Arun Chandra Roy vs Assistant Commissioner of Commercial Taxes

D. Basu, J.—This Rule involves an interpretation and application of item No. 26 of Schedule I of the Bengal Finance (Sales Tax) Act, 1941, which says as follows:

Water, but not aerated or mineral water when sold in bottles and sealed containers.

This Schedule is issued in pursuance of the provisions of Section 6 of the Act which deals with tax-free goods. The result is that the sale of any sort of water, which includes aerated water, would be exempted from sales tax under the Bengal Act excepting when the aerated or mineral water is sold in bottles and sealed containers. The very fact that aerated or mineral water is stated as an exception to the word ''water'' shows that the term ''water'' is used in this context in its technical sense instead of the literal meaning of water which we ordinarily drink. Therefore, when mineral water is sold in any form other than as such put in a bottle or sealed container, it cannot be taxed. In the instant case, the Petitioner has been assessed with sales tax for sale of mineral water of some quantity which was not sold and charged from the customers in its bottled condition.

To be more precise, the Petitioner who is the owner of a hotel and restaurant with a bar purchased bottled aerated water during the tax period in question worth Rs. 9,487 05 np. (Rupees nine thousand four hundred eighty-seven and five naye paisa). Out of that quantity he showed a sale of Rs. 4.19.69 np. for the purpose of taxation alleging that the quantity represented by that figure was sold as aerated water to customer in their bottled condition. But, as regards the rest of the stock, the Petitioner''s case is that that was supplied free to consumers with wine at the bar in the form of mixture, i.e. added to the liquor purchased by them and without charging anything extra for the addition of mineral water. Prima facie, this is not a sale of the aerated water in bottle and would come under the exception of item No. 26, but the appellate officer by his order at annEx. D has overcome this difficulty by a two fold reasoning. Firstly, he has argued that the Petitioner has not taken upon himself the business of a charity as a wine dealer making gratuitous sale of mineral water to his customers at the bar This, of course, as has been rightly argued on behalf of the Petitioners, is little more than an assumption. Devotees of the cult of Vaishnavism would not certainly open a liquor bar. But there is nothing to prevent a prudent trader from offering gratuitous supplies of incidental materials and goods in order to attract customers in a world of competition. Whether they have charged extra for the mineral water or not is a question of fact and not a reasoning or assumption. The appellate officer did not go into this question of fact on the further reasoning that:

If it is not separately charged in the bill, the assessing authority is within his competence to estimate the price having had" regard to all available data.

In other words, his reasoning is that, even if the bill does not show any extra amount having been charged for the mineral water, the assessing authority can come to that conclusion from other material data. But then the question arises, what is that other material data ? The only data which is relied upon by the assessing authority is an examination of the Petitioner''s books of accounts showing the purchase of a particular quantity of aerated water as to which only a fraction is shown as a sale in the Petitioner''s return. That this is not an infallible reasoning would be apparent from the consideration that the same situation may happen even if the quantity purchased for stock was lost by theft, damage or destruction, by personal consumption and the like. In such cases, the taxing authority cannot say that because the particular quantity has been purchased the sale must be equivalent. The second reason which is offered by the appellate authority is that even in the case of mineral water being supplied with wine in glasses, there is involved a sale of the bottles. As soon as the bottles are used for the mixture, there is an appropriation of the goods in the transaction with the customers. This again is fallacious inasmuch as the concept of sale includes several ingredients apart from the transfer of property, and perhaps the most important of them is the consideration or payment of price.

So far as I understand, there is nothing in jurisprudence in the nature of a gratuitous sale. We, therefore, ultimately come to the same question which was posed at the outset, namely, whether the Petitioner has charged anything extra over the money due for the wine in consideration of the mineral water supplied to from the mixture which was supplied to the customers at the bar. This is the proper line of approach which has got to be adopted in applying item No. 26 to the facts of this case. It is striking that this line of approach was adopted by the Assistant Commissioner of Commercial Taxes in respect of a previous period of assessment as per annEx. A and the statements relevant in this behalf are worth the paper producing that� Having gone through some of the bills and the entries in the books of accounts I am satisfied that the Appellant did not realize anything from the customer on account of mineral water served with wine....

It is evident that the Petitioner submitted all his books of accounts, cash memos, and sales registers which are the relevant materials to come to a finding on the point before the assessing authority for the disputed period as well, but no finding comparable to the above, just quoted, was arrived at. The statements at annEx. A show that it is possible to come to such a finding from the cash memos., bills etc, which are kept by the Petitioner and, as a matter of fact, it has never been urged before me that there have been any sales without any cash memos, or bills.

A question of res judicata was raised before me on behalf of the Petitioner to urge that having taken the view at annx. A the Respondents should not come to a different conclusion for a successive period. It has, however, been held in various cases of the Supreme Court that in the case of taxation for different periods the different periods constitute different causes of action and, as a matter of fact, the Assessee also may resort to different trade practices in different years. It is difficult, therefore, to apply the doctrine of res judicata in a case like the instant one, but at the same time there is no reason why the Respondents should not give some consideration and respect for the finding arrived at by an officer of similar rank and status in a previous year.

Above all, there is no reason why they should come to a quasi-judicial decision without adverting to the proper requirements of item No. 26 of Schedule I of the Bengal Finance (Sales Tax) Act, 1941, the exception to which gives them the jurisdiction to tax. Much was said about the onus upon the Petitioner, but in a case of taxation and particularly where the jurisdiction is given by an exceptional provision, it cannot, be said that the assessing authority has little to do provided the Petitioner has placed all the materials in his possession before the assessing authority. In this view of the matter, I am satisfied that the original order of assessment and the appellate order impugned in this case must be quashed and a fresh determination should be arrived at on a re-examination of the materials produced by the Petitioner and further materials, if available, under the law, as to whether the Petitioner did charge any sum extra from the customers on account of supply of mineral water by way of mixture with liquor supplied or, in other words, whether the price of the mixture was charged at a rate higher than the price which is charged from a customer who does not like to have mineral water with his liquor. If this task is impossible, the Respondents should give up the venture of assessing the Petitioner If it is possible, they are to come to a fresh decision in the light of the observations made herein.

The impugned orders are, accordingly, set aside and the case is sent back to the assessing authority who is the Respondent No. 2 for a determination in accordance with law as explained herein.

The Rule is made absolute but without any order as to costs.