STATE OF ORISSA Vs. JANATA MEDICAL HALL CUTTACK

JUDGEMENT

(1.) THIS is a reference made to this court pursuant to a direction issued on 2nd February, 1971, in exercise of the powers vested in this court under section 24 (2) (b) of the Orissa Sales Tax Act (hereinafter called the Act ). The question that has been referred is as follows :

(2.) THE assessee is a registered dealer and sells allopathic patent medicines and mixtures. The assessing officer while examining its books of account found that it had purchased chemicals in solid and liquid form on the strength of its registration certificate free of tax, but did not resell them in Orissa in the same form in which they were purchased, but prepared mixtures out of them on the prescriptions issued by doctors. The assessing officer, therefore, estimated the purchase value of the chemicals to be Rs. 40 and he added the amount to the taxable turnover. The corresponding tax demand came to Rs. 2 only. The assessee had paid tax on the sale of mixtures. The appellate authority did not accept the assessee's contention that he was entitled to exemption. In second appeal, the Tribunal took the view that as the assessee was not a manufacturer of medicines, he had no liability under the Act. As the reasonings of the Tribunal though brief are somewhat peculiar, we propose to extract the same here :

(3.) THE Tribunal's approach to the matter seems to be wholly untenable. Whether the assessee was a manufacturer was not at all necessary to be examined. Mr. Bhattacharya appearing for the assessee next contended that in view of the finding that the tax has already been paid on the sale of the mixture, there is no scope for adding the purchase price of the chemicals to the taxable turnover of the assessee. This contention seems to be fallacious. It is true, as we have already noticed, that a single point taxation method has been adopted under the Act. But it is too well-known that such a benefit would be available only when the scheme of the Act is followed. Where a registered dealer buys without giving a declaration, he obviously pays tax at the time of purchase and when he sells to an unregistered dealer or a consumer, he pays another set of tax on the same goods. When the registered dealer gives a declaration and buys on its basis without paying the tax, he obliges himself to comply with the terms of the declaration. If he makes a breach, the benefit which he had taken is provided by the statute to be withdrawn and the tax which he would have paid at the time when he purchased the goods is attempted to be collected by adding the purchase price to the taxable turnover of the dealer.