BIHAR STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD Vs. STATE OF BIHAR

JUDGEMENT

(1.) These two writ applications have been heard together as the facts are similar and some of the points involved in them are identical. They are being disposed of by a common judgment. Bihar State Agro-Industries Development Corporation Ltd. is the sole petitioner in these two writ applications, in which the State of Bihar is respondent 1 and the Assistant Commissioner of Commercial Taxes, Urban Circle, Patna, is respondent 2. The petitioner is a Government Undertaking incorporated under the Companies Act, 1956. It deals in and supplies, tractors, pumping sets, threshers and other agricultural equipments to the agriculturists for development of agriculture and agriculture-based industries in the State of Bihar. The petitioner-company is a registered dealer under the Bihar Sales Tax Act, 1959 (Bihar Act 19 of 1959), hereinafter called the Act. The petitioner's case is that one of its modes of effecting sales is to make deliveries on the basis of hire-purchase agreements executed by intending purchasers to suit their convenience. A specimen copy of the agreement is annexure 1 in both the cases. What seems to have happened in the case of the petitioner-company is that according to the revised return filed by it for the assessment period 1968-69 a gross turnover of Rs. 92,51,290.97 being the amount of sales was shown. During the said period, the petitioner had also delivered pumping sets and tractors worth Rs. 2,39,06,588.65 on hire-purchase basis to the agriculturists on execution of agreements, like the one contained in annexure 1. Respondent 2 assessed the petitioner-company and passed an assessment order dated 18th April, 1972. A copy of the order is annexure 2 in C. W. J. C. 883 of 1972. In this assessment order the learned Assistant Commissioner of Commercial Taxes added the sum of Rs. 2,39,06,588.65, the amount of the hire-purchase transactions, as being the sales during the assessment period 1968-69. The only grievance of the petitioner in this writ application is that respondent 2 has committed an error of lain treating the hire-purchase transactions as sales taxable to sales tax during the period in question.

(2.) In C.W.J.C. 882 of 1972, the period of assessment is 1967-68. In respect of this period an assessment order dated 13th June, 1970, was made by another Assistant Commissioner of Commercial Taxes, respondent 2 ; a copy of this order is annexure 2 to this writ application. In this assessment order the hire-purchase transactions entered into by the petitioner-company were not treated as sales and were not added to the gross turnover. Later on the Assistant Commissioner, who had made the assessment order for the period 1968-69 issued a notice dated 18th April, 1972, under Section 18 of the Act proposing to reassess as, in his opinion, certain turnover had escaped assessment. He has passed fresh assessment order dated 22nd May, 1972 (annexure 3), which is the subject-matter of challenge in C.W.J.C. 882 of 1972. In this assessment order he has added the sum of Rs. 1,44,76,061.84 to the turnover of the petitioner-company in exercise of his power under the second proviso to Sub-section (2) of Section 7 of the Act. The petitioner objects to this addition and challenges it.

(3.) The relevant portion of the definition of "sale" as given in Clause (p) of Section 2 of the Act is as follows: 'Sale' means any transfer of property in goods for cash or deferred payment or other valuable consideration including such transfer of property in goods made by a society, club or association but does not include a mortgage or hypothecation of or a charge or pledge on goods ; and all grammatical variations and cognate expressions shall be construed accordingly and 'purchase' means such acquisition of property in goods ; Explanation (1).-A transfer or acquisition of goods on hire-purchase or under any other system in which payment of valuable consideration is made by instalments shall, notwithstanding the fact that the seller retains the title in the goods as security for the payment of the valuable consideration or for any other reasons, be deemed to be a sale or purchase. Under explanation (1) a transfer of goods on hire-purchase will be deemed to be sale although within the meaning of the word it is not so. Such an explanation was there appended to the definition of "sale" given in Clause (g) of Section 2 of the 1947 Bihar Sales Tax Act. A case went up to the Supreme Court. The decision is reported in Damodar Valley Corporation v. The State of Bihar A.I.R. 1961 S.C. 440. It will be noticed from the report at page 107 of the S.T.C. volume that the Damodar Valley Corporation, the appellant before the Supreme Court, took a nepoint that the "proviso" to Section 2(g) of that Act was ultra vires the Bihar Legislature. But this point being a nepoint was not allowed to be taken in the Supreme Court. On a consideration of the terms of the agreement in that case, it was held that the effect of the agreement was effecting a sale and, therefore, the transaction was liable to be taxed under the Act. Following this decision, the Kerala High Court did not accept the contention put forward on behalf of the assessee that such an explanation was ultra vires the State Legislature, although it may be noticed that this point had not been allowed to be argued in the case of Damodar Valley Corporation A.I.R. 1961 S.C. 440. The matter went up to the Supreme Court and by its judgment reported in Marikar (Motors) Ltd. v. Sales Tax Officer [1967] 19 S.T.C. 18 (S.C.) the Supreme Court struck down the explanation as being ultra vires because by that time the decision of the Supreme Court in K.L. Johar & Company v. Deputy Commercial Tax Officer A.I R. 1965 S.C. 1082 had taken the field.