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PETITIONER: THE STATE OF ORISSA AND ANOTHER

       Vs.

RESPONDENT: M/s.  CHAKOBHAI GHELABHAI AND COMPANY

DATE OF JUDGMENT: 20/09/1960

BENCH: DAS, S.K. BENCH: DAS, S.K. HIDAYATULLAH, M. 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)

ACT: Sales Tax-Sales tax authorities-Whether courts-Levy of  fees on memorandum of    appeal and application    for  revision- Whether   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.

HEADNOTE: 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

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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 that section; The Commissioner, Hindu Religious Endowments, Madras v.  Sri Lakshmindra  Thirtha  Swamiar  of Sri  Shirur  Mutt,  [1954] 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.

JUDGMENT: 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 respondents. R.   Gopalakrishnan   and   J.  B.   Dadachanji,   for   the Intervener. 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

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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 petition- in 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

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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,s. 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

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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                                 rupees. (iii) .....................     .......................... (iv) On an application for    One rupee."       revision. The  first  question is if s. 29(2)(s) in so far as  it  em- powers 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  with  s. 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  that  s. 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

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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 these terms: "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)  [1954] 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

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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 Court. Appeal allowed, 93 728