1990 (10) TMI 338 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner's supply of blocks and printed materials to its advertisers amounted to sales.
2. Whether the petitioner was a dealer under section 2(k) of the Karnataka Sales Tax Act, 1957.
3. Whether the assessment was not bad in law because the proceedings to assess commenced after the expiry of the statutory period of five years from the close of the year under issue.

Detailed Analysis:

Issue 1: Whether the petitioner's supply of blocks and printed materials to its advertisers amounted to sales.
The court examined whether the activities carried on by the petitioner, which included supplying blocks and printed materials to its advertisers, amounted to sales. The petitioner argued that the company was merely preparing artwork, booking space in various media, and acting on behalf of the advertiser-customer without any element of sale. However, the assessing authority and subsequent appellate bodies concluded that the activities involved sales, as evidenced by the separate contracts for art and design and the sale of printed materials and blocks. The court upheld this view, citing the decision in Commissioner of Sales Tax v. Durga Khote Productions [1975] 36 STC 77, which held that contracts for production and supply of prints were divisible and taxable as sales. The court rejected the petitioner's reliance on cases from other High Courts, noting that those decisions were based on different facts and statutory provisions.

Issue 2: Whether the petitioner was a dealer under section 2(k) of the Karnataka Sales Tax Act, 1957.
The court analyzed the definition of "dealer" under section 2(k) of the Act, which includes any person engaged in the business of buying, selling, supplying, or distributing goods, whether for cash, deferred payment, commission, remuneration, or other valuable consideration. The definition is broad and encompasses various agents and activities. The court concluded that the petitioner fell within this definition, as the company's activities involved the supply and distribution of goods, making it a dealer liable to tax.

Issue 3: Whether the assessment was not bad in law because the proceedings to assess commenced after the expiry of the statutory period of five years from the close of the year under issue.
The court addressed the question of limitation raised in S.T.R.P. No. 23 of 1985. The petitioner contended that the assessment proceedings were initiated beyond the statutory period of five years. The court noted that the notice for assessment was issued on October 18, 1975, which was beyond the five-year period from the end of the previous assessment year (March 31, 1975). The court rejected the Revenue's argument that the proceedings commenced with a notice issued in February 1974 for the production of books of accounts, distinguishing between investigation and initiation of proceedings. The court held that the proceedings were barred by time, as the notice under section 12-A(1) was issued only in October 1975. The court also rejected the argument that the assessment should be construed under section 12(1), noting that section 12-A specifically covered escaped assessments.

Conclusion:
The court dismissed the petitions except for S.T.R.P. No. 23 of 1985, which was allowed on the ground of being barred by limitation. The court held that the petitioner's activities amounted to sales, making it a dealer under the Act, and that the assessment proceedings in S.T.R.P. No. 23 of 1985 were initiated beyond the statutory period. No order as to costs was made.