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Bhudharmull Ramchunder Vs. the Investigating Officer, Government of West Bengal and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberC.R. No. 2244 (W) of 1971
Judge
Reported in[1977]39STC184(Cal)
AppellantBhudharmull Ramchunder
RespondentThe Investigating Officer, Government of West Bengal and ors.
Appellant AdvocateSanjoy Bhattacharya, Adv.
Respondent AdvocateS.N. Dutta, Adv.
Cases ReferredAssam v. Prabhat Marketing Co. Ltd.
Excerpt:
- .....section 14(1) of the bengal finance (sales tax) act, 1941.2. the petitioner sells salt packed in gunny bags. according to the petitioner, the salt comes packed in gunny bags or loose and when the same comes loose, the quantities of salt are packed in gunny bags and sold as such. the petitioner states that no separate price is charged for the said bags which are used for packing of the salt. the petitioner further states that there was no express or implied agreement for sale of the gunny bags used for packing of salt with the parties to whom the salt was and/or is sold. gunny bags are goods within the meaning of the bengal finance (sales tax) act, 1941. so the question is whether the salt sold by the petitioner in gunny bags were liable to sales tax. if the gunny bags were sold and.....
Judgment:

Sabyasachi Mukharji, J.

1. This is an application under Article 226 of the Constitution by Bhudharmull Ramchunder, a partnership firm, chal lenging a notice dated 15th January, 1971, asking the petitioner-firm to produce books of account with all the supporting documents, relevant final accounts and balance sheet for the period from 1st July, 1969, to 14th March, 1970, under Section 14(1) of the Bengal Finance (Sales Tax) Act, 1941.

2. The petitioner sells salt packed in gunny bags. According to the petitioner, the salt comes packed in gunny bags or loose and when the same comes loose, the quantities of salt are packed in gunny bags and sold as such. The petitioner states that no separate price is charged for the said bags which are used for packing of the salt. The petitioner further states that there was no express or implied agreement for sale of the gunny bags used for packing of salt with the parties to whom the salt was and/or is sold. Gunny bags are goods within the meaning of the Bengal Finance (Sales Tax) Act, 1941. So the question is whether the salt sold by the petitioner in gunny bags were liable to sales tax. If the gunny bags were sold and prices were charged for the gunny bags as such, then the petitioner was liable to pay sales tax. If, however, the gunny bags were not sold as such then the petitioner was not liable to pay sales tax. This is a question of fact to be determined in this case.

3. In the case of Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd. [1967] 19 S.T.C. 84 (S.C.), the Supreme Court was dealing with hydrogenated oil. The dealer in that case was selling hydrogenated oil which was exempt from sales tax under the Assam Sales Tax Act, 1947. A question arose as to whether the value of the containers in which the hydrogenated oil was sold could be assessed to tax under the Act. The High Court held that the value of the containers was not assessable to sales tax unless separate price had been charged for the containers. On appeal the Supreme Court held that the value of the containers was assessable to sales tax under the Act if there was an express or implied agreement for the sale of such containers and the mere fact that the price of the containers was not separately fixed made no difference to the assessment of sales tax. The Supreme Court further held as to whether there was an agreement to sell packing material, is a pure question of fact depending upon the circumstances found in each case. Thereafter, it appears that, as a result of the said decision of the Supreme Court, the Public Relations Officer of Government of West Bengal, Directorate of Commercial Taxes, issued a circular drawing the attention of the trade circle to the aforesaid state of affairs and observed, inter alia, as follows :.In this State the value of containers of goods, sales of which are exempted from tax under the provisions of law, were not so long being taxed under administrative instructions if the value of containers was not separately charged for. Since the Supreme Court has clarified the position now, it has been decided that in such cases tax should be charged on the value of containers even if such value is not separately charged for. But to avoid complications and hardship to the dealers it has been decided administratively not to give effect to the said decision in respect of transactions made before 1st July, 1969.

4. Salt is not liable to sales tax under the Bengal Finance (Sales Tax) Act, 1941. On 21st March, 1970, there was another trade circular, which is annexure B to the petition, wherein it was, inter alia, stated as follows:

Having taken into consideration the difficulties of the traders dealing in goods included in Schedule I of the Bengal Finance (Sales Tax) Act, 1941, Government have been pleased to decide that, until further orders, no tax will be levied on sales of the containers and packing materials supplied as such for sale of the goods specified in Schedule I appended to the Bengal Finance (Sales Tax) Act, 1941, provided the price of such containers or packing materials is not separately charged for by the dealers....

5. In the premises, as mentioned hereinbefore, notice under Section 14(1) of the Bengal Finance (Sales Tax) Act, 1941, dated 15th January, 1971, was issued, which is the subject-matter of challenge.

6. Counsel for the petitioner contended that there cannot be any imposition of tax by virtue of a circular. He is absolutely right on this point. But the true position here is that there was no imposition of any tax by virtue of a trade circular. The tax on gunny bags was leviable by virtue of the provisions of the Bengal Finance (Sales Tax) Act, 1941. Only if these were used as containers for selling goods which were not liable to tax a difficulty had arisen and the trade circular merely clarified the position in the light of the decision of the Supreme Court as there was an administrative decision not to impose sales tax in respect of containers of goods which were not liable to tax under the provisions of law. The question, therefore, as mentioned by the Supreme Court, is purely a question of fact to be decided on the facts of each case. For this purpose books of account with all supporting documents, relevant final accounts and balance sheet for the period concerned will be very relevant. In this case, the concerned officer has merely asked the dealer to produce the books of account, all supporting documents, relevant final accounts and balance sheet. In my opinion, it cannot be said that he has acted in any manner in excess of jurisdiction or contrary to the provisions of law.

7. Counsel for the petitioner drew my attention to the decision in the case of Shamsuddin Akbar Khan & Co. v. State of Orissa [1970] 26 S.T.C. 280. There, in a reference under the Orissa Sales Tax Act, 1947, the Division Bench of the Orissa High Court held that containers constituted no integral part of the agreement to sell, that they were of comparatively insignificant value and were used only as a convenient vehicle for putting the purchaser in possession of the gudaku and that there was no sale of the containers and the petitioner was therefore not liable to sales tax. The application of the principle enunciated by the Division Bench of the Orissa High Court would depend upon the facts and circumstances of the case. Reliance was also placed on a decision in the case of Bengal Immunity Co. Ltd. v. State of Bihar [1955] 6 S.T.C. 446 at 456-457 (S.C.). Counsel for the petitioner drew my attention to the observations of the Supreme Court. There the question was regarding realisation of tax in violation of the provisions of Article 265 and Article 286 of the Constitution. There it was observed : 'It is, however, clear from Article 265 that no tax can be levied or collected except by authority of law which must mean a good and valid law. The contention of the appellant-company is that the Act, which authorises the assessment, levying and collection of sales tax on inter-State trade, contravenes and constitutes an infringement of Article 286 and is, therefore, ultra vires, void and unenforceable. If, therefore, this contention be well-founded, the remedy by way of a writ must, on principle and authority, be available to the party aggrieved.' That principle, again, in my opinion, cannot be invoked in the instant case. Counsel for the petitioner also drew my attention to the decision of the Madhya Pradesh High Court in the case of United Excise v. Commissioner of Sales Tax, M.P., Indore [1971] 28 S.T.C. 16. There also on the facts, it was found that the assessing authority was acting beyond the jurisdiction. Reliance was placed on the observations of the Supreme Court in the case of Carl Still G.m.b.H. v. State of Bihar A.I.R. 1961 S.C. 1615 at 1620, para 11. Counsel for the petitioner drew my attention to the observations of the court in paragraph 11 of the judgment at page 1620 of the Reports (at pages 458-459 of 12 S.T.C). It appears that when proceedings were taken before a Tribunal under a provision of law, which was ultra vires, it is open to a party aggrieved thereby to move the court under Article 226 for issuing appropriate writs for quashing them on the ground that they were incompetent, without his being obliged to wait until those proceedings run their full course. In para 10, at the same page of the Reports (page 458 of 12 S.T.C), it was stated that the respondents had no right to impose a tax on the materials supplied in execution of the contract on the footing that such supply was sale. In the instant case, there is no question of resorting to any provision which is ultra vires. It is true that counsel for the petitioner rightly argued that the imposition of tax by virtue of trade circular was beyond the jurisdiction of the assessing authority, but that is not the case as mentioned hereinbefore. The imposition, if any, was not by virtue of any trade circular, but under the provision of the Bengal Finance (Sales Tax) Act, 1941. The question whether there was any express or implied agreement for sale of the gunny bags is a question of fact, as observed by the Supreme Court in the case of Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd. [1967] 19 S.T.C. 84 (S.C) and is a question, which is certainly within the jurisdiction of the respond ent, the assessing authority. Merely because, in an application under Article 226 of the Constitution, the petitioner has made a statement which is not controverted by counter-affidavit or an affidavit-in-opposition by the respondents, the jurisdiction of the respondent-officer to determine that question is not ousted. In that view of the matter, there is nothing in the notice issued which calls for interference in this application under Article 226 of the Constitution.

8. In the premises, the rule nisi is discharged.

9. There will, however, be no order as to costs.

10. Interim orders are vacated.

11. The order, however, will not prejudice the right of the petitioner to take all legal grounds before the assessing authority.

12. Let the operation of the order be stayed for a fortnight from date.


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