JAIPURIA BROTHERS LTD Vs. SALES TAX OFFICER

JUDGEMENT

(1.) THIS is a petition under Article 226 of the Constitution.

(2.) THE petitioner is a public limited liability company having its head office at Calcutta. It was appointed as managing agent of the Swadeshi Cotton Mills Company Ltd. , Kanpur, which concern is engaged in the manufacture of cloth and yarn. According to the petitioner, it was also appointed as the sole selling agent of the Swadeshi Cotton Mills with effect from the 5th october, 1946, as a temporary measure. The petitioner used to sell the cloth and yarn manufactured by the Swadeshi Cotton Mills. In 1948 the U. P. Legislature passed the U. P. Sales tax Act, which came into force from the 1st April, 1948. A sales tax was imposed on the sales of cloth and yarn and the rate was changed from time to time. The petitioner obtained a licence under Section 6 of the Act and the case of the petitioner was that it was not selling any cloth or yarn on its own account but was doing so as the agent of the Swadeshi Cotton Mills. It, therefore, thought that it was not a dealer, as defined in Section 2 (c) of the U. P. Sales Tax Act. It did not file a return, as provided for the assessment year 1948-49 and the year in dispute is this year only.

(3.) ON the 20th March, 1952, a notice was issued to the petitioner purporting to be under Section 21 of the U. P. Sales Tax Act stating that the petitioner was liable to assessment to sales tax for the year 1948-49, and the entire turnover of the business had escaped assessment. It called upon the petitioner to file a return on or before the 29th March, 1952, and to produce the account books on the 31st of March. The petitioner filed an application on the 31st March, 1952, stating that it was an agent of the Swadeshi Cotton Mills and it obtained a licence under Section 6 and was not liable for the payment of sales tax. It was also stated that the account books were at the head office at Calcutta and could not be produced at such short notice. The Sales Tax Officer did not agree with the petitioner and passed what may be called "a best judgment assessment" on the 31st March, 1952, assessing the petitioner to a sales tax amounting to more than Rs. 78,000. He was of the opinion that the petitioner was not acting as the agent of the Swadeshi Cotton Mills but as a sole distributor. The petitioner preferred an appeal against this order and the Judge (Appeals), Sales Tax, Allahabad, allowed the appeal and set aside the assessment on the ground that the petitioner was acting merely as the agent of the Swadeshi Cotton Mills and thus did not come within the definition of the word "dealer" as given in Section 2 (c) of the U. P. Sales Tax act. A revision was preferred against this order by the Commissioner of Sales Tax, and it came up for hearing before the Judge (Revisions), Sales Tax. The Judge (Revisions) decided the case on the 18th March, 1955, but he did not come to any clear decision whether the decision of the judge (Appeals) was correct or not. He thought that the decision of the matter would depend upon the question whether the petitioner paid the price of the cloth taken from the Swadeshi cotton Mills and whether it received the goods on payment or otherwise. He thought that if the goods were received on cash payment or that the petitioner debited them with the price of the goods, the obvious inference would be that the petitioner was not acting as an agent and should be held to be dealer. He himself did not decide this question and was of the opinion that the question could only be determined after going into the account books. The operative portion of the order is : i, therefore, allow this application and, setting aside the order of the learned Judge as well as the assessment order, remand the case for a fresh assessment after proper scrutiny of the account books in the light of the observations made above.