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Showing 41 to 60 of 81 Records
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1964 (4) TMI 106
Issues:
1. Validity of levy of penalty under section 13(5) of the Orissa Sales Tax Act.
2. Jurisdiction of the Certificate Officer in certificate proceedings.
3. Impact of setting aside the original assessment order on the levy of penalty.
4. Comparison with a similar provision in the Indian Income-tax Act.
Analysis:
1. The petitioner challenged the order of the Member, Board of Revenue, which upheld the levy of penalty by the Sales Tax Authorities under section 13(5) of the Orissa Sales Tax Act. The penalty was imposed for failure to pay the assessed amount within the prescribed time. The petitioner argued that since the original assessment order was set aside on appeal, the levy of penalty should also be deemed void. However, the court noted that at the time of the penalty levy, there was a valid assessment order against the petitioner. The court highlighted that the law did not provide for automatic cancellation of penalty if the original assessment order was annulled at a later stage.
2. The Certificate Officer rejected the petitioner's objection to the continuation of the certificate proceeding, stating that the issue should have been raised before the Sales Tax Authorities in appeal or revision. Both the Collector and the Member, Board of Revenue upheld this view. The court emphasized that the petitioner had opportunities to challenge the penalty levy through provisions like seeking a stay on penalty or filing a revision petition, which were not utilized.
3. The court referred to a decision of the Kerala High Court regarding a similar provision in the Indian Income-tax Act, where it was held that the validity of penalty should be assessed based on the circumstances at the time of the penalty levy, not on subsequent events like setting aside the original assessment order. The court found this decision contrary to the petitioner's argument and concluded that the levy of penalty was not void in this case.
4. Ultimately, the court held that the Certificate Authority was correct in determining that the penalty levy was valid. The application was dismissed with costs, and a hearing fee was assessed. The judgment was agreed upon by both judges. The petition was dismissed based on the analysis and conclusions drawn from the legal provisions and precedents cited during the proceedings.
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1964 (4) TMI 105
Issues Involved:
1. Validity of the assessment order dated 30th December 1963.
2. Statutory force of the Commissioner's circular prescribing the time limit for filing "C" Forms.
3. Consistency of Rule 8(2) of the C.S.T. (U.P.) Rules with Section 8(4) of the C.S.T. Act.
4. Inconsistency between Rule 8(2) and Rule 5A of the C.S.T. (U.P.) Rules.
5. Reasonability of Rule 8(2) of the C.S.T. (U.P.) Rules.
6. Existence of an alternative remedy.
Detailed Analysis:
1. Validity of the Assessment Order Dated 30th December 1963:
The assessment order dated 30th December 1963 denied the petitioner the benefit under Section 8(1) of the Central Sales Tax Act because the petitioner failed to file the declaration in Form "C" by 31st March 1963. The petitioner filed 235 "C" Forms on 21st December 1963, covering inter-State sales of Rs. 1,61,601-81 nP. The Sales Tax Officer rejected these forms as they were not filed within the time prescribed by the circular of the Commissioner. Consequently, the petitioner was taxed at 7% instead of 1%.
2. Statutory Force of the Commissioner's Circular Prescribing the Time Limit for Filing "C" Forms:
The petitioner's counsel argued that the circular issued by the Commissioner of Sales Tax lacked statutory force. The counsel further contended that Rule 8(2) of the C.S.T. (U.P.) Rules, which required the "C" Forms to be attached to the quarterly returns, was ultra vires Section 8(4) of the C.S.T. Act. The Full Bench decision of the Kerala High Court in Abraham v. Sales Tax Officer was cited, where it was held that the phrase "in the prescribed manner" in Section 8(4) does not include a time element for filing "C" Forms.
3. Consistency of Rule 8(2) of the C.S.T. (U.P.) Rules with Section 8(4) of the C.S.T. Act:
The court agreed with the Kerala High Court's interpretation that the words "in the prescribed manner" do not authorize the State Government to fix a time limit for filing "C" Forms. Section 8(4) only prescribes the mode in which the "C" Forms are to be produced, not the time for filing them. The court found Rule 8(2) to be repugnant to Section 8(4) of the C.S.T. Act.
4. Inconsistency Between Rule 8(2) and Rule 5A of the C.S.T. (U.P.) Rules:
Rule 8(2) requires "C" Forms to be attached to the quarterly returns, while Rule 5A allows a dealer to file a revised return at any time before the assessment is completed. The court noted that if a revised return can be filed showing an omission in the turnover, it reasonably follows that "C" Forms can also be attached to the revised return. Therefore, the rigid time limit under Rule 8(2) is inconsistent with Rule 5A.
5. Reasonability of Rule 8(2) of the C.S.T. (U.P.) Rules:
The court acknowledged the practical difficulties dealers face in obtaining "C" Forms from purchasers residing outside the State. It emphasized that rigid time limits could lead to unjust penalties and that the Sales Tax Department has sufficient means to investigate and penalize the submission of bogus "C" Forms. The court found Rule 8(2) unreasonable and inconsistent with the objectives of Section 8(1) of the C.S.T. Act.
6. Existence of an Alternative Remedy:
The court noted that the existence of an alternative remedy is not an absolute bar, especially when the vires of a rule are under challenge. Given that the "C" Forms were filed before the assessment was completed, the court found no justification for depriving the petitioner of the benefit of Section 8(4) of the C.S.T. Act.
Conclusion:
The writ petition was allowed, and the assessment order dated 30th December 1963 was quashed. The Sales Tax Officer was directed to make a fresh assessment in accordance with the law. The petitioner's counsel undertook not to raise any question of the bar of limitation for the new assessment. The petitioner was awarded costs.
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1964 (4) TMI 104
Issues Involved:
1. Statutory force and binding nature of press notes under section 7 of the Orissa Sales Tax Act.
2. Legality of assessments during the interim period between press notes.
3. Entitlement to refund of tax paid before assessment.
4. Limitation on assessment for the quarter ending 31st December 1953.
5. Restriction of assessments to actual collections due to involuntary payment under threat and coercion.
Issue-wise Detailed Analysis:
1. Statutory Force and Binding Nature of Press Notes:
The primary issue was whether the press notes dated 2nd November 1955 and 31st December 1956 had statutory force under section 7 of the Orissa Sales Tax Act and whether they were binding on the State Government. The court concluded that these press notes could not be deemed to have been issued under section 7 of the Orissa Sales Tax Act and, as such, had no statutory force. They were administratively binding but could not exempt the legal liability to pay tax in view of the Sales Tax Laws Validation Act.
2. Legality of Assessments During Interim Period:
The second issue concerned the legality of assessments made during the interim period between the press notes. The court held that the assessments made after the Sales Tax Laws Validation Act came into force were valid, even though the second press note was still in effect at the time of assessment. The press note did not affect the validity of the assessment orders made after the Validation Act.
3. Entitlement to Refund of Tax Paid Before Assessment:
The third issue was whether the petitioner was entitled to a refund of the tax paid before assessment in excess of collections actually made from purchasers. The court answered this in the negative, stating that the petitioner was not entitled to a refund as the tax was lawfully payable.
4. Limitation on Assessment for Quarter Ending 31st December 1953:
The fourth issue addressed whether any valid assessment for the quarter ending 31st December 1953 was barred by limitation. The court found that the assessment for this quarter was not barred by limitation as it was made within thirty-six months from the relevant date.
5. Restriction of Assessments to Actual Collections Due to Involuntary Payment:
The final issue was whether assessments should be restricted to actual collections due to involuntary payment under threat and coercion. The court noted that there was no finding by the Member, Sales Tax Tribunal, that the tax was paid under threat or coercion. Additionally, since the tax was lawfully payable and actually paid, the petitioner could not claim a refund in view of condition (3) of the third press note. The answer to this question was also in the negative.
Conclusion:
The court answered all the questions in the negative, affirming the validity of the assessment orders and denying the petitioner's claims for refund and exemption based on the press notes. The petitioner was ordered to pay a consolidated hearing fee of Rs. 200 to the opposite party.
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1964 (4) TMI 103
Issues:
Violation of principles of natural justice by the Assistant Commissioner and competence of the Tribunal to dispose of appeals based on materials on record.
Violation of Principles of Natural Justice by the Assistant Commissioner:
The case involved a dispute regarding the assessment of sales tax on rubbles supplied for construction. The Assistant Commissioner, Sri Ramarao, conducted further inquiries without informing the petitioner or providing an opportunity to rebut the evidence gathered. This action was held to be a violation of natural justice principles and the law laid down by the Supreme Court. The Tribunal found that Sri Ramarao did not hear the arguments of the appellant, which further supported the violation of natural justice. The Tribunal's decision was based on the fact that Sri Ramarao's order was contrary to the principles of natural justice, leading to the affirmative answer to the first question raised.
Competence of the Tribunal to Dispose of Appeals Based on Materials on Record:
The Tribunal decided the appeals on the materials on record after hearing the State representative, which was within its jurisdiction. The petitioner's absence during the hearing disabled him from rebutting the materials used by Sri Ramarao. The Tribunal's power under the relevant section of the Act was considered plenary and co-extensive with that of the first appellate Court. The Tribunal was deemed competent to dispose of the appeals based on the materials on record, especially since the petitioner did not avail the opportunity to challenge the evidence presented. This led to the affirmative answer to the second question raised.
Extraneous Materials Used by the Tribunal:
The contention that the Tribunal used extraneous materials without notice to the petitioner was raised. However, the Tribunal's emphasis on deciding based on the materials on record indicated that the documents produced by the State representative were likely not fresh but already part of the record. The argument regarding the introduction of extraneous evidence was not admissible as it was not part of the questions referred to the Court. The Court held that there was no evidence to suggest that the Tribunal used materials extraneous to those already considered by Sri Ramarao, leading to the dismissal of this contention.
In conclusion, both issues were answered in the affirmative, affirming the violation of natural justice by the Assistant Commissioner and the competence of the Tribunal to dispose of appeals based on the materials on record. The applications were dismissed with costs, and the reference was answered in the affirmative by the Court.
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1964 (4) TMI 102
Issues:
1. Application for refund of sales tax payments under Article 226 of the Constitution.
2. Claim for refund barred by limitation under Section 14 of the Orissa Sales Tax Act, 1947.
3. Requirement of an order of assessment for claiming a refund.
4. Lack of statutory provision for claiming refund before assessment order.
5. Jurisdiction of High Court under Article 226 in enforcing statutory obligations.
Analysis:
1. The petitioner sought a refund of sales tax payments made voluntarily for two quarters in 1953 under Article 226 of the Constitution. The payments were lawful at the time following the United Motors case but became invalid after the Supreme Court's decision in the Bengal Immunity case. The petitioner contended that the Sales Tax Laws Validation Act, 1956, did not apply to their case.
2. The Sales Tax Authorities rejected the petitioner's refund application, citing limitation as the claim was not made within the prescribed period. Section 14 of the Orissa Sales Tax Act, 1947, provides a specific time limit for refund applications based on the date of assessment order or final order on appeal, revision, review, or reference.
3. The court considered the requirement of an assessment order for claiming a refund under Section 14. The petitioner argued for a refund under the main portion of the section despite no formal assessment order. However, the court held that an assessment order is necessary as per the Orissa Sales Tax Rules for claiming a refund under Section 14.
4. The absence of a statutory provision for claiming a refund before an assessment order was highlighted. The court noted that the petitioner could seek a refund under general law subject to the rules of limitation specified in the Limitation Act. The lack of specific provisions in the Sales Tax Act or Rules for such cases was emphasized.
5. Regarding the jurisdiction of the High Court under Article 226, the court clarified that it arises to enforce statutory obligations on state officers. In cases where no assessment order exists, and there is no right against the Sales Tax Officer under the Orissa Sales Tax Act, the court stated that the petitioner should pursue normal remedies for refund claims. The court concluded that the case did not warrant the exercise of jurisdiction under Article 226, leading to the dismissal of the application.
In conclusion, the court dismissed the application for refund of sales tax payments, citing limitation and the absence of an assessment order as key factors. The petitioner was advised to pursue alternative remedies for claiming a refund, and the jurisdiction under Article 226 was deemed inapplicable in this scenario.
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1964 (4) TMI 101
Issues:
Determining whether the petitioner, an evangelical Literature Service Society, is considered a dealer under the Madras General Sales Tax Act based on their sales of religious books.
Analysis:
The dispute in this case revolves around whether the evangelical Literature Service Society qualifies as a dealer under the Madras General Sales Tax Act due to its sales of religious books. The Appellate Assistant Commissioner initially ruled in favor of the petitioner, stating that they were not a dealer. However, the Board of Revenue, utilizing its suo motu powers of revision, disagreed with this decision and reinstated the assessment orders. The crux of the matter lies in whether the Society's activities, particularly the purchase and sale of books for profit, align with the definition of a dealer under the Act.
The Board of Revenue's argument hinged on the profit motive behind the Society's sales activities, emphasizing that the Society engaged in buying and selling books with the intention of earning profit up to 25%. The Board contended that even though the Society's profits were not distributed to its members, the commercial nature of the transactions indicated a dealer status. The Act defines a dealer as someone involved in the business of buying, selling, supplying, or distributing goods for valuable consideration. It is crucial for these transactions to be commercially motivated to fall under the Act's purview.
However, the petitioner's main objective, as outlined in its Memorandum of Association, pertains to printing, publishing, and distributing Christian literature. The Society's name, Evangelical Literature Service, further underscores its non-commercial nature. While the Society's rules permit the adoption of normal business means to achieve its objectives, the primary goal remains non-commercial. The court emphasized that engaging in trade or commerce is a prerequisite for dealer classification, and the Society's activities did not exhibit a commercial motive.
In comparing the present case to legal precedents, the court distinguished the circumstances from previous rulings involving income tax deductions and tanners engaged in commercial activities. The court ultimately concluded that the evangelical Literature Service Society does not meet the criteria to be classified as a dealer under the Madras General Sales Tax Act. Consequently, the assessment orders against the petitioner were quashed, and the petitions were allowed with costs awarded in favor of the petitioner in one petition.
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1964 (4) TMI 100
Issues Involved:
1. Whether the transactions constitute a contract for "sale of goods" or contracts of "work and labour".
2. Whether the assessees are entitled to exemption from sales tax for the portion of the turnover attributable to "work and labour".
3. Whether the respondent could levy sales tax at a rate higher than that mentioned in section 5(1) of the Mysore Sales Tax Act, 1957.
Issue-wise Detailed Analysis:
1. Whether the transactions constitute a contract for "sale of goods" or contracts of "work and labour":
The court examined whether the transactions in question were contracts for the sale of goods or contracts for work and labour. The assessees constructed bus bodies on chassis supplied by customers. The Tribunal found that the bodies were built piece by piece on the chassis, and not as ready-made bodies. The court referred to Halsbury's Laws of England and Benjamin on Sale to distinguish between a contract of sale and a contract for work and labour. It was noted that if the essence of the contract is to improve the customer's goods, it remains a works contract, even if materials are used. The materials used become part of the principal chattel through accession. The court concluded that the transactions were "works contracts" as they involved the improvement of the customer's property rather than the sale of a separate chattel.
2. Whether the assessees are entitled to exemption from sales tax for the portion of the turnover attributable to "work and labour":
The court referenced the Mysore Sales Tax Act, 1957, which defines "sale" and "works contract". It was noted that the State Legislature intended to tax "turnover" from works contracts, but it lacked the competence to do so under Entry 54 of List II of the Seventh Schedule of the Constitution. The Supreme Court's decision in State of Madras v. Gannon Dunkerley & Co. was cited, which established that the State cannot tax wages for labour or remuneration for services. The court reiterated that the transactions in question were indivisible contracts for work and labour, and thus not liable to sales tax. The court rejected the argument that the assessees could be taxed under the Act's definition of "works contract" since the State Legislature had no competence to levy sales tax on such contracts.
3. Whether the respondent could levy sales tax at a rate higher than that mentioned in section 5(1) of the Mysore Sales Tax Act, 1957:
The court found that if the transactions were considered "sale of goods", they would fall under Entries 70 to 73 of the Second Schedule of the Act, which pertain to motor vehicles and their components, taxed at 7%. However, since the transactions were determined to be works contracts, they were not subject to sales tax under section 5(1) of the Act. The court dismissed the argument that the materials used in building motor bodies should be taxed separately under section 5(1), as they were integral parts of the works contract.
Conclusion:
The court allowed the petitions, quashing the orders of assessment and ruling that the transactions were works contracts not liable to sales tax. The Revenue was ordered to pay the costs of the assessees.
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1964 (4) TMI 99
Issues:
Taxability of foreign liquor under the Madras General Sales Tax Act and Central Sales Tax Act.
Analysis:
The judgment dealt with the taxability of foreign liquor under the Madras General Sales Tax Act and the Central Sales Tax Act. The petitioner, a company dealing in foreign liquor, disputed the tax levied on their turnovers for the years 1957-60 due to inter-State sales not supported by C Forms as required by the Central Sales Tax Act. The department imposed a tax at a rate of 50% under section 8(2)(b) of the Central Sales Tax Act based on the Madras Prohibition Act. The petitioner contended that foreign liquor sales were exempt under the Madras General Sales Tax Act, warranting a "nil" tax rate for inter-State sales. The court analyzed the relevant provisions of the Acts to determine the taxability of foreign liquor.
The court examined the exemption provisions under the Madras General Sales Tax Act, specifically section 8, which exempts certain goods from tax. The Third Schedule of the Act exempts goods on which duty is levied under the Madras Prohibition Act. However, since no duty is levied on foreign liquor under the Prohibition Act, the court concluded that foreign liquor was not exempted by the Madras General Sales Tax Act. Therefore, the initial contention of the petitioner regarding exemption failed.
Regarding the tax rate, the court analyzed section 8(2)(b) of the Central Sales Tax Act, which mandates a tax rate of 7% for inter-State sales of goods not falling under sub-section (1). The department relied on section 21-A of the Madras Prohibition Act to levy a 50% tax rate on foreign liquor sales. However, the court determined that the 50% rate was not applicable as it was a specific provision for certain sales under the Prohibition Act, and the general rate of 2% under the Madras General Sales Tax Act should apply to foreign liquor sales.
The court highlighted the amendment to section 8(2) of the Central Sales Tax Act, which introduced a 7% tax rate from October 1, 1958. Therefore, sales before this date were subject to a 2% tax rate, while sales after that date were taxed at 7%. The court allowed the petitions, directing the department to amend the assessments accordingly and awarded costs to the petitioner.
In conclusion, the judgment clarified the taxability of foreign liquor under the Madras General Sales Tax Act and the Central Sales Tax Act, emphasizing the exemption provisions and the applicable tax rates for inter-State sales of foreign liquor.
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1964 (4) TMI 98
Issues Involved:
1. Whether the items deleted from the certificate of registration are covered within the scope of Rule 13.
2. Whether the respondents acted without jurisdiction in seeking the impugned amendment of the certificate of registration.
Issue-wise Detailed Analysis:
1. Coverage of Deleted Items under Rule 13:
The petitioner contended that the deleted items (drawing instruments, photographic materials, building materials including iron, steel, cement, lime, and electricals) were necessary for the manufacture of goods and thus should be included under Rule 13. Rule 13 prescribes the goods that a registered dealer may purchase for use in the manufacture or processing of goods for sale, or in mining, or in the generation or distribution of electricity or any other form of power. The court examined whether the deleted items fell within the scope of Rule 13.
- Drawing Instruments, Colours, Chemicals, and Photographic Materials: The court held that these items are needed for preparing designs, which is a process separate and earlier than manufacture. Designing is distinct from manufacturing, and thus, these items cannot be comprehended in the expression "in the manufacture or processing of goods for sale."
- Electricals: The court acknowledged that while electric lights and fans are necessary for efficient factory operations, they are not directly used in the manufacture of goods. The expression "in the manufacture of goods" is limited to articles directly and actually needed for turning out or making the goods.
- Building Materials (Cement and Lime): The court found that these materials, although necessary for setting up the factory building, are not directly needed in the manufacture or creation of goods. Rule 13 does not include these articles as they are not directly involved in the manufacturing process.
- Machinery: The court concluded that machinery, while essential for manufacturing, is not used in the manufacturing or processing of goods in the sense of being an ingredient or commodity used in the creation of goods. Machinery facilitates the creation of goods but is not directly used in making or creating them.
The court found support for its view from the case of Bhartia Electric Steel Co. Ltd. v. Commercial Tax Officer and Others, which reinforced the interpretation that only goods directly used in manufacturing fall under Rule 13.
2. Jurisdiction to Amend the Certificate of Registration:
The petitioner argued that the respondents acted without jurisdiction in amending the certificate of registration as the items were included after due inquiry. The court examined Section 7(4) of the Central Sales Tax Act, which allows for the cancellation of a certificate of registration for sufficient reasons.
- Section 7(4): The court noted that the words "for any other sufficient reason" are wide in their amplitude, allowing for partial cancellation of the certificate if justified. The respondents deleted the items on the ground that they were not used for the manufacture of goods, which is a sufficient and relevant reason for refusing a registration certificate.
The court held that the respondents had the jurisdiction to modify, amend, or partly cancel the certificate of registration with regard to the disputed articles. The respondents' notification adding the items was deemed erroneous, and their subsequent action to amend the certificate was justified.
Conclusion:
The court dismissed the petition, ruling that the items deleted from the certificate of registration were not covered under Rule 13 and that the respondents had the jurisdiction to amend the certificate. The petitioner's submissions were overruled, and the court found no merits in the petition. The petition was dismissed without any order as to costs.
Petition dismissed.
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1964 (4) TMI 97
Issues Involved:
1. Validity of the assessment orders under the U.P. Sales Tax Act.
2. Authority of the State Government to issue notifications under sections 3-A and 3-AA.
3. Applicability of section 3-AA in relation to section 3-A.
4. Jurisdiction of the Sales Tax Officers in passing the assessment orders.
5. Availability and exhaustion of alternative remedies by the petitioners.
Detailed Analysis:
1. Validity of the Assessment Orders under the U.P. Sales Tax Act:
The petitioners, dealers in cotton yarn, sought certiorari against orders assessing them to sales tax on the turnover of sales of cotton yarn for various assessment years. The assessment was made at the rate of 2 nP. per rupee of turnover. The court noted that the assessment orders were based on notifications issued by the State Government, which were purportedly under sections 3-A and 3-AA of the U.P. Sales Tax Act.
2. Authority of the State Government to Issue Notifications:
The court examined the provisions of section 3-A and section 3-AA. Section 3-A allows the State Government to declare that the turnover of certain goods shall be taxable only at a single point in a series of sales and to fix the rate of tax, not exceeding 10 nP. per rupee. Section 3-AA, however, specifically dealt with cotton yarn and other declared goods, stating that the turnover shall be taxable only at the point of sale by a dealer to the consumer and that the rate of tax shall not exceed 2 nP. per rupee. The court found that section 3-AA did not authorize the State Government to issue any notification fixing the rate of tax.
3. Applicability of Section 3-AA in Relation to Section 3-A:
The court held that section 3-AA, being a specific provision for cotton yarn, superseded section 3-A. The Legislature itself fixed the point of sale for cotton yarn, thereby removing the State Government's power to select the point of sale or to fix the rate of tax under section 3-A. The notifications issued by the State Government under the purported exercise of power conferred by sections 3-A and 3-AA were deemed unauthorized and without effect.
4. Jurisdiction of the Sales Tax Officers:
The court acknowledged that the Sales Tax Officers had jurisdiction to pass the assessment orders. However, since no valid rate of tax was fixed for cotton yarn under any provision of the Sales Tax Act, the assessment orders could not be sustained. Despite this, the court noted that the petitioners did not raise the contention regarding the invalidity of the notifications before the Sales Tax Officers but brought it up for the first time in the petitions.
5. Availability and Exhaustion of Alternative Remedies:
The court emphasized that the petitioners had an alternative remedy available by way of appeals from the assessment orders, which they did not utilize. The court cited precedents where it was held that an assessee cannot bypass the departmental remedy and directly invoke the extraordinary jurisdiction of the High Court. The court also noted that some petitions were delayed as the petitioners applied for rectification instead of appealing in a timely manner.
Conclusion:
The court dismissed the petitions, holding that the notifications issued by the State Government were unauthorized and without any effect. However, the petitioners were not entitled to relief as they failed to exhaust the available alternative remedies and did not raise the relevant contentions before the Sales Tax Officers. The court exercised its discretion to refrain from quashing the assessment orders and let the parties bear their own costs.
Petition dismissed.
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1964 (4) TMI 95
Whether the assessment of the sales tax in question is void and ultra vires?
Whether the assessment of sales tax was properly and validly made on the 1st defendant firm?
Held that:- Appeal dismissed. Failure to see how the filing of a revision petition can constitute waiver of the illegality of the assessment order or proceedings to recover sums due on the basis of an assessment order passed not against the defendants but against another party. The subsequent revision petition to the Board of Revenue and its dismissal on July 23, 1949, stands on no better footing.
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1964 (4) TMI 93
Whether in view of Article 295(2) of the Constitution the exemption granted by the agreement of April 7, 1947, still continued and the assessments made against the respondent for the years 1950-51 to 1956-57 must therefore be quashed?
Held that:- Appeal allowed. Considering the effect of this agreement after April 1, 1950, in view of the legislative provisions made thereafter, and we have held therein that though the agreement of April 7, 1947, might cast an obligation on the Government of India under Article 295(l)(b), the legislative provisions made from April 1, 1950, would supersede the agreement and thereafter the legislative provisions would prevail in spite of the obligation cast on the Government of India by Article 295(l)(b). The principle of that decision in our opinion applies to Article 295(2) also under which the obligation in the present case devolved on the Part B State of Madhya Bharat, and in that view the legislative provisions made by the M.B. Sales Tax Act, 1950, or the Madhya Pradesh General Sales Tax Act, 1958, would prevail as against the agreement.
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1964 (4) TMI 90
Whether the contract and delivery to the common carrier are effected directly or through agents?
Whether the sale is one for export or is one in the course of export?
Held that:- Appeal dismissed. The transaction of sale in the present case did not occasion the export of the goods, even though the appellants knew that the buyers in offering the bids for chests of tea and the export quotas were acting on behalf of foreign principals, and that the buyers intended to export the goods. There was between the sale and the export no such bond as would justify the inference that the sale and the export formed parts of a single transaction or that the sale and export were integrally connected. The appellants were not concerned with the actual exportation of the goods, and the sales were intended to be complete without the export, and as such it cannot be said that the said sales occasioned export. The sales were therefore for export, and not in the course of export.
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1964 (4) TMI 75
It cannot be said in the present case that tanning bark was bought by the respondents for any purpose unconnected with the business carried on by them, viz., manufacture and sale of the dressed hides and skins. Consumption in the business and not sale of the commodity bought therefore does not exclude the respondents from the definition of dealer qua the tanning bark.
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1964 (4) TMI 73
Whether the assessing officer was not wrong in allowing deduction of ₹ 2,40,000 for the quarter ending on 30-6-51 and ₹ 15,677-1-3 for the quarter ending on 30-9-51 from the respective gross turnover of the applicant?
Held that:- Appeal dismissed. High Court came to a correct conclusion. The High Court is correct in holding that the production of declaration under rule 27(2) is not always obligatory on the part of a selling dealer when claiming the exemption. It is open to him to claim exemption by adducing other evidence so as to bring the transaction within the scope of section 5(2)(a)(ii) of the Act. In this case, the Sales Tax Officer was satisfied by a mere statement of the dealer and it has not been shown that in fact the registration certificate of the buying dealer, M/s. S. Lal and Co., did not contain the statement that the goods were intended for resale by him in Orissa.
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1964 (4) TMI 61
Issues Involved:
1. Entitlement of the petitioner, a debenture-holder, to prosecute the petition.
2. Commercial solvency of the company.
3. Feasibility of a new scheme for running the business.
4. Sufficiency of the company's assets to clear liabilities.
5. Adjournment of the petition to propose a new scheme.
Detailed Analysis:
1. Entitlement of the Petitioner to Prosecute the Petition:
The opposing parties contended that the petitioner, being a debenture-holder, was not entitled to prosecute the petition due to condition 9 in the debentures and clauses 3 and 4 in the debenture trust deed, which vested all remedies for recovery in the trustees. However, the court noted that the operative part of the debentures provided a direct covenant by the company to pay the principal and interest to the debenture-holder. Citing the case of Bachharaj Factories Ltd. v. Hirjee Mills Ltd., the court affirmed that a debenture-holder with a direct covenant for payment by the company is entitled to present a petition for winding up. Additionally, section 439(2) of the Companies Act, 1956, was referenced, which confers an unconditional right on debenture-holders to file such petitions.
2. Commercial Solvency of the Company:
The court recorded that no party contended the company was commercially solvent. The balance-sheet for the year ended March 31, 1963, showed significant liabilities, including secured loans aggregating Rs. 1,68,94,419, unsecured loans and current liabilities amounting to Rs. 60,10,116, and arrears of interest and debts to sundry creditors. The company had also failed to pay substantial amounts to the Provident Fund Commissioner and the Employees' State Insurance Corporation, indicating its inability to meet current liabilities and confirming its commercial insolvency.
3. Feasibility of a New Scheme for Running the Business:
The opposing parties suggested the feasibility of a new scheme for running the business and requested adjournment of the petition. However, the court found it difficult to adjourn the matter given the company's failure to pay significant amounts to the Provident Fund Commissioner and the Employees' State Insurance Corporation. The court emphasized that companies failing to meet such statutory obligations are unfit to continue in existence and must be wound up.
4. Sufficiency of the Company's Assets to Clear Liabilities:
The opposing parties argued that the company's assets were sufficient to clear its liabilities, pointing to the increased value of certain assets like land and the Latur ginning and pressing factory. However, the court noted that the true value of the assets, even if higher than shown in the balance-sheet, would still be less than the company's liabilities when accounting for capital gains tax and other factors. The contention that the assets were worth Rs. 3,50,00,000 was found to be unfounded.
5. Adjournment of the Petition to Propose a New Scheme:
The opposing parties requested an adjournment to ascertain the wishes of all creditors regarding a new scheme of arrangement. The court held that even if a large number of creditors desired the company to continue, it would still be bound to order winding up due to the company's inability to meet current liabilities and its commercial insolvency.
Conclusion:
The court concluded that the petitioner was entitled to maintain the petition, the company was commercially insolvent, and the arguments for a new scheme and asset sufficiency were unconvincing. Consequently, the court ordered the winding up of the company, with the official liquidator to take charge of all properties and effects, and directed the petitioner to advertise the order and serve copies to relevant parties. Costs were to be paid out of the company's assets, with opposing creditors bearing their own costs.
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1964 (4) TMI 60
Issues Involved:
1. Priority of payment to contributories holding 5% cumulative preference shares for capital credited as paid-up and arrears of dividends not declared over ordinary shareholders.
2. Priority of payment between ordinary A class shares and ordinary B class shares.
3. Entitlement of ordinary shareholders to set off amounts payable upon a call against amounts payable to them as holders of preference shares.
Detailed Analysis:
1. Priority of Payment to Contributories Holding 5% Cumulative Preference Shares:
The official liquidator sought determination on whether holders of 5% cumulative preference shares should be given priority in payment of capital credited as paid-up and arrears of dividends not declared over ordinary shareholders. The liquidator argued that the preference shareholders are entitled to repayment of the capital contributed by them in full and arrears of dividends calculated at 5% up to the date of the winding-up order. The liquidator also submitted that a call should be made against ordinary A and B class shareholders to repay the preference shareholders.
The court referred to the memorandum and articles of association, particularly clause 5 of the memorandum and articles 5, 143, 144, 146, and 174. Article 5(2)(a) provided that 5% cumulative preference shares confer the right to payment of capital and arrears of dividends (whether declared or undeclared) up to the commencement of the winding-up in priority over ordinary shareholders. The court concluded that the phrase "arrears of dividend undeclared" was intended to create an absolute right for preference shareholders to receive cumulative dividends at the rate of 5% on the capital contributed by them, even in the absence of profits.
The court cited various authorities, including In re W.J. Hall & Co, Limited, and subsequent cases which clarified that preference shareholders are entitled to arrears of dividends out of the surplus assets, whether they include profits available for the purpose or not. The court held that the preference shareholders are entitled to payment of capital credited as paid-up and arrears of dividends in priority over ordinary shareholders.
2. Priority of Payment Between Ordinary A Class Shares and Ordinary B Class Shares:
The liquidator also sought determination on the priority of payment between ordinary A class shares and ordinary B class shares. Article 5(2)(b) provided that ordinary A class shares shall rank next after the 5% cumulative preference shares in priority to ordinary B class shares regarding payment of capital in a winding-up.
The court upheld this provision, affirming that ordinary A class shares shall rank next after the 5% cumulative preference shares and in priority to ordinary B class shares.
3. Entitlement of Ordinary Shareholders to Set Off Amounts Payable Upon a Call:
The ordinary shareholders contended that they should be allowed to set off the amounts payable upon a call against the amounts payable to them as holders of preference shares towards return of capital and arrears of dividends. They relied on sections 156, 186, and 216 of the Companies Act, 1913, which they argued allowed for such a set-off.
The court examined the relevant provisions, particularly the proviso to section 186(2), which allows set-off of any money due to a contributory from the company against any subsequent call. However, the court noted that the liability to repay capital and cumulative dividends to preference shareholders arises by way of adjustment of rights between contributories and not as a debt. The court concluded that money was never due to the preference shareholders as such, and the preference shareholders have no right to set off their call liability against amounts payable to them for return of capital and arrears of dividends.
Judgment:
- The contributories holding 5% cumulative preference shares are entitled to payment of capital credited as paid-up and arrears of dividends at the rate of 5% cumulative up to the date of the winding-up order in priority over contributories holding ordinary A class shares and ordinary B class shares.
- The contributories holding ordinary A class shares shall rank next after the 5% cumulative preference shareholders and in priority to ordinary shareholders class B.
- The holders of ordinary shares are not entitled to set off the amounts that may be called against them against the amounts payable to them towards return of capital and arrears of dividends for their holding of 5% cumulative preference shares.
- The costs of each of the opposing parties are fixed at Rs. 600, and the liquidator's cost will be as between attorney and client. All costs are to come out of the assets of the company.
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1964 (4) TMI 45
Issues: Jurisdiction of ordinary civil court in matters related to winding up of a company under the Companies Act.
The judgment revolves around the jurisdiction of an ordinary civil court in a case concerning the winding up of a company governed by the Companies Act. The company in question went into voluntary liquidation 25 years ago, and the voluntary liquidators appointed were accused of misfeasance and non-feasance. A suit was filed seeking accounts from the liquidators and distribution of surplus assets among shareholders. The contesting defendants argued that only the court under the Companies Act had jurisdiction over such matters. The lower court overruled this objection, leading to the revision petition.
The key contention raised was regarding the jurisdiction of the ordinary civil court in matters related to the winding up of a company under the Companies Act. The petitioners argued that the provisions of the Companies Act of 1956, specifically section 647(2), mandated that winding up proceedings for the company in question were to be governed by the provisions of the Act of 1913. Sections 208 to 220 of the Act outlined the powers and duties of liquidators and provided for the removal and appointment of liquidators by the court. The court was empowered to determine questions arising in voluntary winding up, and its powers were akin to those in a winding up by the court.
The judgment delved into the interpretation of statutory provisions and legal principles governing the jurisdiction of ordinary civil courts in company winding up matters. It highlighted that while the Companies Act did not expressly bar the jurisdiction of ordinary civil courts in matters covered by the Act, there was a general principle that such jurisdiction could be excluded if expressly stated or necessarily implied. The court emphasized that cases related to the winding up of a company, even in voluntary winding up scenarios, were traditionally dealt with by the court under the Act, particularly in cases involving allegations of misfeasance and non-feasance against liquidators.
The judgment referenced the special provision in section 235 of the Act of 1913, which conferred the court with the power to assess and award damages against delinquent company officers or liquidators. It cited legal precedent to support the argument that liabilities created by statute, such as those for misfeasance or non-feasance by liquidators, required remedies provided by the statute itself. The court concluded that shareholders seeking such remedies must approach the court under the Companies Act to obtain them, rather than an ordinary civil court. Consequently, the lower court's decision to entertain the suit was deemed erroneous, and the revision petition was accepted, directing the return of the plaint to the plaintiffs, with costs to be borne by the parties.
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1964 (4) TMI 44
Whether, on the facts and in the circumstances of the case, the receipt of ₹ 50,787 was a receipt of dividend and is taxable under the Indian Income-tax Act ?
Held that:- Agree with the High Court that the answer to the question referred to it is in the affirmative. The appeal fails and is dismissed
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1964 (4) TMI 43
Whether on a true interpretation of article 95 of the First Schedule to the Indian Companies Act, 1913, the dividend of ₹ 4,12,500 was liable to be included in the assessment year 1952-53?
Held that:- If the mere declaration of dividend in general meeting of the company is not to be regarded as payment within the meaning of section 16(2), much less can it be said that a resolution declaring interim dividend—-which is capable of being rescinded by directors—operates as payment before the company has actually parted with the amount of dividend or discharged its obligation by some other act. The High Court was, therefore, right in recording an affirmative answer to the question propounded for the consideration of the court. Appeal dismissed.
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