TMI Blog1967 (3) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... ing subject to the prescribed restrictions and conditions. Item 2 in the Third Schedule covers tobacco and its products. It was in view of these provisions the assessee claimed exemption which was allowed in the first instance. But, by an order dated 26th February, 1966, the Deputy Commercial Tax Officer of Ambasamudram reopened the assessment order, determined the gross turnover at Rs. 1,28,14,809.76 and the taxable turnover at Rs. 21,85,393.74. The taxable turnover, according to the Deputy Commercial Tax Officer, consisted of sales of beedi leaves, fibre and root flour and was charged at 2 per cent. resulting in a tax demand of Rs. 43,707.88. The reassessment order shows that there were two kinds of transactions. The first was, the assessee supplied raw tobacco, leaves for rolling beedies, twine or fibre, old newspaper, gunnies, etc., to persons called branch managers. In the books of the assessee, a certain sum was debited against them purporting to be the cost of these materials. The branch managers got the beedies rolled out of the materials supplied, and delivered manufactured beedies to the assessee. They got payment from the assessee at so much per thousand. The turnover re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er with a quantity of raw products supplied and to make him responsible for the goods supplied to him; further, there was no recorded proof with the assessee to support his argument that the title had not passed. While bringing to tax the said net turnover as having escaped assessment, he levied also a penalty of Rs. 65,562 which is one and a half times the tax levied on the net turnover. Though in the counter-affidavit it is made to appear that the penalty was levied under section 12(3), it could not obviously be so as this was a case of reassessment of turnover which, according to the assessing officer, had escaped assessment or to which exemption from tax had been given but wrongly. The penalty could, therefore, only have been levied or imposed under section 16(2). The facts in the other petitions are similar except for the difference In the turnovers taxed and penalties levied and the fact that in W.P. No. 379 of 1967 relating to 1965-66, the assessment itself was made under section 12, not a case of reopening. Sri V.K. Thiruvenkatachari, for the petitioner, contends that both the reassessments as well as the assessment are illegal inasmuch as there was no element of sale In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seller transfers or agrees to transfer the property in the goods to the buyer for a price. The essential elements of a sale are: (1) goods, (2) seller and purchaser, (3) agreement between them for sale and purchase, (4) transfer of property in the goods from seller to buyer as a result of the agreement between them, and (5) the price being the consideration for the transfer of property under the agreement. In each case, the facts will have to be examined to see whether all these elements are present. If any one or more of them is absent, the conclusion is inevitable that the facts do not constitute a sale of goods. A mere nomenclature or description of the transaction as sale will not be conclusive. In most cases It may be Prima facie evidence of sale. But where the character of the transaction as a sale of goods is in question, it becomes necessary to go behind the description of the transaction as a sale and examine the facts in the light of the essential elements required to make up a sale of goods. In this case the assessee's objection before the assessing officer was that the materials were supplied by the assessee only for the purpose of the recipient of these materials assem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Beedi Workers' UnionA.I.R. 1959 Mad. 221., the facts were these: There were certain proprietors engaged In the manufacture and sale of beedies. The beedi rolling work was done by certain persons engaged by contracts called intermediaries. The work of rolling beedies was not done In any of the premises belonging to, or at the disposal of the proprietors, but in the premises of the intermediaries with whom the proprietors had entered into written contracts. The contracts provided for supply by the proprietors to the intermediaries of tobacco and beedi leaves. The intermediary should engage premises of his own and obtain the requisite licence to carry on the work of having the beedies rolled in such premises. The intermediary should meet all the incidental charges of rolling the beedies, including the cost of thread and the remuneration paid to the beedi rollers. A further term in the contract was that for every unit of thousand beedies rolled and delivered by the intermediary to the proprietors, the latter should pay the stipulated amount after deducting the cost of the tobacco and the beedi leaves supplied by the proprietors. The intermediaries were forbidden under the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... choice supply beedi leaves or refuse to do so. The intermediary has no right to insist upon the supply of beedi leaves to him. Nay more: evidence reveals that the management takes the real hand in settling all matters relating to the workers, and the intermediary is a mere cipher." The implication is that the relationship between the proprietors and the intermediaries was not that of vendor and purchaser and that, therefore, the transaction between them involved no element of sale. One of the proprietors then took the matter in appeal to the Supreme Court in D.C. Dewan Mohideen Sahib and Sons v. United Beedi Workers' Union[1964] 2 L.L.J. 633., but unsuccessfully. The view in United Beedi Workers' Union v. S. Ahmed Hussain Sons[1964] 1 L.L.J. 285. was confirmed. In the course of its judgment the Supreme Court said: "The sale of raw materials to the so-called independent contractor and resale by him of the manufactured beedies is also a mere camouflage, the nature of which is apparent from the fact that the so-called contractor never paid for the materials. All that happens is that when the manufactured beedies are delivered by him to the appellants, amounts due for the so-ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he account books invariably show that in every case the materials supplied have been used in assembling of beedies and such manufactured beedies have been delivered to the assessee, it will be a reasonable inference to make that there has been no transfer of property, especially in the context of the balancing of cost of the materials and cost of the manufactured goods debited and the difference being paid to the intermediaries by way of remuneration. It will also be noteworthy to enquire as far as possible whether in any case the intermediaries have transferred the materials supplied to them to their parties and if there is no such instance this circumstance may strengthen the said inference that no sale of goods was involved in the supply of materials by the assessee to the intermediaries. In the second category of transactions we see no difficulty in holding that there is no element of sale at all on the face of the entries in the account books. There is not even any room to justify the view of the assessing officer that the transactions amounted to barter. It seems to us that the assessing officer has applied his imagination and spelt out a sale from a transaction which in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
