1952 (7) TMI 8 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction and applicability of the Orissa Sales Tax Act, 1947.
2. Limitation period for filing a petition against the refusal to state a case.
3. Legality of the assessment based on the definition of "sale" under the Orissa Sales Tax Act.

Issue-wise Detailed Analysis:

1. Jurisdiction and Applicability of the Orissa Sales Tax Act, 1947:

The petitioners, a limited company incorporated under the Indian Companies Act, 1913, with their head office in Calcutta, were engaged in the business of bamboos and Sabaigrass, supplying these to various paper mills. Despite conducting business for a long period, they did not register under Section 9 of the Orissa Sales Tax Act. The Sales Tax Officer issued a notice under Section 12, clause (5), of the Act, which the firm contested, claiming that the sales occurred outside Orissa and thus were not taxable in Orissa. However, the Sales Tax Officer assessed a tax of Rs. 3,215-10-0 based on a letter from the Collector of Commercial Taxes, which stated that the export of bamboos to Bengal constituted a "sale" in Orissa and attracted sales tax liability. The Commissioner upheld this assessment, presuming that the sales were completed in Orissa due to the collection and dispatch of goods from Orissa, despite the petitioners providing no evidence to the contrary.

2. Limitation Period for Filing a Petition Against the Refusal to State a Case:

A preliminary objection was raised regarding the petition being time-barred. The refusal to state a case was dated 30th July, 1951, and the petition was filed on 28th September, 1951. Under Section 24 (2) of the Orissa Sales Tax Act, the petition should be filed within 30 days of such refusal. The petitioners contended that the limitation period should start from the communication date of the refusal, not the signing date. The refusal was communicated on 9th August, 1951, and received on 13th August, 1951. The court agreed, stating that "refusal" implies "communicated refusal," supported by the Madras High Court decision in Muthiah Chettiar v. Commissioner of Income-tax, Madras, which held that limitation should not commence before the aggrieved party knew of the order. The court further allowed the computation of the period taken to obtain copies of the order, granting an additional 22 days, making the petition timely.

3. Legality of the Assessment Based on the Definition of "Sale" under the Orissa Sales Tax Act:

The main contention was the legality of the assessment, arguing that a mere contract for sale within Orissa does not constitute a sale under the Orissa Sales Tax Act. The assessment was based on the Sales Tax Officer's order and the Collector's letter, which incorrectly deemed mere export as sufficient to constitute a sale. The court found merit in the argument that a mere contract for sale is executory and does not transfer ownership, whereas a sale is an executed contract transferring complete ownership. The second proviso in Section 2(g) of the Orissa Sales Tax Act, deeming a contract for sale as a sale, was considered ultra vires, as it extended the meaning of "sale" beyond the Government of India Act, 1935, which only allowed taxation on completed sales. The court cited the Allahabad High Court decision in Budh Prakash Jai Prakash v. Sales Tax Officer, Kanpur, which distinguished between an agreement to sell and a sale, supporting the view that only completed sales are taxable. The Commissioner's finding that sales were completed in Orissa was deemed a presumption without material evidence.

Conclusion:

The court required the Commissioner, Northern Division, Sambalpur, to state a case and refer it to the High Court on the point of whether the assessment was legal based on the position that a mere contract for sale and export from Orissa suffices for taxation under the Orissa Sales Tax Act, 1947. The petition was allowed.

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