Haleema Zubair
Tropical Traders Vs. State of Kerala [2008] INSC 1979 (19 November 2008)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. _6707 OF 2008 (Arising
out of SLP ) No. 9606 of 2007) Haleema Zubair, Tropical Traders .... Appellant
Versus State of Kerala .... Respondent
S.B. SINHA, J.
1.
Leave
granted.
2.
Appellant,
Haleema Zubair, is an assessee under the Kerala General Sales Tax Act, 1963
(for short `the Act'). She is said to be the proprietress of two concerns, -
one known as M/s. Tropical Traders and another .M/s. Poseidon Food Company.
3.
The
said Topical Traders is a dealer in ceramic tiles. The business of M/s.
Poseidon Food Company was to render services to various exporters as regards
inspection and certification of quality of the items sought to be exported. The
total turnover for the purpose of payment of sales tax was disclosed on the
basis of the business carried out in the name of M/s. Tropical Traders. Whereas
the taxable turnover was shown as 28,20,474.97, an addition of Rs.45,80,168.09
thereto was made by the Assessing Authority assessing a sum of
Rs.3,58,87,960.97 by way of total turnover. The order of assessment proceeded
on the basis that receipt shown as commission amounting to Rs.45,80,168.09 from
M/s. Poseidon Food Company is not supported and proved by any documentary
evidence.
Appellant contended
that the services so rendered is not a `sale' and thus, the said order of
assessment is wholly illegal and without jurisdiction..
4.
An
appeal was preferred there against. Before the appellate authority the
appellant produced income-tax returns, orders of assessments passed by the
income-tax officer, orders placed by the exporters and the certificates granted
by Marine Products Export Development Authority (MPEDA), Cochin.
5.
By
reason of an order dated 24th October, 2000 the first appellate authority upon
noticing that the assessee had produced copies of the certificates issued by
the MPEDA, Cochin and copies of letters issued by various parties requesting
the appellant to inspect the goods to be exported, held that the professional
services rendered to the exporters involving skill and knowledge did not
constitute any `transfer of property'. It was held that the levy of tax on the
receipt of commission for the sum of Rs.45,80,168.09 was not in order. The
appellate authority for the purpose of assessment of tax reduced the additional
income which was added by the taxing authority in the taxable turnover from 5 %
to 2 = %.
6.
Aggrieved
by and dissatisfied therewith both the parties preferred appeals before the
Sales Tax Appellate Tribunal in terms of Section 12 of the Act.
7.
By
an order dated 20th February, 2003, the Tribunal held as under :- "We are
afraid that the first appellate authority has not correctly understood the
legal position involved. The observation of the first appellate authority that
the sale for valuable consideration alone is exigible to tax does not appear to
be 3 correct. As per Section 5(1)(iii) of the KGST Act the consideration received
in the case of transfer right to use any goods for any purpose is exigible to
tax. We also notice that by a strange reasoning the first appellate authority
shifted the burden of proof regarding the taxability of the disputed receipt to
the assessing authority, contrary to the provisions of Section 12 of the KGST
Act, as per which the burden of proving that any transaction of a dealer is not
liable to tax shall lie on the dealer. We do not think that the assessee was
able to discharge this burden of proof as enjoined under Section 12 of the KGST
Act. From the available materials on record the first appellate authority was
therefore, not justified in deleting the receipt of Rs.45,80,168/- from the
turnover of the assessee. It follows that the order of the assessing authority
in this regard as has also to be restored thereby allowing the State appeal to
that extent."
8.
Revision
petition filed thereagainst by the appellant has been dismissed by the High
Court by its order dated 4th August, 2006,stating :- "Even though Section
does not provide a presumption that such unexplained amount represents sales
turn over, we have no doubt in our mind that the Assessing Officer is free to
consider what exactly is the nature of receipt.
If it is a net credit
in the form of an income, it may even be possible for the officer to take it as
income gross up the turn over (sic) as representing unaccounted sales and
assess the same. In this case, the officer has taken the amount as unaccounted
sales, which is probably the minimum damage that could be caused to the
petitioner by virtue of Section 12 of the Act. In other words, we 4 uphold
this addition as a necessary consequence of the petitioner's failure to explain
the receipt in this account."
9.
A
review application filed there against has also been dismissed by an order
dated 22nd March, 2007.
10.
Mr.
Bali, learned counsel appearing on behalf of the appellant urged :
(i) The learned
Tribunal as also the High Court committed a serious error in so far as they
failed to take into consideration that the appellant having produced documents
to show that two sister concerns of the appellant had been carrying out two
different businesses, the income derived by one could not have been added to
the sales turnover, although the business of the other does not occasion any
sale.
(ii) Although burden
of proof in terms of Section 12 of the Act is on the assessee but having regard
to the authentic documents produced by the appellant, the same must be held to
have been discharged.
(iii) The orders of
the learned Tribunal as well as the High Court are manifestly erroneous in so
far as they failed to take into consideration 5 the distinction between an
order of assessment under the Income Tax Act and the one under the Sales Tax
Act.
11.
Mr.
Dinesh, learned counsel appearing on behalf of the respondent, however, would
draw our attention to the averments made in the review application which is to
the following effect :
"9. In this
connection, the petitioner is also producing a list of persons/exporters/importers
from whom commission was received during the period from 1.4.1988 to 31.3.1988
aggregating to Rs.45,80,168.09.
The above document
conclusively supported the petitioner's case that the sum of Rs.45,80,168.09 is
not liable to be assessed to Sales Tax. The petitioner was unable to bring the
above documents and evidence before this Hon'ble Court at the time of hearing
of the Sales Tax Revision due to reasons beyond control. The dismissal of Sales
Tax Revision would result in great hardship and prejudice and unbearable
financial burden for the petitioner."
to submit that the
said documents do not appear to have been filed before the assessing authority
and, thus, admittedly the appellant could not discharge the burden of proof
cast upon her in terms of Section 12 of the Act.
12.
The
Act indisputably is a taxing statute. The jurisdiction of an assessing
authority, therefore, is confined to assess tax on taxable turnover.
Its primary duty is
to ascertain as to whether the figures furnished by the assessee are correct or
not.
13.
Assessment
of sales tax must be on sale of goods. There is no bar in law for the same
assessee to carry out different businesses. If the contention of the appellant
is correct, the business carried out by her of ceramic tiles involving
transactions of sales and purchase has no connection with the professional
services rendered by her to the exporters.
14.
The
sine qua non or the condition precedent for passing of an order of assessment
is transaction of sale. Professional service rendered does not constitute sale.
Such a professional service rendered by a person attracts service tax, which is
a different nature of tax, as has been held in Bharat Sanchar Nigam Ltd. and
another v. Union of India and others, [ (2006) 3 SCC 1 ], stating :- "84.
As we have said Article 366(29-A) has no doubt served to extend the meaning of
the word "sale" to the extent stated but no further. We cannot
presume that the constitutional amendment was loosely drawn and must proceed on
the basis that the parameters of "sale" were carefully defined. But
having said that, it is sufficient for the purposes of this judgment to find,
as we do, that a telephone service is nothing but a service.
There is no sales
element apart from the obvious one relating to the handset, if any. That and
any other accessory supplied by the service provider in our opinion remain to
be taxed under the State sales tax laws. We have given the reasons earlier why
we have reached this conclusion."
15.
It
is true that in terms of Section 12 of the Act the burden is on the assessee.
The said provision reads thus :- "12. Burden of proof. –
(1) The burden of
proving that any transaction of dealer is not liable to tax under this Act
shall lie on such dealer.
(2) The burden of
proving that the dealer has not received fair market price on any transaction
shall lie on such dealer.
(3) The burden of
proving the genuineness of the transport of goods using the documents
prescribed in section 29, shall lie on such dealer."
16.
A
provision relating to "reverse burden", must be construed having
regard to the nature of the statute; as the general law is that the burden of
proof would be on the State as has been held by this Court in Cooperative
Company Ltd. V. Commissioner of Trade Tax, U.P. [ (2007) 4 SCC 480 ], in the
following terms :- "
16. In absence of any
stipulation made in the contract of sale for the purpose of levy of sales tax
or otherwise, the Revenue Authorities must arrive at a finding as to whether
there had been any implied condition of transfer, burden of proof wherefor
would be on the Revenue. Consideration of (sic - for) a part of goods may be
held to be a condition precedent for constituting a sale, but therefore each
case must be judged on its own facts."
17.
Section
12 of the Act, however, places the burden on the assessee. The said provision
would be attracted subject to the condition that first, a transaction of sale
has taken place; secondly that one of the parties thereto is a dealer.
18.
A
dealer has been defined in Section 2(viii) to mean - "(viii)
"dealer" means any person who carries on the business of buying,
selling, supplying or distributing goods, executing works contract,
transferring the right to use any goods or supplying by way of or as part of
any service, any goods directly or otherwise, whether for cash or for deferred
payment, or for commission remuneration or other valuable consideration and
includes:
(a) xxx xxx xxx (b) a
casual trader;
(c) a commission
agent, a broker or a delcredere agent or an auctioneer or any other mercantile
agent, by whatever name called, who carried on the business of buying, selling,
supplying or distributing goods [executing works contract, transferring right
to use any goods or supplying by way of or as part of any service, any goods]
on behalf of any principal;
(d) a non-resident
dealer or an agent of a non- resident dealer, or a local branch of a firm or
company of association of body of persons whether incorporated or not situated
outside the State;
(e) a person who,
whether in the course of business or not, sells;
(i) goods produced by
him by manufacture, agriculture, horticulture or otherwise; or (ii) trees which
grow spontaneously and which are agreed to be severed before sale or under the
contract of sale;
(f) a person who
whether in the course of business or not:
10 (1) transfers any
goods, including controlled goods whether in pursuance of a contract or not,
for cash or deferred payment or other valuable consideration;
(2) transfers
property in goods (whether as goods or in some other form) involved in the
execution of a works contract;
(3) delivers any
goods on hire-purchase or any system of payment by installments;
(4) transfers the
right to use any goods for any purpose (whether or not for a specified period)
for cash, deferred payment or other valuable consideration;
(5) supplies, by way
of or as part of any service or in any other manner whatsoever, goods, being
food or any other articles for human consumption or any drink (whether or not
intoxicating), where such supply or service is for cash, deferred payment or
other valuable consideration);
Explanation.-(1) A
society (including a cooperative society, club or firm or an association or
body of persons, whether incorporated or not) which whether or not in the
course of business, buys, sells, supplies or distributes goods from or to its
members for cash or for deferred payment, or for commission, remuneration or
other valuable consideration, shall be deemed to be a dealer for the purposes
of this Act;
11 Explanation.-(2)
The Central Government or a State Government, which, whether or not in the
course of business, buy, sell, supply or distribute goods, directly or
otherwise, for cash or for deferred payment, or for commission, remuneration or
other valuable consideration, shall be deemed to be a dealer for the purposes
of this Act.
(g) a bank or a
financing institution which, whether in the course of its business or not,
sells any gold or other valuable article pledged with it to secure any loan,
for the realization of such loan amount;
Explanation I.-Bank
for the purposes of this clause includes a Nationalised Bank or a Scheduled
Bank or a Co-operative Bank;
Explanation II. -
Financing Institution means a financing institution other than a bank."
19.
The
business activities relating to transaction of M/s. Poseidon Food Company
unless otherwise proved cannot bring the appellant within the purview of
definition of `dealer'.
20.
If
she was not a dealer, the professional fees earned by her would not be exigible
to payment of sales tax; only because the appellant happens to be the
proprietress of M/s. Tropical Traders also.
21.
Both
the assessing officer as also the High Court had noticed not only the payment
of income-tax during the relevant assessment years but also the certificates
issued by MPEDA, Cochin and other documents.
The High Court did
not take into consideration the contention of the appellant that by production
of such documents the burden of proof, if any, has been discharged by her.
Furthermore for
attracting Section 12 of the Act the foundational facts must be established.
22.
The
High Court furthermore committed a serious error in so far as it failed to draw
a distinction between the assessment under income tax and assessment under
sales tax. Whereas income tax is levied on income under the Income Tax Act
irrespective of the sources from which such an income had been derived, sales
tax is levied only on the quantum of sales and, therefore, element of
transaction of sale is pre-requisite for levy of sales tax.
23.
This
aspect of the matter has been considered by this Court in Girdhari Lal Nannelal
V. The Sales Tax Commissioner, M.P. [ (1996) 3 SCC 701 ] wherein it was held :-
"7. The approach which may be permissible for imposing liability for
payment of income-tax in respect of the unexplained acquisition of money 13
may not hold good in sales tax cases. For the purpose of income-tax it may in
appropriate cases be permissible to treat unexplained acquisition of money by
the assessee to be the assessee's income from undisclosed sources and assess
him as such.
As against that, for
the purpose of levy of sales tax it would be necessary not only to show that
the source of money has not been explained but also to show the existence of
some material to indicate that the acquisition of money by the assessee has
resulted from transactions liable to sales tax and not from other sources.
Further, whereas in a case like the present a credit entry in respect of Rs. 10,000
stands in the name of the wife of the partner, no presumption arises that the
said amount represents the income of the firm and not of the partner or his
wife. The fact that neither the assessee-firm nor its partner or his wife
adduced satisfactory material to show the source of that money would not, in
the absence of anything more, lead to the inference that the said sum
represents the income of the firm accruing from undisclosed sale transactions.
It was, in our opinion, necessary to produce more material in order to connect
the amount of Rs. 10,000 with the income of the assessee-firm as a result of
sales. In the absence of such material, the mere absence of explanation
regarding the source of Rs. 10,000 would not justify the conclusion that the
sum in dispute represents profits of the firm derived from undisclosed sales.
"
24.
For
the reasons aforementioned the impugned judgment cannot be sustained which is
set aside accordingly.
25.
The
appeal is allowed. The matter is remitted to the assessing authority to
consider the matter afresh on the basis of the materials placed by the
appellant, namely - income tax returns, orders of assessment, certificates
issued by MPEDA, Cochin etc. The other doucments filed by the appellant before
the revisional authority may also be taken into consideration. The State, if so
advised, may also file additional documents.
No costs.
............................J.
( S.B. SINHA )
............................J.
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