Hesanadhi Jay Industries and anr. Vs. Commercial Tax Officer and ors. - Court Judgment

Excerpt:
1. by the instant application the applicant no. 1, a partnership firm, challenges levy of purchase tax on purchase of jute sticks. the firm manufactures jute-stick-dust out of jute sticks purchased from cultivators. as a dealer registered under the bengal finance (sales tax) act, 1941 (in short, "the 1941 act"), the firm was assessed for four quarters ending march 31, 1988. the assessing officer (the respondent no. 1), apart from enhancing the gross turnover, estimated taxable specified purchase price (spp) under section 4(6)(i) of the 1941 act at rs. 79,978 and. demanded rs. 3,198.90 as purchase tax including interest thereon and also imposed penalty of rs. 300. appeal against the assessment having been filed, the appellate authority (respondent no. 2), though modified the assessment order and reduced the penalty amount, affirmed the levy of purchase tax on the applicant.against this appellate order the firm filed a revision application before the west bengal commercial taxes appellate and revisional board (in short, "the board") making specific assertion that jute stick falls under entry no. 32 of schedule i of the 1941 act and hence is not exigible to sales tax and is also not subject to purchase tax in view of the provisions of section 6d(2)(b) of the said act. but the board rejected the applicant's plea in that regard. the instant application before this tribunal has, therefore, been filed by the applicant-firm challenging in particular the levy of purchase tax on the purchase of jute stick and the assessment of interest on such purchase tax.2. in their affidavit-in-opposition the respondents dispute the firm's plea that jute stick is covered by entry no. 32 of schedule i.according to them, purchase of jute stick from unregistered dealer for manufacturing purpose brings such transaction within the ambit of section 4(6)(i) and hence such purchases are exigible to purchase tax.their further contention is that since without any logical basis the firm withheld the payment of purchase tax on purchase of jute stick, it (the firm) cannot evade the liability to pay interest.3. the issues calling for decision are (i) whether jute stick comes within the purview of the expression "raw jute" as appearing in entry no. 32 of schedule i of the 1941 act and (ii) whether the firm is liable to pay purchase tax under section 4{6)(i) of the 1941 act and also interest thereon.4. we do not propose to go to the first issue because in our opinion the decision of the second issue will be sufficient to dispose of the application as is before us. we, therefore, take up the second issue for a decision. in terms of sub-section (6) of section 4 of the 1941 act purchase tax is leviable on three distinct types of purchase of goods [other than those enumerated in clause (i) of the sub-section (6) of section 4]. according to section 4(6) the purchase tax is attracted whenever a goods is : (i) purchased from a dealer, who is not registered under the 1941 act, intended for direct use in the manufacture in west bengal of goods for sale and of containers and other materials for the packing of goods so purchased for manufacture ; or (iii) purchased from any person, whether a dealer or not, who is not registered under this act (the goods must be other than gold, rice, wheat) intended for a purpose, other than those specified in clause (i).the above categories of purchase have been specified in clauses (i), (ii) and (iii) of sub-section (6) of section 4 respectively. purchase of jute sticks being for manufacture of jute stick powder and undisputedly such purchase not having been made against any declaration form in terms of section 5(1)(bb) leviability of purchase tax to such purchases by the applicant shall have to be examined only in the context of provisions of clause (i) of section 4(6). mr. s.k.chakraborty, learned advocate for the applicant, argues that since purchase of jute sticks are made from cultivators who are not dealers at all there can be no question of levy of purchase tax on such purchases. though in the application, the applicants have not elaborated this point beyond making reference to purchases from the cultivators (page 2 of the application), mr. chakraborty contends that the nature of such cultivators clinches the whole issue. mr. j.k.goswami, learned state representative, however, points out that in the application the firm has admitted that the cultivators are "unregistered dealers" (vide para 16 of the application). but before giving importance to such expression used in para 16 of the application it must be seen if cultivators can at all be treated as dealers. since the jurisdiction of the assessing officer to levy purchase tax under section 4(6)(i) of the 1941 act is very much dependent on the question whether a cultivator is a dealer, it is highly pertinent to examine if the cultivator from whom the firm makes purchase can be said to be a "dealer" within the meaning of definition given in section 2(c) of the 1941 act.5. to become a dealer under the said section, the concerned person must carry on a business of selling goods in west bengal. there is no dispute that the persons from whom the firm makes purchases of jute sticks are cultivators. even the appellate authority in his order (vide page 23 of the application) has made a finding that seller of jute-sticks are cultivators. this finding has not been questioned either before the revisional authority or before us. in support of his contention that cultivators selling their agricultural produce as such are not "dealers", mr. chakraborty has referred to the decisions reported in [1957] 8 stc 732 (bom) [girdharilal jiwanlal v. assistant commissioner of sales tax (appeals), nagpur], [19641 15 stc 615 (ker) (deputy commissioner of agricultural income-tax and sales tax, quilon v. travancore rubber and tea co. ltd.) and [1967] 19 stc 45 (ker) (deputy commissioner of agricultural income-tax and sales tax v. mammu haji). in the first case [1957] 8 stc 732 (bom) [girdharilal jiwanlal v. assistant commissioner of sales tax (appeals), nagpur] it fell for consideration of the high court of bombay whether a person who cultivated his 440.77 acres of land to raise crops and sell his agricultural produce could be treated as a dealer, for such sale, within the meaning of section 2{c) of the c.p. and berar sales tax act, 1947. in giving their decision mudholkar and kotval, jj., quoted an excerpt from the decision of the same high court in the case of the state of bombay v. ahmedabad education society [1956] 7 stc 497. the excerpt runs thus : "it is clear from the definition of a dealer that it is not merely the act of selling as defined in the act which constitutes a person a dealer. the activity which the person must indulge in is not merely the activity of selling in the sense of transferring property in goods, but it must be the activity of carrying on the business of selling or supplying goods. what the legislature has emphasised is not the act or activity of selling but the act or activity of carrying on the business." in agreement with the said findings mudholkar and kotval, jj., have observed as follows : "it will thus be seen that a person does not necessarily fall within the definition of a 'dealer' contained in the act merely because he sells or supplies commodities, and in order to bring him within the definition it is additionally necessary to show that he carried on those activities as his business........ again, an agriculturist may sell the produce from his lands but this activity cannot by itself be regarded as a business of sale or supply of agricultural produce ; nor again would the two sets of activities taken together be said to constitute such a business, unless of course his primary intention in engaging himself in such activities was to carry on the business of sale or supply of agricultural produce." no doubt the above observations have been made in the context of definition of "dealer" as appearing in c.p. and berar sales tax act, 1947 and the wordings of the definition differs from the definition of "dealer" given in the bengal act (the 1941 act) ; but there is nothing special in the definition given in the bengal act which pulls into its ambit a cultivator on the mere ground that he sells his crop. there is no reason why the above quoted observations shall not equally apply to a cultivator who cultivates jute-plants on his lands and sells such jute. if a cultivator is stated to be carrying on business of selling of crop on the sole ground that he sells his agricultural produce, perhaps all agriculturists will become "dealers". but the legislature cannot be said to have contemplated that in enacting the sales tax statute. we also quote below the observations made by kerala high court in the case of deputy commissioner of agricultural income-tax and sales tax, quilon v. travancore rubber and tea co. ltd. "we take the view that an agriculturist selling his own produce either as gathered or after subjecting it to the minimum requirements necessary for transport and marketing cannot be considered to be a person engaged in the business of selling. the sale which he effects, as we see it, is only the culmination of his agricultural operations ; it is not separate and distinct from his agricultural avocation ; and he cannot be considered to be a person carrying on a business of selling simply because he effects a sale of his own agricultural produce." 6. an identical view was taken by the same high court in the case of deputy commissioner of agricultural income-tax and sales tax v. mammu haji [1967] 19 stc 45. in view of the observations above we are unable to hold that the cultivators who sold the jute sticks to the applicants are "dealers". mr. j.k. goswami has contended that sellers of jute sticks may be cultivators but that ipso facto cannot lead to a conclusion that in the matter of sale of jute sticks to the applicants they are not acting as middlemen. but the identity of a man as a cultivator ipso facto leaves no scope for an inference that he is also a middleman. if the respondents assert that they are middlemen, the onus is on them (respondents) to prove the same. but there is nothing on record to make such an inference.7. since the cultivators selling jute sticks to the applicants cannot be treated as "dealers" within the meaning of section 2(c), the provisions of section 4(6){i) of the 1941 act is not attracted for the purpose of levy of purchase tax on the purchases of jute sticks by the applicants from such cultivators. the assessing authority, thus, erred in levying purchase tax on the applicants on such purchases.8. in view of the above findings there is no necessity, as we have already observed, for going into the issue as to whether jute sticks come within the entry no. 32 of schedule i or not.9. in the result, the orders of the respondents nos. i, 2 and the board so far they relate to levy of purchase tax on purchase of jute stick and payment of interest of such tax are set aside. the rest part of the assessment and the orders of the respondent no. 2 and of the board thereon remain uninterfered.10. in the result, the application is allowed in view of the findings above. the assessing authority shall modify the assessment order in terms of the above observation. we make no order as to costs.

Judgment:
1. By the instant application the applicant No. 1, a partnership firm, challenges levy of purchase tax on purchase of jute sticks. The firm manufactures jute-stick-dust out of jute sticks purchased from cultivators. As a dealer registered under the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act"), the firm was assessed for four quarters ending March 31, 1988. The assessing officer (the respondent No. 1), apart from enhancing the gross turnover, estimated taxable specified purchase price (SPP) under Section 4(6)(i) of the 1941 Act at Rs. 79,978 and. demanded Rs. 3,198.90 as purchase tax including interest thereon and also imposed penalty of Rs. 300. Appeal against the assessment having been filed, the appellate authority (respondent No. 2), though modified the assessment order and reduced the penalty amount, affirmed the levy of purchase tax on the applicant.

Against this appellate order the firm filed a revision application before the West Bengal Commercial Taxes Appellate and Revisional Board (in short, "the Board") making specific assertion that jute stick falls under entry No. 32 of Schedule I of the 1941 Act and hence is not exigible to sales tax and is also not subject to purchase tax in view of the provisions of Section 6D(2)(b) of the said Act. But the Board rejected the applicant's plea in that regard. The instant application before this Tribunal has, therefore, been filed by the applicant-firm challenging in particular the levy of purchase tax on the purchase of jute stick and the assessment of interest on such purchase tax.

2. In their affidavit-in-opposition the respondents dispute the firm's plea that jute stick is covered by entry No. 32 of Schedule I.According to them, purchase of jute stick from unregistered dealer for manufacturing purpose brings such transaction within the ambit of Section 4(6)(i) and hence such purchases are exigible to purchase tax.

Their further contention is that since without any logical basis the firm withheld the payment of purchase tax on purchase of jute stick, it (the firm) cannot evade the liability to pay interest.

3. The issues calling for decision are (i) whether jute stick comes within the purview of the expression "raw jute" as appearing in entry No. 32 of Schedule I of the 1941 Act and (ii) whether the firm is liable to pay purchase tax under Section 4{6)(i) of the 1941 Act and also interest thereon.

4. We do not propose to go to the first issue because in our opinion the decision of the second issue will be sufficient to dispose of the application as is before us. We, therefore, take up the second issue for a decision. In terms of Sub-section (6) of Section 4 of the 1941 Act purchase tax is leviable on three distinct types of purchase of goods [other than those enumerated in clause (i) of the Sub-section (6) of Section 4]. According to Section 4(6) the purchase tax is attracted whenever a goods is : (i) purchased from a dealer, who is not registered under the 1941 Act, intended for direct use in the manufacture in West Bengal of goods for sale and of containers and other materials for the packing of goods so purchased for manufacture ; or (iii) purchased from any person, whether a dealer or not, who is not registered under this Act (the goods must be other than gold, rice, wheat) intended for a purpose, other than those specified in clause (i).

The above categories of purchase have been specified in clauses (i), (ii) and (iii) of Sub-section (6) of Section 4 respectively. Purchase of jute sticks being for manufacture of jute stick powder and undisputedly such purchase not having been made against any declaration form in terms of Section 5(1)(bb) leviability of purchase tax to such purchases by the applicant shall have to be examined only in the context of provisions of clause (i) of Section 4(6). Mr. S.K.Chakraborty, learned Advocate for the applicant, argues that since purchase of jute sticks are made from cultivators who are not dealers at all there can be no question of levy of purchase tax on such purchases. Though in the application, the applicants have not elaborated this point beyond making reference to purchases from the cultivators (page 2 of the application), Mr. Chakraborty contends that the nature of such cultivators clinches the whole issue. Mr. J.K.Goswami, learned State Representative, however, points out that in the application the firm has admitted that the cultivators are "unregistered dealers" (vide para 16 of the application). But before giving importance to such expression used in para 16 of the application it must be seen if cultivators can at all be treated as dealers. Since the jurisdiction of the assessing officer to levy purchase tax under Section 4(6)(i) of the 1941 Act is very much dependent on the question whether a cultivator is a dealer, it is highly pertinent to examine if the cultivator from whom the firm makes purchase can be said to be a "dealer" within the meaning of definition given in Section 2(c) of the 1941 Act.

5. To become a dealer under the said section, the concerned person must carry on a business of selling goods in West Bengal. There is no dispute that the persons from whom the firm makes purchases of jute sticks are cultivators. Even the appellate authority in his order (vide page 23 of the application) has made a finding that seller of jute-sticks are cultivators. This finding has not been questioned either before the revisional authority or before us. In support of his contention that cultivators selling their agricultural produce as such are not "dealers", Mr. Chakraborty has referred to the decisions reported in [1957] 8 STC 732 (Bom) [Girdharilal Jiwanlal v. Assistant Commissioner of Sales Tax (Appeals), Nagpur], [19641 15 STC 615 (Ker) (Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Travancore Rubber and Tea Co. Ltd.) and [1967] 19 STC 45 (Ker) (Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Mammu Haji). In the first case [1957] 8 STC 732 (Bom) [Girdharilal Jiwanlal v. Assistant Commissioner of Sales Tax (Appeals), Nagpur] it fell for consideration of the High Court of Bombay whether a person who cultivated his 440.77 acres of land to raise crops and sell his agricultural produce could be treated as a dealer, for such sale, within the meaning of Section 2{c) of the C.P. and Berar Sales Tax Act, 1947. In giving their decision Mudholkar and Kotval, JJ., quoted an excerpt from the decision of the same High Court in the case of the State of Bombay v. Ahmedabad Education Society [1956] 7 STC 497. The excerpt runs thus : "It is clear from the definition of a dealer that it is not merely the act of selling as defined in the Act which constitutes a person a dealer. The activity which the person must indulge in is not merely the activity of selling in the sense of transferring property in goods, but it must be the activity of carrying on the business of selling or supplying goods. What the Legislature has emphasised is not the act or activity of selling but the act or activity of carrying on the business." In agreement with the said findings Mudholkar and Kotval, JJ., have observed as follows : "It will thus be seen that a person does not necessarily fall within the definition of a 'dealer' contained in the Act merely because he sells or supplies commodities, and in order to bring him within the definition it is additionally necessary to show that he carried on those activities as his business........

Again, an agriculturist may sell the produce from his lands but this activity cannot by itself be regarded as a business of sale or supply of agricultural produce ; nor again would the two sets of activities taken together be said to constitute such a business, unless of course his primary intention in engaging himself in such activities was to carry on the business of sale or supply of agricultural produce." No doubt the above observations have been made in the context of definition of "dealer" as appearing in C.P. and Berar Sales Tax Act, 1947 and the wordings of the definition differs from the definition of "dealer" given in the Bengal Act (the 1941 Act) ; but there is nothing special in the definition given in the Bengal Act which pulls into its ambit a cultivator on the mere ground that he sells his crop. There is no reason why the above quoted observations shall not equally apply to a cultivator who cultivates jute-plants on his lands and sells such jute. If a cultivator is stated to be carrying on business of selling of crop on the sole ground that he sells his agricultural produce, perhaps all agriculturists will become "dealers". But the Legislature cannot be said to have contemplated that in enacting the sales tax statute. We also quote below the observations made by Kerala High Court in the case of Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Travancore Rubber and Tea Co. Ltd. "We take the view that an agriculturist selling his own produce either as gathered or after subjecting it to the minimum requirements necessary for transport and marketing cannot be considered to be a person engaged in the business of selling. The sale which he effects, as we see it, is only the culmination of his agricultural operations ; it is not separate and distinct from his agricultural avocation ; and he cannot be considered to be a person carrying on a business of selling simply because he effects a sale of his own agricultural produce." 6. An identical view was taken by the same High Court in the case of Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Mammu Haji [1967] 19 STC 45. In view of the observations above we are unable to hold that the cultivators who sold the jute sticks to the applicants are "dealers". Mr. J.K. Goswami has contended that sellers of jute sticks may be cultivators but that ipso facto cannot lead to a conclusion that in the matter of sale of jute sticks to the applicants they are not acting as middlemen. But the identity of a man as a cultivator ipso facto leaves no scope for an inference that he is also a middleman. If the respondents assert that they are middlemen, the onus is on them (respondents) to prove the same. But there is nothing on record to make such an inference.

7. Since the cultivators selling jute sticks to the applicants cannot be treated as "dealers" within the meaning of Section 2(c), the provisions of Section 4(6){i) of the 1941 Act is not attracted for the purpose of levy of purchase tax on the purchases of jute sticks by the applicants from such cultivators. The assessing authority, thus, erred in levying purchase tax on the applicants on such purchases.

8. In view of the above findings there is no necessity, as we have already observed, for going into the issue as to whether jute sticks come within the entry No. 32 of Schedule I or not.

9. In the result, the orders of the respondents Nos. I, 2 and the Board so far they relate to levy of purchase tax on purchase of jute stick and payment of interest of such tax are set aside. The rest part of the assessment and the orders of the respondent No. 2 and of the Board thereon remain uninterfered.

10. In the result, the application is allowed in view of the findings above. The assessing authority shall modify the assessment order in terms of the above observation. We make no order as to costs.