TATA TEA LIMITED Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THESE two sales tax revision petitions are directed against the assessment orders passed by the assistant Commissioner of Commercial Taxes-IV, Bangalore, confirmed in appeals before the deputy Commissioner of Commercial Taxes (Appeals) and further confirmed in S. T. A. Nos. 415 and 416 of 1992 by the order dated February 17, 1994 passed by the Karnataka Appellate tribunal, Bangalore, dismissing the appeals filed by the petitioners.

(2.) THE appellant is a public limited company engaged in the business of blending, packing and selling tea. Its head office is in Calcutta with branches in several other States. The Bangalore branch is in-charge of the packing division of the company. It is having a factory in Bangalore where tea which is purchased mostly from Assam is blended and packed and the packed tea of different brands is sold either in the State or in the course of inter-State trade. The petitioners filed returns of turnover under the Karnataka Sales Tax as well as Central Sales Tax Acts disclosing the total turnover of Rs. 33,44,85,457. 16 for the year ending March 31, 1989. They disclosed a taxable turnover under the Karnataka Sales Tax Act at Rs. 9,31,92,914. 18 and the taxable turnover under the Central Sales Tax Act amounting to Rs. 50,415. 64. The place of business of the appellant was inspected by the Commercial Tax Officer (ENF), cross-Verification-I, South Zone, Bangalore on August 21, 1990 and reported receipt of consideration for sale of REP licences for an amount of Rs. 9,43,852 and tax liability on the part of the petitioner amounting to Rs, 66,070. The assessing authority on verification of the books of accounts of the petitioner at the stage of assessment proceedings detected that the petitioners have received miscellaneous incomes and on further probing into the matter it was detected that the petitioners had sold salvaged tea worth Rs. 9,18,919. 45 within the State and Rs. 2,47,378. 88 to parties outside the State and those sales were not disclosed in their returns and the consideration on account of REP licences was also not disclosed. The assessing authority assessed the appellant on the sale within the State in addition to levying tax on sale of REP licences and the levy was made both under the Karnataka Sales Tax as well as the Central Sales tax Acts. The assessing authority further levied penalty of Rs. 1,79,199. 36 under Section 12 (4)of the Karnataka Sales Tax Act, 1957 and Rs. 48,238. 90 under Section 9 (2) of the Central Sales tax Act, 1956 read with Section 12a of the Karnataka Sales Tax Act, 1957. Being aggrieved by the said assessment and levy of penalty, petitioner appealed before the first appellate authority who upheld the assessment which was questioned before the Appellate Tribunal which also confirmed the order passed by the assessing authority.

(3.) AS mentioned earlier the petitioner is engaged in blending, packing and selling tea mostly imported from Assam from their own estate. While importing their goods, the goods were always covered by insurance against damages and if the goods are damaged beyond salvation, petitioner is entitled to recover the entire value of the claims. Sometimes the damaged goods are received by the petitioner and while claiming damages for the said damaged goods, the petitioner instead of returning the damaged tea, revision petitioner helps the insurance company to dispose of the damaged tea at a relatively premium rates. Before such sale of damaged tea without salvage, they bifurcate certain quantity of usable tea which could be sold at a concessional rate. In the said process, the petitioner apparently helps the insurance company to dispose of the salvaged tea. According to the petitioner, the petitioner incurs certain expenditure in the process of salvaging and selling such salvaged tea on behalf of the insurance company and in the said process the petitioner incurs certain expenditure and the said amount is made good by the insurance company. According to the petitioner this amount made good by the insurance company to the petitioner represents the miscellaneous income which has been reflected in the balance sheet and therefore, the petitioner has not indulged in the sale of salvaged tea and it is only the insurance company which can be made liable to pay the tax.