Patna High Court
Commissioner Of Commercial Taxes vs Bhag Singh Milkha Singh on 14 May, 1973
Equivalent citations: [1974]34STC535(PAT)
Author: Nand Lall Untwalia
Bench: Nand Lall Untwalia
JUDGMENT Sushil Kumar Jha, J.
1. In pursuance of a direction, of this court by an order dated 19th August, 1968, at the instance of the Commissioner of Commercial Taxes, Bihar, Patna, the Commercial Taxes Tribunal, Bihar (hereinafter called "the Tribunal"), has submitted a statement of the case and referred three questions of law to this court, This tax reference has thus been made under Section 33(3) of the Bihar Sales Tax Act, 1959 (hereinafter called the "Act").
2. The assessee, a partnership-firm, was registered under the Act as a dealer in timber. In the course of assessment of sales tax for the year 1962-63, it claimed a deduction of a sum of Rs. 49,418.29 from its taxable turnover on account of sales of timber in the course of inter-State trade or commerce to some dealers in Neyamatpur in the State of West Bengal and Amritsar in the State of Punjab. The Assistant Superintendent of Commercial Taxes, Hazaribagh, by Us order dated 26th December, 1964, held that the transactions in question were intra- State sales since there was no written contract of sale between, the assessee and the purchasers in fulfilment of which the movement of goods outside the State of Bihar had been occasioned. Hence the assessee's claim was rejected.
3. The assessee, thereafter, preferred an appeal before the Deputy Commissioner of Commercial Taxes, who by his order dated 18th April, 1966, set aside the order of the assessing officer with respect to the aforesaid sum in the light of the decision dated 29th October, 1965, of the Tribunal passed in the case of this very assessee arising out of the assessment for the years 1960-61 and 1961-62. It may be pointed out here that the above-mentioned decision of the Tribunal was also the subject-matter of reference in Tax Cases Nos. 69 and 70 of 1966, which was decided by this court by a judgment dated 11th October, 1971, since reported as Commissioner of Commercial Taxes, Bihar v. Bhag Singh Milkha Singh 1972 B.L.J.R. 518, wherein the Tribunal's decision was held to be correct. That case, however, being for a different period of assessment certainly cannot operate as res judicata for the assessment in respect of the year 1962-63 with which we are concerned, but the case will be referred to at an appropriate place for the purpose of the principles of law enunciated therein.
4. Against, the order of the Deputy Commissioner, the Commissioner of Commercial Taxes, Bihar, Patna, filed a revision application before the Tribunal, which by its order dated 26th November, 1966, upheld the order of the Deputy Commissioner setting aside the assessment of the assessee in respect of the sum of Rs. 49,418.28. The Tribunal recorded the following findings:
(1) The opposite party (assessee) was registered having his place of business at Hazaribagh.
(2) The purchasers were Nand Ram Jainarain Sharma of Neyamatpur in West Bengal and Haibhajan Singh Kulwant Singh of Amritsar in Punjab.
(3) These purchasers used to place orders on phone to the opposite party for supply of timber and that there was no separate written contract of sale.
(4) The timbers so purchased by the purchasers used to be carried by trucks outside the State of Bihar on the same day of purchase or on the day following.
(5) There is evidence that some of these goods purchased had passed through the Chirkunda check-post on the Bihar-Bengal border.
(6) The Chirkunda check-post declaration revealed that the goods purchased passed through this check-post on the day of purchase or immediately on the next day.
(7) It cannot also be said that the opposite party had nothing to do with the transport of the goods from the State of Bihar to places outside Bihar as the declarations produced in this case show that the opposite party was the consignor of the goods purchased by the outside State purchasers. It has further been proved that the opposite party issued credit memos mentioning the truck number through which the goods were transported outside the State. These facts clearly establish that there was an obligation on the part of the opposite party to transport the goods outside the State.
5. It had been urged on behalf of the Commissioner before the Tribunal that the assessee delivered the timber to the purchasers at Hazaribagh and that there was no evidence to support the contention of the assessee that the goods moved outside the State as a result of the contract of sale. The Tribunal, however, negatived this contention, as in the opinion of the Tribunal, there was evidence on record that the goods crossed the border of the State in pursuance of the contract of sale. The Tribunal further held that the sale of timber in question by the assessee to the purchasers outside the State and the resultant transport of goods to the other States involved a series of integrated activities commencing from placing of orders for supply of timber and ending with the transport of goods outside the State. While deciding the case the Tribunal relied, inter alia, on some documents produced on behalf of the assessee at the time of the hearing of the arguments in the case in the presence of the representatives of the Commissioner. These documents were of three types;
(a) declarations in form C prescribed by the Central Sales Tax Rules given by the purchasers to the seller;
(b) credit memos issued by the seller to the purchasers indicating therein the registration number of trucks which were to transport the purchased goods as also the place where the goods were to be carried; and
(c) some check-post declarations showing that the goods for which the credit memos were issued were transported by road through trucks mentioned in the credit memos on the same day on which these credit memos were actually issued. All these check-post declarations bore the seal of the sales tax department indicating that the goods mentioned therein had actually been transported outside the border of the State of Bihar. The Tribunal had held that there was no material on the record to doubt the genuineness of those check-post declarations and the aforesaid facts were also not controverted on behalf of the department.
6. Being dissatisfied with the aforesaid order of the Tribunal dated 26th November, 1966, in Revision Case No. 163 of 1966, the Commissioner filed an application for stating a case under Section 33(1) of the Act to this court, which having been rejected, the Commissioner filed an application before this court which directed the Tribunal to refer the following three questions for the decision of the High Court:
(1) Whether the revisional power of the Tribunal as conferred by the Bihar Sales Tax Act, 1959, empowers the Tribunal to entertain and examine evidence, not produced before the assessing authority, or other earlier stages?
(2) Whether the documents relied upon by the Tribunal were brought on record and considered in accordance with law?
(3) Whether the Tribunal has rightly held that sales of timber worth Rs. 49,418.29 had taken place in the coarse of inter-State trade and commerce and were not liable to be taxed under the Bihar Sales Tax Act, in the absence of any written contract on the point laying an obligation on the assessee to transport the goods to West Bengal?
7. For the purpose of going into questions Nos. (1) and (2), it is pertinent to point out that the scope, nature and extent of the jurisdiction of the High Court under Section 33 of the Act is mutatis mutandis the same as that conferred by Section 66 of the Income-tax Act, 1922, for under the provisions of both the sections, referred to above, the jurisdiction of the High Court is a consultative or advisory jurisdiction and the High Court has to advise by determining only questions of law arising out of the order of the Tribunal. The well-settled principles with regard to the scope, nature and extent of the jurisdiction of the High Court under Section 66 of the Income-tax Act, 1922, as laid down by the Supreme Court will fully apply to its consultative or advisory jurisdiction under Section 33 of the Act. I have mentioned the provisions of Section 66 of the Income-tax Act, 1922, only because for the purpose of defining the jurisdiction of the High Court. I seek to place reliance on some decisions of the Supreme Court which have dealt with the provisions of Section 66 of the Income-tax Act, 1922. On a review of the entire case-law on the subject, the Supreme Court laid down the following propositions in the case of Commissioner of Income-tax, Bombay v. Scindia Steam Navigation Co. Ltd. [1961] 42 I.T.R. 589 (S.C.):
(1) When a question is raised before the Appellate Tribunal and is dealt with by it, it is clearly one arising out of its order.
(2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order.
(3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.
(4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order.
8. In the present case, it is evident that the first two questions, referred to this court, cannot be said to arise out of the order of the Tribunal, as they were neither raised before nor decided by the Tribunal. Learned standing counsel No. 1 appearing on behalf of the Commissioner has, however, urged that as no application for receiving additional evidence was filed before the Tribunal on behalf of the assessee, the Commissioner had no opportunity to raise those objections before the Tribunal. Even so, in my view, the first two points cannot be said to arise out of the order of the Tribunal for two reasons: (i) If the parties do not raise a certain contention before the Tribunal with the result that the facts relevant to that contention are not dealt with in the judgment of the Tribunal, no question arising out of such a contention can be referred to the High Court: (i) The New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax, Bombay North, Kutch and Saurashtra [1959] 37 I.T.R. 11 (S.C.); (ii) It is evident from the statement of case that no objection was raised on behalf of the Commissioner when the assessee produced the documents on which reliance was placed at the time of arguments before the Tribunal and the learned counsel for the Commissioner had also an opportunity to meet the arguments on behalf of the assessee based on those documents. I am definitely of the view, therefore, that the first two questions, referred to this court, do not arise out of the order of the Tribunal and do not, therefore, need to be answered.
9. Assuming, however that question No. (1), referred to this court in its abstract form may, by any stretch of imagination, be said to arise out of the order of the Tribunal, it is manifest that the Tribunal exercising its revisional jurisdiction has been conferred with the same power as that of the Deputy Commissioner exercising his appellate power. In Messrs. Hewitt Robins Incorporation v. State of Bihar [1973] 32 S.T.C. 146 (Tax Case No. 40 of 1967) recently decided on the 26th April, 1973, by this Bench, this Court, relying upon an earlier Bench decision in Basta Colla Colliery Co. (P.) Ltd. v. State of Bihar [1969] 23 S.T.C. 142, held (hat. in exercise of revisional power the Tribunal, and in the case of exercise of appellate power the first appellate court, had co-extensive jurisdiction in so far as admitting additional evidence is concerned. Of course, in these two cases, the question had arisen incidentally and the real question referred to this court, was whether after admitting additional evidence the Tribunal or the first appellate authority had power to remand the case to the assessing authority for reconsideration of the matter after taking into consideration such additional evidence as had already been admitted either by the appellate court in exercise of its appellate power or by the Tribunal in exercise of its revisional jurisdiction. In the present case, it is true, the question referred to is not whether the Tribunal in exercise of its revisional jurisdiction could, after admitting additional evidence, decide the matter itself, or remit the case back to the assessing authority for a fresh decision after taking into consideration such additional evidence. But it goes without saying that in the ratio of the two above-mentioned Bench decisions of this Court is implicit the principle that the tribunal in exercise of its revisional jurisdiction as well as the appellate court in exercise of its appellate jurisdiction had ample power in appropriate cases and, for sufficient cause, to take additional evidence. Therefore, even if question No. (1) were to be answered in its abstract form, it would be decided in favour of the assessee and against the Commissioner.
10. The only other question that remains for consideration is whether the Tribunal has rightly held in law that the sales of timber in question had taken place in the course of inter-State trade and commerce and whether in the absence of any written contract on the point laying an obligation on the assessee to transport the goods outside the State on the findings recorded by the Tribunal is correct. There is no doubt in my mind that such sales had taken place in the course of inter-State trade and commerce. Learned standing counsel No. 1 urged that since there was no written contract or any direct evidence to show that there was an obligation flowing from the contract, the sales ought not to have been held as being in the course of Inter-State trade or commerce. There is no substance in this contention of the learned standing counsel. It is now well-established that sales and purchases which themselves occasioned the transportation of goods outside the State came within the exemption. To occasion the transportation of goods there must exist such a bond between the contract of sale and the actual transportation outside the State that each link is inextricably connected with the one immediately preceding it [cf. State of Travancore-Cochin v. Bombay Co. Ltd., Alleppey A.I.R. 1952 S.C. 366, commonly known as the first cashew-nut case, and Ben Gorm Nilgiri Plantations Co., Coonoor (Nilgiris) v. Sales Tax Officer, Special Circle, Ernakulam A.I.R. 1964 S.C. 1752 at 1756]. Where the transportation is the result of sale, the transportation being Inextricably linked up with the sale so that the bond cannot be dissociated without a breach of the mutual understanding between the buyer and seller arising from the nature of the transaction, the sale must be held to be in the course of inter-State trade or commerce. Such a sale means not only sales taking place during the activities directed to the end of transportation of the goods outside the territory of the State, but also as part of or connected with such activities: (State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory A.I.R. 1953 S.C. 333, commonly known as the second cashew-nut case). On a review of all the case-law on the point a Full Bench of this Court in the case of Shankerjee Raut Gopalji Raut v. State A.I.R. 1968 Pat. 329 has laid down succinctly, if I may say so with great respect, the law on the subject with regard to the interpretation of the term sale "in the course of the import of the goods into, or export of the goods out of the territory of India" occurring in Article 286(1) of the Constitution of India, which fully applies to the term "in the course of inter-State trade or commerce" occurring in Section 4 of the Act. On the authority of that case it must be held that what is of importance to make the sale as one in the course of inter-State trade or commerce is that there must be an obligation to transport the goods outside the State--the obligation may be of the seller or the buyer--and it may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them or even from the nature of the transaction which linked the sale to such transportation. Such an obligation may be imposed expressly under the contract itself or infinitely by a mutual understanding. It is not necessary that in all cases there must be pieces of direct evidence showing such obligation in a written contract or oral agreement. Such obligations are inferable from circumstantial evidence also. To use the language of Ayyangar, J., in Ben Gorm Nilgiri Plantations Co., Coonoor v. Sales Tax Officer, Special Circle, Ernakulam A.I.R. 1964 S.C. 1752 at 1756, such an understanding between the parties may be "inferable from all the circumstances attendant on the transaction". I may mention here that although the judgment of Ayyangar, J., was a dissenting judgment on the facts of that case, in principle there was no difference between the majority and the minority judgment. This being the position in law, the findings recorded by the Tribunal, as mentioned above, even though they may be based on circumstantial evidence, fully justify the inference of the Tribunal that the sales of timber worth Rs. 49,418.29 had taken place in the course of inter-State trade or commerce and were exempted from tax under the Act. I am also fortified in my view by a Bench decision of this Court in the case of Commissioner of Commercial Taxes, Bihar v. Bhag Singh Milkha Singh 1972 B.L.J.R. 518, a case of this very assessee, as already mentioned, where in similar circumstances and on similar facts this court had come to the same conclusion. In this view of the matter, question No. (3), referred to this court, must be answered against the Commissioner and in favour of the assessee and it must be held that the Tribunal has rightly held that the sales of timber worth Rs. 49,418.29 had taken place in the course of inter-State trade or commerce and were not liable to be taxed under the Bihar Sales Tax Act, even in the absence of any written contract on the point laying an obligation on the assessee to transport the goods to West Bengal.
11. I, accordingly, refrain from answering the first two questions, as they do not arise out of the order of the Tribunal and answer the third question of law referred to us in the affirmative. The assessee-dealer shall be entitled to its costs. Hearing fee is assessed at Rs. 100 (Rupees one hundred only).
Nand Lall Untwalia, C.J.
I agree.