COMMISSIONER OF SALES TAX Vs. NATHALAL SHIVLAL

JUDGEMENT

(1.) This is a reference on a case stated by the Sales Tax Tribunal under section 61(1) of the Bombay Sales Tax Act, 1959 (referred to hereinafter as "the Bombay Sales Tax Act"), at the instance of the Commissioner of Sales Tax. The question submitted to us for determination in the reference is as follows :

(2.) The facts giving rise to the reference are as follows : The respondent is a partnership firm registered as a dealer under the Bombay Sales Tax Act. The Sales Tax Officer concerned assessed the respondent under section 33 of the Bombay Sales Tax Act for the period from 10th November, 1969 to 31st October, 1970 on 5th May, 1971. Thereafter, it came to the notice of the Sales Tax Officer that sales amounting to Rs. 83,306 made by Kamala Mills Ltd. to the respondent during the said period of assessment were allowed as casual sales in the assessment of Kamala Mills Ltd. In the aforesaid order of assessment, passed under section 33, in the case of the respondent these purchases of Rs. 83,306 had been treated as purchases from a registered dealer and the corresponding sales were allowed as resales not liable to tax. Merely on this material, the Sales Tax Officer came to the conclusion that as the said sales of Rs. 83,306 were of yarn and as Kamala Mills Ltd. was not a dealer in yarn as revealed in the assessment record of that dealer, that respondent was not entitled to claim that the purchases of Rs. 83,306 made from Kamala Mills Ltd. were from a registered dealer and he held that it was necessary to disallow corresponding resale claim which had been erroneously allowed in the original assessment order under section 33 passed against the assessee. It may be mentioned here that it is quite clear the only material on which the Sales Tax Officer proceeded is that in the assessment of Kamala Mills Ltd. the sales of yarn of Rs. 83,306 to the respondent were treated as casual sales and that was the only fact disclosed to the respondent-assessee in the present case. No other assessment record of Kamala Mills Ltd. has been shown to the respondent. The Sales Tax Officer initiated proceedings under section 35 of the Bombay Sales Tax Act by the issue of a notice in form 28 and ultimately, by an order dated 23rd October, 1974 passed under section 35, subjected the corresponding resales out of the purchase of Rs. 83,306 made by the respondent to sales tax at the rate of 2 per cent. An appeal preferred by the respondent to the Assistant Commissioner was dismissed. The Assistant Commissioner took the view that the sales made by Kamala Mills Ltd. could not be held to be in the regular course of business of the mills, and consequently, he concluded that even though the bills issued by Kamala Mills Ltd. in respect of purchase of Rs. 83,306 made by the respondent from Kamala Mills Ltd., showed that Kamala Mills Ltd. had a registration certificate and those bills also contained a certificate as requested under section 12A of the Bombay Sales Tax Act, the respondent-assessee was not entitled to claim these purchases as made from a registered dealer. The respondent preferred a second appeal to the Sales Tax Tribunal. The two bulls in question were produced before the Sales Tax Tribunal and showed that Kamala Mills Ltd., the vendor, held a valid registration certificate under the Bombay Sales Tax Act and had furnished certificates as required under section 12A of the Bombay Sales Tax Act. The Tribunal accepted the contention urged on behalf of the respondent-assessee herein that, as the finding in the case of Kamala Mills Ltd. to the effect that the sales were casual sales had been arrived at without any notice to the assessee, that finding could not affect the claim of the respondent. The Tribunal pointed out that Kamala Mills Ltd. had issued certificates in favour of the respondent as required under section 12A of the Bombay Sales Tax Act and under the circumstances, it was for the Sales Tax Officer to enquire into the matter in detail and to confront the assessee with this finding. This was not done. The assessee had produced the requisite certificates under section 12A from Kamala Mills Ltd. and had discharged the initial burden of showing that the purchases made by the respondent were from a registered dealer. The burden then shifted on the department and the department had failed to discharge the burden. This reasoning has not been expressly given by the Tribunal in the judgment in the present case. But the fact found show that at the hearing of the appeal in the present case before the Tribunal, the Sales Tax Officer (Legal) appearing on behalf of the applicant before us stated that he merely adopted all the arguments which had been advanced on behalf of the department in the case of Messrs. B. Hasmukhlal & Co. v. State of Maharashtra, and the Tribunal found, as a fact, that the facts in the case of Messrs. B. Hasmukhlal & Co. were on all fours with the facts in the present case. This statements is contained in the statement of case which has been forwarded with the approval of the parties, and hence, even if there is a slight discrepancy in the same, it would be but proper to proceed on the basis of it being correct. Moreover, it is not disputed that, in the present case also, all that was pointed out by the Sales Tax Officer to the respondent was that in the case of Kamala Mills Ltd. the said sales were held to be casual sales. The reasoning of the Tribunal which we have stated above has been expressly stated in the judgment in the case of Messrs. B. Hasmukhlal & Co. v. State of Maharashtra (Second Appeal No. 1882 of 1974 decided by the Tribunal on 27th February, 1975). It is from this decision that the question set out by us has been submitted to us.

(3.) Before setting out the respective submissions of the parties, it will not be out of place to refer to the relevant provisions of the Bombay Sales Tax Act. The term "dealer" is defined by clause (11) of section 2 of the said Act as "any person who whether for commission, remuneration or otherwise carries on the business of buying and selling goods in the State, .........". Under section 3 of the Act, after the coming into force of the Act from January 1, 1960 every dealer whose turnover exceeds certain limits in the previous year becomes liable to pay tax on his turnover of sales and purchases. Under Chapter II, the taxes which are levied are not levied in respect of every sale or purchase made by any person, but only in respect of sale or purchase made by a dealer. Section 22 of the said Act provides for the registration of a dealer. Under the said section every dealer liable to pay tax has to obtain a valid certificate of registration as provided by the Act. Under sub-section (2) of section 22, such dealer has to make an application for the said purpose in the prescribed manner to the prescribed authority. Under sub-section (3), if the prescribed authority is satisfied that an application is in order, it has to register the dealer and to issue him a certificate of registration in the prescribed form. Under clause (21) of section 2 of the Act, "prescribed" means prescribed by rules (see Impex (India) Ltd. v. State of Maharashtra [1976] 37 STC 249). Section 8 of the Bombay Sales Tax Act deals with the levy of sales tax on goods in Schedule C. The yarn in respect of which the resales in question were made in covered by entry 2 of Schedule C. The relevant portion of section 8, as it stood at the relevant time, ran thus :