karnataka State. The effect of it is that the asesses company itself is registered as a dealer. Under the Companies Act under which the asesses company is incorporated no separate legal status is given to the branch of the company wherever it is situated. In that circumstance, the effect of the registration of the branch at Bangalore as a dealer amounts to registration of the asesses company. In any event, the registration of the Bangalore branch of the asesses company is clearly permissible under the mandatory requirement in terms of clause (iv) of sub-section (2) of section 10 of the Act. Therefore, for purposes of determining the disputed questions of law and fact which arise in the petitions, the petitions by the branch at Bangalore should be treated as petitions by the head office at Madurai. Clause (iv) of sub-section (2) of section 10 of the Act provides for compulsory registration as a dealer of every manager or agent of a non-resident dealer. I, therefore, do not think that there is any misdescription of the asesses company in the cause title and even if that were to be construed as misdescription, still the petitions are maintainable as there is no dispute that the branch at Bangalore is the company which tendered and had paid the tax under the impugned assessment orders.

11. What really falls for determination on the facts and circumstances of the case is whether in terms of the transactions of sale of bus bodies, as evidenced by the invitations to tender and the quotations offered by the asesses company, constitute inter-State sales of bus bodies and not local sales. If it is held to be inter-State sales, whether this Court under article 226 of the Constitution of India should disturb the assessment orders which came to be concluded long prior to the filing of the petitions on 8th January, 1981. The further question that falls for determination is whether the petitioner is entitled to have the impugned assessment orders set aside as being without jurisdiction and claim for a direction from this Court for refund of the tax paid under the impugned assessment orders under a mistake of law.

12. In furtherance of the rival contentions reliance was placed on numerous decided cases of the High Courts and the Supreme Court. I do not think any useful purpose will be served by adverting to all the cited cases. The controversy in the cases on hand can be narrowed down to the determination of the nature and character of the sales in respect of which provisions of the Act were pressed into service by the assessing authority.

13. It requires no authority of decided cases that if a sale is an inter-State sale it will attract the provisions of the Central Sales Tax Act and such an inter-State sale or sales stand excluded from the operation of the Act.

14. Sri Devanathan, the learned counsel for the petitioner-asesses company has presented his case on a very narrow compass. It has been his argument that the impugned assessment orders were the result of a mistake of law as neither the assessing authority nor the asesses company were at the relevant time aware of the true nature and character of the sales in question. He has entirely relied upon the ruling of the Supreme Court in Khosla's case : [1979]2SCR453 which made it clear that the sales by the asesses company to the Corporation were inter-State sales. Therefore, it becomes necessary to briefly refer to Khosla's case : [1979]2SCR453 both in respect of facts and the law declared by the Supreme Court.

15. Messrs. Khosla and Company Limited had their registered office (head office) in the Union Territory of Delhi and carried on business of manufacturing air compressors and garage equipments in its factory at Faridabad in Haryana State. Orders for supply of goods from various a parties were received by that company at its head office in Delhi. The goods were manufactured in the factory at Faridabad and received at the head office at Delhi and despatched from the head office to various customers whether outside or inside Delhi. The bills were issued and the payments were received at Delhi. Therefore, the question arose whether the sales of the Company made at Faridabad were in the course of inter-State trade or whether they were intra-State sales effected within the Union Territory of Delhi. The Delhi High Court held that the sales by that company were inter-State sales. On appeal by the revenue, the Supreme Court held : (i) that if a contract of a sale contained a stipulation for the movement of the goods from one State to another, the sale certainly should be an inter-State sale. But for the purpose of section 3(a) of the Central Sales Tax Act it was not necessary that the contract of sale must itself provide for the cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. A sale could be inter-State sale even if the contract of sale did not itself provide for the movement of goods from one State to another but such movement was the result of a covenant in the contract of sale or was an incident of that contract; (ii) that goods conforming to agreed specifications having been manufactured at Faridabad, the contracts of sale could be performed by the respondent only by the movement of the goods from Faridabad with the intention of delivering them to the purchasers. Although the contracts of sale did not require or provide that the goods should be moved from Faridabad to Delhi, the movement of the goods was occasioned from Faridabad to Delhi, as a result or incident of the contracts of sale made in Delhi.

16. In the light of the above enunciation of the Supreme Court, Sri Devanathan contends that looking at the invitation to tender which was addressed to tenderers both inside and outside Karnataka and the offer made by the asesses company it was clear that the bodies could be built only at Madurai where the asesses company has the head office and the factory, though it was not spelt out in detail in the offer or tender that the bodies were going to be built at Madurai. In fact, the thrust of his arguments has been that the corporation was fully aware that the bodies could be built only at Madurai and not at the branch office at Bangalore where only the factory is maintained for re-treading of tyres and repairing motor vehicles. The emphasis of the argument is entirely based on the ruling of the Supreme Court that a sale could be an inter-State sale even if the contract of sale did not specifically provide for the movement of goods from one State to another but the movement was a result or incident of that contract. He has undoubtedly drawn the attention of the court to some specific provisions in the actual contract of sale which are produced at annexures D1, D2 and D3 to the petition. These provisions relate to the facilities being provided by the asesses company to the Chief Mechanical Engineer of the corporation or his assistants to inspect the work as and when required. That provision itself in the contract of sale is not indicative of the fact as to where the bus bodies would be built. In fact, the intrinsic evidence that the work tendered would be performed only at Madurai is available in tenders made by the asesses company which are uniform in respect of all the three contracts relating to the three assessment years. Annexures B1, B2 and B3, which are in identical terms have this provision :

'SECURITY DEPOSIT : We request, we may be exempted from remittance of such deposits. Our head office is one of the largest body builders in India. They build about 1,000 bodies per year. They have been constructing a number of bus, lorry and van bodies to various Government departments, public sector undertakings, State transport services, State Electricity Boards, etc., and they have been exempted from remittance of such deposits in those case. They have executed the orders to the fullest satisfaction of those concerned. They are on the list of approved body building contractors of DGS & D, New Delhi. Their registration number is CS-4 Reg. 332826-S. They have also been recognised as approved body builders by the Governments of Mysore, Tamil Nadu and Kerala. However in lieu of Security deposit, we are prepared to furnish you with Bank Guarantee.

17. A perusal of the above would leave no one in doubt that the tenders though made by the branch at Bangalore was on the implicit understanding that the bodies would be built at Madurai where the head office of the asesses company had its body building division. This statement in the tender read with the conditions contained in the contracts for inspection of the work by the agents of the corporation, transportation of chassis from Bangalore to the place of body construction and return of the chassis after construction of bodies and delivery at Bangalore clearly establish that both the parties knew that the movement of the bus bodies from Madurai to Bangalore was a direct incident of the contract.

18. In the light of this, the contention of the learned Advocate-General that the contract of sale did not provide for the movement of goods from Madurai to Bangalore and therefore notwithstanding that the tenderer chose to have the body built at Madurai, the sale which was contracted and concluded by delivery at Bangalore should be construed as intra-State sale and therefore not inter-State sale has no force. The ruling of the Supreme Court in Khosla's case : [1979]2SCR453 is clear that irrespective of the absence of a specific term or condition in the contract for movement of goods, if movement is occasioned of the goods from one State to another State such a sale would be inter-State sale. The respondents' contention in the facts and circumstances of the case is liable to be rejected.

19. Similarly, the contention of the learned Advocate-General that the facts in Khosla's case : [1979]2SCR453 are different from the facts of the present case is also liable to be rejected as on a close examination, it is clearly seen that the facts are similar. In this case, instead of the head office being at Bangalore the branch office is at Bangalore receiving the order. The factory where the bus bodies are to be built is at Madurai in Tamil Nadu. That the bodies where in fact built at Madurai is not seriously disputed by the learned Advocate-General. But for this transposition of the situation of the sales office and factory other facts are almost identical.

20. In the case of Indian Oil Corporation Limited v. Union of India : [1981]1SCR673 similar is the view expressed by the Supreme Court. In the said decision, on the fact that the very nature of the contract made it implicit that the refinery was situated at Barauni in the State of Bihar and it had also a depot at Panki, Kanpur, in U.P., it was held that presumably the performance of the contract was by the refinery outside the State of U.P. and in that circumstance the movement of the goods in question was held to be a direct incident of contract of sale and no specific mention was required to be made.

21. In this view of the matter, I have no hesitation to hold that the sales in question by the asesses company to the corporation at Bangalore were an inter-State sale and therefore, the first respondent-Assistant Commissioner of Commercial Taxes did not have jurisdiction under the Act to assessee the turnover to the State sales tax.

22. The next question is whether this Court exercising jurisdiction under article 226 of the Constitution, in the circumstances of the case, should give the relief prayed for the petition. The reliefs claimed are two fold : one is to quash the proceedings of assessment as being without jurisdiction and another is for refund of tax paid under the aforementioned mistake of law.

23. The learned Advocate-General has strenuously contended that none of the materials now placed before the Court to spell out the character and nature of the sale transactions in question were before the assessing authority and therefore, the assessment could not be said to be illegal. It is true that materials placed before this Court were not before the assessing authority. The fact is that the asesses company has admitted that it did not dispute the liability to pay the Karnataka sales tax as it was under a mistaken impression that Karnataka sales tax was due on the transactions in question. In that circumstance there was not any need to place any material before the assessing authority. The asesses company's stand throughout before this Court and the revisional authority is that only after the decision in Khosla's case : [1979]2SCR453 that it came to know that levy of Karnataka sales tax was not warranted in regard to the transactions as the same were only subject to payment of Central sales tax under the Central Sales Tax Act.

24. In fact, it has been brought to the notice of the Court that after the decision in Khosla's case : [1979]2SCR453 the Tamil Nadu sales tax authorities at Madurai initiated proceedings and brought to tax the very same transactions under the provisions of the Central Sales Tax Act. Appeals filed in that behalf by the asesses company are said to be pending before the Tamil Nadu Sales Tax Appellate Tribunal (Madurai Bench). This fact has not been disputed by the respondents. A mere illegality in the course of the assessment proceedings may not compel this Court to interfere with the assessments after a considerable lapse of time. But when the levy of tax by the said assessment proceedings is clearly without jurisdiction rendering the levy of tax without the authority of law contrary to article 265 of the Constitution, it would certainly call for interference by this Court. No doubt, inordinate delay in approaching this Court would deprive the petitioner of the benefit of interference by this Court under article 226 of the Constitution. But in this case the petitioner has claimed the knowledge of the mistake of law only after 6th March, 1979, when the Supreme Court decided the Khosla's case : [1979]2SCR453 . Soon thereafter, the asesses company has preferred the revision petition before the appropriate authority for relief though unsuccessfully. That remedy may have been misconceived. But that misconception was again a genuine mistake in the understanding of the law and not because of negligence.

25. In that view of the matter, the asesses company approaching this Court immediately after the revision petitions were dismissed for want of jurisdiction should not disentitle the petitioner for reliefs on the grounds of laches or delay or even negligence. This is the view I have taken in the case of ITC, Limited v. Union of India [1980] 2 Kar LJ 39 following the decision of the Supreme Court in the case of Shiv Shankar Dal Mills v. State of Haryana : [1980]1SCR1170 wherein the Supreme Court observed that there was no law of limitation especially for public bodies on the virtue of returning what was wrongly recovered to whom it belongs. Nor was it palatable to our jurisprudence to turn down the prayer for high prerogative writs, on the negative pleas of 'alternative remedy', since the root principle of law married to justice, was ubi jus ibi remedium.

26. In the result, these petitions are allowed. The impugned assessment orders at annexures K1, K2 and K3 are set aside in so far as they bring to tax under the Act sales of bus bodies in the relevant assessment years as being without jurisdiction. Following the orders made in Khosla's case : [1979]2SCR453 by the Supreme Court, I direct the tax paid by the asesses company in respect of the assessments impugned in these writ petitions shall be remitted by the first respondent to the extent of the asesses company's liability under the relevant assessment orders passed under the Central Sales Tax Act by the authorities in Tamil Nadu as finally determined by the Sales Tax Appellate Tribunal before whom appeals in M.T.A. Nos. 642/80, 643/80 and 644/80 are pending. The balance, if any, shall be paid to the Karnataka Road Transport Corporation if a claim is made by them. This would serve the ends of justice as otherwise the asesses company would have been levied sales tax twice under different enactments when it is liable to pay only under the Central Sales Tax Act.

27. Rule is made absolute in terms indicated above.

28. There will be no order as to costs.

Order dated 21st June, 1982, in Application for modification.

Chandrakantaraj Urs, J.

29. This is an application made by the writ petitioner after the judgment was pronounced seeking modification in the directions issued by this Court.

2. I had directed that the concerned sales tax authorities in Karnataka should transmit the amount paid by the petitioner-company under a mistake of law to the corresponding authorities in Tamil Nadu State. That was the prayer made by the counsel at the time of arguments. But, it now transpires that when the judgment was reserved, in the interregnum before the order was passed, the petitioner-company has paid on 31st March, 1982, the sums due to the Tamil Nadu sales tax authorities and it is submitted that there is no question of any balance payable to the Karnataka State Road Transport Corporation. As taxes have now been paid in both the States, on the same transactions, it is just and necessary that a direction may be made to the first respondent to refund the amount paid by the company for the assessment years 1973-74, 1974-75 and 1976-77 in respect of the payments made to the Tamil Nadu sales tax authorities under the Central Sales Tax Act for the relevant years regarding the same transactions. The certificate is also produced.

3. I am satisfied with the submission made. The petitioner is entitled to the modification and I therefore now direct that the respondents should refund the amounts paid by the petitioner-company to the Karnataka sales tax authorities in respect of the bus body building transactions for the years 1973-74, 1974-75 and 1976-77. My earlier order in this writ petition will stand modified accordingly.


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