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TMI Blog1982 (3) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... rtments, State Government departments and various undertakings, projects and/or institutions of the Central and State Governments and very occasionally to some of the private concerns as and when directed by the State or the Central Government authorities. It is contested by the petitioner that such manufacture and/or supply of goods to different other institutions and Government undertakings is done only to absorb surplus capacity of the said Gun and Shell Fatory and to minimise or avoid imports and also to help such undertakings and/or concerns to execute the Government orders. It is contended by the petitioner that even when the factory utilises its surplus resources for the production of non-defence for the purposes indicated hereinbefore, such production and/or distribution and supplies are made in a non-commercial and non-trading manner and not with the purpose of making profit. In support of the said contention, the petitioner has also annexed documents showing pricing of stores manufactured by the said Gun and Shell Factory and other ordnance factories, production of civil goods in different ordnance factories and utilisation of production capacities in ordnance factories. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not vested with power under section 15 of the Bengal Finance (Sales Tax) Act, 1941, read with rule 71 of the Bengal Sales Tax Rules, 1941, with the power to fix such liability for payment of tax and/or for registration under the Central Sales Tax Act or under the Bengal Finance (Sales Tax) Act. It is contended by the petitioner that such power remained only with the Commissioner of Commercial Taxes, West Bengal, appointed under section 3(1) of the Bengal Finance (Sales Tax) Act, 1941. The petitioner further contends that apart from the said question of lack of jurisdiction on the part of the Commercial Tax Officer, 24-Parganas Charge, the commercial tax authorities had also no power to fix any liability on the petitioner to pay sales tax either under the Central Sales Tax Act or under the Bengal Finance (Sales Tax) Act because the petitioner in the matter of production and supplies from the said Gun and Shell Factory had not carried on any business within the meaning of the said Act as the petitioner was not a "dealer" liable to pay sales tax under the said Acts. It appears that the Commercial Tax Officer, Shyambazar Charge, by his memo dated 30th March, 1962, intimated the Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner's representative could not appear on the said date and by order dated 14th March, 1964, the said respondent No. 1 made an ex parte assessment imposing a huge tax demand of Rs. 33,97,409.66 for the period from 6th July, 1957, to 12th September, 1962, and accordingly the demand notice dated 18th March, 1964, was served on the petitioner. It appears that after the receipt of the said demand notice the petitioner requested the State Government to keep the matter in abeyance till a final directive was received from the Government of West Bengal on the representation already made for waiver of taxes during the pre-registration period. The petitioner was informed by the Commercial Tax Officer, Shyambazar Charge, by letter dated 16th June, 1964, that the said representation for waiving the tax liability had been referred to the higher authority and the decision of such authority would be communicated to the petitioner as soon as the same would be received, but the State Government subsequently by letter dated 23rd June, 1964, informed the petitioner that the said representation of the petitioner to waive the tax liability was not accepted. It appears that thereafter the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents from initiating any sales tax proceeding. The said respondent No. 1 ultimately passed the impugned assessment order dated 12th February, 1972, imposing a demand of Rs. 71,334.40 for the period of 4 quarters ending 31st March, 1968, and served on the petitioner the impugned notice dated 25th February, 1972, for the said amount. The petitioner thereafter moved the instant writ petition before this Court contending inter aria that the petitioner had not carried on any "business" as defined under section 1(1a) of the Bengal Finance (Sales Tax) Act, 1941, and the petitioner was also not a "dealer" as defined under section 2(b) of the said Act and the petitioner did not transact any "sale" as defined under section 2(g) of the said Act. The petitioner also contends that whatever tax had been imposed or assessed or realised or collected by the respondents from the petitioner and/or paid by the petitioner consequent upon calculation, finding or fixation of liability, issue of registration certificate and/or the assessment order or demand notice were all made under mistake of law, but the inherent lack of jurisdiction to impose sales tax were not cured by efflux of time and all such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of selling those goods. A casual sale of unserviceable goods cannot be held to be a business. For this contention, Mr. Mukherjee refers to a decision of the Supreme Court made in the case of State of Gujarat v. Raipur Manufacturing Co. Ltd. reported in [1967] 19 STC 1 (SC). He also refers to another decision of the Supreme Court made in the case of Director of Supplies & Disposals v. Member, Board of Revenue reported in [1967] 20 STC 398 (SC). It has been held in the said decision that ordinarily there must exist the characteristics of volume, frequency, continuity and system indicating an intention to continue the activity of carrying on the transactions for a profit. But no single test or group of tests is decisive of the intention to carry on business and it must be decided in the facts and circumstances of each particular case. In the said decision, the question of liability under the Bengal Finance (Sales Tax) Act on account of disposal of certain goods by the Director of Supplies and Disposals, came for consideration. Mr. Mukherjee refers to another decision of the Supreme Court made in the case of State of Madras v. K.C.P. Limited reported in [1969] 23 STC 173 (SC) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment, the view expressed by the larger Bench is to be preferred and for this contention, Mr. Mukherjee refers to a decision of the Supreme Court made in the case of Mattulal v. Radhe Lal reported in AIR 1974 SC 1596. Mr. Mukherjee also refers to a decision made in the case of joint Director of Food, Visakhapatnam v. State of Andhra Pradesh reported in [1976] 38 STC 329 (SC). It has been held that under the definition of "dealer" in section 2(b) of the Central Sales Tax Act, 1956, a person becomes a dealer only if he carries on a business, but the ordinary concept of business has the element of gain or profit, whose absence negatives the character of the activity as business. However, under the Andhra Pradesh General Sales Tax Act, 1957, a person becomes a dealer even if there is no profit-motive or profit accrual. Mr. Mukherjee contends that under section 3(1) of the Bengal Finance (Sales Tax) Act, 1941, the Commissioner of Commercial Taxes has been made the taxing authority and section 15 has authorised the Commissioner to delegate his powers and such delegation has been made under rule 71 of the Bengal Sales Tax Rules, 1941. He contends that there is no provision in the Benga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 71 of the Bengal Sales Tax Rules. Mr. Mukherjee submits that in the decisions made by Sabyasachi Mukharji, J., and Chittatosh Mookerjee, J., in Civil Rule Nos. 2404(W) of 1972 and 2171(W) of 1972, similar contentions were raised by the very same petitioner in respect of the assessment orders for other periods for the transaction made in the Cossipore Gun and Shell Factory and the decisions were made in favour of the petitioner. Mr. Mukherjee submits that the said decisions should also be followed by this Court and the rule should be made absolute. Mr. Mukherjee submits that if the assessment is void, it is not necessary to set aside the void assessment and no period of limitation is prescribed for claiming a refund on account of payment made consequent upon a void assessment. For this contention, Mr. Mukherjee refers to a Bench decision of this Court made in the case of State of West Bengal v. Suresh Chandra Bose reported in [1980] 45 STC 118; 84 CWN 229. Mr. Mukherjee also contends that if tax was collected from purchasers when such collection was not authorised by the Act, such collection must be held to be illegal and a party making payment on account of such illegal impositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f manufacture of the goods in question and sale has been effected in the regular course of business, then the petitioner must be held to be a dealer within the meaning of the Central Sales Tax Act. He also submits that the petitioner got itself registered and has also paid sales tax not under any misconception of law or fact as alleged but only after understanding its liability to pay sales tax, the petitioner got registered and had paid sales tax. He also contends that in the instant rule, the petitioner has raised a dispute as to the jurisdiction of the State Government to realise sales tax from the petitioner, namely, the Union of India, but such a dispute between the State Government and the Central Government cannot be decided by this Court under article 131 of the Constitution, and only the Supreme Court can decide such dispute. Mr. Dutt contends that under section 2(b) of the Central Sales Tax Act, 1956, a "dealer" means any person who carries on the business of buying or selling goods and includes the Government which carries on such business. He submits that profit-motive is not essential to constitute a business and for this contention, he refers to a decision made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the registered dealer intended to raise plantation crops after clearing the area of forest growth. After clearing the trees from the forest growth, the said trees were sent to saw mills and logs were made into suitable sizes and sold the sized logs to consumer. Though the ultimate object of the dealer was to grow coffee or tea the motive to do business in timber, etc., was clearly discernible. Hence, under the Tamil Nadu General Sales Tax Act, the dealer was liable to pay sales tax. Mr. Dutt submits that dictionary meaning of the expression "profit" is gain, benefit or advantage. Hence, there is no manner of doubt that for some gain or advantage which may not be always monetary advantage, the Central Government decided to manufacture certain goods for use of the private consumers and had also sold the same to the private consumers. Hence, the transaction made to such private consumers must be held to be sales. Mr. Dutt contends that section 4 of the Bengal Finance (Sales Tax) Act has no bearing on section 6 of the Central Sales Tax Act. The said section 6 is an independent section and the liability under the Central Sales Tax Act is also not dependent on the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision for preferring an appeal if the assessee is dissatisfied by an order of assessment and the constitutional writ jurisdiction is not intended to be invoked for the purpose of by-passing the local Act. Mr. Dutt also contends that the petitioner could clearly pursue other effective remedies under the taxing statute for the relief prayed for but the petitioner allowed the assessment to be final without pursuing the remedy. The petitioner had also the right to sue for recovery on payment of court-fees. In such circumstances the long delay in presenting the instant writ petition must be held to be a dissuading factor. For this contention, Mr. Dutt refers to a Bench decision of the Madras High Court made in the case of M. Mohamed Salam v. Commissioner of Commercial Taxes reported in [1970] 26 STC 163. In this connection, Mr. Dutt refers to two decisions of the Supreme Court made in the case of Swadeshi Cotton Mills Co. Ltd. v. Government of Uttar Pradesh reported in [1973] 32 STC 627 (SC) and State of Madhya Pradesh v. Bhailal Bhai reported in [1964] 15 STC 450 (SC). In Swadeshi Cotton Mills' case [1973] 32 STC 627 (SC) the Supreme Court has observed that every one is deemed to kn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ways be proper for the court to hold that it is unreasonable. Mr. Mukherjee, the learned counsel for the petitioner, in reply to the contentions made by Mr. Dutt, has submitted that the dispute in the instant case is not a dispute challenging the State's authority to impose sales tax on any Central Government department even when such department is carrying on business and trading activity. The dispute in the instant case is on the factual aspect of the dealings in question. Hence the same is not a dispute qua the Union Government. In this connection, Mr. Mukherjee refers to a Bench decision of the Mysore High Court made in the case of State of Mysore by General Manager, Mysore Implements Factory v. Union of India reported in AIR 1968 Mys 237. It has been held in the said decision that when the State Government files writ petition challenging the order of the Central Government the jurisdiction of the High Court to issue writs in favour of the State Government is not excluded by article 131. A dispute falls within article 131 of the Constitution only when the Central Government is a disputant as such. The dispute must arise directly between the State and the Central Government as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the dispute is not dependent on the right of the Government of India qua Government of India. Accordingly, the writ petition is not barred under the provisions of article 131 of the Constitution. Mr. Mukherjee has next contended that there must be a distinction between a void assessment and illegal assessment and claim of refund even after three years from knowledge may be entertained in proper places in the writ proceeding and in support of this contention, he refers to a Bench decision of this Court made in the case of State of West Bengal v. Suresh Chandra Bose reported in [1980] 45 STC 118; 84 CWN 229. He also refers to a decision made in the case of Burmah Construction Company v. State of Orissa reported in [1961] 12 STC 816 (SC). Relying on the decision in Gannon Dunkerley & Co.'s case [1958] 9 STC 353 (SC) that works contracts are not assessable for sales tax, a writ petition was made by the Burmah Construction Co. for refund of tax paid on mistaken belief in law and the High Court allowed the said claim of refund made under article 226. It was held by the Supreme Court in the said decision in Burmah Construction Co.'s case [1961] 12 STC 816 (SC) that the appellant was en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of tax under the Central Sales Tax Act. It has been contended by the petitioner that the Commercial Tax Officer had no jurisdiction for assessing under the Central Sales Tax Act. It is contended by Mr. Mukherjee that there is no provision in the Bengal Act which authorises the Commercial Tax Officer to fix and determine the liability to pay tax independent of and prior to an assessment which is made under the Act. He also contends that neither the Central Sales Tax Act nor the Bengal Finance (Sales Tax) Act envisages a proceeding for determination of such liability which ipso jure and ex hypothesi arises by reason of charging section. For this contention, reference was made on the decision made by this Court in Surajmal Jain's case reported in [1973] 32 STC 601. It may also be noted in this connection that in respect of another period, the petitioner also moved a writ petition challenging the assessment of sales tax on transactions made by the General Manager, Cossipore Gun and Shell Factory, in Civil Rule No. 2404(W) of 1972. The said rule was disposed of on 5th March, 1976, and Sabyasachi Mukharji, J., held that assessment based on determination of liability under section 4( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced by the defence factories including the Gun and Shell Factory at Cossipore were made to selected manufacturers so that they may fulfil the contracts of the Central Government and/or the State Government and/or the Government companies and also fulfil the development programme of the country. It does not appear that really with any profit-motive and to constitute a regular business dealing, such productions were made. Accordingly, in any event, the transactions in question could not be the subject-matter of tax under the existing Central Sales Tax Act. Hence, even assuming that the Commercial Tax Officer had jurisdiction to assess the tax under the Central Act, in the facts of the case, no tax could be imposed at the relevant time. Although the learned counsel for the petitioner has argued that payment of tax made by the petitioner on mistaken view of law and fact should be directed to be refunded, there is no such specific prayer in the writ petition. That apart, in my view, Mr. Dutt is justified in his contention that even if an assessment is void and payment was made through mistake, the writ court is not bound to order for repayment and exercise of discretion will depend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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