S.H. Sunagar vs State of Karnataka

Per B. Rajeeva Hegde, M.-This is an appeal under S. 22(1) of the Karnataka Sales Tax Act, 1957. It relates to the final assessment order under the Act for the year ending 31-3-1978. It is directed against the order dated 27-11-1979 passed by the first appellate authority namely, the Additional Deputy Commissioner of Commercial Taxes (Appeals), Hubli in his KST/AP/C/149/78-79. The only dispute in it is with regard to the levy of tax under S. 6 of the Act on a turnover of Rs. 62,500-00.

The relevant facts, which are not in dispute, are briefly as follows:

(i) The appellant is running a Dairy. In the course of his business he purchases Bran, Fodder, Oil Cake etc., and feeds them to his cows and she buffaloes; and he sells milk. He is a dealer registered under the Act. According to the return filed by him his total and taxable turnovers for the year ending 31-3-1978 are Rs. 1,08,300-00 and nil respectively. His books of account revealed sales of milk to the extent of Rs. 1,08,300-00. They also revealed purchases of bran, fodder and oil cake etc., at Rs. 19,500-00, Rs. 24,500-00 and 18,500-00 respectively. There were no purchase vouchers or invoices in support of these purchases. Evidently the purchases are from unregistered dealers.

(ii) The assessing authority held that bran, fodder, and oil cake etc., purchased by the appellant from unregistered dealers, were consumed in the manufacture of other goods, namely, milk, and that as such the purchases attract tax under S. 6 of the Act. Accordingly he subjected the purchases to tax under S. 6.

(iii) The first appellate authority came to the conclusion that:

"Even accepting the contention * * * that the said goods * * * * were not used in the manufacture of milk, they have been disposed of other than by way of sale and as such purchases had not suffered tax, purchase tax under S. 6 is leviable and the assessing authority is therefore right in imposing tax under S. 6". Accordingly he dismissed the appeal.

The instant appeal is against this order of the first appellate authority.

The only ground of appeal is that the lower authorities have failed to prove the ingredients which warrant the levy and that the first appellate authority erred in holding that the goods in question have been disposed of other than by way of sale and as such S. 6 is attracted. The learned counsel for the appellant contended that it is only if the title in the goods is transferred to some other person that the goods can be stated to have been ''disposed of'' within the meaning of S. 6; and that as there was no transfer of title so far as the bran fodder and oil cake are concerned. S. 6 cannot be invoked. In support of this stand he relied on the decision of our High Court rendered in the case of State v. B. Raghurama Shetty, 35 STC 360.

On the other hand the learned State Representative contended-relying on the very same decision reported in 35 STC 360-that the term ''disposed of has been held by our High Court to convey other meanings also such as, ''exchange'' ''give'', ''finish with'', ''get rid of'' (vide para 14 of the judgment at page 365) and that when so understood the facts of the case clearly come within the purview of S. 6 of the Act.

We have examined the connected records with reference to the grounds of appeal and the arguments advanced by both the parties.

As held by our High Court in B.J. Jeevendraiah v. State of Mysore, 35 STC 104, the conditions to be satisfied for attracting charge under S. 6 are the following:

"(1) The dealer must have purchased taxable goods in the course of his business:

(2) the purchase of the aforesaid goods must have been in circumstances in which no tax under S. 5 is leviable at the sale point; and (3) the dealer must have either consumed such goods in the manufacture of other goods for sale or otherwise, or must have disposed of such goods in any manner other than by way of sale in the State or must have despatched those goods to a place outside the State except as a direct result of sale or purchase in the course of inter-state State trade or commerce.

If the aforesaid three conditions are satisfied, subject to the provisions of sub-section (5) of S. 5, a dealer shall be liable to pay tax at the purchase point at the same rate at which it would have been leviable on the gale price of such goods under S. 5 of the Act".

It has also been held therein that the burden of proving these ingredients is clearly on the taxing authority. The facts of the case referred to above would establish that the first two ingredients exist. Thus the only question to be considered is whether, by feeding the bran, fodder and oil cake etc., to his cows and she buffaloes, the appellant can be said to have disposed of these goods within the meaning of that term occurring in the third condition referred to above. Whatever doubts there be in this regard have been set right by the judgment by our High Court in K. Chayyabba v. State of Karnataka, 45 STC 1, wherein it has been held as follows.

"In the context in which the word ''disposed of'' are used in S. 6 they mean transfer of title in the goods to any other person in the State otherwise than by way of sale."

In view of this the orders of the first appellate authority holding that the goods in question have been disposed of by the appellant other than by way of sale cannot be upheld.

In the result the orders of both the lower authorities are hereby set aside. The appeal is allowed.