1960 (9) TMI 54 - SC - VAT and Sales Tax

Supreme Court sets aside High Court judgment, upholds tax liability based on sales location

The Supreme Court allowed the appeal, setting aside the High Court's judgment and order. The respondent's contention of not being a dealer in Orissa was ... Whether section 29(2)(s) in so far as it empowers the State Government to make a rule prescribing fees for appeals and applications in revision was within the legislative competence of the Provincial Legislature? Held that:- We do not think that section 29(2)(s) can be held to be bad on the ground of legislative in- competence. Nor do we think that rule 59 goes beyond what is permitted under section 29(2)(s). The fees imposed are not taxes at all; they come within the expression 'other matters (including fees) incidental to the disposal of appeals and applications for revision etc. Unable to agree with the High Court that the word 'incidental' has reference to a matter of casual nature only. The procedure for disposal of an appeal includes as a necessary incidental matter the filing of an appeal on a proper fee. We consider that the fees imposed by rule 59 are for services rendered by a govern- mental agency and though ordinarily fees are uniform, there may be various kinds of fees and it is not possible to formulate a definition that would be applicable to all cases. Section 12(5) talks of a period, and the period may consist of more than one quarter. The return has, however, to be submitted in Form IV which read with rule 20 of the Orissa Sales Tax Rules, 1947, requires the assessee to furnish details of his turnover for each quarter. The assessment must, therefore, be made on the taxable turnover of each quarter - unable to hold that the assessment for the last three quarters was bad - Appeal allowed. Issues Involved:1. Whether the respondent was a dealer in Orissa.2. Constitutionality of the assessment orders due to the repeal of the second proviso to section 2(g) of the Orissa Sales Tax Act.3. Legality of the fees levied under rule 59 of the Orissa Sales Tax Rules, 1947.4. Validity of the notice issued under section 12(5) of the Orissa Sales Tax Act.5. Assessment and penalty imposition under section 12(5) of the Orissa Sales Tax Act.Detailed Analysis:1. Dealer Status in Orissa:The respondent, a partnership firm dealing in bidi leaves, contended that it was not a dealer in Orissa as the sales were not effected in Orissa. However, during the appeal, the respondent's pleader admitted that 'the sales were completed in Orissa'. This admission meant the sales fell within the definition of 'sale' under section 2(g) of the Orissa Sales Tax Act, making the respondent liable to tax in Orissa. The Supreme Court found that the High Court erred in considering the repeal of the second proviso to section 2(g) since the admission made the consideration of the proviso unnecessary.2. Constitutionality of Assessment Orders:The High Court held that the assessment orders were unconstitutional due to the repeal of the second proviso to section 2(g) by the Adaptation of Laws Order, 1950. The Supreme Court disagreed, stating that the clear admission by the respondent that sales were completed in Orissa made it unnecessary to consider the second proviso or its repeal. The Court emphasized that the admission was factual and not a question of law, thus binding on the respondent.3. Legality of Fees Levied:The High Court found that the fees levied under rule 59 of the Orissa Sales Tax Rules amounted to an unwarranted tax. The Supreme Court overturned this finding, stating that section 29 of the Act empowered the State Government to make rules for fees incidental to the disposal of appeals and applications for revision. The fees were not taxes but charges for services rendered by a governmental agency, falling within the legislative competence of the Provincial Legislature under items 48 and 54 of List II of the Seventh Schedule of the Government of India Act, 1935.4. Validity of Notice under Section 12(5):The High Court held that the notice issued under section 12(5) was not in accordance with law due to the failure to score out unnecessary words in Form No. VI. The Supreme Court found this to be an error, as the respondent clearly understood the notice was under section 12(5) and responded accordingly. The notice explicitly stated the requirement to show cause for not imposing a penalty under section 12(5).5. Assessment and Penalty Imposition:The respondent argued that the assessment for the last three quarters was invalid due to the lack of a specific notice under section 12(5). The Supreme Court noted that the assessing officer had directed the respondent to produce accounts for these quarters, and reasonable opportunity was given. Section 12(5) allows for best judgment assessment for 'all subsequent periods' after giving the dealer a reasonable opportunity of being heard, which was satisfied in this case.Conclusion:The Supreme Court allowed the appeal, set aside the High Court's judgment and order dated September 5, 1955, and dismissed the respondent's writ petition. The appellants were entitled to their costs in the High Court and the Supreme Court. The Supreme Court upheld the assessment orders, the legality of the fees levied, and the validity of the notice under section 12(5).