Mani Lal and Company Vs. Commercial Taxes Officer - Court Judgment

V.K. Singhal, J.

1. The assessee has filed this revision petition under Section 15 of the Rajasthan Sales Tax Act, 1954, raising the following questions :

'(i) Whether to effectuate a sale under the Rajasthan Sales Tax Act, it is necessary that there should be a sale from one person to another, and whether a sale made to different branches of a firm or company in various parts of the country, cannot be considered to be 'sale' within the definition clause of the aforesaid word 'sale' as occurring in Section 2(o) of the Rajasthan Sales Tax Act, 1954 ?

(ii) Whether, in the facts and circumstances of the case, it can be held that the sale made by the petitioner to its various branches in various parts of the country was not a sale but only a stock transfer ?

(iii) Whether the Tribunal was bound to follow the earlier Division Bench decision of the Board of Revenue in the case of this very petitioner based on the same facts, and whether the Tribunal could take a different view without, in any manner, holding that the earlier decision of the Board of Revenue was not correct ?

(iv) Whether in the facts and circumstances of the case, purchase tax was leviable from the petitioner even though the goods had been purchased from a registered dealer and had been sold in the course of inter-State trade after obtaining 'C' forms and recovering tax at 4 per cent ?

(v) Whether, in the facts and circumstances of the case, the petitioner had violated the declaration given by him under ST-37 form and he was, therefore, liable to pay purchase tax ?

(vi) Whether in the absence of any finding of mens rea and the fact that all the sales made by the petitioner had been shown by him in his returns, the Tribunal could have imposed a penalty under Section 16(1)(k) of the Rajasthan Sales Tax Act, 1954 ?

(vii) Whether the petitioner was liable to pay interest under Section 11-B of the Rajasthan Sales Tax Act, 1954, even though he had paid the entire amount of tax collected by him consequent upon the sales made by him to the various branches after obtaining 'C' forms and recovering tax at 4 per cent ?'

2. Brief facts of the case are that the assessee had purchased iron wire nets during 1977-78 from a manufacturer in terms of notification dated March 23, 1963, read with notification dated January 2, 1976. A declaration form was issued to the manufacturer in terms of the notification and it was contemplated that the assessee would effect sale of goods so purchased from a manufacturer under form ST-17 either in the State or in the course of inter-State trade. Without effecting sale, the goods were transferred to the head office of the assessee which was situated outside the State of Rajasthan. 'C' forms were also produced and 4 per cent tax was deposited by the assessee. While finalising the assessment, the assessing authority came to the conclusion that the assessee is liable for purchase tax under Section 5-A of the Rajasthan Sales Tax Act in respect of the purchases of goods so made and the goods transferred outside the State of Rajasthan. Besides tax of Rs. 1,37,752 penalty of Rs. 35,000 under Section 16(1)(k) was also levied. The main contention of the assessee Was that the provisions of Section 5-A are not applicable because the head office and the branch are separately registered. So far as this question is concerned, even in a State there may be a provision for registration of the head office as well as branch office separately. There may be provision under law by which one registration is sufficient to cover the business transaction of the head office as well as of the branch office. The sales tax is a State subject and, therefore, if the assessee is having business either by way of head office or branch office in the other State, then the said dealer has to obtain registration in that State in accordance with the law prevailing in that State. The registration in one State is of no help for the business which is being carried in the other State. The contention which has been raised that separate registration of the branch and head office would make it a transaction of sale, is contrary to law. The sale contemplates four elements, namely, (i) there must be an agreement between the parties, (ii) agreement must contemplate transfer of goods from one party to another, (iii) agreement for transfer of goods must be for money consideration and (iv) there must be actual transfer of property in goods. If the goods have been sent from branch office to head office or vice versa it cannot be said that there is transfer of property in goods from one person to another and irrespective of the fact that the branch or head offices are separately registered, it cannot be considered to be a sale. The notification dated March 23, 1963, as amended by notification dated January 2, 1976, under which purchases were made by the assessee of the manufactured goods from another registered dealer, contemplated the sale of those goods either within the State or in the course of inter-State trade or commerce. In the present case looking to the nature of transactions, there cannot be sale and the transfer of goods by the assessee outside the State cannot be considered to be a sale. The Sales Tax Tribunal has come to the conclusion that the goods were transferred to the head office outside the State and, therefore, it is not a sale. The submission of 'C' form could not convert a transaction of non-sale to a sale. 'C' form may be issued under mistake or wrong interpretation of law or may be for taking wrong advantage of concessional rate of tax. The submission of 'C' form, therefore, is not the determinative factor for the nature of transaction that it is the inter-State sale, more particularly when the fact that the goods were transferred by the assessee to its head office outside the State has not been denied. In these circumstances, it is held that the assessee has not complied with the declaration which has been given in accordance with the notification dated March 23, 1963.

3. The provisions of Section 5-A cover the transaction of purchases which have been made and has not resulted in sale and liability of purchase is effected therein. In these circumstances, the provisions of Section 5-A were rightly invoked. It has been submitted by Mr. Rajpal that the provisions of Section 5-A have been amended retrospectively and therefore, there should not be any liability of interest. This argument could have been considered if in accordance with the provisions which were earlier existing, there was no liability of tax and the liability of tax for the first time has been fixed by amending the provisions of Section 5-A retrospectively. Liability of interest could not have been fastened if such contingency had arisen that the tax was not payable under the earlier provisions of Section 5-A and a fresh liability has been created now by amending the provisions of Section 5-A. retrospectively. Taking for example, under the earlier provisions of Section 5-A, if the goods have been purchased from unregistered dealer and sold in the course of inter-State trade and commerce then there was no liability of purchase tax. Now under the amended provisions of Section 5-A if the goods so purchased have been sold in the course of inter-State trade and commerce, then there would be liability of purchase tax unless it has specifically been exempted, In the present case, liability which has been fixed is by virtue of the proviso to Section 2(s), which during the relevant time provided as under :

'Provided further that when any dealer has purchased any goods without paying any tax or after paying tax at concessional or reduced rate of tax on the strength of any declaration furnished by him under the Act and such goods are used by him for any purpose other than the one mentioned in the declaration, the purchase price of such goods shall be included in his taxable turnover.......'

4. It is by virtue of this proviso that the purchase price of the assessee has to be included in the taxable turnover and the purchases which have been made by the assessee were for the purposes of effecting sale either within the State of Rajasthan or in the course of inter-State trade or commerce and the goods were not used for the purpose declared in the declaration form and were used for the purposes different than that. Therefore, the proviso to Section 2(s) of the Act was applicable and the assessee was liable to make payment of tax on the basis of this proviso read with Section 5-A. Interest under Section 11-B was accordingly payable thereon.

5. Another point, which has been raised is that the assessee had been subjected to penalty of Rs. 35,000 which was reduced by the Sales Tax Tribunal to Rs. 5,000. The provisions of Section 16(1)(k) of the Act are as under :

'16. Offences, penalties and prosecutions, etc.--(1)............

(k) after purchasing any goods in respect of which he has made a declaration under the provisions of this Act or rule0s made thereunder, fails without reasonable cause to make use of the goods for the declared purposes.'

From the above provision, it would be evident that besides liability of tax as provided under Section 2(s) mentioned above, the assessee is also liable for penalty if after purchasing any goods in respect of which he has made declaration under the provisions of this Act, he fails without reasonable cause to make use of the goods. The question as to what is the reasonable cause has to be considered on the facts of each case. In the present case, the Tribunal has considered this aspect of the matter and came to the conclusion that the explanation which was given by the assessee was that he treated this transaction as inter-State sale and 'C' form was also submitted. The facts which have been found above do not justify such a conclusion. The Tribunal has found that the penalty to the extent of Rs. 5,000 is leviable. The use of the goods for the different purposes than the declared one is evident from the observations made above and whether failure was with or without reasonable cause, is a question of fact. The Tribunal on the basis of the facts which were submitted, has taken a view that the penalty has to be reduced. The reduction could have been to any extent and therefore, the amount which has been reduced to Rs. 5,000 is not further required to be reduced any more.

6. The various questions which have been referred by the assessee in the application for revision are reduced into following three questions :

(i) Whether the assessee who has purchased the goods from a manufacturer under notification dated March 23, 1963, for sale of goods within the State of Rajasthan or in the course of inter-State trade or commerce is liable to pay tax under Section 2(s)(iv) when the goods have not been utilised for the declared purposes ?

(ii) Whether the provisions of Section 11-B of the Act could be made applicable for non-payment of tax under the provisions of the Rajasthan Sales Tax Act on the tax liability created in para 1 ?

(iii) Whether the assessee has committed any offence under Section 16(1)(k) of the Act or not ?

All the above questions arc decided against assessee.

The revision petition has, therefore, no merit and is hereby dismissed. No order as to costs.