Tata Tea Limited Vs. State of Karnataka - Court Judgment

Excerpt:
- sections 4 & 12: [c.r. kumaraswamy, j] benefit under convictions and sentences under sections 279 and 338 of i.p.c read with sections 184 and 134(a)(b) of motor vehicles act, 1988 -conviction and sentence-revision against by the accused who is working in the state road transport undertaking whether the accused can be released under section 4 of the probation of offenders act, 1958 - held, the accused can be given benefit under section 3 or 4 of the probation of offenders act, even though he has paid the fine amount. no doubt, when fine amount is deposited or when the accused has undergone sentence, there is no bar for the court to apply the provisions of probation of offenders act. while maintaining the conviction, high court directed that the petitioner shall be released on.....ordera.m. farooq, j. 1. these two sales tax revision petitions are directed against the assessment orders passed by the assistant commissioner of commercial taxes-iv, bangalore, confirmed in appeals before the deputy commissioner of commercial taxes (appeals) and further confirmed in s.t.a. nos. 415 and 416 of 1992 by the order dated february 17, 1994 passed by the karnataka appellate tribunal, bangalore, dismissing the appeals filed by the petitioners.2. the appellant is a public limited company engaged in the business of blending, packing and selling tea. its head office is in calcutta with branches in several other states. the bangalore branch is in-charge of the packing division of the company. it is having a factory in bangalore where tea which is purchased mostly from assam is.....

Judgment:
ORDER

A.M. Farooq, J.

1. These two sales tax revision petitions are directed against the assessment orders passed by the Assistant Commissioner of Commercial Taxes-IV, Bangalore, confirmed in appeals before the Deputy Commissioner of Commercial Taxes (Appeals) and further confirmed in S.T.A. Nos. 415 and 416 of 1992 by the order dated February 17, 1994 passed by the Karnataka Appellate Tribunal, Bangalore, dismissing the appeals filed by the petitioners.

2. The appellant is a public limited company engaged in the business of blending, packing and selling tea. Its head office is in Calcutta with branches in several other States. The Bangalore branch is in-charge of the packing division of the company. It is having a factory in Bangalore where tea which is purchased mostly from Assam is blended and packed and the packed tea of different brands is sold either in the State or in the course of inter-State trade. The petitioners filed returns of turnover under the Karnataka Sales Tax as well as Central Sales Tax Acts disclosing the total turnover of Rs. 33,44,85,457.16 for the year ending March 31, 1989. They disclosed a taxable turnover under the Karnataka Sales Tax Act at Rs. 9,31,92,914.18 and the taxable turnover under the Central Sales Tax Act amounting to Rs. 50,415.64. The place of business of the appellant was inspected by the Commercial Tax Officer (ENF), Cross-Verification-I, South Zone, Bangalore on August 21, 1990 and reported receipt of consideration for sale of REP licences for an amount of Rs. 9,43,852 and tax liability on the part of the petitioner amounting to Rs, 66,070. The assessing authority on verification of the books of accounts of the petitioner at the stage of assessment proceedings detected that the petitioners have received miscellaneous incomes and on further probing into the matter it was detected that the petitioners had sold salvaged tea worth Rs. 9,18,919.45 within the State and Rs. 2,47,378.88 to parties outside the State and those sales were not disclosed in their returns and the consideration on account of REP licences was also not disclosed. The assessing authority assessed the appellant on the sale within the State in addition to levying tax on sale of REP licences and the levy was made both under the Karnataka Sales Tax as well as the Central Sales Tax Acts. The assessing authority further levied penalty of Rs. 1,79,199.36 under Section 12(4) of the Karnataka Sales Tax Act, 1957 and Rs. 48,238.90 under Section 9(2) of the Central Sales Tax Act, 1956 read with Section 12A of the Karnataka Sales Tax Act, 1957. Being aggrieved by the said assessment and levy of penalty, petitioner appealed before the first appellate authority who upheld the assessment which was questioned before the Appellate Tribunal which also confirmed the order passed by the assessing authority.

3. As mentioned earlier the petitioner is engaged in blending, packing and selling tea mostly imported from Assam from their own estate. While importing their goods, the goods were always covered by insurance against damages and if the goods are damaged beyond salvation, petitioner is entitled to recover the entire value of the claims. Sometimes the damaged goods are received by the petitioner and while claiming damages for the said damaged goods, the petitioner instead of returning the damaged tea, revision petitioner helps the insurance company to dispose of the damaged tea at a relatively premium rates. Before such sale of damaged tea without salvage, they bifurcate certain quantity of usable tea which could be sold at a concessional rate. In the said process, the petitioner apparently helps the insurance company to dispose of the salvaged tea. According to the petitioner, the petitioner incurs certain expenditure in the process of salvaging and selling such salvaged tea on behalf of the insurance company and in the said process the petitioner incurs certain expenditure and the said amount is made good by the insurance company. According to the petitioner this amount made good by the insurance company to the petitioner represents the miscellaneous income which has been reflected in the balance sheet and therefore, the petitioner has not indulged in the sale of salvaged tea and it is only the insurance company which can be made liable to pay the tax.

4. It is contended on behalf of the petitioner that the petitioner had not acted as commission agent nor had they purchased the goods from the insurance company and they simply undertook the work of marketing and sale of salvaged tea on behalf of the insurance company and made over the proceeds to insurance company and only the expenses actually incurred were reimbursed to the petitioner and the said amount cannot be treated as commission and hence the petitioner cannot be said to be an agent and therefore the department should have proceeded against the insurance company for recovery of tax. The department could not have further levied penalty under the Central Sales Tax or Karnataka Sales Tax Acts. It is the contention of the revision petitioner that the turnover of the salvaged tea is discovered from the petitioner's books of accounts and the petitioner cannot be penalised since there is no wilful non-disclosure.

5. On behalf of the Revenue it was contended that the petitioner in any case admittedly took delivery of the damaged tea powder and after salvaging the same, sold the same to various customers which amounts to a sale attracting levy of tax in the hands of the petitioner irrespective of the fact whether the petitioner has acted on behalf of the insurance company or on their own behalf. The petitioner has relied upon the judgment reported in United India Insurance Co. Ltd. v. Commissioner of Commercial Taxes, Bangalore [1990] 78 STC 99 (Kar).

6. We have heard the learned counsel for the petitioner and the State representative and we have gone through the impugned orders passed by the lower authorities. We find from the orders that the main question which was argued on behalf of the petitioner was that the petitioner has acted only as an intermediary in helping the insurance company to sell the salvaged tea and the petitioner has not charged anything for the service but only took bare expenses for salvaging work. According to the petitioner, it occasionally sells tea on behalf of the insurance company and the said tea represents tea salvaged out of insured goods received in the damaged condition in respect of which insurance company paid the appellant. That instead of selling the damaged tea, the insurance company entrusted the revision petitioner to sort out the tea fit for human consumption and sell the same and remit the sale proceeds to the insurance company. That the appellant has charged Rs. 1.50 per kg. from the insurance company towards expenses for segregating and packing. According to the revision petitioner no commission has been charged and therefore it is not an agent of the insurance company. As concluded by the Appellate Tribunal, the materials on record clearly disclose that the revision petitioner took possession of all the tea whether damaged or in good condition and thereafter salvaged the damaged tea, sold the same and the entire sale proceeds towards the sale of salvaged tea have been realised by the petitioner's unit and all the transactions have been completed within the State. Simply because some of the purchasers are situated outside the State the transactions which took place in Bangalore or within the State cannot be said to have been completed outside the State. The bifurcation made by the revision petitioner showing sales in Bangalore and in Secundrabad is without any basis. First of all when the assessing officer proposes the assess the petitioner, the petitioner did not put forth such a plea before the assessing authority. As held by the Tribunal, the petitioners have failed to prove that the transactions in question have taken place outside the State.

7. In United India Insurance Company case [1990] 78 STC 99 (Kar) the facts were that the appellant-insurance company which carried on business of insuring the goods, motor vehicles, machinery, etc., came into possession of damaged goods in the course of its business and those goods were mostly sold as scrap. The division Bench in the said case considered whether the sale of the goods rejected by the insured because of damages in transit and sold by the appellant-insurance company by way of salvage was liable to tax under the Karnataka Sales Tax Act and it was held that the activity in salvaging the damaged goods and recovering as much money as possible by sale thereof was 'business' and the appellant was therefore a dealer under the Act and the sale in question was taxable. In this case, that is not the question involved. The question involved is whether it is the revision petitioner who is liable to pay the tax towards the sale of salvaged tea. In the above cited case, the salvaged goods were returned to the insurance company which sold the same as scrap and therefore it was the insurance company who was to pay the tax. Here in this case admittedly it is the revision petitioner who took possession of the damaged tea and salvaged the same and after salvaging sold the same and for the said purpose it also charged the insurance company. Everything including sale has been done by the revision petitioner and the burden lies on the revision petitioner to prove that tax has been paid by the insurance company for the transaction of sale. No such evidence has been led by the revision petitioner. The petitioner who admittedly receives the damaged goods and takes up the work of salvaging and selling the same is either the principal or the agent. Even as regards imposing of fine also does not call for any interference. The Tribunal on scrutiny of the notes obtained by the assessing authority found that the transactions were not reflected in the books of accounts of the petitioner. The books showed the income received from the insurance company on account of salvaged tea that was accounted for. The petitioner had not disclosed the sale proceeds realised on account of the salvaged tea and if the petitioner had disclosed the same and then claimed exemption, it could have been said that the petitioner has not suppressed the transactions. But when there is no such disclosure in the books of accounts and it was detected only on verification by the assessing authority, it has to be held that the petitioner has suppressed the same. The Tribunal also found that the penalty levied did not exceed the maximum prescribed under the Act. The Tribunal was of the view that since the petitioner had suppressed the material facts while filing the return and it was only during reverification, the fact of sale of salvaged material was discovered and but for the reverification it would not have come to light. Thus the department unearthed the suppressed sale transaction and therefore it is not a case where a lenient view should be taken while imposing fine and the Tribunal therefore did not accept the prayer of the petitioner for levy of lesser fine. On reappraisal of the materials on record, we do not find any ground to interfere with the orders passed by the Tribunal or the taxing authorities. There is no merit in this revision petition. It is accordingly dismissed.