1983 (11) TMI 328 - SC - VAT and Sales Tax

Whether the appellant-company could be regarded as a dealer within the meaning of section 2(5) read with the explanation thereto of the Orissa Taxation (on Goods Carried by Road and Inland Waterways) Act, 1959? Held that - Appeal dismissed. High Court was right in coming to the conclusion that the appellant-company was a dealer within the meaning of section 2(5) read with the explanation thereto of the Orissa Taxation Act, 1959 as both the principals (the jute companies) had their registered offices in Calcutta (West Bengal), that their principal businesses were carried on in Calcutta (West Bengal) and that the central management and control of the businesses was done from Calcutta. It is true that these two jute companies had storage equipment and godowns at Kendupatna in the State of Orissa but on their own showing (vide certificates of registration) at Kendupatna they had additional places of businesses .

Summary

Issues Involved:
1. Whether the appellant-company could be regarded as a "dealer" within the meaning of section 2(5) read with the explanation thereto of the Orissa Taxation Act.
2. Whether the assessment orders were passed without following the principles of natural justice.

Issue-wise Detailed Analysis:

1. Interpretation of "Dealer" under Section 2(5) of the Orissa Taxation Act:

The primary issue was whether the appellant-company could be considered a "dealer" under section 2(5) read with the explanation of the Orissa Taxation Act, 1959. The appellant-company was managing agent and secretary/treasurer for two jute mills, storing jute in godowns at Kendupatna, Orissa. The appellant contended it did not have a place of business in Orissa and thus could not be assessed as a dealer. The court held that the definition of "dealer" includes an agent of a non-resident dealer who stores goods within Orissa. The explanation to section 2(5) deems the manager or agent of a dealer residing outside Orissa as a dealer for the purposes of the Act, irrespective of whether the agent resides or has a place of business within Orissa. The court emphasized that the agent's place of residence or business is irrelevant; what matters is the act of storing goods within Orissa. The court rejected the argument that the agent must have a place of business in Orissa to be assessed.

2. Residence of the Principal Companies:

The appellant argued that the principal jute companies were not "non-resident dealers" as they had places of business in Orissa. The court referred to legal principles distinguishing the concepts of nationality, domicile, and residence of a company. For tax purposes, a company's residence is where its actual management occurs. The jute companies had their central management and control in Calcutta, with only additional places of business in Orissa. Therefore, they were considered non-resident dealers in Orissa. The court cited the House of Lords decisions in *Egyptian Delta Land and Investment Co. v. Todd* and *De Beers Consolidated Mines v. Howe*, affirming that the central management and control determine a company's residence. Since the jute companies' central management was in Calcutta, they were non-resident dealers in Orissa, making the appellant-company their agent subject to assessment under the Act.

3. Principles of Natural Justice:

The appellant also challenged the assessment orders on the ground of violation of natural justice, arguing they were made without an opportunity to respond to the Inspector's report. The High Court had set aside the assessment orders and remanded the proceedings for fresh assessment, ensuring the appellant would get a reasonable opportunity to meet or explain the materials relied upon by the assessing officer. The Supreme Court did not delve into this issue further, as the High Court's decision to remand the matter was not contested.

Conclusion:

The court concluded that the appellant-company was a dealer within the meaning of section 2(5) read with the explanation of the Orissa Taxation Act. The appeal was dismissed with costs, affirming the High Court's judgment that the appellant-company could be assessed as a dealer under the Act.