INDIAN ALUMINUM COMPANY LTD. Vs. STATE OF ORISSA

JUDGEMENT

(1.) THE Orissa Sales Tax Tribunal, Cuttack (hereinafter referred to as "the Tribunal") has referred the following two questions of law under Section 24(1) of Orissa Sales Tax Act, 1947 (hereinafter referred to as "OST Act") at the behest of the petitioner -Indian Aluminum Company Limited.

(2.) SHORN of unnecessary details, the brief facts of the case are that during the year 1984 -85 the dealer -petitioner effected purchase of raw -materials of Rs.15,35,146.48 by paying concessional rate of tax at the rate of 4% on furnishing declaration in Form -IV. The raw -materials so purchased were utilized for manufacturing of the finished product (ingots). Since the finished goods manufactured were sent outside the State of Orissa by way of branch transfer, the Assessing officer held the dealer to have contravened the conditions of declaration. Invoking the mischief of fifth proviso to Section 5(1) of the OST Act he levied the differential tax at the rate of 4% on value of raw -materials in addition to 4% tax already paid at the time of purchase. In First Appeal, the Assistant Commissioner of Sales Tax (hereinafter called "the ACST") found that out of such despatch of finished goods (ingots), Calcutta Branch had sold ingots worth Rs.2,17,812/. Since the finished goods were sold by the branch of the petitioners as such, he held that the mischief of fifth proviso to Section 5(1) of OST Act was not attracted to that extent. But as regards to other despatches which were ultimately converted into plates of different sizes and thickness and sold by the units outside the State of Orissa, the dealer held to have contravened the provisions contained in fifth proviso to Section 5(1) of the OST Act. Against such order of ACST, the petitioner as well as the State has filed second appeal before the Tribunal. The Tribunal by a common order dated 11.12.1990 confirmed the assessment order passed by the Assessing Officer who levied the differential rate of tax of 4% on the value of raw material purchased at concessional rate by furnishing form -IV. The dealer was also running a canteen providing tiffins and meals to its employees at subsidized rate, and received a sum of Rs.47,057/ - from the employees. Treating the said amount to be sale turnover in respect of sales effected in the canteen, the dealer paid tax thereon. It was found that the dealer was paid a subsidy of Rs.6,05,803/ - during the year in question to run the canteen.The Assessing Officer has held that the subsidy amount of Rs.6,05,803/ - given for running the canteen shall constitute part of the sale price on which the petitioner was liable to pay the tax. In appeal, the ACST found that under the Labour Welfare Regulations renewed in 1985, the dealer -appellant bound to sell a meals to a labourer at the rate of 36 paise. A cup of tea or a piece of Kachuri was supplied to the labourer only for 5 paise. Even free snacks and tea on certain occasions were given to the labourers. So, he deleted the levy of tax on the amount of subsidy of Rs.6,05,803/ -. The learned Tribunal in a majority view confirmed the assessment treating the subsidy amount as part of the sale price. However, the Chairman of the Tribunal in a descending view held that the petitioner is liable to pay tax only on the amount received from the employees/labourers and the subsidy price given did not form a part of the sale price. Thereafter, a petition under Section 24(1) of the OST Act was moved before the Tribunal to refer the questions of law enumerated above for opinion of this Court. The learned Tribunal relying on the decision of this Court in Orissa Cement Ltd. and Anr. v. State of Orissa in OJC Nos.3800 of 1987, 431 of 1988, 4333 of 1989 and 2090 of 1991 disposed of on 02.12.1991 referred the first question of law for opinion of this Court. Since there was difference of opinion on the second issue between the members and the Chairman, the learned Tribunal also referred the second question of law for the opinion of this Court. The said reference was initially numbered as S.J.C. 115 of 1992 and subsequently converted to STREV 127 of 2007.

(3.) TO deal with first question it is necessary to know what is contemplated in fifth proviso to Section 5(1) of the OST Act, Entry 48 of List 'C and Form -IV. The relevant provisions are quoted below :