9911796707
TMI Blog1986 (1) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the cigarette factory. The labels and shells contain representations of the trade marks. 3.. The petitioner is a registered dealer under the Bihar Sales Tax Act, 1959 (hereinafter called "the Act"). As such it has been granted certificate of registration. The certificate specifies and entitles the petitioner to purchase board and paper as required by the company for use by it in the packing of the products for sale without being liable to pay special sales tax in terms of section 5 of the Act. The petitioner purchased paper and board from Rohtas Industries and used them in the packing of its products after printing on them. These purchases were effected on furnishing declaration in form IX. The petitioner filed return showing gross turnover of Rs. 5,51,124.06 for the year 1964-65 and Rs. 5,10,315 for the year 1965-66. The Sales Tax Officer enhanced the gross turnover (hereinafter called "G.T.O.") by another Rs. 95,00,000. These were held to represent sale value of paper and cardboards purchased by the petitioner and utilised in the preparation and manufacture of labels, cartons, etc. This enhancement had been done by the assessing officer on the footing that the paper and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .77 purchased under section 5 of the Bihar Sales Tax Act to places outside Bihar. The order which is part of annexure 6 shows that in the view of the assessing officer, some portion of packing materials purchased under section 5, free of tax, for packing cigarettes manufactured by the factory at Munger were despatched to places outside Bihar. The despatch to places outside Bihar, according to his view, was in contravention of the provisions of section 5 read with section 7(2)(b) of the Bihar Sales Tax Act. Notice in terms of section 18(1) was issued to the assessee in regard to escapement of sales tax for the years 1964-65 as well as 1965-66. The petitioner contested the jurisdiction of the assessing officer to reopen assessment. A comprehensive show cause was filed by the assessee. After hearing the parties the assessing officer rejected the objections of the assessee and reassessed the petitioner. On reassessment a sum of Rs. 71,12,716 was added as taxable turnover. Tax of Rs. 4,43,198.50 (including penalty of Rs. 75,000) was assessed by the Superintendent of Commercial Taxes. It may be mentioned that notice under section 18(2) for showing cause against imposition of penalty for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions and restrictions as may be specified in the notification, be paid at any other point." The next provision relevant for our purpose for disposing of these applications is section 7 of the Act which deals with the expanse of the expression "taxable turnover". Section 7(1) relates to general sales tax with which we are not concerned. Sub-section (2) thereof deals with special sales tax which reads as follows so far as is relevant: "7. Taxable turnover.-For the purposes of this Act, the 'taxable turnover' of a dealer shall be * * * (2) in respect of special sales tax, that part of the gross turnover which remains after deducting therefrom- (a)(i) sale prices on account of sales exempted under section 4; (ii) amount of sales tax actually collected as such, if any, along with the sale prices received or receivable in respect of sales of goods, and (b) sale prices on account of sales to a registered dealer other than a dealer liable to pay tax under sub-section (8) of section 3, of goods specified in his registration certificate as being required- (i) for resale by him inside Bihar or in course of inter-State trade or commerce or export out of the territory of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as under: "8. Evidence its support of claim for deductions from gross turnover.-(1) A dealer who claims that any amount should be deducted from his gross turnover on account of sales exempted from tax, * * * (c) under clause (b) or (c) of sub-section (3) of section 4, as having been made to a dealer who is entitled by virtue of the exemption allowed by the State Government under any of the said clause to purchase the goods free of general sales tax or special sales tax or both general sales tax and special sales tax, shall substantiate such claim before the authority prescribed in rule 12 by producing, in addition to the evidence prescribed in clause (b) of this rule, a true declaration in writing, in form IX obtained from the prescribed authority by the purchasing dealer or by his manager declared under section 10 that the dealer is entitled to purchase the goods, which are the subject of the sale, free of tax as aforesaid and that the said goods are covered by his registration certificate, and;". That brings us to form IX. This form postulates certain declarations by the purchasing dealer which may be conveniently quoted as follows "Certified that the goodsordered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding would be, therefore, out of time. Thus contended learned counsel for the petitioner. 9.. In considering the submissions urged on behalf of the petitioner we cannot lose sight of the fact that sales tax has to be realised by the State from every sale provided it falls above a certain flooring. It may be general sales tax or special sales tax. It is not in controversy that but for the exemption granted to it the petitioner would have been liable to pay special sales tax for the purchase of paper and board from Rohtas Industries. Paper and board are mentioned in the registration certificate of the petitioner being goods required for resale by the assessee for use in the packing of goods. Section 7(2) prescribes the manner of calculating the taxable turnover for the purpose of special tax. It is that part of the turnover which remains after deducting sale prices on account of sales to a registered dealer of goods specified in his registration certificate as being required for use by him in the packing of goods which the assessee sells inside Bihar. The pre-condition for this mode of ascertaining the taxable turnover is laid down in the provisos to section 7(2). The first proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that case. That would be on account of the provisions of section 7(2)(b) that such a sale would constitute part of the G.T.O. of the purchasing dealer. It is thus obvious that the concession to the petitioner was on account of certain undertakings given by it in the interest of trade and commerce within the State. The legislature and the Government in their wisdom considered it expedient to grant such a concession. The result of the concession was that the sale which would form part of the turnover of the selling dealer and the purchasing dealer, the assessee, ceased to be so. It necessarily follows, that if the undertaking in form IX is not adhered to, the concession or special treatment must disappear. If that disappears, the value of the purchase must form part of the taxable turnover of the purchasing dealer. The selling dealers, Rohtas Industries, were deprived of the opportunity to realise special sales tax from the purchasing dealer on account of the injunction of the State in terms of sections 5 and 7(2)(b)(ii) and form IX of the Sales Tax Act and the Rules made thereunder. 10.. The concession was granted on the tacit understanding that the packing materials would be us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax department had been informed that they intended to purchase paper and board from Rohtas Industries for making cartons and shells for use of the several factories in the whole of India is no answer to the difficulty of the petitioner. An assessee may have to furnish information of various categories on various points to the sales tax department from time to time, but the taxing officer cannot be fastened with the knowledge of all those informations furnished to the sales tax department at some point of time, when he proceeds to assessment. After relevant information is not supplied in the return and the accompanying statement, it would amount to withholding relevant material. That would not be full and true disclosure, if a particular item which is liable to be included in the G.T.O. has not been included. In that view of the matter, I have not the least doubt that primary relevant facts had not been disclosed by the assessee. The law in regard to disclosure of primary facts was succinctly spelt out by the Supreme Court in Calcutta Discount Company Ltd. v. Incometax Officer, Companies District I, Calcutta AIR 1961 SC 372 in the following words at paragraph 9: "(9) There can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to disclose all relevant materials. The fact that at some point of time much before the assessment, may be at the time of making declaration in form XXVIII-B the petitioner had informed the sales tax department that the purchased paper and board would be despatched to places outside Bihar for consumption of the assessee's different units would not absolve the petitioner of mentioning that fact in the statement accompanying the return. There is another significant aspect in this behalf. The Sales Tax Officers may not be knowing whether the petitioner was purchasing paper and board only from Rohtas Industries or also from other dealers outside Bihar. If it was purchasing from places outside Bihar as well, that would be purchase in terms of form C in which there was no undertaking to sell the goods which were being packed in those paper and board inside Bihar. The volume of goods going out of Bihar in respect of purchases under form IX would be a matter to be calculated. The purchases from Rohtas Industries and purchases from outside Bihar would have to be sorted out. Those informations, therefore, had to be supplied in the return and the accompanying statement. It is, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced upon Gurna Mal v. State of Uttar Pradesh [1970] 26 STC 270 (All). The submission is devoid of substance. Section 5 lays down the point at which special sales tax shall be levied. Every specie of items passes through a series of sales. The first link in that series is the sale by Rohtas Industries to the petitioner. The petitioner sells those goods to others and so on and so forth. It cannot, therefore, be doubted that a series of sales are involved. The petitioner happens to be at the threshold of those series, but that does not take over the ordinary characteristic that the goods purchased by Rohtas Industries were being subjected to series of sales. The Allahabad case of Gurna Mal [1970] 26 STC 270 was decided on special facts. That was a case of levy of tax over bricks. It was emphasised in that case that bricks are species of materials which are passed directly from the producer to the consumer without there being a middle man. In that situation, the question of series of sales does have relevance. The instant case, however, is different. The paper and board were not such an object which is handed down from the producer to the consumer. That case, therefore, has no releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the petitioner. 16.. The next submission urged on behalf of the petitioner was that in arriving at the figure of turnover of the escaped assessment the assessing authority had not followed the affirmative procedure laid down in second proviso to section 7(2)(b)(ii). It was submitted that the book value of the debits against the petitioner and other factories would be different from the value of the goods purchased from the Rohtas Industries. That may be so. To that extent there is substance in the submission of learned counsel for the petitioner. The book value of the goods despatched to the sister units of the petitioner may swell on account of process of printing, shelling, cutting, etc. The assessing officer, therefore, should have ascertained the value of the sale by Rohtas Industries from it rather than relying upon the value of the despatches by the petitioner. 17.. Lastly, the learned counsel for the petitioner submitted that section 5 of the Bihar Sales Tax Act was ultra vires inasmuch as, to tax fictional sales, according to learned counsel for the petitioner, the State Government in terms of entry 54 of List II of the Seventh Schedule to the Constitution there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture/processing of goods for sale/use in mining use in generation/distribution of power/packing of goods for sale/resale and are covered by my/our registration certificate No...........dated.................... issued under the Central Sales Tax Act, 1956. Name and address of the purchasing dealer in full..................................... ...................................................... Date..................................... ............................................ Signature." It should be noted that in terms of the purchase order, form C, the purchases were not from inside but from outside Bihar. Secondly, there was no undertaking that the goods would be used in packing of articles inside Bihar. It was, therefore, obvious that there was no violation of the undertaking in the previous I.T.C. case. In those circumstances, the question falling for consideration whether the assessee after purchasing goods for the purposes specified in clause (b) of sub-section (3) of section 8 had failed without reasonable excuse to make use of the goods for any such purpose did not arise. That was not a case where the obligation of the assessee to use the goods, name ..... X X X X Extracts X X X X X X X X Extracts X X X X
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