9911796707
TMI Blog1969 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... company supplied to the contractors for use in construction, bricks, coal, cement, steel, etc., for consideration and adjusted the value of the goods supplied at the rates specified in the tender. In proceedings for assessment of tax under the Orissa Sales Tax Act, 1947, the Sales Tax Officer held that the company was a dealer in building material, and had sold the material to contractors and was on that account liable to pay tax at the appropriate rates under the Orissa Sales Tax Act. The Sales Tax Officer directed the company to pay tax due for ten quarters ending December 31, 1958, and penalty in addition to the tax for failure to register itself as a dealer. The Appellate Assistant Commissioner confirmed the order of the Sales Tax Officer. In second appeal the Tribunal agreed with the tax authorities and held that the company was liable to pay tax on its turnover from bricks, cement and steel supplied to the contractors. The Tribunal however substantially reduced the penalty imposed upon the company. At the instance of the company the Tribunal referred six questions to the High Court of Orissa under section 24(1) of the Orissa Sales Tax Act, 1947. The questions were : " A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s at agreed rates. There was concurrence of the four elements which constitute a sale, (1) the parties were competent to contract ; (2) they had mutually assented to the terms of contract ; (3) absolute property in building materials was agreed to be transferred to the contractors ; and (4) price was agreed to be adjusted against the dues under the contract. No serious argument was advanced before us that the supply of building material belonging to the company for an agreed price did not constitute a sale. Under the Act penalty may be imposed for failure to register as a dealer : section 9(1), read with section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks " and 25 per cent. premium in the case of " first class bricks ". Steel, cement and other materials were initially supplied at 3 1/2 per cent. premium over the purchase price paid by the company. It was contended on behalf of the company that merely because the price charged to the contractors exceeded the price paid by the company for acquiring the materials, motive of the company to carry on business in building materials for profit, cannot be inferred. The company, it is true, maintained no separate accounts relating to the expenditure incurred by it for overhead and other charges in respect of those materials. Before the sales tax authorities counsel for the company also conceded that the company had not maintained separate accounts from which it could be proved that the transactions of supply of bricks, cement, steel and other commodities resulted in no profit. The High Court observed : " It is the stores department of the company as a whole which deals with the purchase, storage and sale of all the goods required both for acquisition and issue of materials to be used for the construction and operation work of the company.... The company had to construct not only the buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of the company. If the company had no idea to en ter into any business, there was no reason why it should have brought contractors to manufacture bricks, purchased the entire stock from them, stocked the same and, thereafter, sell the same to its building contractors." But, in so observing, a very important piece of evidence appears to have been ignored by the Tribunal. Annexed to the form of the tender submitted by the contractors there are certain " general rules and directions for the guidance of contractors ". Paragraph 8 stated : " The memorandum of work tendered for, and the schedule of materials to be supplied by the H. S. Ltd., and their issue rates, shall be filled in and completed in the office of the Divisional Officer before the tender form is issued. If a form is issued to an intending tenderer without having been so filled in as completed he shall request the office to have this done before he completes and delivers his tender." Then follow the conditions of contract of which condition No. 10 is material ; it states : " If the specification or estimates of the work provides for the use of any special description of materials to be supplied from the Engineer-in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t first class bricks ". Apparently 3 1/2 per cent. over the specified rate was agreed to be paid by the contractors as storage charges in respect of cement and structural steel and M.S. rods. No specific percentage was set out in respect of the bricks and an inclusive price was made chargeable. Relying upon the terms of the schedule, counsel for the company contends that the contractors and the company expressly agreed that 3 1/2 per cent. over the agreed price of the goods was chargeable as storage charges. It is common ground that the rate mentioned against cement and structural steel is the price at which the goods were purchased by the company. If the company was charging a fixed percentage on the price paid by it for procuring such goods for storage and other incidental charges, it would be difficult to resist the conclusion that the company was not carrying on the business of selling cement and structural steel. There is, of course, no statement in the schedule that the price charged by the company in excess of the price paid by the company to its contractors for bricks was in respect of storage charges. But neither the Tribunal nor the High Court has referred to this impor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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