State of Orissa vs Royal Half-tone Company

R.N. Misra, J.—By order dated 28.8.1975, on an application made by the Commissioner of Sales-Tax u/s 24(2)(b) of the Orissa Sales Tax Act, 1947 (hereinafter referred to as the ''Act''), this Court called upon the Sales Tax Tribunal to state a case and refer the following two questions for opinion of the Court:

(1) Whether on the facts and in the circumstances of the case, the Tribunal was correct in coming to the conclusion that the transactions were not exigible to Orissa Sales Tax? and

(2) Whether on the facts and in the circumstances of the case, the annulment of penalty u/s 12(5) of the Act was justified? Pursuant to the direction, a case has been stated.

Assessee is M/s. Royal Half-tone Company of Calcutta and the relevant periods are 1962-63, 1963-64 and 1964-65 (financial years) Assessee manufactured and sold printing blocks, coloured covers and printed designs to be used as book covers. During the relevant periods, Assessee supplied these materials to the Orissa Government Press, the Orissa Text Book Press and many other Government Offices as also to private parties. Up to July, 1963, representatives of the Assessee used to visit Cuttack, obtain orders from the customers and used to sell the goods to them in terms of orders and specifications by effecting delivery of the goods to the buyers. From July, 1963, Assessee opened a branch at Cuttack and then started manufacturing of printing blocks at Cuttack itself.

The Assessing Officer found that the Assessee supplied various items of goods to several buyers during the relevant period within the State of Orissa. Orders used to be received at Cuttack and goods were also delivered at Cuttack. Bills were prepared after approval of the goods by the buyers.

One Sri Nihar Ranjan Das who was working as a Manager of the lessees stated to the Assessing Officer that he used to receive blocks, books and printing materials from Calcutta and sold the same at Cuttack. Similarly one Sri Tushar Mitra who was the previous Manager also stated that orders used to be procured from different parties at Cuttack and after the goods were obtained from Calcutta, supplies were effected at Cuttack on payment. The Proprietor of the firm also appeared before the Assessing Officer and stated that he was not able to prove that he was making sales directly from Calcutta to the buyers. In fact, at the end of his examination, he even admitted that nothing had been sent directly from Calcutta to the buyers.

Before the Assessing Officer, it was claimed that the sales were not exigible to tax either under the Orissa Act or even under the Central Sales Tax Act. After due investigation, the Assessing Officer negatived the stand of the Assessee and completed assessments u/s 12(5) of the Act, treated the Assessee as an unregistered dealer after estimating the turnover and imposed penalties....

Assessee''s first appeals were dismissed by the Assistant Commissioner of Sales Tax. On further appeal to the Tribunal, the learned Member found that the goods had moved from Calcutta in West Bengal to Cuttack in Orissa as an incidence of contract of sale and, therefore, the transactions were not liable to tax under the provisions of the State Act as being sales pure and simple inside the State of Orissa. Accordingly he vacated the assessments and with that the penalties were also set aside.

The undisputed facts which can conveniently be gathered from the Statement of the Case are these Assessee''s principal place of business is at Calcutta. Assessee had some agents to procure orders from customers within the State of Orissa. After orders were placed, the goods used to be brought to Cuttack and thereafter supplied against the orders previously obtained. There was no direct supply to customers from Calcutta. The goods used to be approved and thereafter bills were drawn up at Cuttack and the price was collected.

On the facts found, it is difficult to accept Assessee''s contention that the goods moved from Calcutta pursuant to any pre-existing contract. There could be some force in such a contention if there had been direct despatch of the goods to the customers. As it appears, the nature of the business was that some people came and ascertained the necessities of buyers within the State and thereafter obtained the goods from their principal place of business to Cuttack within the State of Orissa and effected local sales.

Series of authorities were cited by Mr. B.K. Mohapatra who argued these cases on behalf of the State in support of the contention that the transactions were exigible to the State tax. On the facts found we find no room for the contention of the Assessee. Admittedly, Section 3(b) of the Central Act has no application and Section 3(a), in our view, is equally not applicable. It is difficult to hold that the sale has occasioned movement of the goods from West Bengal to Orissa. The representatives of the Assessee got the goods from Calcutta and had full control over them when the goods were within this State It was open to them to deliver the goods to any customer and, therefore, the bringing of the goods into Orissa did not necessarily relate to pre-existing contracts. When a particular item did not satisfy the customer, it also became available to be canalised in the sale stream. All the incidences of a local sale are present in these transactions, namely, the agreement was entered into in this State; the sellers representative procured the goods and stored the same under his control, got the goods approved by the customer, drew up a local bill and received payment. Title to the goods did pass only upon delivery within this State. It is unnecessary in these premises to quote authorities for answering the question.

Our answer to the first question is against the Assessee, i.e. In the facts and circumstances of the case the Tribunal was not correct in coming to the conclusion that the transactions were not exigible to Orissa sales tax.

So far as the other question is concerned, we find that the Tribunal knocked off the penalty more or less as a consequence of vacation of the assessment. Now that on our answer, the tax liability is bound to be restored, the impossibility of penalty and quantum may be re-agitated before the Tribunal at the hearing of the appeal after the records go back so that the Tribunal may re-dispose of the matter. We express no opinion in the circumstances.

There shall be no order as to costs.

N.K. Das, J.

I agree.