Decided on August 07,1973



- (1.) This is an application under Articles 226 and 227 of the Constitution asking for a writ of certiorari to quash orders of assessment made under the Orissa Sales Tax Act (briefly referred to as the "Act" hereafter) for three years, namely, 1967-68, 1968-69 and 1969-70. The assessing officer (opposite party No. 2) has assessed the petitioner under Section 12(5) of the Act, the petitioner being an unregistered dealer, and has raised the demand of tax for all the three years and penalty for the last two of the three years. The assessee had carried appeals under the Act, but Mr. Mohanty undertook to withdraw the same when objection was raised regarding maintainability of this petition during the pendency of the appeals. Mr. Mohanty assured us that steps have been taken to withdraw the appeals.
(2.) The assessee is a public limited company and has its registered office in India at New Delhi. For business convenience it has a branch at Calcutta. Under annexure-1, a document dated 1st February, 1965, the petitioner-company appointed Messrs. International Stores as its distributing agent at Sambalpur. The relevant terms of agreement were as follows: (1) The godown at Sambalpur belongs to the agent but the goods despatched to the agent and stored in the said godown would continue to be the property of the petitioner-company and would be disposed of only in accordance with the instructions of the company's representative. (2) For the services rendered by the agent, he would be entitled to a commission of one and half per cent on the total value of the goods sold. He would also be remunerated at one per cent on account of clearance and delivery expenses. The Sales Tax Officer issued notice in August, 1970, in form VI and required returns to be filed for assessment under the Act. The petitioner took the stand in its reply dated 10th September, 1970, to the assessing officer: ... We submit that we do not carry on the business of purchasing or selling goods in the State of Orissa and as such we are not a 'dealer' under the sales tax law of your State. We submit that the notice issued by you is without jurisdiction and we contest the same. Our goods are, however, marketed in the State of Orissa by our authorised commission agent. M/s. International Stores are our agents at Sambalpur. They sell our goods and collect the applicable sales tax. They have been remitting the net sale proceeds to us and regularly paying the sales tax collected to you. The stand of the petitioner was ultimately rejected and assessments for the three years as already indicated were completed under Section 12(5) of the Act. The petitioner impugns the assessments on the following counts: (i) The transfer of the stocks by the agent to himself does not constitute sale. (ii) The petitioner is a non-resident principal and has an agent within the State who carries on business within the jurisdiction of the Sales Tax Officer (opposite party No. 2). The agent alone could be liable as a dealer and the non-resident petitioner has no liability under the Act. (iii) The petitioner being a non-resident principal, the Sales Tax Officer has no jurisdiction to make the assessments. (iv) In the absence of delegation under Section 12(5) of the Act, the notice of the Sales Tax Officer is bad in law.
(3.) The opposite parties in their counter-affidavit have pleaded that one Sri Chandak happens to be the proprietor of Messrs. International Stores and is a registered dealer under the Act. Title in the goods remained in the company when the goods were received and stored in the godown at Sambalpur and such title was transferred to Messrs. International Stores at Sambalpur. The transferee, a registered dealer under the Act, in its turn sold the goods to others and became accountable under the Act. According to the department there were thus two sales: one by the petitioner through its agents to Messrs. International Stores and the other by Messrs. International Stores to others. Messrs. International Stores had two capacities -- one as the petitioner's agent and the other as an independent registered dealer carrying on its own business. In the order of assessment it has been indicated: ... The statement as recorded from M/s. Jamunadas Chandak goes to prove that there are 2 separate transactions, first being transfer of stock to the shop account of M/s. International Stores against receipt of commission by the latter, besides direct sales in the cash memo of M/s. Nestle's Products. It is interesting to note that M/s. International Stores with the sole distributorship of such product initially transfers the goods with their value to his shop account and commission is immediately charged against such transfer. Further the transfer of stock and such nature with its value find place in the column '(sales)' as per the stock account pertaining to the stocks of M/s. Nestle's Products maintained by M/s. International Stores.... In paragraphs (10), (11) and (12) of the counter-affidavit, the following has been pleaded: (10)... From the statement of Sri Jamunadas Chandak it was found by opposite party No. 2 that he is the sole distributor of the petitioner. As the sole distributor, the goods of the petitioner came to him. He effects sales of the goods which may be divided into two categories. One category is that sales are effected to third parties. The other category is that Sri Chandak transfers the goods to his own account for retail sale by him. (11) That it was further found out that Sri Chandak has paid the tax in respect of the goods sold on account of the petitioner to third parties by acknowledging his own liability to pay the tax and by incorporating the same to his return. But the transfers to his own account for retail sales have neither been returned nor any tax has been paid on that transfer though Sri Chandak has paid tax on the retail sale of the petitioner's product on his own account. (12) That it was found out from the accounts that no sooner the goods of the petitioner are transferred to the account of Sri Chandak for retail sale, Sri Chandak as the sole distributor has accounted for the disposal of such goods to the petitioner and has charged commission on the amount representing the price of such goods which was never objected to by the petitioner at any time. From the pleadings and the orders of assessment, the following facts clearly emerge: (1) Sri Chandak as proprietor of Messrs. International Stores worked as the agent of the petitioner. (2) The agent has a godown at Sambalpur. All the goods received from the petitioner were stocked in the said godown but title in the said goods still continued to be in the petitioner. (3) The arrangement with the agent was that he would be entitled to commission of one and half per cent on all sales effected by him out of the stock. The agent used to transfer the entire stock to his account and claim commission. (4) After the agent became owner of the goods by such transfer of title, he effected sales in his own turn to others. (5) There is no dispute regarding the sales effected by the agent to others. The agent is a registered dealer and has duly accounted for his sales. (6) While the petitioner claims that there is no sale by it to the agent, according to the taxing department, there is a sale at Sambalpur after the goods are received and stored in the godown by the petitioner through its agent to Messrs. International Stores. The petitioner has been taxed on that event of sale and this assessment is impugned before us as being an imposition in the absence of any taxable event.;

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