JEYPORE SUGAR COMPANY LTD. Vs. SALES TAX OFFICER

JUDGEMENT

(1.) THESE are three applications by Jeypore Sugar Company Limited for quashing the orders of assessment made under the Central Sales Tax Act of 1956 (hereafter referred to as the Act). The relevant periods are 1970 -71, 1971 -72 and 1972 -73. The Petitioner is a registered dealer under the Act within the jurisdiction of the Sales. Tax Officer, Koraput -II Circle. For the first year, assessment has been completed under Rule 12(8) of the Central Sales Tax (Orissa) Rules, 1957 (hereafter referred to as the Rules) while the other two are regular assessments under Rule 12(4) of the Rules.

(2.) EVER since its formation, the Petitioner was engaged in manufacture of sugar and sugar products and from 1958 it also started manufacturing ferro -manganese. The Company started exporting ferro -manganese to different countries on its own. Around 1967, the Government of India in furtherance of its policy of canalising the export of minerals and mineral products took a policy decision that all export of such commodities should be canalised through the Minerals and Metals Trading Corporation of India (hereafter referred to as the M.M.T.C.). The Petitioner exported ferro -manganese to several foreign countries during the years 1967 -68, 1969 -70 and 1970 -71, contracts for which had been finalised at the instance of the Petitioner but the goods meant for export was canalised through the M.M.T.C. In respect of the assessments for those years, Petitioner claimed that the turnover representing the export sales were exempt from sales tax under the provisions of the Act and Petitioner's contention, after due scrutiny, had been accepted. Subsequently the opposite party -Sales Tax Officer issued notice under Rule 12(8) of the Rules and proceeded to assess the turnover relating to export which at the time of regular assessment, he had accepted as exempt from tax. The Petitioner pleaded that the original decision was correct and there was no escapement of the turnover which could be brought to the net of the taxation. The Sales Tax Officer, however, overruled the objection and proceeded to make assessment under Rule 12(8) of the Rules and imposed penalty of Rupees one lakh. For the two subsequent years, as already indicated, the Sales Tax Officer completed assessment under Rule 12(4) of the Rules and included the turnover representing the export sale and raised additional demand. These three applications are directed against the three respective orders and the Petitioner prays for issue of a writ of certiorari quashing each of the demands. During these three years, export of Petitioner's ferro -manganese had been made to Japan and Rumania. There is basis for Petitioner's contention that the contracts had been negotiated by it but there is no dispute that ultimate export was made under the contracts entered into between the M.M.T.C. and the foreign buyers. There were back to back contracts between the M.M.T.C. and the Petitioner. There is material on record to link the two contracts i. e. the contract between the Assessee and the M.M.T.C. and the corresponding contract between the M.M.T.C. and the foreign buyer. Between the Assessee and the M.M.T.C.'s was agreed under Clause 14 that the said contract shall be deemed to be cancelled either wholly or partially without any claim for compensation if for any reason whatsoever the corresponding foreign contract was cancelled. In the matter of payment of price to the Assessee for its goods, it was agreed that the sale price realised from the overseas buyers against M.M.T.C.'s corresponding sale contract with a deduction of Rs. 5/ - per metric ton being the service charges of the M.M.T.C. would be the price. Several correspondences between the M.M.T.C. and the Assessee have been produced in support of the contention that the M.M.T.C was only a name lender to satisfy the policy decision of the Government of India and the true seller was indeed the Assessee. Though there appear to be two sales, one between the Assessee and the M.M.T.C. and the other between the M.M.T.C. and the foreign buyer, there was indeed one sale the true vendor being the Assessee and the buyer, the foreign purchaser."

(3.) IN the very first year relating to O.J.C. No. 576 of 1974, there is a dispute over imposition of penalty under Rule 12(8). Assessee had disclosed its turnover before the Assessing Officer and had claimed that the sale was exempt from taxation under Section 5(2) of the Act. The Assessing Officer relying on the past records and after applying his mind had come to hold that the turnover representing the alleged export was exempt from assessment to tax. The question was indeed contentious until it was directly disposed of by the. Supreme Court in Md. Serajuddin's case. In these circumstances, we do not think there is any justification for imposition of any penalty at all. Penalty after all is connected with contumacy and since there was no contumacy in the conduct of the Petitioner, there was no occasion to direct it to be visited with penalty. We accordingly delete the imposition of penalty in the very first assessment.