The State of Orissa & ANR Vs. M/S.
Chakobhai Ghelabhai And Company  INSC 156 (20 September 1960)
GUPTA, K.C. DAS SHAH, J.C.
AYYANGAR, N. RAJAGOPALA
CITATION: 1961 AIR 284 1961 SCR (1) 719
CITATOR INFO :
R 1968 SC 565 (20)
Sales Tax-Sales tax authorities-Whether
courts-Levy of fees on memorandum of appeal and application for revisionWhether
taxes-Legislative competence place where sale effected-Question of law or
fact-Issue of one notice for several quarters-Legality-Orissa Sales Tax Act,
1947 (Orissa 14 of 1947), ss. 2(g), 12(5), 29(2)(s)-Orissa Sales Tax Rules,
1947, rr. 20, 59-Government of India Act, 1935 (25 & 26 Geo. 5, Ch. 42),
Seventh Schedule, List II, Items 1, 48, 54.
The respondent firm, which had its
headquarters in Madhya Pradesh and was, during the years 1948 to 1951, engaged
in collecting bidi leaves from certain forest areas in Orissa and dispatching
them to various destinations outside the State of Orissa, did not get itself
registered as a dealer under the Orissa Sales Tax Act, 1947, and did not submit
a return in spite of the notice issued to it, It was asked to show cause why a
penalty should not be imposed under s. 12(5) of the Act. The assessing
authority then proceeded to assess the tax to the best of its judgment and
determined the taxable turnover for each of the twelve quarters, the first
quarter ending on June 30, 1948, and the last quarter ending on March 31, 1951.
A penalty of Rs. 500 for each quarter was also imposed. The respondent's appeal
to the Assistant Collector of Sales Tax against the orders of assessment and
penalty was dismissed, and the revision petition was rejected by the Collector
of Commercial Taxes as having been filed out of time. One of the pleas taken
before the appellate authority was that the respondent was not a dealer in
Orissa inasmuch as the sales of bidi leaves were not effected in Orissa, but at
the hearing of the appeal it was admitted by the respondent's pleader that the
sales were completed in Orissa. The High Court, on a writ petition filed by the
respondent, set aside the orders of assessment and penalty on the grounds,
inter alia, (i) that the assessment orders were bad because of the repeal of
the second proviso to S. 2(g) of the Act defining " sale ", by the
Adaptation of Laws Order, 1950, (2) that the levy of fees on the memorandum of
appeal and the application in revision on a graded scale under r. 59 read with
s. 29(2)(s) of the Act amounted to the imposition of a tax which was beyond the
competence of the State, and (3) that the notice issued under s. 12(5) of the
Act was not in accordance with law, inasmuch as separate notices were not
issued for each quarter.
92 720 Held, (i) that the question as to
where a sale was completed depended on facts and was not a pure question of law
and, therefore, the admission made by the respondent's pleader was binding on
the respondent; and that as the admission brought the sales within s. 2(g) of
the Act, it was unnecessary to consider the second proviso to s. 2(g) and the sales,
were liable to tax ;
(2) that the sales-tax authorities including
the Assistant Collector of Sales Tax and the Collector of Commercial Taxes,
though they exercised quasi-judicial functions under the Act, were not courts
in the strict sense of the term " Court " ;
(3) that fees levied under r. 59 read with s.
29(2)(s) of the Act were not taxes but were imposed for services rendered by a
governmental agency. Section 29(2)(s) was, not invalid on the ground of legislative
incompetence and r.
59 did not go beyond what was permitted under
The Commissioner, Hindu Religious Endowments,
Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt,  S.C.R.
1005, relied on.
(4) that the issue of one notice under s.
12(5) of the Act for several quarters was not contrary to law as the section
makes reference to a period which might consist of more than one quarter.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
710 of 1957.
Appeal from the judgment and order dated
September 5, 1955, of the Orissa High Court in O. J. C. No. 92 of 1954.
N. C. Chatterjee, H. J. Umrigar and T. M.
Sen, for the appellants.
J. M. Thakar and J. B. Dadachanji for the
R. Gopalakrishnan and J. B. Dadachanji, for
1960. September 20. The Judgment of the Court
was delivered by S. K. DAS J.-This is an appeal on a certificate granted by the
High Court of Orissa. The appellants are the State of Orissa and the Collector
of Commercial Taxes, Orissa. The respondent is a partnership firm called
Messrs. Chakobhai Ghelabhai and Company dealing in " bidi ' leaves.
The short facts are these. The respondent
firm' has its headquarters in Bagbehera in Madhya Pradesh.
721 During the years 1948 to 1951 it was engaged,
in collecting ' bidi' leaves from certain forest areas in Orissa. The leaves so
collected were made up into bundles and stored in the respondent's godowns in
Orissa. They were then sold and dispatched to various destinations outside the
State of Orissa. The respondent did not get itself registered as a dealer under
the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947), hereinafter called the
Act. On July 21, 1950, a notice was issued to the respondent by the Assistant
Sales Tax Officer, Patna Circle, requiring it to submit a return in Form No. IV
showing separately the particulars of its turnover for each of the quarters
commencing October, 1947, and upto June 30, 1950. The respondent was also asked
to show cause why a penalty should not be imposed on it under s. 12(5) of the
Act. To this notice the respondent sent a reply to the effect, substantially,
that it carried on no selling business in Orissa and was, therefore tinder no
liability to register itself as a dealer in Orissa or to pay sales tax under
the Act. Thereafter, the respondent took no part in the assessment proceedings
and made no appearance before the assessing authority except on June 30, 1951,
when one of its partners Narvaram Popatbhai appeared and said that the accounts
were at Bagbehera and the dispatches of 'bidi' leaves from Orissa were mixed up
with other dispatches and, therefore, he was not in a position to give a
correct account of the business in Orissa. It was admitted, however, that the
'bidi ' leaves were collected in Orissa, were processed and manufactured for
sale and then stored in godowns in Orissa; they were then sold and dispatched
to different customers outside Orissa. The assessing authority held on the
materials before it that the transfer of property in the 'bidi ' leaves sold
and dispatched to customers as aforesaid was completed in Orissa and the
respondent wailfully. failed to get itself registered and to submit a return of
its turnover. The assessing authority then proceeded to assess the tax to the
best of its judgment and determined the taxable turnover to be Rs. 61,250 for
each of the twelve quarters, the first quarter ending 722 on June 30, 1948, and
the last quarter ending on March 31, 1951. It also imposed a penalty of Es. 500
for each quarter. The orders of assessment were made on two dates-on July 4,
1951, for four quarters and on August 29, 1951, for the remaining eight
quarters. Against these orders of assessment the respondent went up in appeal
to the Assistant Collector of Sales Tax, Sambalpur. One of the pleas taken
before the appellate authority was that the respondent was not a dealer in
Orissa inasmuch as the sales of ' bidi ' leaves were not effected in Orissa. In
the course of the hearing of the appeal this plea. was given up, and it was
admitted by the respondent's pleader that "the sales were completed in
Orissa ". The appeal was then heard on the contentions that (1) the
turnover determined was excessive, and (2) that no penalty should have been
imposed. These contentions were rejected by the appellate authority. The
respondent then moved in revision, but the revision petition having been filed
out of time was rejected by the Collector of Commercial Taxes, Orissa.
The respondent then moved the High Court of
Orissa by means of a writ petitionin which it was contended that (1) the
respondent was not a dealer in Orissa; (2) that the sales of the
post-Constitution period were sales within the meaning of the Explanation to
Art. 286(1)(a) as it then stood and Orissa could not tax them ; (3) that the notice
under s. 12(5) of the Act was bad on various grounds; (4) that the fees levied
under rule 59 of the Orissa Sales Tax Rules, 1947, on the respondent's
'Memorandum of appeal and revision application, were not justified in law; and
(5) that the assessment was illegally made and so also the penalty under s.
12(5) of the Act. On these contentions the respondent asked for a writ quashing
the assessment proceedings and the notices of demand and for a direction for a
refund of the fees paid. The High Court allowed the petition by its Judgment
and order dated September 5, 1955. It set aside the assessment orders, directed
a refund of the fees paid and further made an order that the respondent shall
be directed " to furnish a return of its transactions 723 under,. 11 for
the period for which it had been served with a notice under s. 11(1) of the Act
". In support of its orders the High Court came to the following findings:
(1) that the assessment orders were bad because of the repeal of the second
proviso-to s. 2(g) of the Act defining "Sale", by the Adaptation of
Laws Order, 1950; (2) that the levy of fees on a graded scale amounted to the
imposition of a tax which was unwarranted and beyond the rule making power of
the State Government; and (3) that the notice issued under s. 12(5) was not in
accordance with law.
On behalf of the appellants it has been
contended that the High Court was in error in respect of all the three findings
at which it had arrived. As to the finding of the High Court that the
assessment orders were bad because of the repeal of the second proviso to s.
2(g) of the Act, we think that the High Court was clearly in error. In view of
the admission made on behalf of the respondent, it was quite unnecessary to
deal with the second proviso s. 2(g) of the Act or to consider the effect of
its repeal by the Adaptation of Laws Order, 1950, or the effect of the saving
clause in paragraph 20 thereof. The admission on behalf of the respondent, made
in very clear terms as recorded by the appellate authority, was that the sales
were completed in Orissa. Section 2(g) of the Act states:
"S. 2(g)-" sale " means, with
all its grammatical variations and cognate expressions, any transfer of
property in goods for cash or deferred payment or other valuable consideration,
including a transfer of property in goods involved in the execution of contract
but does not include a mortgage, hypothecation, char or pledge." The
admission made in this case clearly brings the sales of 'bidi' leaves within s.
2(g) of the Act; and as the sales were completed in Orissa, they were liable to
tax under the Act. It was quite unnecessary to go to the second proviso to s.
2(g) in view of the admission of the respondent.
Learned Counsel for the respondent suggested
that the admission made by the respondent's pleader was an admission on a
question of law and, therefore, not 724 binding on the respondent. We do not
agree. The question where a sale is completed depends on facts and is not a
pure question of law. It is worthy of note, that at no stage subsequent to the
admission did the respondent repudiate it or challenge its correctness. Even in
the writ' petition it was not stated that a wrong admission had been made; on
'the contrary the appellate authority's order in which the admission was set
out was an annexure to the writ petition.
It is indeed true that is paragraph 13(a) of
the writ petition a contention was raised with regard to the sales of the
post-Constitution period and a reference was made to the Explanation to Art.
286(1)(a) as it then stood. But the necessary averments to attract the
Explanation were not made, and nowhere was it stated that the goods were
dispatched outside Orissa for the purpose of' consumption in the delivery
State. In other words, no foundation was laid for making a distinction between
the pre-Constitution and post-Constitution sales, and with regard to all of
them it was admitted that they were completed in Orissa-an admission which was
never repudiated or challenged. We are, therefore, of the opinion that the High
Court, was clearly in error in its first finding as to the unconstitutionality
of the assessment orders made.
We think that the High Court was also in
error in its finding as to the legality of the fees levied on the memorandum of
appeal and the application in revision.
Section 29 of the Act deals with the rule
making power. It states:
" S. 29(1)-The State Government may,
subject to the condition of previous publication, make rules for carrying out
the purposes of this Act.
(2) In particular and without prejudice to
the generality of the foregoing power, such rules may prescribe(s) the
procedure for and other matters (including fees) incidental to, the disposal of
appeals and applications for revision and review under s. 23." Rule 59 of
the Orissa Sales Tax Rules, 1947, so far as it is relevant for our purpose
says:725 R. 59. Fees-Subject to the provisions of rule 60 the following fees
shall be payable:(i) ..................... .....................
(ii) On a memorandum of Five per cent of the
amount appeal against an order of amount in dispute calculated assessment or
penalty or both to the nearest rupee subject or an application for revision to
a minimum of one rupee or review of such order. and maximum of one hundred
(iv) On an application for One rupee."
The first question is if s. 29(2)(s) in so
far as it empowers the State Government to make a rule prescribing fees for
appeals and applications in revision was within the legislative competence of
the Provincial Legislature. The Act was enacted in 1947 and the source of
legislative power must be found in the Government of India Act, 1935. Item 48
of List II (Provincial Legislative List) in the Seventh Schedule of the said
Act related to "Taxes on the sale of goods " and item 54 read: "
Fees in respect of any of the matters in this list, but not including fees
taken in any court". Item "related inter alia to " constitution
and Organisation of all courts except the Federal Court, and fees taken
therein." The High Court held that the assessing authorities including the
Assistant Collector of Sales Tax and the Collector of Commercial Taxes, Orissa,
were not courts in the strict sense of the term " Court ", though they
exercised quasi judicial functions under the Act. We think that is a correct
view. But it does not necessarily follow that the fees imposed under r. 59 read
29(2)(s) are illegal. Under items 48 and 54
the then Provincial Legislature had power to make a law for taxes on the sale
of goods and for fees in respect thereof. Even with regard to Court-fees, the
Provincial Legislature had power to make a law under item 1. We do not think
29(2) (s) can be held to be bad on the ground
of legislative incompetence. Nor do we think that r. 59 goes beyond what is
permitted under a. 29(2)(s). The fees imposed are not taxes; they 726 come
within the expression " other matters (including fees) incidental to the
disposal of appeals and applications for revision etc.". We are unable to
agree with the High Court that the word "incidental' has reference to a
matter of casual nature only. The procedure for disposal of an appeal includes
as a necessary incidental matter the filing of an appeal on a proper fee. The
distinction between a tax and a fee was considered by this Court in The
Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha
Swamiar of Sri Shirur Mutt(1) and it is unnecessary to repeat what was said
there. We consider that the fees imposed by r. 59 are for services rendered by
a Governmental agency and though ordinarily fees are uniform, there may be
various kinds of fees and it is not possible to formulate a definition that
would be applicable to all cases.
Now, the last finding of the High Court is
that the notice under s. 12(5) was not in accordance with law. Here again we
think that the High Court was in error. The notice was issued in Form no. VI,
which is a combined form for the purposes of ss. 11 and 12. A foot-note appended
to the form required the assessing authority to score out unnecessary words.
The High Court points out, that this was not done.
We are, however, unable to agree with the
High Court that the failure to score out unnecessary words made the notice bad
in law. The respondent sent a reply to the notice and claimed that it was not a
dealer in Orissa. Obviously, the respondent had no difficulty in understanding
that the notice was one under s. 12(5) of the Act. The notice stated in terms
that the respondent should show cause why a penalty should not be imposed under
s. 12(5) of the Act. Section 12(5) as it stood at the relevant time was in
"S. 12(5). If upon information which has
come into his possession, the Collector is satisfied that any dealer has been
liable to pay tax under this Act in respect of any period and has nevertheless
wilfully failed to apply for registration, the Collector shall, after giving
the dealer a reasonable opportunity of being heard, assess, to the best of his
judgment, the (1)  S.C.R. 1005.
727 amount of tax, if any, due from the
dealer in respect of such period and all subsequent periods and the Collector
may direct that the dealer shall pay, by way of penalty, in addition to the
amount so assessed, a sum not exceeding one and a half times that amount."
It has been argued before us that one notice was issued for several quarters
and an assessment was made for each quarter separately-four quarters on July 4,
1951, and eight quarters on August 29, 1951. This, it is contended, was
illegal. We are unable to accept this contention as correct. Section 12(5)
talks of a period, and the period may consist of more than one quarter.
The return has, however, to be submitted in
Form IV which read with r. 20 of the Orissa Sales Tax Rules, 1947, requires the
assessee to furnish details of his turnover for each quarter. The assessment
must,, therefore, be made on the taxable turnover of each quarter.
Lastly, it has been argued that there was no
notice under s. 12(5) for the last three quarters and, there. fore, for those
quarters the assessment orders must be held to be bad.
The appellate authority has pointed out that
even for the last three quarters the assessing officer, after he had made his
orders of assessment in the first five quarters, had directed the respondent to
produce his accounts, but DO accounts were produced. Section 12(5) enables the
assessing authority to make a best judgment assessment for " all
subsequent periods " after giving the dealer a reasonable opportunity of
being heard. Such an opportunity was given in the present case even in respect
of the last three quarters, and we are unable to hold that the assessment for
the last three quarters was bad.
For the reasons given above, we must allow
this appeal, set aside the judgment and order of the High Court dated September
5, 1955, and dismiss the writ petition of the respondent. The appellants will
be entitled to their costs of the proceedings in the High Court and in this