2015 (11) TMI 353 - HC - VAT and Sales Tax

Claim of sales tax exemption on rice bran - The contention of the petitioner is that, rice-bran were sold to the tax exempted units, for which no sales tax was collected and, therefore, there was no justification for extra demand in assessment under Section 12 (8) of the Act. - contravention of Section 5(2)(A)(a)(ii) of Orissa Sales Tax Act, 1947 - Held that - under Section 5(2)(A)(a)(i) of the Act the sale of any goods notified from time to time as tax free under Section 6 is deducted from the gross turnover of a selling dealer for the purpose of computation of a taxable turnover. In other words, a selling dealer, who produced evidence to show that it has sold goods covered by notification issued under Section 6 and the conditions and exceptions are complied with, is entitled to a deduction while its taxable turnover is computed. So far as Section 5(2)(A)(a)(ii) is concerned, it is found that when a selling dealer otherwise entitled to tax free purchase by giving declaration in Form XXXIV has to resell the goods in Orissa in a manner that such resell shall be subject to levy of tax under the Act. In other words, if the selling dealer in a series of sale purchases goods by giving declaration in Form XXXIV, he has to sell the same to another registered dealer in the State of Orissa in a manner that would be subject to levy of tax under the Act. It is not for the selling dealer to go after the purchasing dealer to find out as to in what manner he utilized the goods, which it has purchased on the strength of the Declaration Forms in order to be entitled to the deduction. Such a requirement would fasten an impossible burden on the selling dealer. It is the purchasing dealer, who is getting exemption on fulfillment of certain conditions. Therefore, if goods purchased on the basis of the declaration are put to a different use, the benefit of exemption is to be denied to it, i.e. the purchasing dealer. The selling dealer cannot be faulted if there is any diversion or change of user. - there is no conflict of opinion in the decisions rendered by this Court in both the aforesaid cases, i.e. State of Orissa vrs. M/s. Sahoo Traders and Tilakraj Mediratta vrs. State of Orissa, (1992 (2) TMI 338 - ORISSA HIGH COURT) - Appeal disposed of.

Summary

Issues Involved:
1. Conflict of opinion between the decisions in State of Orissa vrs. M/s. Sahoo Traders and Tilakraj Mediratta vrs. State of Orissa.
2. Validity of the extra demand raised under Section 12(8) of the Orissa Sales Tax Act, 1947.
3. Interpretation of Section 5(2)(A)(a)(ii) and Section 5(2)(A)(a)(i) of the Orissa Sales Tax Act, 1947.
4. The burden of proving the proper use of goods sold under tax exemption declarations.

Detailed Analysis:

1. Conflict of opinion between the decisions in State of Orissa vrs. M/s. Sahoo Traders and Tilakraj Mediratta vrs. State of Orissa:
The core issue addressed by the Larger Bench was whether there was a conflict between the decisions in State of Orissa vrs. M/s. Sahoo Traders and Tilakraj Mediratta vrs. State of Orissa. The Division Bench had referred the matter to the Larger Bench due to perceived conflicting opinions. However, upon detailed examination, it was concluded that the two cases dealt with different provisions of the Orissa Sales Tax Act, 1947, specifically Section 5(2)(A)(a)(ii) and Section 5(2)(A)(a)(i), respectively. Therefore, there was no actual conflict of opinion between the two decisions.

2. Validity of the extra demand raised under Section 12(8) of the Orissa Sales Tax Act, 1947:
The petitioner, M/s. Manisha Enterprises, challenged the validity of the extra demand of Rs. 41,635/- raised by the Sales Tax Officer under Section 12(8) of the Act. The demand was based on the allegation that the petitioner sold rice-bran to S.S.I. units free of tax against Declaration Form 1-D, contrary to the stipulations of resale within the state subject to tax. The revisional authority upheld the demand, relying on the judgment in State of Orissa vrs. M/s. Sahoo Traders.

3. Interpretation of Section 5(2)(A)(a)(ii) and Section 5(2)(A)(a)(i) of the Orissa Sales Tax Act, 1947:
Section 5(2)(A)(a)(ii) pertains to sales to registered dealers for resale within Orissa, subject to tax. In State of Orissa vrs. M/s. Sahoo Traders, it was held that if the purchasing dealer enjoys tax exemption, the selling dealer contravenes the declaration given in Form XXXIV. On the other hand, Section 5(2)(A)(a)(i) deals with the sale of tax-free goods as notified under Section 6. In Tilakraj Mediratta vrs. State of Orissa, it was held that the selling dealer is not responsible for ensuring the purchasing dealer's use of goods as per the declaration, and any misuse should be addressed by taxing the purchasing dealer.

4. The burden of proving the proper use of goods sold under tax exemption declarations:
In Tilakraj Mediratta vrs. State of Orissa, the court held that it is not the responsibility of the selling dealer to verify the use of goods by the purchasing dealer, as this would impose an impossible burden. Instead, the tax authorities should target the purchasing dealer if there is any misuse. This principle was contrasted with the decision in State of Orissa vrs. M/s. Sahoo Traders, where the selling dealer was held accountable for the resale conditions stipulated in the declaration.

Conclusion:
The Larger Bench concluded that there was no conflict of opinion between the decisions in State of Orissa vrs. M/s. Sahoo Traders and Tilakraj Mediratta vrs. State of Orissa, as they addressed different provisions and contexts under the Orissa Sales Tax Act, 1947. The reference was answered accordingly, affirming that both decisions hold the field without contradiction.