Hindustan Petroleum Corporation Ltd. vs State of Bihar and Others

Sarwar Ali, Ag. C.J.

In this writ application the petitioner prays for quashing of the orders contained in annexures 1, 2 and 3 in so far as the orders hold that additional tax is not deductible from the taxable turnover of the petitioner for the purpose of levy of general sales tax and special sales tax.

The petitioner is a Government company within the meaning of Section 617 of the Companies Act, 1956. For the year 1975-76 the company returned a gross turnover of Rs. 6,90,07,425.44. In the gross turnover the amount of additional tax collected by it from the purchasers amounting to Rs. 4,72,742.31 was not included. The assessing officer held that the amount collected by way of additional tax by the petitioner-company from the purchasers formed part of the gross turnover of the company. It was also held that the amount of additional tax was not deductible from the taxable turnover of the petitioner for the purpose of computing the general sales tax, special sales tax and additional tax payable by the petitioner. In respect of the amount of additional sales tax collected by the petitioner, as mentioned above, the Assessing Officer fixed the amount of additional sales tax collected by the petitioner at a slightly higher figure of Rs. 4,77,517.48. The order of the Assessing Officer contained in annexure 1 has been affirmed in appeal (annexure 2). The appellate order has been affirmed by the revisional order (annexure 3). The petitioner thereafter filed a revision before the Commercial Taxes Tribunal. This revision was dismissed in limine on the point of limitation. In this writ application the circumstances under which the petitioner could not move before the Commercial Taxes Tribunal in time have been explained.

Learned counsel for the petitioner raised two contentions. The first contention is that the additional tax realised by the petitioner from the customers cannot be included in the gross turnover of the petitioner within the meaning of Section 2(k) of the Bihar Sales Tax Act. The second contention is that in determining the taxable turnover u/s 7 of the Act the amount of additional tax realised by the petitioner from the customers has to be deducted.

I first propose to deal with the second contention. The charging section is Section 3. By the Bihar Sales Tax (Fourth Amendment) Ordinance, 1971, Section 3B was introduced with effect from 1st December, 1971. Section 3B(1) states:

Notwithstanding anything contained in Sub-section (3) of Section 4, or Section 5, 6, 6A or 7 or in any notification issued thereunder, every dealer liable to pay tax u/s 3 or Section 3A shall, with effect from the 1st December, 1971, pay an additional tax at such rate, not exceeding one per centum of his gross turnover, as the State Government may, from time to time, by notification in the Official Gazette, fix.

There is a proviso thereto which need not be quoted. I would now quote the relevant portion of Section 7. It states :

For the purposes of this Act, the ''taxable turnover" of a dealer shall be-

(1) in respect of the general sales tax, that part of the gross turnover which remains after deducting therefrom-

(a) sale prices on account of sales exempted u/s 4; and

(b) amount of sales tax actually collected as such, if any, along with the sale prices received or receivable in respect of sales of goods;

(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 u/s 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....

It was contended on behalf of the State that in respect of general sales tax it is only the amount collected as general sales tax which is deductible u/s 7(1)(b) of the Act. Similarly, in relation to special sales tax, it is the amount of sales tax collected as special sales tax which is deductible u/s 7(2)(a)(ii) of the Act. Additional tax not coming within this category could not be deducted. It was further contended that tax has been defined and additional sales tax does not come within the definition.

I have already quoted Section 3B. It authorises the imposition of additional tax, at the prescribed rate, on the gross turnover of a dealer. Section 20A(2) of the Act enacts :

No registered dealer shall collect from any person any such amount, except in a case in which and to the extent to which such dealer is liable to pay tax under this Act.

Tax has been defined in Section 2(s) as-

''tax'' includes the general sales tax and special sales tax as also purchase tax levied u/s 3.

This definition is not exhaustive. Therefore, it cannot be confined to general sales tax and special sales tax and any amount payable as tax under the provisions of the Bihar Sales Tax Act comes within the definition. Additional tax also as such is a tax within the meaning of the Act. By virtue of Section 20A(2), which has been quoted, it is implicit that a dealer may recover from the purchasers, in addition to the value of the goods, an amount or amounts which he will have to pay as tax on that value : see Ashoka Marketing Ltd. Vs. State of Bihar and Another, . Consequently, in my view, he is entitled to collect from the purchasers additional tax which is payable by him u/s 3B of the Act.

A perusal of Section 7 of the Act makes it clear that for the purpose of computing taxable turnover, in respect of general sales tax as also special sales tax, the amount of sales tax actually collected as such is deductible. Additional tax is also a tax within the meaning of Section 2(s) of the Act.. When a dealer collects from a purchaser additional tax, he is collecting it as a sales tax. If it was otherwise, he would not be entitled to collect the same. The expression "sales tax actually collected as such" only means that tax should be separately collected by a dealer. If it is not collected as a tax then it is not covered by the expression aforesaid. I am, therefore, of the view that if additional tax has been collected by a dealer as a tax he is entitled to deduction of the same along with the general sales tax or special sales tax, as the case may be, for the purpose of computation of his taxable turnover.

So far as the first contention of the petitioner is concerned, I find it difficult to accept the same. Reliance was placed on several decisions of other High Courts in support of tire contention. Learned counsel for the petitioner did not refer to any decision of our High Court having direct bearing on the contention raised. Learned counsel for the State referred to Ashoka Marketing Ltd. Vs. State of Bihar and Another, and the decisions reported in Tata Iron & Steel Co. Ltd. v. State of Bihar AIR 1958 SC 452 and Malpani Brothers Vs. The State of Bihar, being cases arising out of sales tax law of this State. But, in my view, none of the cases directly deal with the question that has been raised. As at present advised, I am, however, of the view that the gross turnover within the meaning of Section 2(k) of the Act includes the amount of sales tax, including additional tax, realised by a dealer from the customers. This is clear from the persual of Section 7 of the Act, relevant extracts wherefrom have already been quoted. It would be observed that in computing the taxable turnover the section requires deduction of sales tax collected as such from the gross turnover. If gross turnover did not include the sales tax collected by a dealer, there would be no meaning in enacting that the same should be excluded from the taxable turnover. Whatever be the position, so far as tax laws of other States are concerned, I am of the view that the scheme of the Bihar Sales Tax Act. indicates that gross turnover includes the amount realised by a dealer as sales tax.

Learned counsel for the State pointed out that the petitioner moved the Tribunal beyond the period of limitation and as such this Court should not interfere in the exercise of writ jurisdiction of this Court. The circumstances in which the delay had occurred have been explained in the writ petition. That apart, since the point raised is of general importance, I am of the view that the legal controversy should be set at rest by interpreting the relevant provisions of the Act. I am, therefore, of the view that it is a fit case in which the petitioner should be given appropriate reliefs.

I would, therefore, allow this writ application and quash the orders contained in annexures 1 to 3 in so far as they hold that additional sales tax is not deductible from the gross turnover and remit the case to the Assistant Commissioner of Commercial Taxes for redetermination of the liability of the petitioner in the light of this judgment. In the circumstances, there will be no order as to costs.

Syed Haidar Shaukat Abidi, J.

I agree.