1951 (3) TMI 20 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the assessee was a dealer within the meaning of Section 2(c) of the Bihar Sales Tax Act, 1944.
2. Whether the assessee was liable to pay sales tax for the quarters ending 31st December 1944 and 31st March 1945.
3. Whether the assessee was liable to pay any penalty.

Issue-wise Detailed Analysis:

1. Dealer Definition under Section 2(c):
The primary question was whether the assessee qualified as a dealer under Section 2(c) of the Bihar Sales Tax Act, 1944. The assessee argued that the production of dehydrated meat was managed by a separate entity under a deed of partnership dated 23rd March 1944. However, the court found that this arrangement was merely administrative and did not alter the assessee's responsibility under the contract with the Government of India. The contract was signed by Messrs. Amin Brothers, who remained accountable for the supply of dehydrated meat. Thus, the court concluded that the assessee was indeed a dealer within the meaning of Section 2(c).

2. Liability to Pay Sales Tax:
The assessee contended that they were a labor contractor and not engaged in the sale of goods as defined under Section 2(g) of the Bihar Sales Tax Act. The Board of Revenue found that the assessee paid for the dressed meat and received payment from the Government of India for the dehydrated meat, indicating a sale transaction. The court agreed, noting that there was a transfer of property for valuable consideration, thus constituting a sale under Section 2(g). Furthermore, the court addressed the applicability of Section 4(2), which the assessee claimed exempted them from tax for the quarters in question. The court clarified that the liability arose under Section 4(1), which imposed tax on dealers with a gross turnover exceeding Rs. 5,000 in the preceding year. The assessee had been conducting business in Bihar prior to the period in question, making them liable under Section 4(1).

3. Penalty Imposition:
The assessee argued against the penalty, citing a bona fide belief that sales to the Government were exempt from tax, supported by correspondence between the Government of India and Bihar Government. The court found merit in this argument, noting that the assessee applied for registration promptly after being informed of the Bihar Government's decision. Additionally, a letter from the Sales Tax Officer indicated that meat was exempt from sales tax, further supporting the assessee's claim of no wilful default. Consequently, the court ruled that the penalty should not have been imposed.

Conclusion:
The court held that the assessee was a dealer under Section 2(c) and was liable to pay sales tax for the specified quarters. However, the imposition of a penalty was deemed unjustified due to the assessee's bona fide belief and prompt action upon clarification. The court ordered the assessee to pay costs for the reference, with a hearing fee of Rs. 250.