Orissa High Court
Vysya Bank Limited vs Commissioner Of Sales Tax on 2 April, 2008
Equivalent citations: 2008(I)OLR716
Author: Chief Justice
Bench: Chief Justice
JUDGMENT A.K. Ganguly, C.J.
1. This Sales Tax Revision has been filed by the assessee challenging the order dated 19.8.2002 passed by the Full Bench of the Orissa Sales Tax Tribunal, Cuttack (hereinafter referred to "said Tribunal"). By the said judgment, the Tribunal dismissed the petitioner's appeal and confirmed the order passed by the Assistant Commissioner of Sales Tax, Koraput Range, Jeypore. The Sales Tax Revision was admitted on various questions formulated at pages 22-23 of the Revision Petition, but at the time of argument only the following questions were pressed.
(I) Whether under the facts and circumstances of the case the plant and machineries having suffered Orissa Sales Tax at the time of purchase inside the State of Orissa, the lease rental received on leasing out those plant and machineries can be taxed ?
(II) Whether under the facts and circumstances of the case the transfer of property in goods and the transfer of right to use the goods are two distinctly separate taxable events once as sale and secondly as deemed sale in the face of the legislative intent of single point taxation as provided Under Section 8 of the Orissa Sales Tax Act?
(III) Whether under the facts and circumstances of the case the imposition of penalty by the Sales Tax Officer and confirmed by the Assistant Commissioner and Sales Tax Tribunal is correct law?
2. The material facts of the case are that the petitioner, a public limited company incorporated under the Companies Act, has its registered office at 72, St. Mark's Road, Bangalore and branch office at Plot No. 6, Arunodaya Market, Link road, Cuttack-12. The petitioner carries on business in Banking and Leasing of diverse equipments and is registered within the jurisdiction of the Sales Tax Officer, Cuttack Central Circle, Cuttack having registration certificate No. CUIC 1932 which appears from Annexure-3 to the paper book.
3. On or about 29th March, 1995, the petitioner entered in a Tease agreement with JK Corp Ltd. at New Delhi for lease of equipments described in the Schedule of the lease deed. Those equipments were purchased by the petitioner at the request of the lessee and leased out to the said JK Corp Ltd. The petitioner purchased those machineries, namely, coal-fired high efficiency boiler along with auxiliary from JK Corp Ltd. on payment of 1st point tax at the rate of 16%. Thereafter those plant and machineries were again leased to JK Corp Ltd (hereinafter called "lessee") on as is where is basis and the said lessee was paying the lease rental for leasing of the equipments. The said lease rental was paid to the petitioner at the rate of Re. 1/- per thousand per month from the 1st month to 24th month of the lease agreement and thereafter at the rate of 15.85 % per thousand per month which is payable from the 25th month to 84th month. On such transaction the Sales Tax Officer, Koraput II Circle, Rayagada by his order dated 16.2.1998 assessed the petitioner under Section 12(5) of the Orissa Sales Tax (hereinafter called "OST Act") for the quarters ending 6/97 and 9/97 and raised a demand of Rs. 8,07,420/-, surcharge of Rs. 80,742/-. Over and above the same penalty of Rs. 8,07,420/- was imposed on the ground of non-registration of the petitioner under the jurisdiction of the Sales Tax Officer, Koraput II Circle, Jeypore.
4. Being aggrieved by the said order of assessment, the petitioner Wed first appeal before the Assistant Commissioner of Sales Tax, Koraput Range, Koraput. The said appeal was numbered as AA (KOII) 2-3/1998-99. The Assistant Commissioner disposed of the said appeal by his order dated 27.7.1999 confirming the assessment and dismissing the appeal of the petitioner.
5. Being aggrieved by the first appellate order the petitioner filed second appeal before the Orissa Sales Tax Tribunal which was numbered as S.A. No. 2774 of 1999-2000. The said appeal was disposed of by the Tribunal by its order dated 19.8.2002 and the order of the Assistant Commissioner was confirmed.
6. Learned counsel for the petitioner assailing the order passed by the salutatory authorities submitted that the scheme of the said Act being a single point levy, the taxable turnover under Section 5(2)(A) is arrived at after making the deductions provided in different Sub-clauses. It has been argued that generally the goods which are subject to Orissa Sales Tax are taxed at the last point of sale in Orissa. In case the goods are to be taxed at the first point the same are to be specifically notified by the State Government in exercise of its power under Section 8 of the OST Act. In the instant case in exercise of such power under Section 8 of the OST Act, a list has been prepared in respect of the goods which are subject to first point tax and item 175 of the said list shows that machinery, machinery parts, spare parts, component parts and accessories thereof and tools are subject to first point tax. The said item 175 of the list published in the OST Act is set out below:
175. Machinery, Machinery Parts, spare parts, component parts and accessories thereof and tools.
In fact the aforesaid items of goods were notified in 1989 vide notification No. 44987-CTA-105/89-F. dated 22.12.1989 which was given effect from 1.1.1990 and the said goods also remained notified in the subsequent notification No. 1691-CTA-37/2001 F dated 9.1.2002 which was given effect from 1.3.2002.
Relying on the aforesaid facts, learned Counsel for the petitioner urged that admittedly the petitioner while purchasing the goods had paid first point tax at the rate of 16% amounting to Rs. 57,60,000/-and the petitioner is therefore entitled to contend that in respect of subsequent sale, which is a deemed sale in respect of the goods which have already suffered tax, at the first point inside the State of Orissa are not to be taxed again.
7. In support of the said contention, learned Counsel for the petitioner has relied on a decision of the Orissa High Court in Bharat Heavy Electrical Ltd. v. Union of India reported in (1988) 71 STC 25. In paragraph 13 of the said judgment, the learned Judges of this High Court held as follows:
13. It is submitted that goods which have suffered taxation in a series of sales are excluded from further taxation and the plain meaning of Section 5(2)(AA)(i) does not envisage such exclusion. Section 5(2)(AA)(i) is also subject to Section 8. When claimed before the assessing authority, it is to determine if the goods involved in works contract were subject to taxation in a series of sale. If it is so held, the same would be excluded. Section 8 and Section 5(2)(AA)(i) are to be read together.
8. Learned counsel has also relied on a decision of Andhra Pradesh High Court rendered in the case of ITC Classic Finance and Service v. Commissioner of Commercial Taxes reported in (1995) 97 STC 330. Dealing with this question, the learned Judges at page 354 have observed that if the goods purchased are leased out by the assessee which had already suffered tax in the State either at the time of sale or purchase, whether the same can be subjected to tax again. Dealing with Section 5-E of the Andhra Pradesh Sales Tax Act and the 46th Amendment of the Constitution of India, the learned Judges held that under the Constitution both sales and deemed sales as provided belong to the same category vide Clause 29-A to Article 366 of the Constitution. Therefore, this cannot be provided separately for the purpose of taxation within the definition of sale in the Andhra Pradesh tax laws. The learned Judges further held that since the basic norm regulating the tax structure under the Andhra Pradesh Sales Tax Act is confined to levy of tax at single point, levy of tax on a second sale in respect of goods which have already suffered tax is impermissible and therefore, a deemed sale cannot be subjected to tax as the goods relatable to such sale have already suffered tax. It was categorically held by the learned Judges "same goods cannot be subject to tax twice-one as sale and secondly as deemed sale in the case of legislative intent of single point taxation.
9. Learned counsel for the petitioner submitted and this Court finds there is a lot of substance in that, that the scheme of the OST Act is one of single point taxation and in view of the provision of Section 8 of the OST Act both levy of tax in respect of same sale is prohibited. Reference in this connection is made to the provisions of Section 8 of the OST Act which are set out below:
8. Powers of the State Government to notify points at which goods may be taxed or exempted Notwithstanding anything to the contrary, in this Act, the State Government may notify the points in the series of sales or purchases by successive dealers at which any goods or classes or description of goods may be taxed or exempted from taxation and in doing so may direct that sales to or purchases by a person other than a registered dealer shall be exempted from taxation law.
Provided that same goods shall not be taxed at more than one point in the same series of sales or purchases by successive dealers.
Explanation - Where in a series of sales, tax is (notified) to be levied at the first point, such point, in respect of goods despatched from outside the State of Orissa shall mean and shall always be deemed to have meant the first of such sales effected by a dealer liable under the Act after the goods are actually taken delivery of by him inside the State of Orissa.
10. It cannot be disputed that the lease rental received by the petitioner from JK Corp Ltd. is a deemed sale under Clause 29(A) of Article 366 of the Constitution read with Section 2(g) of the OST Act. In view of the aforesaid judgment of the Andhra Pradesh High Court in ITC Classic Finance the said deemed sale cannot be distinguished from an ordinary sale. The said judgment of Andhra Pradesh High Court in ITC Classic Finance has been affirmed by the Hon'ble Supreme Court in 20th Century Finance Corporation Ltd. and Anr v. State of Maharashtra reported in (2000) 119 STC 182. Learned counsel for the Revenue has not been able to controvert the submissions made by the learned Counsel for the petitioner excepting referring to the judgment of the Tribunal. But from the judgment of the Tribunal itself it appears that the goods have suffered first point taxation. After saying so, the Tribunal could not have held that the transfer of right to use the goods and the transfer of property in goods are two distinctly separate taxable events. This Court is of the view that the Tribunal's interpretation of Section 2(g) and Section 8 of the OST Act is erroneous and contrary to the interpretation accepted in ITC Classic Finance which has been affirmed by the Supreme Court in 20th Century Finance.
11. Learned counsel for the petitioner has relied on a subsequent Division Bench judgment of the Sales Tax Tribunal in the case of petitioner for the earlier period, i.e., for the quarters ending 9/95 to 3/96 and quarters ending 6/96 to 9/96. The said judgment was delivered by the Tribunal on 29.3.2004 in S.A. Nos. 805-806 of 1999-2000. On similar questions and facts the Tribunal came to the following finding:
In the instant case when Sales Tax was paid at the time of purchase of machinery, further claim of Sales Tax, from the rent of letting of the machinery, which amounts to sale only, is not permissible Under Section 8 of the OST Act.
In coming to the aforesaid finding the Division Bench of the Tribunal relied on the decision of the Andhra Pradesh High Court ITC Classic Finance and the judgment of the Orissa High Court in Bharat Heavy Electricals. The Division Bench also referred to another Full Bench decision of the Tribunal in similar matter in S.A. Nos. 1789 and 1790 of 1999-2000 decided on 7.10.2002 where it was decided that the rent collected subsequently after sale is not taxable.
12. This Court holds that since no tax can be imposed by way of subsequent lease rent in respect of the same goods on the petitioner, there cannot be any imposition of penalty for non-payment of the same. As such, the penalty imposed on the petitioner is quashed.
For the reasons aforesaid, this Court cannot uphold the judgment of the Sales Tax Tribunal dated 19.8.2002 passed in S.A. No. 2774 of 1999-2000 and the same is quashed. All the three questions referred to above on which the matter has been argued are answered in the negative, i.e., in favour of the assessee and against the Revenue.
The Sales Tax Revision is thus disposed of.
B.N. Mahapatra, J.
13. I agree.