INTERNATIONAL COTTON CORPORATION P LTD Vs. COMMISSIONER OF COMMERCIAL TAXES
LAWS(KAR)-1966-2-11
HIGH COURT OF KARNATAKA
Decided on February 11,1966

INTERNATIONAL COTTON CORPORATION (P.) LTD. Appellant
VERSUS
COMMISSIONER OF COMMERCIAL TAXES Respondents

JUDGEMENT

Hegde, J. - (1.)This is an appeal, under section 24(1) of the Mysore Sales Tax Act, 1957 (which will be referred to hereinafter as the "Act") against the order of the Commissioner of Commercial Taxes in Mysore, Bangalore, in C.T.R.P. No. 337 of 1963-64 on his file. That was an order made by the Commissioner in exercise of his suo motu powers under section 21(2)(i) of the "Act", whereunder he revised the order of the Commercial Tax Officer, Circle I, Hubli. The order in question relates to the assessment of the assessee, who is the appellant herein, for the assessment year 1957-58, the accounting period being 1st October, 1957, to 31st July, 1958.
(2.)It is admitted that during the accounting period, the assessee was dealing in cotton. From out of the cotton purchased by it during the accounting year, a portion of the cotton, i.e., of the value of Rs. 20,93,265, was not sold during that year. Only last purchases of the cotton within the State were exigible to tax, the levy being a single point levy. The Commercial Tax Officer did not bring to tax the value of the cotton purchased during the accounting period and not sold in that period. Evidently, he was of the opinion that those purchases would be exigible to tax only when the goods in question were sold outside the State, which event or events had not taken place during the accounting period. One other fact need be stated at this stage and that is, cotton is one of the declared goods.
(3.)When the above facts came to the notice of the Commissioner of Commercial Taxes, he took suo motu action under section 21(2) of the "Act" and issued the following notice to the assessee on 6th February 1964 :
"No. CTRP. - 337/63-64 - Office of the Commissioner of Commercial Taxes in Mysore, Bangalore 1, dated 6th February, 1964. Show cause notice under section 21(6) of Mysore Sales Tax Act, 1957. Subject : Mysore Sales Tax Act, 1957 - M/s. International Cotton Corporation (Pvt.) Ltd., Hubli - Year of assessment 1st October 1957 to 31st July, 1958 - Revision of Commercial Tax Officer's Order - Notice issued. From the perusal of the assessment records for the period 10th October, 1957, to 31st July, 1958, it is seen that the Commercial Tax Officer, I Circle, Hubli, in his assessment order dated 29th April, 1961, failed to levy tax on the purchase turnover of Rs. 20,93,265 under section 5(4) of the Mysore Sales Tax Act, 1957, which was held in stock and which was sold outside Mysore State on consignment basis. Therefore, the assessment order passed by the Commercial Tax Officer was illegal, incorrect and improper. Hence under the powers vested under section 21(2)(i) of the Mysore Sales Tax Act, 1957, I propose to add back the turnover of Rs. 20,93,265 and to tax at 1 per cent. under section 5(4) of the Mysore Sale Tax Act, 1957. You are, therefore, given an opportunity to state your objections, if any, either in person or through an authority representative or in writing before the undersigned at 4 p.m. on 4th March, 1964, failing which orders will be passed as proposed. (Sd.) C. Narasimha Moorthy, Commissioner of Commercial Taxes. To, Messrs International Cotton Corporation (Pvt.) Ltd., Hubli, (through the Commercial Tax Officer, I Circle, Hubli.) "
The assessee sent its reply to the above notice on 11th April, 1964. Therein, it admitted that on 31st July, 1958, it was holding cotton worth of Rs. 20,93,265. It did not refute the allegation in the notice issued by the Commissioner of Commercial Taxes to the effect that the stock in question had been "sold outside Mysore State on consignment basis". On the other hand, it averred - "but the allegation that the petitioner sold the said stock outside Mysore State is not borne out by the record of assessment of the petitioner for the year 1957-58. Hence, even if the allegation is correct, the same is extraneous to the record of the assessment for the year 1957-58 and cannot be acted upon in a proceeding under section 21 of the Mysore Sales Tax Act, 1957. Each of the assessment year is a self-contained unit." It was not disputed before us that taxable events are the purchase transactions and not the sale of those goods outside this State. Once the goods are sold to dealers not registered under the "Act" or consumers in the State the purchase transactions in question become liable to be taxed. This position is concluded by the decision of this Court in The State of Mysore v. M/s. Pratapsingh Vasanthalal & Co. Raichur (C.R.P. No. 398 of 1959).


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