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The State Of Assam And Ors. v. Garodia Brothers And Anr.
Structured Summary of the Opinion
Factual and Procedural Background
Opposite party No. 1, Garodia Brothers, held a contract from the Public Works Department to collect, break and supply stones from the Dilli quarry. The Superintendent of Taxes, Dibrugarh, assessed tax on Garodia Brothers for supply of gravels, boulders, etc., treating the transactions as "sales" for the periods ending 30th September 1968 and 31st March 1969. Garodia Brothers appealed to the Assistant Commissioner of Taxes, Jorhat, asserting that the transactions were not sales but execution of works contracts. The Assistant Commissioner rejected the two appeals by orders dated 27th June 1970.
Garodia Brothers then appealed to the Assam Board of Revenue under Section 31A of the Assam Sales Tax Act, 1947; these were Cases Nos. 69-70 STA/70. The Board of Revenue allowed the appeals, set aside the appellate orders of the Assistant Commissioner and the original assessment orders of the Superintendent of Taxes. The State of Assam, the Superintendent of Taxes, Dibrugarh, and the Assistant Commissioner of Taxes, Jorhat (petitioners), filed writ petitions under Article 226/227 of the Constitution seeking certiorari to quash the Board's judgment and order dated 28th April 1972. The court considered these petitions and disposed of them as set out below.
Legal Issues Presented
- Whether petitions under Article 226/227 of the Constitution of India filed by the taxing authorities/State are maintainable to challenge the Assam Board of Revenue's order (i.e., preliminary point on maintainability).
- Whether the taxing authorities or the State have the statutory right under the Assam Sales Tax Act, 1947 to appeal against or seek reference of the Board's order to the High Court (i.e., statutory scope of rights of appeal and reference under Sections 30, 31A and 32).
- Whether the transactions between Garodia Brothers and the Public Works Department amounted to sales liable to tax under the Assam Sales Tax Act, 1947, or were contracts for work and services (i.e., characterization of the transactions as sale or works contract and consequent tax liability).
Arguments of the Parties
Opposite Party No. 1 (Garodia Brothers) — Arguments
- Garodia Brothers argued that there were no "sales" of stones; rather the transactions constituted execution of a works contract. They contended ownership of the stones did not pass to them from the Forest Department and that they merely carried specified quantities of stones to locations directed by the P.W.D., charging for carrying and stacking.
- It was contended that Garodia Brothers had no authority to quarry more than the quantity asked for by the P.W.D., could not dispose of the stones to others, and were not free to sell the stones at will — facts relied upon to assert that no sale had occurred.
- Mr. J.P. Bhattacharjee, counsel for Garodia Brothers, raised a preliminary point challenging the maintainability of the petitions under Articles 226/227 of the Constitution.
Petitioners (State of Assam; Superintendent and Assistant Commissioner of Taxes) — Arguments
The opinion does not contain a detailed account of the petitioners' legal arguments beyond their relief sought.
- The petitions sought a writ of certiorari to quash the Assam Board of Revenue's judgment and order dated 28th April 1972 in Cases Nos. 69-70 STA/70.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner Of Sales Tax, M.P. v. Purshottam Premji [1970] 26 S.T.C. 38 (S.C.) | Illustration that an arrangement for payment of royalty does not alter legal ownership; used to determine whether a party acquiring materials has become owner for purposes of taxation. | The Board's finding that no sale occurred was supported by the Supreme Court's observation that arrangements for payment (e.g., royalty) do not necessarily confer ownership — used to infer that Garodia Brothers did not acquire ownership of stones. |
| C.B. Gosain v. State of Orissa [1964] 2 S.C.R. 879 (S.C.) | Principle that classification between contract for work and materials and contract for sale depends on the essence of the contract; if production and transfer as a chattel is not its essence, it may be a works contract. | The court relied on this principle (quoted in the Board's reasoning) to evaluate whether the transactions were contracts for work and materials rather than sales; it supported the view that the essence of the contract determines tax liability. |
| Putnaik and Co. v. State of Orissa [1965] 2 S.C.R. 782 (S.C.) | Principle that the true effect of an accretion (addition) must be judged from the intention of the parties rather than by an artificial rule about affixation to a chattel. | The opinion cites this authority (via the Board's reasoning) to emphasize that the intention of the parties is decisive in determining whether property in goods passed and whether a sale occurred; it supports the Board's conclusion that no sale took place. |
Court's Reasoning and Analysis
The court proceeded through a textual and structural analysis of the Assam Sales Tax Act, 1947 and the facts as found by the Assam Board of Revenue.
First, the court examined the statutory scheme for appeals and references:
- Section 30 grants the right of appeal against assessment orders to "any dealer" and contains safeguards (time limits and payment of tax before appeal). The court noted that the right of appeal is given to the dealer and not to taxing authorities.
- Section 31A permits a dealer aggrieved by an order passed in appeal (under Section 30) or revision to appeal to the Board within sixty days; again the court emphasized that this right is given to the dealer and not to any taxing authority.
- Section 32 provides that within sixty days the dealer may require the Board to refer any question of law arising out of the Board's order to the High Court; additionally, the Board may, on its own motion, make such a reference. Sub-sections allow the Board to reject such applications and provide a route to the High Court if the applicant acts under specified timelines. The court highlighted that these provisions operate at the instance of the dealer or the Board, not the taxing authorities.
The court also referred to Section 8 (and Rule 3(1) of the Assam Sales Tax Rules, 1947) which prescribe the taxing authorities (Commissioner, Deputy Commissioners, Assistant Commissioners, Superintendents, Inspectors, etc.) and authorize delegation of powers by the Commissioner under Section 60. From this statutory framework the court reasoned that taxing authorities (including the Superintendent and Assistant Commissioner in these cases) are bound by the Board's decisions and are not given an express statutory right to challenge the Board's order by way of reference to the High Court or otherwise.
On the factual issue of characterization of the transactions, the court relied on the Board of Revenue's findings of fact: Garodia Brothers carried specified quantities of stones from the quarry by direction of the P.W.D., had no authority to quarry or dispose of more than specified quantities, could not sell to others, and were not free to obtain and sell stones at will. From these findings the Board concluded, and the court accepted, that no sale was involved in these transactions.
The court reinforced the Board's factual conclusion with legal principles drawn from Supreme Court authority (Purshottam Premji; C.B. Gosain; Putnaik & Co.) emphasizing (a) that payment arrangements do not necessarily establish ownership, (b) that whether a contract is of sale or for work and materials depends on the essence and intention of the parties, and (c) that accretions must be judged by intention. Applying these principles to the Board's factual findings, the court concluded the transactions did not amount to sales liable under the Assam Sales Tax Act, 1947.
Regarding maintainability and the petitioners' locus to seek writ relief under Articles 226/227, the court analysed the statutory appeal and reference scheme and observed that taxing authorities were not granted rights to appeal under the Act nor to require Board references to the High Court. The court thus treated the Board's order as binding on the department unless the dealer or the Board itself invoked the statutory reference procedure.
On this combined statutory and factual analysis, the court found no ground to interfere with the Board of Revenue's order within the writ jurisdiction invoked by the petitioners.
Holding and Implications
Holding:
The petitions are rejected.
The court discharged the rules and made no order as to costs.
Implications
- Direct effect: The Assam Board of Revenue's orders in Cases Nos. 69-70 STA/70, dated 28th April 1972, stand affirmed — the assessments and appellate orders set aside by the Board remain in force. Consequently, no tax was leviable under the Assam Sales Tax Act, 1947, on the transactions in question as found by the Board.
- Statutory interpretation implication: The opinion emphasises that under the Assam Sales Tax Act, 1947 the statutory rights of appeal and reference are conferred on the dealer (and the Board on its own motion) and not on taxing authorities; accordingly, taxing officers and the State do not have an express statutory right under the Act to challenge a Board order by way of reference to the High Court or appeal in the same manner as a dealer.
- Broader precedent: The court did not indicate that it was laying down a new or novel legal precedent beyond applying existing statutory reading and cited Supreme Court authorities; the decision's practical consequence is the rejection of the petitioners' challenge and endorsement of the Board's factual and legal conclusion that no sale occurred.
Prepared from the provided opinion. No information beyond the text of the opinion has been added.
1. By these applications under Article 226/227 of the Constitution of India, the petitioners, namely, (1) the State of Assam, (2) the Superintendent of Taxes, Dibrugarh and (3) the Assistant Commissioner of Taxes, Jorhat, have prayed for a writ of certiorari quashing the judgmentb and order dated 28th April, 1972, passed by the Assam Board of Revenue in Cases Nos. 69-70 STA/70.
2. The facts of these cases may be briefly stated as follows :
Opposite party No. 1, Garodia Brothers, took a contract from the Public Works Department for collection, breaking and supply of stones from the Dilli quarry. The Superintendent of Taxes, Dibrugarh, assessed tax on opposite party No. 1 for supply of gravels, boulders, etc., to the Public Works Department treating the transactions to be "sales". The periods involved are periods ending 30th September, 1968 and 31st March, 1969. Against these orders opposite party No. 1 preferred two appeals to the Assistant Commissioner of Taxes, Jorhat, contending, inter alia, that there were no sales but only execution of works contract. But the Assistant Commissioner of Taxes, .Jorhat, rejected the two appeals by his orders dated 27th June, 1970.
3. Thereafter opposite party No. 1 filed two appeals before the Board of Revenue under Section 31A of the Assam Sales Tax Act, 1947, hereinafter referred to as "the Act" and these two appeals were numbered as Cases Nos. 69-70 STA/70.
4. The Board of Revenue allowed the two appeals, set aside the appellate orders dated 27th June, 1970, passed by the Assistant Commissioner of Taxes, Jorhat, as well as the assessment orders dated 31st December, 1969, passed by the Superintendent of Taxes, Dibrugarh. Hence these writ petitions.
5. Mr. J.P. Bhattacharjee, the learned counsel for the opposite party No. 1, has raised a preliminary point as to the maintainability of the petitions under Article 226/227 of the Constitution of India in the instant cases.
6. Section 30(1) of the Act provides for appeal and it reads as follows :
30. Appeal.-(1) Any dealer objecting to an order of assessment or penalty passed under this Act may, within thirty days from the date of the service of such order, appeal to the prescribed authority, against such assessment or penalty :
Provided that no appeal shall be entertained by the said authority unless he is satisfied that the amount of tax assessed or the penalty levied, if not otherwise directed by him, has been paid :
Provided further that the authority before whom the appeal is filed may admit it after the expiration of thirty days, if such authority is satisfied that for reasons beyond the control of the appellant or for any other sufficient cause it could not be filed within time.
7. In the instant cases, the dealer filed appeals under Section 30 of the Act against the assessment orders dated 31st December, 1969, before the Assistant Commissioner of Taxes, Jorhat.
8. It may be noticed that right of appeal has been given to the dealer and not to any of the taxing authorities.
9. Section 31A(1) deals with appeal to the Board, which reads as follows:
31A. Appeal to the Board.-(1) Any dealer aggrieved by an order passed in appeal under Section 30 or passed in revision under Sub-section (1) of Section 31 may appeal to the Board within sixty days of the date on which such order is communicated to him.
10. sub-section (4) of section 31a reads as follows : (4) The Board may, after giving the dealer an opportunity of being heard, pass such orders thereon as it thinks fit and shall communicate any such orders to the dealer and to the Commissioner.
11. Here also right of appeal has been granted to the aggrieved dealer and not to any taxing authority.
12. Section 32 deals with reference. Section 32(1) reads as follows : Within sixty days from the date of service of any order under Section 31A, the dealer may, by petition in writing, require the Board to refer to the High Court any question of law arising out of such order of the Board or the Board may make such reference out of its own motion. Where the petition is made by a dealer, it shall be accompanied by a fee of one hundred rupees.
13. Under Sub-section (3) of Section 32, the Board may reject the application under Sub-section (1).
14. Sub-section (4) of Section 32 reads as follows: Where the application under Sub-section (1) is rejected on the ground that no question of law arises and where no action is taken by the applicant under Sub-section (3), he may, within ninety days from the date of such rejection, apply to the High Court against the order rejecting the application and, if upon receipt of such an application, the High Court is not satisfied with the correctness of the decision, it may require the Board to state the case and refer it and, on receipt of any such requisition, the Board shall state and refer the case accordingly.
15. Sub-section (7) of Section 32 reads as follows : The High Court upon the hearing of any such case shall decide the question of law raised thereby and shall deliver its judgment thereon containing the grounds on which such decision is founded and shall send to the Board a copy of such judgment under the seal of the Court and signature of the Registrar and the Board shall, on receipt of the copy of judgment, order disposal of the case accordingly.
16. Going through the provisions of section 32 also it is found that at the instance of the dealer or on its own motion the Board may refer any question of law arising out of its order to the High Court. Here also no taxing authority under the Act has been given the right of filing an application for reference unlike the provisions of Section 256(1) of the Income-tax Act, 1961. Thus we find that the original assessment order made by the Superintendent of Taxes may be appealed against by the dealer. If no appeal is filed by the dealer then that order is binding on both the dealer as well as the department.
17. Similarly, from the appellate order of the Assistant Commissioner of Taxes the dealer may prefer an appeal before the Assam Board of Revenue. But if he does not file any appeal that decision of the Assistant Commissioner of Taxes would be binding on the dealer as well as the department. The department also has not been given any right to make any application to refer any question of law arising out of the order of the Board. So the Board's order is binding on the department.
18. At the instance of the dealer or on its own motion the Board may refer any question of law arising out of its order. But if neither the dealer requires the Board to refer to the High Court any question of law, nor the Board suo motu refers any question of law, the Board's order remains binding on the dealer and the department in view of the scheme of the Assam Sales Tax Act, 1947.
19. Section 8 of the Act reads as follows :
8. Taxing authorities.-(1) The State Government may, for carrying out the purposes of this Act, appoint a Commissioner of Taxes and such other persons to assist him as it thinks fit.
(2) Persons appointed under Sub-section (1) shall exercise such powers as may be conferred and perform such duties as may be required, by or under this Act.
(3) All persons appointed under Sub-section (1) shall be deemed to be public servants within the meaning of Section 21 of the Indian Penal Code (Act XIV of 1860).
20. Taxing authorities have been prescribed under Rule 3(1) of the Assam Sales Tax Rules, 1947, which reads as follows :
3. (1) Taxing authorities.-There shall be the following taxing authorities to assist the Commissioner :-
(i) Deputy Commissioners of Taxes,
(ii) Assistant Commissioners of Taxes (Appeals),
(iii) Assistant Commissioners of Taxes,
(iv) Superintendents of Taxes,
(v) Inspectors of Taxes,
(vi)All Assam Investigation Officers,
(vii) Any other persons appointed as such by the State Government.
21. Thus it is found that the taxing authorities under the Act include the Commissioner, Deputy Commissioners of Taxes, Assistant Commissioners of Taxes (Appeals), Assistant Commissioners of Taxes, Superintendents of Taxes, Inspectors of Taxes, All Assam Investigation Officers and any other persons appointed as such by the State Government.
22. All the persons appointed as taxing authorities shall have such powers as may be conferred and perform such duties as may be required by or under this Act. That being the position, the Superintendent of Taxes and the Assistant Commissioner of Taxes in the instant cases are bound by the order of the Assam Board of Revenue and they are not entitled to challenge the order of the Board as has been done in the instant cases. All the powers under the Act are invested on the Commissioner of Taxes, who is empowered under Section 60 of the Act to delegate subject to the restrictions and conditions prescribed by the Rules made under the Act any of his powers to any person appointed under Section 8 to assist him.
23. That being so, if the Commissioner or any other taxing authority prescribed under the rule is not entitled to challenge the order of the Board, it is doubtful whether the State of Assam as such can come and challenge the order of the Board passed under the Act. Considering the materials on record the Board has found as follows : The appellant has contended that at no stage did the ownership in stones ever passed on from the Forest Department to him. He simply carried the specified quantity of stones from the quarry to wherever the P.W.D. wanted it and charged for carrying and stacking the stones. It is also seen that the appellant had no authority to quarry more quantity than asked for by the P.W.D. He also could not dispose it of to any other person. Thus it is clear that the appellant was not free to obtain as much quantity of stones from the Forest Department quarry as he liked and sell it to any and everybody according to his own sweet will. If the appellant acquired any title or ownership of the stones he should have been free to dispose of the same as he wished. But it is seen that this was not so. Hence we are inclined to accept the contention of the learned Advocate for the appellant that no sale was involved in the transaction and, as such, these transactions are not liable to assessment under the Assam Sales Tax Act, 1947.
24. Thus it is seen that the Board has categorically held that no sale was involved in the transactions carried on by opposite party No. 1 and, therefore, the provisions of the Assam Sales Tax Act, 1947, were not attracted to the transactions.
25. This finding of the Board is supported by the decision of the Supreme Court in Commissioner Of Sales Tax, M.P v. Purshottam Premji. [1970] 26 S.T.C. 38 (S.C.) wherein the Supreme Court has observed as follows:
The fact that the railway had provided in the agreement that the assessee shall pay the royalty due to the State Government does not in any manner detract from the legal position that the railway was the owner of the quarry. It is merely an arrangement for the payment of a royalty.
In C.B. Gosain v. State of Orissa [1964] 2 S.C.R. 879 (S.C.), this court ruled that for finding out whether a contract is one of work done and materials found or one for sale of goods depends on its essence. If not of its essence that a chattel should be produced and transferred as a chattel, then it may be a contract for work done and materials found and not a contract for sale of goods.
The primary difference between a contract for work or service and a contract for sale of goods is that in the former there is in the person performing work or rendering service no property in the thing produced as a whole notwithstanding that a part or even the whole of the materials used by him may have been his property. In the case of a contract for sale, the thing produced as a whole has individual existence as the sole property of the party who produced it, at some time before delivery and the property therein passes only under the contract relating thereto to the other party for price. Mere transfer of property in goods used in the performance of a contract is not sufficient; to constitute a sale there must be an agreement express or implied relating to the sale of goods and completion of the agreement by passing of title in the very goods contracted to be sold. Ultimately, the true effect of an accretion made pursuant to a contract has to be judged, not by an artificial rule that the accretion may be presumed to have become byb virtue of affixing to a chattel, part of that chattel, but from the intention of the parties to the contract: see Putnaik and Co. v. State of Orissa [1965] 2 S.C.R. 782 (S.C).
26. Considering the materials on record the Board has found that there were no sales involved in the transactions in the instant cases and, therefore, no tax is leviable under the Assam Sales Tax Act, 1947.
27. In the result, we find that in any view of the matter there is no ground to interfere with the impugned order of the Board of Revenue in our writ jurisdiction.
28. The petitions are accordingly rejected. The rules are discharged. We, however, make no order as to costs.
M. Sadanandaswamy, J.
29. I agree
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