MCLEOD AND COMPANY LIMITED Vs. STATE OF ORISSA

JUDGEMENT

(1.) This appeal by special leave raises the question whether the appellant-company could be regarded as a 'dealer' within the meaning of S. 2(5) read with the Explanation thereto of the Orissa Taxation (on Goods Carried by Road and Inland Waterways) Act, 1959 (hereinafter referred to as the Orissa Taxation Act and which was validated by Act of 1968) and as such was liable to be assessed under the Act for the quarters covering the period 30-9-1960 to 31-3-1962 The question which pertains to the proper interpretation of the aforesaid provisions of the Act arises in the following circumstances.

(2.) Nellimarla Jute Mills Co. Ltd. and Chitavalsah Jute Mills Co. Ltd. are two independent and separate companies having their registered offices at Mcleod House 3, Netaji Subhas Road, Calcutta and additional places of business in several parts of the country including one at Kendupatna. P.O. Kendupatna, District Cuttack, in the State of Orissa. These two public limited companies primarily carried on the business of jute manufacturing and owned jute mills in different parts of the country such as. Nellimarla Jute Mills Co. Ltd. owning Jute Mills at Elore in Andhra Pradesh and Chitavalsah Jute Mills Co. Ltd. owning Jute Mills at Chitavalsah in Andhra Pradesh. The appellant-company (M/s. Mcleod and Co. Ltd. having its Registered Office at Mcleod House 3. Netaji Subhas Road, Calcutta) by virtue of agreements with the said two jute mills has appointed the 'Managing Agent' for Chitavalsah Jute Mills Co. Ltd. and the 'Secretary and Treasurer' for Nellimarla Jute Mills Co. Ltd. The appellant-company did not do any business nor had any place of its business in any part of the State of Orissa. But as the Managing Agent of Chitavalsah and as the Secretary and Treasurer of Nellimarla looked after the work of storing their jute in their godowns at Kendupatna. District Cuttack, State of Orissa. It may be stated that under Cl. (4) of the Agreement dated 7-10-1960 with Nellimarla the appellant-company was precluded from and was "not entitled (unless and except to the extent they are authorised by the Board of Directors) to sell any goods or articles manufactured or produced by the Company or to purchase, obtain or acquire machinery, stores, goods or materials for the purposes of the Company or to sell the same". In other words, the prohibition contained in Cl. (4) of the Agreement with Nellimarla merely pertained to selling or purchasing of goods or materials for the purposes of the company but left intact the appellant-company's powers to store jute of the Company in its godowns at Kendupatna in the State of Orissa.

(3.) Since the two jute mills carried on the trade of purchasing and storing of jute, inter alia at Kendupatna, they were registered as 'Dealers' under the Orissa Taxation Act and the Rules framed thereunder, each one having a separate Registration Certificate. It may be stated that Nellimarla had filed Returns of their turnover for all the quarters from 30-9-1959 to 30-6-1960 and had paid the admitted tax for the said period under the Act. Similarly, Chitavalsah had filed Returns of their turnover for all quarters from 30-9-1959 to 31-3-1960 and had paid the admitted tax for the said period under the Act. It appears that thereafter some time in 1969 the said jute companies filed writ petitions in the Orissa High Court under Art. 226 of the Constitution challenging the validity of the original Act of 1959 as also the Validation Act of 1968 and obtained interim stay of proceedings under the said Act but we were informed by counsel that ultimately the challenge to the validity of the Acts failed; however, we are not concerned with the proceedings in this appeal. In the meanwhile, seven ex parte assessment orders were passed against the appellant-company by the Assistant Tax Officer for quarters covering the period from 30-9-1960 to 31-3-1962 on the business of the said two companies on the basis that appellant-company was a 'dealer' (as agent of both the companies) within the meaning of S. 2(5) read with the Explanation thereto and had carried on the business of stocking or storing jute and carrying the same by motor boats at Kendupatna in District Cuttack, State of Orissa and the appellant-company received a notice of demand along with the said assessment orders claiming a total amount of Rs. 74,125 inclusive of penalty. Against the said assessment orders the appellant company preferred appeals under Section 12 (1) of the Act to the Assistant Commissioner of Taxes but the appeals failed. The appellant-company preferred revisions under S. 12 (3) of the Act to the Commissioner of Taxes. Orissa but the Commissioner of Taxes by his order dated 15th October. 1965 dismissed the revisions and confirmed the Assessment Orders made against the appellant-company. Aggrieved by the order of the Commissioner of Taxes the appellant-company approached the High Court by means of a Writ Petition under Art. 226 of the Constitution and challenged the assessments made against them on the basis that as agent of the two Jute Companies it was not a 'Dealer' within the meaning of S. 2 (5) read with the Explanation thereto of the Orissa Taxation Act. The assessment orders were also challenged on the ground that these had been passed without following the principles of natural justice inasmuch as the appellant-company had no opportunity to meet the materials. particularly the Inspector's Report relied upon by the Assistant Taxing Officer while making the assessments. The High Court by its judgment dated 16th April. 1971 negatived the appellant-company's principal contention that it could not be regarded as a 'Dealer' within the, meaning of S. 2 (5) read with Explanation thereto of the Act and therefore it could not be assessed at all under the Act but set aside the assessment orders and remanded the assessment proceedings to the taxing authority to pass fresh orders on the ground that though notice of the assessment proceedings had actually been served on the appellant-company the assessment orders had been made arbitrarily without the appellant-company getting a reasonable opportunity of meeting or explaining the materials in the Inspector's Report which had been relied upon by the Assessing Officer for making the assessment. Though the matter has been remanded by the High Court for fresh assessment. the principal contention of the appellant-company which goes to the root of the matter having been negatived by the High Court the appellant-company has preferred this appeal to this Court challenging the High Court's view thereon.