Arthur Butler v. State Of Bihar — 1972 DIGILAW 10 (PAT)

Judgment Shambhu Prasad Singh, J. 1. By its order dated the 23rd September, 1965, the Commercial Taxes Tribunal, Bihar (hereinafter to be referred to as "the Tribunal") referred to this court for its opinion under Sec.25 (5) of the Bihar Sales Tax Act, 1947 (hereinafter to be referred to as "the Act"), the following two questions: (i) Whether in the facts and circumstances of the case, the sales amounting to Rs.3,74,013.85 were rightly taxed as intra-State sales (ii) Whether in the facts and circumstances of the case, the amount of Rs.4,73,860 received during 1958-59 being the sale price of goods sold in the previous year was rightly held as turnover for the year 1958-59 ? 2. The assessee, a public limited company with its head office in the town of Muzaffarpur and engaged in the business of manufacturing and selling railway wagons, fabricated structures, machinery parts and other goods, claimed exemption for the assessment year 1958-59 in respect of a turnover of Rs.3,74,013, mentioned in question No. (i), on the ground that the sales were in the course of inter-State sales and not intra-State sales. The said sum constituted of two items, namely, Rs.3,53,623.85 from the sale of steel structures to the railway administration, Izatnagar, in the State of Uttar Pradesh, and Rs.20,390 from the sale of machinery to sugar mills in the said State. When the matter came up for hearing on, 12th February, 1968, before R. L. Narasimham, C. J. , (as he then was) and B. N. Jha, J. , it was conceded by the learned counsel for the assessee that so far as the turnover of Rs.20,390 was concerned, the claim that the sales were inter-State sales could not be sustained and the reference was pressed only in respect of Rs.3,53,623.85. On hearing the parties, the learned Judges felt that the findings of fact on the record, as they were, were not sufficient to enable them to answer the question. They accordingly directed the Tribunal to state a supplementary case on the question as to whether, so far as the turnover of Rs.3,53,623.85 was concerned, there was an obligation to move the goods from Muzaffarpur to Izatnagar arising out of the contract of sale or mutual understanding or agreement between the seller and buyer. The Tribunal submitted the supplementary statement and, thereafter, the matter was placed before us for hearing. 3. The Tribunal submitted the supplementary statement and, thereafter, the matter was placed before us for hearing. 3. I propose to take up the first question No. (ii ). The order dated 12th February, 1968, of this court calling for a supplementary statement gives an impression that the reference in respect of question No. (ii) was not pressed because it states that the learned counsel for the petitioner pressed the reference only in respect of Rs.3,53,623.85. However, as it is not specifically stated that the reference was not pressed in respect of question No. (ii), we heard the learned counsel for the parties on that question as well. 4. The case of the assessee in respect of Rs.4,73,860 was that this amount represented sale proceeds in respect of sales made in the previous years and not the year 1958-59, the assessment year. Accordingly, the assessee claimed deduction of this amount from the turnover of that year. Really, the assessee did not claim that this was not liable to be taxed at all but, according to them, the amount being turnover of previous year, was liable to be taxed at the rate of 3 1/8 per cent, and not at 4 percent. , which was the rate effective for the year 1958-59. The Superintendent of Sales Tax, Muzaffarpur, the assessing officer, did not deal with this claim separately. The learned Deputy Commissioner of Sales Tax, however, dealt with this claim separately and held that the assessee had not been able to produce any detailed papers on the basis of which it could be found that the amount represented difference in price received in respect of goods sold in the previous year. The Member, Board of Revenue, who heard the revision against the order of the Deputy Commissioner confirmed the finding of the Deputy Commissioner. The Tribunal, while stating the case, observed that as the assessing officer did not consider this claim separately in the assessment order and neither the Deputy Commissioner nor the Member, Board of Revenue, directed him to give a finding about the fact whether the amount was actually the sale price in respect of the goods sold in the previous year, a question of law for reference did arise. In my opinion, no question of law in respect of question No. (ii) arises out of the order of the Member, Board of Revenue, and the question ought not to have been referred to for the opinion of this court by the Tribunal. True it is that the Member, Board of Revenue," has discussed in detail the arguments advanced on behalf of the assessee with respect to the meaning of the term "turnover", but it has itself further said that the discussion was academic. Before taking up for consideration the contentions advanced on behalf of the assessee as to the meaning of the term "turnover" in the Act, the Member, Board of Revenue, observed as follows: the short answer to this claim is that there is no finding of fact by the learned Deputy Commissioner, who says, he could not come to any finding because the assessee was not able to produce any detailed papers on the basis of which he could satisfy him about the claim. It would appear that no price was originally settled when the order was placed on 26th April, 1957. From some correspondence produced by the assessee, it would appear that the price was provisionally fixed at Rs.8,346 per wagon on 13th December, 1957, later changed to Rs.10,000 on 18th April, 1958, again to Rs.10,840 on 7th April, 1959, reduced to Rs.10,595 on 27th November, 1959, and raised again to Rs.10,898 on 24th February, 1960. These changes are apparently with reference to the escalator clause on account of materials and wages with reference to various base dates. It would obviously involve extensive and detailed research to find out what was the supply made during the relevant periods by the assessee, and how much more he had been paid on account of his supplies in various periods in order to understand his claim. No finding could be reached by the learned Deputy Commissioner because of the failure of the assessee to produce the papers. In the circumstances, it is needless to consider the question of law applicable, which becomes more or less academic. After concluding the discussion of the arguments advanced on behalf of the assessee as to the meaning of the term "turnover", the Member, Board of Revenue, again observed : to conclude, the facts have not been investigated and could not be investigated because of failure on the part of the assessee. 5. After concluding the discussion of the arguments advanced on behalf of the assessee as to the meaning of the term "turnover", the Member, Board of Revenue, again observed : to conclude, the facts have not been investigated and could not be investigated because of failure on the part of the assessee. 5. Thus, the Member, Board of Revenue, has given a clear finding of fact that on the materials placed on the record by the assessee, it was not possible to hold that the amount of Rs.4,73,860 was the sale price received in respect of the goods sold in the previous year. On this finding, the assessee was not entitled to claim any deduction of the aforesaid amount from the turnover for the assessment year 1958-59. Under Sec.25 (1) of the Act, only such a question of law could be referred to this court which arose out of the order of the Member, Board of Revenue, passed under Sub-section (4) of Sec.24 of the Act. I accordingly hold that the question of law referred to in question No. (ii) by the Tribunal ought not to have been referred to this court, as it does not rise from the order of the Member, Board of Revenue, passed under Sec.24 (4) of the Act and refuse to answer this question. 6. I now take up question No. (i) for consideration. In respect of this question too, the contention of the learned counsel for the department was that it does not arise out of the order of the Member, Board of Revenue. As observed earlier, the case of the assessee was that so far as the turnover of Rs.3,53,623.85 was concerned, it was on account of sales in the course of inter-State sales and, therefore, not liable to taxation under the Act. The assessing officer held that the title in goods passed from the dealer to the purchaser while the goods were at Muzaffarpur and, therefore, the transactions were taxable under the Act. Before the learned Deputy Commissioner, it was contended on behalf of the assessee that the goods which were sent to Izatnagar were on self-consignment-basis and, as such, levy of State sales tax was unjustified. Before the learned Deputy Commissioner, it was contended on behalf of the assessee that the goods which were sent to Izatnagar were on self-consignment-basis and, as such, levy of State sales tax was unjustified. The learned Deputy Commissioner held that as before the delivery, the assessee had already received payment to the extent of 10 per cent, of the sale price, which indicated that the sales had already been completed before the goods were delivered to the railway administration, the question of exemption from the levy of State sales tax in respect of those despatches did not arise. The learned Member, Board of Revenue, rejected this item of the claim on the ground that the assessee had made contradictory claims in respect of this item in his grounds of appeal before the Deputy Commissioner and the grounds of revision before the Board of Revenue. According to the learned counsel for the department, this observation of the learned Member, Board of Revenue, also amounts to a finding of fact that the assessee failed to establish that the goods worth Rs.3,53,623.85 were supplied to the railway administration, Izatnagar, and sales were in the course of inter-State sales. In the revision application filed before the Member, Board of Revenue, there was no mistake committed by the assessee. It was specifically stated that the claim of Rs.3,74,014 was on account of inter-State sales for goods (other than wagons) supplied to the railway department at Izatnagar and sugar mill parts to sugar mills at Bijnor and Chhitauni outside the State of Bihar. In the grounds of appeal filed before the Deputy Commissioner, however, it was stated that the claim of Rs.3,74.013.85 was in respect of steel fabricated materials and sugar mill parts supplied by the assessee to dealers other than the railway department. The case of the assessee was that the words "other than" were typing mistake for the word "and". The learned Deputy Commissioner appears to have dealt with the appeal of the assessee on the basis that the claim in respect of the aforesaid amount was for the goods supplied by the assessee to the railway department at Izatnagar. He did not pin down the assessee to the grounds of the assessee filed before him. The learned Deputy Commissioner appears to have dealt with the appeal of the assessee on the basis that the claim in respect of the aforesaid amount was for the goods supplied by the assessee to the railway department at Izatnagar. He did not pin down the assessee to the grounds of the assessee filed before him. Can the learned Member, Board of Revenue, in the circumstances, be said to be justified in refusing to go into the claim of the assessee merely on account of the contradictory statements made before it and the Deputy Commissioner in the grounds of revision and appeal respectively In their petition for reference, the assessee appended annexures and stated that annexures B and C were statements which were attached to the return as well. This statement nowhere has been challenged on behalf of the department. Annexure B shows that Rs.2,25,279.53 represented the difference in price of steel work supplied to Izatnagar. Similarly, annexure C shows that Rs.1,28,344-32 was received as price of steel work supplied to Izatnagar. The total of these two sums come to Rs.3,53,623.85. The assessing officer did not disbelieve the documents filed by the assessee. Thus, it is apparent that there were materials available before the assessing officer, the Deputy Commissioner and the Member, Board of Revenue, as well, to show that during the assessment year 1958-59, the assessee did receive the aforesaid sum of Rs.3,53,623.85 from the railway department, Izatnagar, for steel structures other than wagons supplied to it. In my opinion, therefore, the observation of the learned Member, Board of Revenue, referred to above, cannot be construed a finding of fact, as contended by the learned counsel for the department and the learned Member, Board of Revenue, erred in not going into the aforesaid claim of the assessee. 7. Reliance was placed by the learned counsel for the department on the decision in Educational and Civil List Reserve Fund No.1, Udaipur V/s. Commissioner of Income-tax, Delhi and Rajasthan, New Delhi [1964] 51 I. T. R.112, in which it was held that the Tribunal could not legitimately ask for an advice on a question which it was called upon to consider and which it had deliberately refused to decide, although it had an opportunity of deciding it. The decision was given on a reference under Sec.66 of the Income-tax Act, 1922. The decision was given on a reference under Sec.66 of the Income-tax Act, 1922. The instant case is not a case of deliberate refusal by the Member, Board of Revenue, to decide the question under consideration and, therefore, this decision has got no application to the facts of the case before us. In Commissioner of Income-tax, Bombay V/s. Scindia Steam Navigation Co. , Ltd. [1961] 42 I. T. R.589 (S. C.), Venkatarama Aiyar, J. , who delivered the leading judgment, while dealing with the expression "arising out of such order" observed that there may be four different contingencies, namely, (i) when a question is raised before the Tribunal and is dealt with by it, (ii) when a question is raised before the Tribunal but the Tribunal fails to deal with it, (iii) when a question is not raised before the Tribunal but the Tribunal deals with it, and (iv) when a question is neither raised before the Tribunal nor considered by it. The learned Judge further observed that in the first three contingencies, the question must be held to be arising out of the order of the Tribunal and it is only in the last one that it cannot be held to be arising out of the order of the Tribunal. From the facts of the case, it appears that the assessee in that case claimed exemption on the ground that a particular amount of their income had been received in the year previous to the year of account and, therefore, they were not liable to be taxed. Before the High Court, it was contended on their behalf that even on the footing that the income had been received in the year of account, the proviso to Sec.19 (2) (vii) of the Income-tax Act had no application. It was contended before the Supreme Court that the contention raised before the High Court was a question not arising out of the order of the Tribunal and thus could not be raised. It was contended before the Supreme Court that the contention raised before the High Court was a question not arising out of the order of the Tribunal and thus could not be raised. The Supreme Court rejected this argument and it was observed that a question of law might be a simple one, having its impact at one point, or it may be a complex one, trenching over an area with approaches leading to different points therein and where the question itself was under issue, there was no further limitation imposed by the section that the reference should be limited to those aspects of the question which had been argued before the Tribunal. The same view appears to have been reiterated by the Supreme Court in Commissioner of Income-tax, West Bengal V/s. Indian Molasses (Private) Ltd. [1970] 78 I. T. R, 474 (S. C.) It has been held in this case that the expression "question of law arising out of such order" in Sec.66 (1) of the Income-tax Act, 1922, is not restricted to take in only those questions which have been expressly argued and decided by the Tribunal and if a question of law is raised before the Tribunal, even if an aspect of that question is not raised, that aspect may be urged before the High Court. These decisions of the Supreme Court do confirm the correctness of the view taken in the preceding paragraph by me that question No. (i) of the reference is a question arising out of the order of the Member, Board of Revenue. 8. In the alternative, the learned counsel for the department argued that at best the question which could be referred to the court was, whether the Member, Board of Revenue, was right in refusing to decide the question on the ground of inconsistency in the grounds of appeal and revision. According to him, the Tribunal ought not to have referred the main question whether the sale amounting to the aforesaid sum was rightly taxed as intra-State sale. In view of the decisions of the Supreme Court referred to in the preceding paragraph, this contention of the learned counsel for the department has to be rejected. 9. According to him, the Tribunal ought not to have referred the main question whether the sale amounting to the aforesaid sum was rightly taxed as intra-State sale. In view of the decisions of the Supreme Court referred to in the preceding paragraph, this contention of the learned counsel for the department has to be rejected. 9. It was also contended by the learned counsel for the department that this court erred in its order dated the 12th February, 1968, in directing the Tribunal to consider "such other evidence as the Tribunal may permit the parties to lead" in making the supplementary statement and the supplementary statement is incompetent as it is not based on the materials already on the record but on additional evidence. Now it is well-settled by various decisions of the Supreme Court in New Jehangir Vakil Mills Ltd. V/s. Commissioner of Income-tax, Bombay North, Kutch and Saurashtra [1959] 37 I. T. R.11 (S. C.), Petlad Turkey Red Dye Works Co. Ltd. V/s. Commissioner of Income-tax [1963] 48 I. T. R.92 (S. C.) and Keshav Mills Co. Ltd. V/s. Commissioner of Income-lax, Bombay North, Ahmedabad [1965] 56 I. T. R.365 (S. C.), referred to and relied upon in Indian Molasses (Private) Ltd. case [1970] 78 I. T. R.474 (S. C.), that in submitting a supplementary statement of the case, the Tribunal must be restricted to the evidence on the record and is not entitled to take additional evidence. The learned counsel for the assessee relying on the decision in New fehangir Vakil Mills Ltd. s case [1959] 37 I. T. R.11 (S. C.) submitted that the Tribunal could be restricted only from embarking upon a fresh line of enquiry which had never been convassed at any time before the income-tax authority or the Tribunal in the first instance and there can be no ban to its taking additional evidence on a matter which had been the subject-matter of enquiry earlier. It is not necessary to examine this contention of the learned counsel for the assessee inasmuch as, in my opinion, though this court erroneously directed the Tribunal that it might take additional evidence, the Tribunal really did not take any additional evidence. The finding recorded by the Tribunal in the supplementary statement is based on a copy of the contract entered into between the assessee and the North Eastern Railway. The finding recorded by the Tribunal in the supplementary statement is based on a copy of the contract entered into between the assessee and the North Eastern Railway. In paragraph 4 of the supplementary statement, the Tribunal has said that the assessee produced before it the aforesaid copy of the contract. The learned counsel for the department contended that this showed that the copy of the contract was produced before the Tribunal for the first time on that day. On the other hand, the learned counsel for the assessee submitted that the copy was produced at all stages from the very beginning, even before the assessing officer. In support of this, he relied on the observation in the order of assessment showing that some agreements for supply of goods to the railway department were produced before him. On 1st of December, 1971, he further filed two affidavits; one of them is by the Chief Accounts Officer of the assessee and he states that a copy of the contract between the assessee on the one part and the North Eastern Railway on the other was produced before the assessing officer, the Deputy Commissioner and the Member, Board of Revenue. The other affidavit is by Shri R. N. Tikmani, a lawyer of the assessee. He also states on oath that a copy of the aforesaid document was produced before the Deputy Commissioner and the Member, Board of Revenue. As the arguments in the case had been concluded earlier, the matter was at first brought under the heading "to be mentioned", and then put up for further hearing. On that date, further arguments were heard on behalf of both the parties. Though the department had sufficient time, it did not file any counter-affidavit denying the claim made in these affidavits. In view of the practice prevailing in the department that documents and books produced by an assessee are not marked as exhibits and are returned to him after their examination and the assessee refiles them before the appellate or revisional authority if he files an appeal and revision, I find no reason to doubt what is stated in the affidavits filed on 1st December, 1971. I am, accordingly, of the opinion that the rinding in the supplementary statement is based on materials which were already on the record and not on any additional material or evidence. I am, accordingly, of the opinion that the rinding in the supplementary statement is based on materials which were already on the record and not on any additional material or evidence. The contention of the learned counsel for the department in this regard has, therefore, to be overruled. 10. The learned counsel for the department also placed reliance on decisions of the Supreme Court in Commissioner of Income-tax, West Bengal II V/s. Smt. Anusuya Devi [1968] 68 I. T. R.750 (S. C.) and Lakshmiratan Cotton Mills Co. Ltd. , Kanpur V/s. The Commissioner of Income-tax, Uttar Pradesh [1969] 73 I. T. R.634 (S. C.), in support of his contention as to the interpretation of the term "arising out of the order" and in competency of this court in calling for the supplementary statement. On the other hand, the learned counsel for the assessee submitted that having not raised the question of incompetency of this court at the time the order calling for supplementary statement was passed, it was not open to the department to reopen that matter. The decision in Lakshmiratan Cotton Mills Co. Ltd. [1969] 73 I. T. R.634 (S. C.) is a direct authority that the correctness of an order calling for statement of case can be challenged at the hearing of reference. Therefore, though the learned counsel for the assessee was not correct in submitting that the question of incompetency could not be raised before us, I am of the opinion, for the reasons already stated earlier, that the order calling for a supplementary statement was a good order inasmuch as it related to a question of law which arose out of the order of the Member, Board of Revenue. On the facts of the instant case, these two decisions are really of not any help to the department on the point whether question No. (i) arises out of the order of the learned Member, Board of Revenue. 11. From the decision of the Supreme Court in Ben Gorm Nilgiri Plantations Co. On the facts of the instant case, these two decisions are really of not any help to the department on the point whether question No. (i) arises out of the order of the learned Member, Board of Revenue. 11. From the decision of the Supreme Court in Ben Gorm Nilgiri Plantations Co. , Coonoor V/s. Sales Tax Officer, Special Circle, Ernakulam A. I. R.1964 S. C.1752, as interpreted by a Full Bench of this Court in the case of Shankerjee Raut Gopalji Raut V/s. State of Bihar A. I. R.1968 Pat.329, the following three facts must co-exist to justify exemption from tax on the ground of sales in the course of export outside the territory of India : (i) common intention of the parties to the transaction to export; (ii) actual exportation ; and (iii) obligation to export, the obligation may be either of the seller or of the buyer. In Nilgiri Plantations case A. I. R.1964 S. C.1752, while dealing with the obligation to export, the Supreme Court observed that the obligation 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 links the sale to export. In a recent Bench decision of this court, to which I was a party, in Commissioner of Commercial Taxes, Bihar V/s. M / s. Bhag Singh Milkha Singh Tax Case No.69 of 1966, dated 11th October, 1971, the principles laid down in the aforesaid decisions were applied to cases of inter-State transactions within India. For claiming exemption from tax on the ground of sales in the course of inter-State trade, the following three facts must co-exist: (i) common intention of the parties to the transaction to transport from one State to another within the country ; (ii) actual transportation ; and (iii) obligation to transport, the obligation may be either of the seller or buyer. In the instant case, it is not in dispute that there was common intention of the parties to the transaction to transport steel goods from Muzaffarpur in the State of Bihar to Izatnagar in the State of Uttar Pradesh and there was- actual transportation. In the instant case, it is not in dispute that there was common intention of the parties to the transaction to transport steel goods from Muzaffarpur in the State of Bihar to Izatnagar in the State of Uttar Pradesh and there was- actual transportation. The Tribunal in the supplementary statement has stated that in its opinion so far as the turnover of Rs.3,53,623.85 is concerned, there was an obligation to move the goods from Muzaffarpur to Izatnagar arising out of the contract of sale between the assessee and the railway administration. Thus, the third condition as to the existence of an obligation to export is also fulfilled and, in my opinion, on the facts and in the circumstances of the case, the sales amounting to Rs.3,53,623.85 were not rightly taxed as intra-State sales. These sales being in the course of inter-State trade should have been exempted from the imposition of State sales tax. 12. In fine, for the reasons already stated, I would answer question No. (i) in respect of sales amounting to Rs.3,53,623.85 in the negative and in favour of the assessee and in respect of sales amounting to Rs.20,390 in the affirmative and against the assessee. I would refuse to answer question No. (ii) as it does not arise out of the order of the learned Member, Board of Revenue. The assessee shall be entitled to costs. Hearing fee is assessed at Rs.250 only.