State of Bihar vs Bengal Chemical and Pharmaceutical Works Ltd.

Case Brief State of Bihar v/s Bengal Chemical and Pharmaceutical Works Ltd.

Citations: AIR 1954 Pat 14

Bench: Das, Ramaswami, Rai

Facts

For the eight quarters beginning on October 1, 1944, the Bhagalpur Circle Sales-tax Officer assessed sales tax of Rs. 250 plus a penalty of Rs. 375 for each of the eight quarters.

The assessee claimed that the Sales-tax Officer lacked authority to tax since the chemicals were sold in Calcutta rather than Bihar, and because the assessee was not a "dealer" as defined by the Act.

The transactions were completed in Bihar, according to the Sales-tax Officer, and the assessee was required to register as a dealer and pay sales tax on the sales to the Bhagalpore District Board and Bhagalpore Municipality.

The Sales-tax Officer calculated the taxable turnover to be Rs. 16,000 each quarter for the period 1-10-1944 to 30-9-1946.

The evaluation was completed on December 31, 1946. The penalty levied in each case, however, was remitted by the Assistant Commissioner of Sales-tax.

The assesses filed a revision application with the Commissioner, but it was denied. The assessee also filed a claim with the Board of Revenue, but it was denied.

Issues 

(1) Whether the assessee is a dealer under Section 2 (c) of the Bihar Sales Tax Act, based on the facts and circumstances of the case? 

(2) Whether the assessee made any sale in Bihar within the meaning of Section 2 (g) of the Bihar Sales Tax Act, based on the facts and circumstances of the case?"

(3)Whereas it is important to increase Bihar's revenue, and to that end, a tax on the sale of products in Bihar is imposed.

Judgment

The first issue to be answered is whether the assessee's sales of chemicals to the District Board and the Municipal Board of Bhagalpur should be considered in answering the second question.

Mr. Lal Narayan Sinha, testifying on behalf of the State of Bihar, agreed with Rai, J. and argued that the second question should be answered in terms of sales in general, rather than specific or individual sales. The phrase "any sale" appear in the second inquiry, which he has highlighted.

He has argued that the assessee adopted the attitude that he was not a dealer at all and thus was not liable to tax in Bihar; he did not raise the issue of his liability on individual sales until much later, when he requested a referral to the High Court; thus, the issue of liability on individual sales does not arise out of the order of assessment, the order in appeal, or the decision of the High Court. He argues that the assessment was a "best of judgment" assessment under Section 10 (3) of the Bihar Sales Tax Act, 1944, because the assessee had not filed any returns.

The assessee was assessed on the sale of chemicals such as alum, bleaching powder, and other medications to the Bhagalpur Municipality and the Bhagalpur District Board, according to the order of assessment under Section 10 of the Bihar Sales Tax Act, 1944.

The assessee rejected his responsibility to pay tax on the sales of the aforementioned chemicals to the Municipality and the District Board, according to paragraph 3 of the assessment order, on the grounds that the sales did not take place in Bihar.

The Sales Tax Officer stated that he had conducted inquiries at both the Municipal and District Board offices, and that he had seen the appropriate communication on the matter based on his order.

He proceeded on the assumption that the sales in Bihar had been finished, as he said in his directive.

It is obvious, and the assessee asserted at the earliest opportunity that the sales did not occur in Bihar, and thus he was not liable to tax on those sales under the Bihar Sales Tax Act, 1944.

In this case, it is hard to believe that the sales of chemicals to the District Board and the Municipality of Bhagalpur, as well as the assessee's asserted obligation thereto, arose from the assessment order.

The assessee pressed the point that the sales to the Bhagalpur Municipality and the Bhagalpur District Board were sales that did not take place in Bihar, according to the order of the Assistant Commissioner of Sales Tax, Bhagalpur, as well as the order of the Commissioner of Commercial Taxes, Bhagalpur.

It should be stated right away that there is no debate that a Provincial Legislature can adopt taxing laws imposing taxes on transactions completed outside of the Province, provided that such transactions have a sufficient and actual geographical connection with the taxing Province.

The question I'm examining here isn't one of constitutional legitimacy; rather, it's one of construction, namely, what is the real extent and meaning of the provisions of the Bihar Sales Tax Act, 1944.

Section 4 of the charge section specifies, among other things, that after the designated date, any dealer whose total turnover for the year exceeds a certain level is responsible to pay tax under the Act on sales made after that date.

It is undeniably true that a "dealer" is defined as a person who engages in the business of selling products in Bihar, and that the term "sale-price" refers to the amount payable to a dealer as valued consideration for the provision of any goods in Bihar, among other things.

The question is whether the words "supplying" or "supply" should be interpreted "noscitur a sociis," that is, whether meaning should be given to the word that it shares with the word "sale" that appears before it, based on Lord Bacon's principle that "copulatio verborum indicat ac-ceptationem in eodum sensu," that is, whether the coupling of words together indicates that they are to be understood in the same sense.