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TMI Blog1977 (5) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... to date are pending. Since, I am liable to pay sales tax to the State, it is incumbent on me to realise sales tax from you. Your transactions with the undersigned from the year 1969-70 are as below and the tax payable by you is noted against each. -------------------------------------------------------------------- Year Amount paid Amount of sales tax to be paid at 5 p.c. -------------------------------------------------------------------- Rs. P. Rs. P. 1969-70 83,749.08 4,187.45 1970-71 1,11,657.35 5,582.90 1971-72 1,29,000.00 6,450.00 1972-73 1,78,915.90 8,945.75 1973-74 3,72,960.00 18,648.00 1974-75 3,72,960.00 18,648.00 ---------- Total 62,462.10 ---------- Since according to the tax laws, tax on all sales are to be realised and remitted during the same quarters, I would request you that all arrears of sales tax as detailed above may please be paid by 15th March, 1975, failing which this letter will be operative for stopping extraction and despatch of bamboo from the forests to your depots ....." The petitioner thereupon sent a letter of protest to the forest authorities contending that the transaction was not exigible to sales tax and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... register themselves as dealers in their respective areas and in view of such decision of the State Government, the Divisional Forest Officer has accepted the assessment raised against him and has demanded reimbursement. The Law Officer attached to the Commissioner of Commercial Taxes in his counter-affidavit on behalf of opposite parties 4 and 5 has pleaded that the Divisional Forest Officer of Balliguda Division has been rightly assessed to tax under the Act and the assessments have become final in the absence of any challenge. It has been further pleaded that the petitioner has no focus standi to challenge the assessment of tax as it is the dealer who has been assessed and even if the petitioner may not be burdened with the tax incidence, opposite party No. 2, who has been assessed as dealer will remain bound to satisfy the tax demand raised against him. 3.. At the hearing, Dr. Pal appearing for the petitioner contended: (i) The State of Orissa in the forest department is the owner of the bamboos in respect of which the two leases have been granted. These bamboos grow spontaneously and it is not the case of the lessor or of the taxing department that these are grown by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for us to examine the exigibility of tax and interfere in the matter. 4.. Having heard both sides, we are of the view that the following questions arise for determination: (1) Whether the writ applications are maintainable? (2) Whether the Divisional Forest Officer could have been assessed to sales tax when the State of Orissa is the lessor (and, therefore, the seller) under the contracts? (3) Whether the levy of sales tax on the transactions covered by the contracts is legal? (4) Is the Divisional Forest Officer entitled to claim reimbursement of tax? (5) Is the petitioner entitled to any relief against the threatened action? Question No. (1): Whether the writ applications are maintainable? 5.. Objection has been raised on behalf of the opposite parties that the petitioner not being the assessee, the assessments to sales tax made against the Divisional Forest Officer are not open to challenge at the instance of the petitioner. On behalf of the petitioner, it has been claimed that the taxing department and the forest department are two wings of the State Government and once the State Government, as indicated in the counter-affidavit, decided that the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer to pay tax on sales of timber, and by virtue of section 64A of the Sale of Goods Act such sums, which became leviable only after the agreement was entered into in 1956, could be recovered from the purchaser-respondent. It is virtually admitted in this appeal, as stated earlier, that both parties are registered dealers under the relevant Sales Tax Act. Nor is it in dispute that if the appellant-forest department were liable to pay sales tax for the sales of timber which were alleged to have taken place the respondent, in turn, would be liable to make good that sum in view of the plain provision in section 64A of the Sale of Goods Act ............" Apart from this reason, we are inclined also to accept Dr. Pal's contention that when the public authorities are forcing the petitioner to bear the ultimate burden of tax and the burden is nothing other than sales tax alleged to be exigible on the transaction, we must hold that it is open to the petitioner to contend that the transaction is not exigible to sales tax and, therefore, it has no liability to reimburse. If the position would be otherwise, the petitioner would have to bear a burden which is not ultimately its. We would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the situation that the Divisional Forest Officer could be taken as the seller and, therefore, the dealer, when the sales are actually by the State of Orissa. It is not disputed that the two contracts are between the Governor of the State of Orissa as the grantor of the leases and the company as the lessee. Even the Divisional Forest Officer is not the authority signing the contract on behalf of the State of Orissa. Royalty which is said to be the sale price is payable under schedule II to the contracts to the grantor, i.e., the Governor of the State of Orissa. In the circumstances, we agree with Dr. Pal that the State of Orissa and not the Divisional Forest Officer could be the dealer qua the transactions covered by the contracts in question in case sales tax was exigible and the Divisional Forest Officer is not competent to demand reimbursement from the company on the footing that he has been assessed to sales tax. Liability under the Orissa Sales Tax Act is a statutory one and it is not open to the State in discharge of its administrative business or at its volition to name an employee under it as the person liable to pay sales tax under the Act. We must, therefore, hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther actually continued or contemplated to be continued with a profit-motive and not for sport or pleasure. But to be a dealer a person need not follow the activity of buying, selling and supplying the same commodity. Mere buying for personal consumption, i.e., without a profit-motive, will not make a person dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or use in manufacturing another commodity for sale, would be regarded as a dealer. The legislature has not made sale of the very article bought by a person a condition for treating him as a dealer: the definition merely requires that the buying of the commodity mentioned in rule 5(2) must be in the course of business, i.e., must be for sale or use with a view to make profit out of the integrated activity of buying and disposal......." Same was the view of the Supreme Court in the case of Deputy Commismissioner of Agricultural Income-tax and Sales Tax, Quilon v. Travancore Rubber and Tea Co.[1967] 20 S.T.C. 520 (S.C.). It is unnecessary to refer to the several other decisions of different courts where that view had been adopted. By Orissa Act 18 of 1974, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity which could be called his "business". In the case of Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central Zone, Ernakulam v. Palampadam Plantations Ltd.[1969] 24 S.T.C. 231 (S.C.)., the Supreme Court took the view that a person selling trees of spontaneous growth was not a "dealer" under the Kerala General Sales Tax Act. The same matter came up for examination before a Division Bench of the Madhya Pradesh High Court in the case of Orient Paper Mills Ltd. v. State of Madhya Pradesh[1971] 28 S.T.C. 532., where the Madhya Pradesh State was selling bamboos and salai wood from its forests to a paper mill. The following four contentions were raised before the court on behalf of the paper mill: (i) The transaction is not a sale of goods and no sales tax is payable in respect of bamboos and salai wood extracted thereunder by the petitioner. (ii) No sales tax is payable under the terms of the lease deed dated 4th August, 1956, and, therefore, such tax cannot be recovered. (iii) Neither the State Government nor the forest department of that Government is or could be a dealer and for this reason also no sales tax is payable or recoverable. (iv) The sales tax, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we leave that aspect untouched. To abbreviate the discussion, thanks to Act 13 of 1971, the forest department of the State shall be deemed to be dealer. If it is a dealer, the levy of sales tax from it is legal and the controversy on this score is silenced." The conclusion of the Supreme Court was rightly reached on the basis of the second explanation added to section 2(d) defining the term "dealer": "The Central or a State Government or any of their departments or offices which, whether or not in the course of business, buy, sell, supply or distributes goods, directly or otherwise, for cash or for deferred payment, or for commission, remuneration or for other valuable consideration, shall be deemed to be a dealer for the purposes of this Act." It is thus clear that the Supreme Court decision in Orient Paper Mills' case[1977] 40 S.T.C. 603 (S.C.); A.I.R. 1977 S.C. 687. assumed that the forest department was a dealer and the scope of the appeal was as indicated in paragraph 3 of the judgment: "...... But to attract that provision there has to be sale of goods. Was there any sale of wood under the lease deed? That is the core of the legal quarrel agitated before us." It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government of Andhra Pradesh are admittedly carried on only annually and not at frequent intervals. Thus the important element of frequency being lacking in the instant cases, it cannot be held that the said Government was carrying on the business of sale of forest produce. In P.T.T.C. S. Merchants' Union v. State of A.P.[1958] 9 S.T.C. 723; (1958) 2 An. W.R. 100., where a person who grew agricultural products and incidentally sold the same, it was held that no sales tax was payable as it could not be said that the person carried on business. A similar view was expressed in Raja Bhairabendra v. Superintendent of Taxes[1958] 9 S.T.C. 60; A.I.R. 1957 Assam 179., where standing sal trees grown spontaneously in his zamindari were sold by the zamindar by auction and the purchasers were permitted to fell the trees and sell them after sawing and other processes." The position indicated by the Supreme Court with reference to the term "business" sans the profit-motive is the position in the cases before us. In Ansari's case[1976] 38 S.T.C. 577 (S.C.); A.I.R. 1976 S.C. 1813., the vending was annual, whereas in the cases before us, the vend comes once in sixteen years, or if we take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he meaning of the Orissa Act because he was not carrying on the business of selling or supplying the goods for the reason that the element of purchase, one of the necessary ingredients of the business, was absent." We are inclined to agree with Dr. Pal that the ratio in Ansari's case(1) is wholly applicable to the present facts and in view of the following conclusion reached in paragraph 22 of the judgment in Ansari's case(1): "In view of the foregoing discussion, we find ourselves unable to hold that the Government of Andhra Pradesh by holding auction of forest produce carried on business in the sale of that class of goods. As such, the respondents could not be made liable to pay the sales tax." It must be held that the transactions under the contracts were not sales exigible to sales tax. Question No. (5): Is the petitioner entitled to any relief against the threatened action? 9.. These applications must succeed. We accordingly hold that the demand for reimbursement of sales tax raised by opposite party No. 2 is not at all tenable as no sales tax is payable on the transactions. We direct that a writ shall issue quashing the letter of demand and prohibiting the opposite ..... 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