9911796707
TMI Blog2015 (1) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... by the impugned judgment, the High Court has set aside the finding of the learned Single Judge which held that the machinery purchased in the auction sale conducted by the Official Liquidator is not be liable to be taxed under the Act, 1963. The impugned judgment has further accepted a fresh plea raised by the appellant that the auction purchaser would be liable to pay purchase tax under section 5A of the Act, 1963. 4. It is relevant to state that respondent No.1, that is, Hindustan Urban Infrastructure Ltd., had filed a separate appeal- Civil Appeal No.5048 of 2003 against the specific finding of the High Court in the impugned judgment with regard to the liability to pay purchase tax which was imposed upon the auction purchaser thereunder. This Court has separately dealt with the aforesaid question by its order dated 04.09.2014 in the said civil appeal. FACTS:- 5. To appreciate the issues involved, it would be necessary to notice the facts leading up to the present appeals. M/s. Premier Cable Company Ltd. (for short, "the Company"), was registered under the Companies Act, 1956 (for short, "the Act, 1956"), and engaged in the manufacturing of PVC power cables, Aluminium conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the sale effected by the respondent No.2. It was stated that, in the opinion of the Official Liquidator, the auction purchaser should be directed by the High Court to meet any expenses or liability towards payment of cess, sales tax, etc., if and when the same becomes payable. 10. An application was also filed by the Official Liquidator, in the Company Petition before the learned Singe Judge, inter alia, seeking clarification on certain aspects of the matter including whether the auction purchaser would be liable to pay tax on the purchase of goods, pursuant to the auction conducted and further to direct the auction purchaser to pay any tax as may be leviable by the Sales Tax Department. The learned Single Judge after considering the prayers made in the application has passed an order, in C.A. No.293 of 2002 and C.A. No.333 of 2002 in C.P. No.2 of 1996, dated 30.10.2002, wherein it was held that the sale in question cannot be treated as a sale by the Central Government or by a registered dealer entitled to collect tax and further has observed that the auction purchaser cannot be treated as a dealer under the Act, 1963 and further that the said sale in question would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidator is an agent of the Central Government and therefore would deemed to be a dealer as provided under explanation 2 to section 2(viii) (f) of the Act, 1963. To further substantiate his contention, he would refer to the Statement filed, by the Special Government Pleader (Taxes), appearing for the Sales Tax Authorities, before the learned Single Judge of the High Court, wherein it was categorically stated that the Official Liquidator would be liable to pay tax at the relevant rate under the Act, 1963, whether or not he had collected the same from the auction purchaser. 16. Shri C.S. Rajan, learned counsel for the Official Liquidator-respondent No.2, would support the findings of the High Court in the review petition and state that the Official Liquidator would not be liable to pay any tax under the Act, 1963. He would further state that the liability would in fact be on the auction purchaser who would be exigible to purchase tax under section 5A of the Act, 1963. 17. Shri Rajan would then elaborate upon the nature of the activities carried on by the Official Liquidator and submit that since an Official Liquidator is an officer of the Court, he merely discharges statutory fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment of an Official Liquidator for the purpose of winding up of a company. The Official Liquidator so appointed conducts the proceedings in the winding up of the company and performs other duties, as the court imposes upon him, in consonance with the provisions of the Act, 1956. Section 456 of the Act, 1956 states that pursuant to a winding up order, the liquidator shall take into his custody or under his control, all the properties, effects and actionable claims to which the company is or appears to be entitled to. By the said provision, all the properties and effects of the company are deemed to be in the custody of the court, from the date of the winding up order. Section 457 of the Act, 1956 lists the powers of the Official Liquidator. The powers include, inter alia, to carry on business of the company for its beneficial winding up, to sell the immovable and movable property and actionable claims of the company, by public auction or private contract, and to do all things as may be necessary for winding up the affairs of the company and distribution of its assets. However, the powers conferred by virtue of the section 457 of the Act, 1956, on the liquidator, are subject to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) x x x x (d) x x x x (e) x x x x (f) a person who whether in the course of business or not: (1) transfers any goods, including controlled goods whether in pursuance of a contract or not, for cash or deferred payment or other valuable consideration; (2) transfers property in goods (whether as goods or in some other form) involved in the execution of a works contract; (3) delivers any goods on hire-purchase or any system of payment by installments; (4) transfers the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (5) supplies, by way of or as part of any service or in any other manner whatsoever, goods, being food or any other articles for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration; Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not, for cash or deferred payment. 27. Section 5 of the Act, 1963 is the charging provision under the said Act and provides for the levy of tax on the sale and purchase of goods. It provides that every dealer, whose total turnover for that year is not less than Rs. 2,00,000/-, would be liable to pay tax as per rates and at points as specified in the Schedules to the Act, 1963. The First Schedule to the Act, 1963 would be relevant for the purpose of the present appeal. Serial No.84 of the said Schedule deals with, inter alia, Machinery and it provides that the point of levy shall be at the point of first sale in the State by a dealer who is liable to tax under section 5 of the Act, 1963. 28. Section 5A of the Act, 1963 is the charging provision as regard to the imposition of purchase tax. Under the said provision, the purchaser of any goods which may be consumed, used, disposed or dispatched to any place outside the State from a registered dealer will incur liability for payment of purchase tax. The provision amply clarifies that purchase tax would be applicable only in circumstances in which no tax is payable under sub-sections (1), (3), (4) or (5) of section 5 of the Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be profitable to refer to Section 2(viii) of the Act, 1963 which defines the expression "dealer" as any person who carries on the business of buying, selling, supplying or distributing goods, executing works contract, transferring right to use any goods or supplying by way of or as part of any service, any goods directly or indirectly. The aforementioned activities are carried out for the payment of consideration, in the form of cash, deferred payment, commission, remuneration, etc. Thus, the emphasis under this clause of "carrying on business" is to be understood in a wide sense and not merely restricted to the activity of buying and selling. 33. The expression "business" has been given a wide and inclusive definition, whereby 'any business, trade, commerce or manufacture or any activity of the said nature, whether or not it is carried on with a motive for profit' has been expressly included. It further includes any transaction in connection with such trade, commerce, etc. including within its purview, all ancillary or incidental activities in connection with any trade, commerce, etc. 34. Section 2(viii)(f) further expands the definition of "dealer" enabling a far wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.P. v. Union of India, (2003) 3 SCC 239, this Court held that the Central Government, when involved in the business of buying and selling, could be treated as a "dealer" under the U.P. Sales Tax Act, 1940. The Court observed as follows: "11. ...It is thus clear that in regard to a transfer of the right to use any goods both a person and a Government will be within the ambit of the definition of "dealer" subject to the following distinction: a person to be a "dealer" should carry on the business of buying, selling etc., whether regularly or otherwise, but a Government which buys, sells etc. (whether in the course of business or otherwise) will be a "dealer" for purposes of the U.P. Act. Inasmuch as the definition of "sale" includes any transfer of property in the goods and a transfer of the right to use any goods for any purpose, DoT which engages in transfer of right to use any goods will be a "dealer" within the meaning of sub-clause (iv) of clause (c) of section 2 of the U.P. Act." 38. In State of T.N. v. Shakti Estates, (1989) 1 SCC 636, this Court while ascertaining whether the assessee could be treated as a dealer gave a wide import to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchasing, selling, supplying or distributing goods." 42. In Food Corporation of India v. State of Kerala, (1997) 3 SCC 410, this Court was ascertaining whether the procurement of food grains by the Food Corporation of India, pursuant to levy orders could amount to sale or purchase to incur sales/ purchase tax liability as levied by the States. This Court held that since there was no statutory compulsion in the matter of sale or purchase of fertilizers and parties had the discretion to enter into consensual contractual agreements subject minimal restrictions such as price fixation, quota requirements, etc., there is no hesitation in holding that the activity of distribution of fertilizers, pursuant to levy orders would amount to sale which is eligible to incur tax liability. This Court stated that supply or distribution of goods need not be in course of business to be considered a sale. 43. Thus, on perusal of the aforesaid decisions of this Court, we are of the view that the definition of "dealer" under various sales tax legislations has been given a broad and inclusive interpretation. It would be gainsaid to state that such a broad and expansive interpretation is in consonance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ),(4),(5) of section 5. However, as noticed hereinabove, the given transaction is exigible to tax under Section 5(1) of the Act, 1963, and therefore tax liability under Section 5A of the Act, 1963 would not apply to the said transaction. 47. Before delving into whether the Official Liquidator could also be treated as a "dealer" under the Act, 1963, it would be apposite to take into account the powers of the Official Liquidator, as provided under the Act, 1956. The Official Liquidator, in generic terms, is an officer appointed to conduct the proceedings and to assist the Court in the winding up of a company. 48. In A. Ramaiya, Guide to the Companies Act, 16th Edition (2004), while interpreting the powers of the Official Liquidator under section 457 of the Act, 1956 observed as follows: "A liquidator is an agent employed for the purpose of winding up of the company. His principal duties are to take possession of assets, to make out the requisite lists of contributors and of creditors, to have disputed cases adjudicated upon, to realise the assets subject to the control of the court in certain matters and to apply the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely as an agent or administrator for and on behalf of the Company." 51. In Ajay G. Podar v. Official Liquidator of J.S. & W.M. & Others, (2008) 14 SCC 17, this Court considered the question pertaining to bar of limitation under the Act, 1956 for misfeasance proceedings filed by the Official Liquidator. While discussing the powers of the Official Liquidator under section 457(1) of the Act, 1956, the Court was of the view that the Official Liquidator must be authorised to take steps for recovery of assets by the Company Court under the winding up order and the said proceedings must be initiated in the name of the company and on behalf of the company to be wound up. This Court had further opined that the Official Liquidator derives his authority from the provisions of the Act, 1956. 52. It would be beneficial to notice the views of Courts in England insofar as powers of the Official Liquidator during winding up proceedings. In Re Mesco Properties, (1980) 1 All ER 117, the Court of Appeal was ascertaining as to whether a company could incur tax liability in consequence of the realization of its assets after a winding up order was passed and whether the Official Liquidator was the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. 177, as follows: "The functions of the liquidator are thus similar to those of a trustee (formerly official assignee) in bankruptcy or an executor in the administration of an estate of a deceased person. There is, however, this difference: that whereas the legal title in the property of the bankrupt vests in the trustee and the legal title to property of the deceased vests in the executor, a winding-up order does not of itself divest the company of the legal title to any of its assets. Though this is not expressly stated in the Act it is implicit in the language used throughout Part V, particularly in sections 243 to 246 which relate to the powers of liquidators and refer to 'property ... to which the company is... entitled,' to 'property... belonging to the company,' to 'assets... of the company' and to acts to be done by the liquidator 'in the name and on behalf of the company." 54. In light of the aforesaid, we would conclude that an Official Liquidator- (i) derives its authority from the provisions of the Act, 1956; (ii) acts on behalf of the company in liquidation for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuant to winding up proceedings. 58. In the present case, the Official Liquidator had issued a notice inviting tenders for the sale of the assets of the Company. The offer of the auction purchaser was accepted and duly confirmed by the High Court. However, the dispute herein arose in respect to determination of which party would be exigible to sales tax. 59. From the discussion in the preceding paragraphs, we can conclude an Official Liquidator is an officer of the Court and that for the purpose of discharging statutory obligations imposed under the Act, 1956, the Official Liquidator merely steps into the shoes of the company in liquidation. By virtue of the notice issued by the Official Liquidator for inviting tenders, dated 26.11.2001, it is amply evident that the liquidator intended to conduct a transfer of the said goods in liquidation. Since the conduct of an auctioned sale involved transfer of goods, it falls within the wide ambit of section 2(viii)(f) of the Act, 1963. 60. The observation of the Court of Appeals in the Re Mesco Properties case (supra), would appear to be squarely applicable to be present factual matrix, that is, during a winding up proceedings, if tax r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
