Patna High Court
I.T.C. Limited vs The Superintendent Of Commercial Taxes ... on 15 January, 1986
Equivalent citations: [1986]62STC149(PAT)
JUDGMENT Uday Sinha, J.
1. By these two writ applications under articles 226 and 227 of the Constitution the petitioner, I. T. C. Ltd., an incorporated company, has prayed for quashing the order of the sales tax authorities (annexure 10) imposing special tax and penalty after reopening the assessments for the years 1964-65 and 1965-66. Initially, the petitioner was Indian Tobacco Company Ltd. Subsequently by order dated 4th July, 1974, consequent upon the change in nomenclature, I. T. C. Ltd. was substituted as the petitioner.
2. The petitioner manufactures and sells cigarettes and smoking tobacco. Such articles are manufactured in several factories all over India. One such manufacturing unit is located at Basudeopur in the town of Munger in this State. The factory has printing section which is used solely in relation to the packing of the products manufactured and sold by the petitioner. It goes without saying that printing the shells for the cigarettes is an integral part of the cigarette factory. The labels and shells contain representations of the trade marks.
3. The petitioner is a registered dealer under the Bihar Sales Tax Act, 1959 (hereinafter called "the Act"). As such it has been granted certificate of registration. The certificate specifies and entitles the petitioner to purchase board and paper as required by the company for use by it in the packing of the products for sale without being liable to pay special sales tax in terms of Section 5 of the Act. The petitioner purchased paper and board from Rohtas Industries and used them in the packing of its products after printing on them. These purchases were effected on furnishing declaration in form IX. The petitioner filed return showing gross turnover of Rs. 5,51,124.06 for the year 1964-65 and Rs. 5,10,315 for the year 1965-66. The Sales Tax Officer enhanced the gross turnover (hereinafter called "G. T. O.") by another Rs. 95,00,000. These were held to represent sale value of paper and cardboards purchased by the petitioner and utilised in the preparation and manufacture of labels, cartons, etc. This enhancement had been done by the assessing officer on the footing that the paper and board purchased by the assessee, after declaration in form IX, had not been used directly for packing of cigarettes sold by them, but had been subjected to a process of printing. In the view of the assessing officer the printed materials used for packing was an item different from paper and board purchased by the assessee. The paper and board not having been utilised in terms of the declaration special tax had to be imposed at the first point of sale and the assessee should not have been allowed to purchase them free of tax.
4. The petitioner contested the correctness of the order of the assessing officer adding the aforesaid sum of Rs. 95,00,000 to the G. T. O. The Sales Tax Tribunal allowed the revision holding that since the assessee was a registered dealer in whose registration certificate paper, cardboard, etc., were specified as required for packing goods sold by them, the special sales tax on paper, etc., was not leviable on the sales made to the applicant (petitioner) in accordance with the substantive part of the section. The Tribunal rejected the conclusion of the assessing officer that printing on the paper and board for making of the labels on shells and cartons brought about a transformation in the products purchased by it. It held that the materials actually used for packing were not different from those purchased on the strength of form IX, only on account of the printing. The Tribunal held as follows :
In these circumstances, we do not find that the paper and cardboard bought by the applicant on the strength of form IX have been misused but have been used for packing goods for sale.
With the above observations, the Tribunal set aside the enhancement in the G. T. O. by Rs. 95,00,000. After the order of the Tribunal, the matter was remanded back to the assessing officer to pass orders in terms of the order of the Tribunal dated 9th July, 1971 (annexure 10 in C. W. J. C. No. 170 of 1974). The remand notice was issued accordingly.
5. On 28th March, 1973, the assessing officer issued notice to the assessee under Section 18(1) of the Sales Tax Act. The assessing officer observed in the order that while examining the books of account of the assessee under Section 16(2) of the Bihar Sales Tax Act and on perusal of order of assessment for the year 1966-67, it had been detected that the assessee had despatched packing materials worth Rs. 81,32,191.77 purchased under Section 5 of the Bihar Sales Tax Act to places outside Bihar. The order which is part of annexure 6 shows that in the view of the assessing officer, some portion of packing materials purchased under Section 5, free of tax, for packing cigarettes manufactured by the factory at Munger were despatched to places outside Bihar. The despatch to places outside Bihar, according to his view, was in contravention of the provisions of Section 5 read with Section 7(2)(b) of the Bihar Sales Tax Act. Notice in terms of Section 18(1) was issued to the assessee in regard to escapement of sales tax for the years 1964-65 as well as 1965-66. The petitioner contested the jurisdiction of the assessing officer to reopen assessment. A comprehensive show cause was filed by the assessee. After hearing the parties the assessing officer rejected the objections of the assessee and reassessed the petitioner. On reassessment a sum of Rs. 71,12,716 was added as taxable turnover. Tax of Rs. 4,43,198.50 (including penalty of Rs. 75,000) was assessed by the Superintendent of Commercial Taxes. It may be mentioned that notice under Section 18(2) for showing cause against imposition of penalty for concealing taxable turnover had been served upon the petitioner earlier. Consequent upon the assessment order, demand notices were issued. The substantial prayer of the petitioner in both the writ applications is to quash the reassessment order and the penalty. The other annexures sought to be quashed are incidental to the proceeding for reopening of assessment and the final order of assessment.
6. The submissions urged on behalf of the petitioner are substantially two. The first submission is that no turnover of the petitioner had escaped assessment or had been under-assessed and, therefore, there was no jurisdiction to initiate reassessment proceeding in terms of Section 18 of the Act. Learned counsel for the petitioner in this behalf submitted that the satisfaction of the assessing officer is in respect of fictional turnover and not actual and since it is the actual turnover which is to be taxed or which can escape assessment, the initiation of proceeding for reassessment was without jurisdiction. The second submission urged on behalf of the petitioner is that the facts may attract the provisions of Section 18(1)(b) but not Section 18(1)(a). The initiation of reassessment proceeding, therefore, beyond six years was without jurisdiction.
7. In order to test the validity of the submissions, it is essential to take note of some of the statutory provisions. Section 3(1) of the Act provides that subject to the provisions of the Act, the general sales tax, the special sales tax and the purchase tax shall be paid by every dealer. The other provisions of Section 3 are not relevant for our purposes. Section 5 of the Act, as it stood at the relevant time, provided that special sales tax would be levied only at the point in the series of sales at which the goods were sold to persons other than a registered dealer and read as follows :
The special sales tax shall be levied only at the point in the series of sales at which the goods are sold to a person other than a registered dealer in whose registration certificate such goods or class or description of goods are specified as being required for resale by him or for use by him in the packing of goods which he sells:
Provided that the State Government may, in respect of any goods or class or description of goods or any class of dealers notified in this behalf, direct that the said tax shall, subject to such conditions and restrictions as may be specified in the notification, be paid at any other point.
The next provision relevant for our purpose for disposing of these applications is Section 7 of the Act which deals with the expanse of the expression "taxable turnover". Section 7(1) relates to general sales tax with which we are not concerned. Sub-section (2) thereof deals with special sales tax which reads as follows so far as is relevant:
7. Taxable turnover.-For the purposes of this Act, the 'taxable turnover' of a dealer shall be-
* * * (2) in respect of special sales tax, that part of the gross turnover which remains after deducting therefrom-
(a)(i) sale prices on account of sales exempted under Section 4;
(ii) amount of sales tax actually collected as such, if any, along with the sale prices received or receivable in respect of sales of goods, and
(b) sale prices on account of sales to a registered dealer other than a dealer liable to pay tax under Sub-section (8) of Section 3, of goods specified in his registration certificate as being required-
(i) for resale by him inside Bihar or in course of inter-State trade or commerce or export out of the territory of India, or
(ii) for use by him in the packing of goods which he sells inside Bihar or in course of inter-State trade or commerce or export out of the territory of India :
Provided that in the case of such sales a declaration in the prescribed form duly filled up and signed by the registered dealer to whom the goods are sold, or by his manager declared under Section 10, is furnished in the prescribed manner by the selling dealer :
Provided further that where any goods exempted from the levy of tax by a notification issued by the State Government in this behalf under Sub-section (3) of Section 4 are purchased by a dealer after furnishing declaration mentioned in the notification or where any goods, specified in the certificate of registration of a dealer, are purchased by him after furnishing a declaration as provided in the first proviso of Clause (2) but are utilised by him for any purpose other than those specified in such a notification or specified in item (i) or (ii) of Sub-clause (b) of Clause (2), as the case may be, the sale price of the goods so purchased shall, without prejudice to any action which is or may be taken under Section 38, be deducted from the gross turnover of selling dealer but shall be included in the taxable turnover of the purchasing dealer :
Provided also that where tax is leviable in respect of sale of any goods or class or description of goods at any other specified point under Sub-section (3) of Section 5, the deduction envisaged under Sub-clause (b) of Clause (2) shall not apply at the point so specified and in such cases the sale prices of such goods at all other points shall be deducted, subject to such conditions and restrictions as the State Government may, by notification, impose in this behalf; and...
It would be seen from the above that the taxable turnover of a dealer in respect of special sales tax will be that part of the G. T. 0. which remains after deducting therefrom sale prices on account of sales to a registered dealer other than a dealer liable to pay taxes under Section 3(8) of goods specified in his registration certificate as being required for use by him in the packing of goods which he sells inside Bihar or in course of inter-State trade or commerce or export out of the territory of India. Rule 8(I)(c) of the Bihar Sales Tax Rules provides for declaration in form IX by the purchasing dealer. The said rule reads as under:
8. Evidence in support of claim for deductions from gross turnover.-(1) A dealer who claims that any amount should be deducted from his gross turnover on account of sales exempted from tax,-
* * *
(c) under Clause (b) or (c) of Sub-section (3) of Section 4, as having been made to a dealer who is entitled by virtue of the exemption allowed by the State Government under any of the said clause to purchase the goods free of general sales tax or special sales tax or both general sales tax and special sales tax, shall substantiate such claim before the authority prescribed in Rule 12 by producing, in addition to the evidence prescribed in Clause (b) of this rule, a true declaration in writing, in form IX obtained from the prescribed authority by the purchasing dealer or by his manager declared under Section 10 that the dealer is entitled to purchase the goods, which are the subject of the sale, free of tax as aforesaid and that, the said goods are covered by his registration certificate, and;
That brings us to form IX. This form postulates certain declarations by the purchasing dealer which may be conveniently quoted as follows :
Certified that the goods-
ordered for in our purchase order No...dated...purchased from you as per bill/cash memo, stated below, supplied under your chalan No..., dated... are-
(i) for resale in Bihar or in course of inter-State trade or commerce or export outside India;
(ii) for packing of goods for sale inside Bihar or in the course of inter-State trade or commerce or export out of the territory of India;
(iii) such as I am/we are entitled to purchase free of general sales tax/ special sales tax/both general sales tax and special sales tax according to the orders of the Government of Bihar issued under Clause (b)/(c) of Sub-section (3) of Section 4 of the Bihar Sales Tax Act, 1959;
(iv) for direct use in the manufacturing/processing of goods for sale/ mining/the generation or distribution of electricity;
and are covered by my/our registration certificate/certificate No... dated....
Particulars of bill/cash memo
Date No. Amount
Name of purchasing dealer and style of
business.
Signature and status of the person
signing the declaration.
Date....
8. Having set out the relevant provisions, let us come to grips with the submissions urged on behalf of the petitioner. The submission urged on behalf of the petitioner is that there had been no turnover which had escaped assessment of tax because every fact had been disclosed by the assessee and the taxing authorities were aware of the fact that packing materials, paper and board were being despatched outside Bihar to other factories of the company outside Bihar for packing. Learned counsel for the petitioner drew our attention to form XXVIII-B in terms of Rule 31 of the Bihar Sales Tax Rules. In order to despatch materials outside Bihar, a permit is necessary. For that purpose form XXVIII-B has to be filled up. In that connection, the assessee had declared that packing materials were being sent outside Bihar. Since the taxing authorities had been informed by the petitioner that the packing materials were being sent outside, there was no concealment by the assessee. Consequently there was no escapement of tax. Alternatively, even if it amounted to escapement, it was not on account of any omission or failure to disclose fully the particulars on the part of the assessee. The case would thus fall in the category of cases covered by Section 18(1)(b) and not 18(1)(a) of the Act. The reassessment proceeding would be, therefore, out of time. Thus contended learned counsel for the petitioner.
9. In considering the submissions urged on behalf of the petitioner we cannot lose sight of the fact that sales tax has to be realised by the State from every sale provided it falls above a certain flooring. It may be general sales tax or special sales tax, It is not in controversy that but for the exemption granted to it the petitioner would have been liable to pay special sales tax for the purchase of paper and board from Rohtas Industries, Paper and board are mentioned in the registration certificate of the petitioner being goods required for resale by the assessee for use in the packing of goods. Section 7(2) prescribes the manner of calculating the taxable turnover for the purpose of special tax. It is that part of the turnover which remains after deducting sale prices on account of sales to a registered dealer of goods specified in his registration certificate as being required for use by him in the packing of goods which the assessee sells inside Bihar. The pre-condition for this mode of ascertaining the taxable turnover is laid down in the provisos to Section 7(2). The first proviso is that a declaration in the prescribed form must be furnished by the registered purchasing dealer in the prescribed manner, i.e., in accordance with the rules. The second proviso is that where any goods exempted from the levy of tax by the State Government under Sub-section (3) of Section 4 are purchased by a dealer after furnishing declaration mentioned in a notification or where the goods specified in the certificate of registration are purchased by him after furnishing a declaration as provided in the first proviso of Clause (2) but are utilised by him for any purpose other than those specified in such a notification, the sale price of the goods so purchased shall be deducted from the G. T. O. of selling dealer but shall be included in the taxable turnover of the purchasing dealer. But shortly, if a dealer sells goods to a registered dealer in contravention of the terms of notification (in terms of which form IX was created), the sale by the seller will not be included in the turnover of the selling dealer, but it will form part of the G. T. O. of the purchasing dealer. In the instant case, the petitioner purchased paper and board in terms of form IX. Form IX was executed by the purchasing dealer. The tacit declaration/undertaking by the purchasing dealer was that the goods were meant for packing of goods to be sold inside Bihar [see Clause (2) of form IX]. The result of the execution of this undertaking was that the sale of paper and board ceased to be part of the G. T. O. of the seller. If the sale by the purchasing dealer would be in terms of Clause (2) the purchasing dealer, i.e., the petitioner would be exempted from payment of special sales tax by virtue of the fact that those sales/purchases would not form part of the G. T. O. of the petitioner. The seller was exempt because the quantum of sale nqtionally did not form part of his G. T. O. It did not form part of the purchaser as well because of the notification. In terms of Section 4(3) it was a facility or concession extended to the petitioner. That facility or concession was on account of the undertaking by the purchaser, the petitioner, that they would be used in the packing of goods for sale inside Bihar. It is axiomatic that the petitioner, the purchasing dealer, would not be entitled to a favourable or special treatment but for the undertaking in form IX. He would be liable to pay special sales tax in that case. That would be on account of the provisions of Section 7(2)(b) that such a sale would constitute part of the G. T.O. of the purchasing dealer. It is thus obvious that the concession to the petitioner was on account of certain undertakings given by it in the interest of trade and commerce within the State. The legislature and the Government in their wisdom considered it expedient to grant such a concession. The result of the concession was that the sale which would form part of the turnover of the selling dealer and the purchasing dealer, the assessee, ceased to be so. It necessarily follows, that if the undertaking in form IX is not adhered to, the concession or special treatment must disappear. If that disappears, the value of the purchase must form part of the taxable turnover of the purchasing dealer. The selling dealers, Rohtas Industries, were deprived of the opportunity to realise special sales tax from the purchasing dealer on account of the injunction of the State in terms of Sections 5 and 7(2)(b)(ii) and form IX of the Sales Tax Act and the Rules made thereunder.
10. The concession was granted on the tacit understanding that the packing materials would be used for the purpose of packing goods for sale inside Bihar. It is not in controversy that part of the goods were despatched outside Bihar. Part of the purchased goods, therefore, were not used for packing materials for sale inside Bihar. Obviously, therefore, the undertaking in form IX was violated. If that undertaking is violated, the concession must disappear. Consequently, the G. T. O. must swell to the extent of the volume of despatches outside Bihar. If the value of those despatches were not included in the return for the G. T. O. of the assessee, it is obvious that taxable turnover of the assessee had escaped assessment.
11. The escapement took place because of the failing of the petitioner. There was no failing on the part of the department. If the value of these despatches had been included in the G. T. O., matters would have been different. The assessee could clearly claim to have fairly and truly disclosed every material. To take a different view of the law or the fact would not entitle the taxing authorities to act in terms of Section 18. But here is a case where part of the turnover was not included in the return. It is, therefore, difficult to hold that there had been no concealment/omission-consequently escapement of turnover. It may be that the petitioner may have been under the impression that it was not liable to include the value of purchases in the value of the G. T. O. under a bonafide mistaken view of law. That mistaken view may be relevant for the purpose of penalty, but not for assessment. In my view, therefore, it is obvious that turnover of the assessee had escaped assessment.
12. Learned counsel for the petitioner laid stress upon the proposition that in matters of taxation an assessee is under obligation only to disclose primary facts and no more. The assessee is under no obligation to state inferences from those primary facts. Reliance was placed upon cases of Calcutta Discount Company Ltd. v. Income-tax Officer, Companies District I, Calcutta AIR 1961 SC 372 and Income-tax Officer, Calcutta v. Lakhmani Mewal Das AIR 1976 SC 1753. In my view, the reliance placed by learned counsel for the petitioner is misplaced. It is true that law casts an obligation upon an assessee only to disclose primary facts. Nothing more is expected. But is this a case where all primary facts had been disclosed ? The fact that at some point of time the sales tax department hadrbeen informed that they intended to purchase paper and board from Rohtas Industries for making cartons and shells for use of the several factories in the whole of India is no answer to the difficulty of the petitioner. An assessee may have to furnish information of various categories on various points to the sales tax department from time to time, but the taxing officer cannot be fastened with the knowledge of all those informations furnished to the sales tax department at some point of time, when he proceeds to assessment. After relevant information is not supplied in the return and the accompanying statement, it would amount to withholding relevant material. That would not be full and true disclosure, if a particular item which is liable to be included in the G. T. O. has not been included. In that view of the matter, I have not the least doubt that primary relevant facts had not been disclosed by the assessee. The law in regard to disclosure of primary facts was succinctly spelt out by the Supreme Court in Calcutta Discount Company Ltd. v. Income-tax Officer, Companies District I, Calcutta AIR 1961 SC 372 in the following words at paragraph 9 :
(9) There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the legislature has put in the explanation, which has been set out above. In view of the explanation, it will not be open to the assessee to say, for example -'I have produced the account books and the documents : You, the assessing officer examine them, and find out the facts necessary for your purpose : My duty is done with disclosing these account books and the documents'. His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to 'omission to disclose fully and truly all material facts necessary for his assessment'. Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them-including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed.
Judged by those standards, I am of the view that there was failure on the part of the assessee to make full disclosure. The assessee may not be guilty of conscious concealment or failure to disclose, but it cannot be doubted that there was certainly omission to disclose the full particulars of the turnover of the year. It is true that in Section 34 of the Income-tax Act, 1922, the explanation, made matters absolutely clear. The absence thereof, however, in the Bihar Sales Tax Act will not make much difference. Even in the absence of any provision like the explanation in Section 34 in the Bihar Sales Tax Act, on general principle, I am of the view that an assessee is obliged to disclose all relevant materials. The fact that at some point of time much before the assessment, may be at the time of making declaration in form XXVIII-B the petitioner had informed the sales tax department that the purchased paper and board would be despatched to places outside Bihar for consumption of the assessee's different units would not absolve the petitioner of mentioning that fact in the statement accompanying the return. There is another significant aspect in this behalf. The Sales Tax Officers may not be knowing whether the petitioner was purchasing paper and board only from Rohtas Industries or also from other dealers outside Bihar. If it was purchasing from places outside Bihar as well, that would be purchase in terms of form C in which there was no undertaking to sell the goods which were being packed in those paper and board inside Bihar. The volume of goods going out of Bihar in respect of purchases under form IX would be a matter to be calculated. The purchases from Rohtas Industries and purchases from outside Bihar would have to be sorted out. Those informations, therefore, had to be supplied in the return and the accompanying statement. It is, therefore, not open to the petitioner to contend that every relevant primary materials had been disclosed by it for the purposes of assessment.
13. Learned counsel for the petitioner relied upon the earlier assessment proceeding which culminated in the deletion of Rs. 95,00,000 from the G. T. O. of the assessee. The order of the Tribunal is annexure 3/1 dated 9th July, 1973, in C. W. J. C. No. 170 of 1974. The assessment proceeding had commenced in 1965. The assessment order of the Superintendent of Commercial Taxes is not before us. But it is not disputed that the G. T. O. was enhanced by Rs. 95,00,000 on the footing that there had been misuse of the privilege granted to the assessee in the matter of payment of special sales tax by printing on the paper and board. It was contended that, on that very occasion it was known that paper and board purchased under exemption was being despatched outside Bihar and, therefore, there was no omission/concealment/non-disclosure. The submission is attractive but it heels over on deeper analysis. The point in controversy on the earlier occasion was whether passing the paper and board through the process of printing brought out a different specie of goods and thus contravened the undertaking to use the goods for packing. On that occasion the focus was on printing on the packing materials purchased by the assessee. In the reassessment proceeding the focus is on sales inside Bihar. The value of despatches of goods outside Bihar is being included in the turnover of the assessee. Apart from the fact that principles of res judicata have no relevance in taxation matters, it is plain that the matter in controversy in the earlier assessment proceeding culminating in passing of the order annexure 3/1 was entirely different from the one now being agitated. In my view, therefore, it is difficult to hold that all primary facts had been disclosed by the assessee. The value of packing materials despatched outside not having been included in the taxable turnover there was failure or omission on the part of the petitioner to disclose fully and truly in the return. Taxable turnover had obviously escaped assessment.
14. Learned counsel for the petitioner submitted that Section 5 of the Bihar Sales Tax Act has no application, as there is absence of a series of sales. He contended that Section 5 applies only if there are a series of sales. Reliance was placed upon Gurna Mal v. State of Uttar Pradesh [1970] 26 STC 270 (All). The submission is devoid of substance. Section 5 lays down the point at which special sales tax shall be levied. Every specie of items passes through a series of sales. The first link in that series is the sale by Rohtas Industries to the petitioner. The petitioner sells those goods to others and so on and so forth. It cannot, therefore, be doubted that a series of sales are involved. The petitioner happens to be at the threshold of those series, but that does not take over the ordinary characteristic that the goods purchased by Rohtas Industries were being subjected to series of sales. The Allahabad case of Gurna Mai [1970] 26 STC 270 was decided on special facts. That was a case of levy of tax over bricks. It was emphasised in that case that bricks are species of materials which are passed directly from the producer to the consumer without there being a middle man. In that situation, the question of series of sales does have relevance. The instant case, however, is different. The paper and board were not such an object which is handed down from the producer to the consumer. That case, therefore, has no relevance. The submission urged on behalf of the petitioner, therefore, has no substance and must be left at that.
15. It was then submitted that in Section 5 of the Bihar Sales Tax Act there was no requirement that the sale or resale must be inside Bihar and, therefore, the benefit of the exemption could not be denied to the petitioner on the supposition that goods purchased had to be sold or utilised in sale inside Bihar. This submission is again devoid of substance. I have set out earlier the relevant parts of form IX. There can be no doubt that the petitioner gave an undertaking that the goods would be used for packing of goods for sale inside Bihar. Form IX has the sanction of Rule 8(1)(c). It will be seen that in order to escape the rigor of special sales tax, the petitioner had to make a true declaration in form IX. If the declaration is found to be not true, the benefit of Rule 8(1)(c) cannot be availed of by the assessee. Form IX, therefore, has statutory effect and cannot be ignored. It is not doubted that Rule 8(1)(c) has statutory force. The conjoint effect of Sections 3, 4(3), 5 and Rule 8(1)(c) read with form IX clearly is that the law postulated that the goods were to be used for the packing of goods for sale inside Bihar. It is not a case of reading that requirement by implication. The amplitude of Section 5 cannot be gauged in isolation. All the relevant statutory provisions must be looked into for appreciating it. Thus read I am clearly of the view that there was an obligation upon the petitioner to use the paper and board for packing materials for sales inside Bihar. The reliance placed by learned counsel for the petitioner upon Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax, New Delhi AIR 1978 SC 897 and Assessing Authority-cnm-Excise and Taxation Officer, Gurgaon v. East India Cotton Mfg. Co. Ltd., Faridabad AIR 1981 SC 1610 do not affect the view taken by me. Those were cases where there was no undertaking by the dealer to sell inside the State where they had purchased the goods like the one mentioned in form IX. If form IX had not been there, Section 5 would have to be interpreted in terms of the two Supreme Court cases, mentioned above. The undertaking makes all the difference. I am, therefore, unable to attach much significance to the cases relied upon by learned counsel for the petitioner.
16. The next submission urged on behalf of the petitioner was that in arriving at the figure of turnover of the escaped assessment, the assessing authority had not followed the affirmative procedure laid down in second proviso to Section 7(2)(b)(ii). It was submitted that the book value of the debits against the petitioner and other factories would be different from the value of the goods purchased from the Rohtas Industries. That may be so. To that extent there is substance in the submission of learned counsel for the petitioner. The book value of the goods despatched to the sister units of the petitioner may swell on account of process of printing, shelling, cutting, etc. The assessing officer, therefore, should have ascertained the value of the sale by Rohtas Industries from it rather than relying upon the value of the despatches by the petitioner.
17. Lastly, the learned counsel for the petitioner submitted that Section 5 of the Bihar Sales Tax Act was ultra vires inasmuch as, to tax fictional sales, according to learned counsel for the petitioner, the State Government in terms of entry 54 of List II of the Seventh Schedule to the Constitution there was power in the legislature in regard to taxation of sales, but that did not confer the power to tax fictional sales. I regret, I am unable to find any substance in this submission. The sale is there. Only the incidence of the tax has been shifted from the seller to the purchaser. Under the law a seller is entitled to shift the incidence of tax from the seller to the buyer. In the instant case, the petitioner is restrained from shifting the incidence on account of its undertaking. I am unable to appreciate why the State Government could not prevent the shifting of the incidence of the tax and making it conditional. The petitioner received a favourable treatment in view of some undertaking given by him. Having taken the benefit because of the undertaking, it does not lie in the mouth of the assessee now to say that there is no sale, but it is only a fictional sale in regard to which there is no legislative power. The submission urged on behalf of the petitioner has only to be stated to be rejected.
18. I cannot conclude this judgment without referring to a Division Bench decision of this Court in I.T.C. (Indian Tobacco Co.) Ltd. v. Assistant Commissioner of Commercial Taxes 1984 PLJR 606, the leading judgment being by my learned brother which was also strongly relied upon by Mr. Chatterji. In that case it was held that the despatch of paper and board outside Bihar was not sale within the meaning of the Central Sales Tax Act, as the I. T. C. with several branches was a single unit and consequently one dealer. The distinguishing feature from that case to the present one is that there the obligation of the assessee (which was not other than the present assessee) under the Central Sales Tax Act was being tested. The registration certificate had been granted to the company under the Central Act. During the relevant year the company had purchased paper and board from outside the State of Bihar. The declaration in form C [prescribed under Rule 12(1)] reads as noted below:
To ...(seller) ...
Certified that the goods ordered for in our purchase order No...dated... purchased from you as per bill/cash memo stated below :
supplied under your chalan No...dated...are for resale/use in manufacture/processing of goods for sale/use in mining use in generation/distribution of power/packing of goods for sale/resale and are covered by my/our registration certificate No...dated... issued under the Central Sales Tax Act, 1956.
Name and address of the purchasing dealer in full...
Date...
...
Signature.
It should be noted chat in terms of the purchase order, form C, the purchases were not from inside but from outside Bihar. Secondly, there was no undertaking that the goods would be used in packing of articles inside Bihar. It was, therefore, obvious that there was no violation of the undertaking in the previous I. T. C. case. In those circumstances, the question falling for consideration whether the assessee after purchasing goods for the purposes specified in Clause (b) of Sub-section (3) of Section 8 had failed without reasonable excuse to make use of the goods for any such purpose did not arise. That was not a case where the obligation of the assessee to use the goods, namely, the paper and board for packing of goods for sale inside Bihar, fell for consideration. The earlier decision of this Court in I. T. C. {Indian Tobacco Co.) Ltd. v. Assistant Commissioner of Commercial Taxes [1985] 58 STC 193; 1984 PLJR 606 is unexceptional, but that has reference to obligation of an assessee under the Central Sales Tax Act. It has no application to obligation under the Bihar Sales Tax Act with reference to Sections 4, 5, 7(2)(b)(ii) and form IX. In my view, therefore, the earlier decision cannot be regarded as having settled the point in issue before us.
19. Considering the matter at length, I am of the view that turnover liable to tax had escaped assessment. That escapement took place because of the omission of the petitioner. The case could, therefore, fall within the mischief of Section 18(1)(a) and not 18(1)(b) of the Bihar Sales Tax Act.
20. It only remains to consider whether the petitioner was liable to pay penalty for non-disclosure of relevant materials. The law as it stands today has been put in a very confused manner and from a perusal of the provisions it is not easy to cull out the obligations of the assessee. Besides this the assessee may have been under the impression that the informations supplied in form XXVIII-B absolved it of all its obligations. A liberal view, therefore, is called for. In my view, it is not an apt case for imposition of penalty. The order of fine/penalty levied by the assessing officer is, therefore, hereby quashed.
21. In paragraph 16 I have considered the value which should have been taken into account in assessing the escapement of the turnover. The value of the goods sent outside Bihar will not be the real value for purposes of taxation. The value of the goods purchased from Rohtas Industries will be the correct valuation of the turnover escaping assessment. The assessing officer, therefore, should proceed to assess on that basis.
22. Before concluding I would like to observe that it would be advisable for the State Government to delete the condition of "sale inside Bihar" from form IX. The sales tax department may lose by such deletion, but industries with which the prosperity of any State is inextricably linked would benefit. This is not, however, our order, but only an advice to consider this aspect of the matter.
23. For the reasons stated above, the applications lack substance. They must be dismissed accordingly with costs. Hearing fee Rs. 250 payable by the petitioner in each application.
Harilal Agarwal, J.
24. I entirely agree.