Labanya Dhar Bania vs State of Assam and Others

Heard Mr. M. K. Choudhury, learned counsel for the petitioner and also Mr. A. K. Thakur, learned State counsel.

This writ petition is directed against the judgment of the Assam Administrative Tribunal dated 26.7.2000 passed in Case No. 71ATA/ 98. The petitioner filed the aforesaid case before the learned Tribunal challenging the order dated 5.2.1998 passed by the disciplinary authority imposing the following penalties :

(i) Withholding of promotion for the next 5 (five) years, and

(ii) Recovery of the pecuniary loss of Rs. 1,30,900.

The learned Tribunal by the impugned judgment has disposed of the case with the following observations :

"28. We are of the view that, instead of the penalties imposed in the final orders of the Governor of Assam (the Disciplinary Authority) under No. FTX.204/95/138 dated 5.2.1998, reiterated by the order under No. FTX.204/95/203 dated 17.6.1998 of the Governor of Assam, the following punishment against the appellant (Delinquent Official) would meet the ends of justice and we order accordingly.

(1) Withholding of promotion of the appellant for next five years from 5.2.1998, i.e., the date of passing of the final order No. FTX.204/95/136 dated 5.2.1998.

(2) Monthly recovery at the rate of Rs. 2000 (Rupees two thousand only) from the monthly pay of the appellant (Delinquent Official) upto the date of this judgment."

The charges framed by the disciplinary authority are that the petitioner had issued two certificates indicating that sale of unserviceable goods or old stock materials or waste product of obsolete or discarded machinery parts or accessories are not exigible to sales tax under the Sales Tax laws in Assam, and thereby he had caused pecuniary loss to the State exchequer to the tune of Rs. 1,30,900. The third charge is relatable to the certificates issued without authority of law: The enquiry officer submitted his report holding that all the three charges have been established. The enquiry report was acted upon and the penalties as indicated above have been imposed. The certificates issued by the writ petitioner on 5.10.1994 and 7.11.1994 are quoted below :

"TO WHOM IT MAY CONCERN

This is to certify that a dealer as defined in Section 2(b) of the C.S.T. Act/56 is liable to pay tax likewise a Government Deptt., which buys, sales, supplies or distribute goods except surplus or unservicable goods, old stores materials or waste products obsolute or discarded machineries or parts of accessories there of. There is no prescribed taxable quantum u/s 6(1) of the C.S.T. Act/56. It is, further, verified that items, which are purchased by the bidders through Lot No. DA/523SSTC/26/ 94-95 and DA/523SSTC/25, 29, 30/94-95 are fully exempted from tax/CST.

Date: 5.10.1994 Sd/- Place : Tezpur L. D. Bania Senior Superintendent of Taxes, Tezpur.

TO WHOM IT MAY CONCERN

CERTIFIED THAT THERE IS NO PRESCRIBED TAXABLE QUANTUM. HENCE EVERY DEALER BECOMES LIABLE TO ANY TAX UNDER THE CENTRAL SALES TAX ACT''56 IN RESPECT OF INTER-STATE SALES MADE BY HIM WITH EFFECT FROM THE DATE OF VERY FIRST INTER-STATE SALES AS PER SECTIONS 6(1) OF THE CENTRAL SALES TAX ACT 56. BUT GOVERNMENT (HEREINAFTER THE DEALER DEFINED, u/s 2(b) OF THE CENTRAL SALES TAX ACT 56) WHICH BUYS, SALES, SUPPLIES OR UNSERVICEABLE GOODS OR OLD STOCKS I MATERIALS OR WASTE PRODUCTS, OBSOLETE OR DISCARDED MACHINERY PARTS OR ACCESSORIES THEREOF FROM THE LIST ATTACHED AGAINST THE LOT NOS. DA/523/SSTC/17/94-95 AND LOT NO. I DA/523/SSTC/18/94-95. IT IS FOUND THAT THESE ARE EITHER SALES, SUPPLIES OR DISTRIBUTE GOODS EXCESS/ SURPLUS OR UNSERVICEABLE GOODS OR OLD STOCK, MATERIALS OR WASTES PRODUCTS OF OBSOLETE OR DISCARDED MACHINERY PARTS OR ACCESSORIES AND ACCORDINGLY IT IS NOT EXIGIBLE TO TAX SO, M/S GLOBE STEELS, 66/IC, G.T. ROAD, HOWRAH (CALCUTTA) IS NOT LIABLE TO PAYTAX.

Station: Tezpur Sd/- Date ; 7.11.1994 L. D.Bania Senior Supdt. Of Taxes, Tezpur."

The enquiry officer in his report with regard to the first charge observed that the act of the petitioner in issuing the certificates was in fragrant violation of the letter No. CTS. 18/84/45 dated 19.1.1985 issued by the Commissioner of Taxes calling upon all the Superintendent of Taxes not to issue any clarification or give any interpretation. With regard to the second charge, the enquiry Officer opined that no taxes were collected from Project Vartak, Tezpur and as such, the State exchequer suffered a loss of Rs. 1,30,900. With regard to the third charge it has been held that the certificates were issued in violation of the clear directives of the Commissioner.

Mr. M. K. Choudhury, learned counsel for the petitioner argued that as per provisions of the Assam General Sales Tax Act, a Central Govt. organisation is not liable to pay tax on sale proceeds of scrap materials sold on public auction casually and, as such there is no loss to the State exchequer as alleged. Mr. Choudhury further submitted that the Commissioner of Taxes has also no authority under the Act to issue any circular restraining the Superintendent of Taxes from clarifying or interpreting the provisions of law. As such Mr. Choudhury argued, the circular of 1985 issued by the Commissioner and alleged to have been violated by the writ petitioner is of no significance. According to him, the petitioner acted bona fide and issued the certificates which may at best be regarded as an error of judgment and, therefore, the penalties imposed are not sustainable in law. It is pointed out that the Project Vartak is a Central Govt. organisation and no sales tax is required to be paid by it in respect of sale proceeds collected by way of auction of scrap materials. Mr. Choudhury also relied upon the decision in the case of C.S. Kesavan v. State of Kerala, reported in 1972 STC 432 and argued that the ratio available in the judgment clearly show that the officers entrusted with quasi-judicial powers should have the freedom to take independent decision in accordance with the provisions of law without threat of any disciplinary action and that such officers cannot be subjected to disciplinary proceedings for expressing independent opinion. Even now the authority has not assessed any tax payable by Project Vartak on the sale of scrap materials and this omission on the part of the taxing authority indicates that proceeds of scrap materials collected by sale on public auction is not exigible to tax. Mr. Choudhury also relied upon the decision of the Hon''ble Supreme Court in the case of Union of India (UOI) and Others Vs. J. Ahmed, in support of his argument. In addition, he has also produced a letter dated 28th June, 1989 issued by the Deputy Commissioner of Taxes, Assam clarifying that Government Departments or undertaking which do not discharge commercial activities are not liable to pay tax on sale of their unserviceable stores as such sale does not constitute business as per Section 2(IB) of the Assam Sales Tax Act, 1947 and Assam Finance (Sales Tax) Act, 1956. The clarification issued on 28th June, 1989 is quoted below to clear the confusion :

"To The Superintendent of Taxes, Tezpur.

Sub :- Clarification in respect of realisation of tax from a buyer by a Government Department when disposing of their .............. .through Public Auction.

Ref: Your letter No. 6977 dated .......

Sir

With reference to the above, the following are clarified for favour of your information and needful.

Government departments or undertaking who do not discharge commercial activities are not liable to pay tax on sale of their unserviceable stores as such sale does not constitute business as per Section 2(IB) of the Assam Sales Tax Act, 1947 and Assam Finance (Sales Tax) Act, 1956.

But Government departments or undertakings who discharge commercial activities are liable to pay tax on sale of their old and serviceable stores hitherto used in their commercial activities as the sale being ancillary to their trade constitute "business" under the aforesaid provision''s. They can be registered under the appropriate provisions of law.

Sd/- (B. Bordoloi) Deputy Commissioner of Taxes, Assam, Guwahati."

Now the question is whether the certificates in question issued by the writ petitioner could be regarded as violative of the circular issued by the Commissioner of Taxes in the year 1985. Technically speaking, it is incumbent upon all the subordinate officers to fallow the directives issued by the Head of the Department. The Commissioner in the said circular specifically prohibited clarification or interpretation of the provisions of taxation law by any officer subordinate to him. This circular has no statutory force since the Commissioner under the Act has not been vested with any power to issue any direction to any of his subordinates restraining them from exercising their quasi-judicial function under the Act. However, the circular can at best be treated as an administrative direction. Insertion of Section 73A by the Assam General Sales Tax (Amendment) Act, 2000 empowering the Commissioner to issue such orders, instructions, directions and clarifications consistent with the provisions of Act and the Rules framed thereunder further reinforce the argument that the circular issued in 1985 was without any authority of law, its violation by an officer exercising quasi-judicial powers do not call for retribution.

The next question for consideration is whether any pecuniary loss has been caused to the State exchequer by the writ petitioner by his act of issuance of the certificates. This necessitates examination of the provisions of the Assam General Sales Tax Act, 1993. The learned Tribunal has held that the sale proceeds even on a casual sale by a Government organisation is exigible to sales tax. There is no dispute that Project Vartak is a Govt. of India organisation and the exemption certificates are not rentable to any dishonest intention on the part of the petitioner. It is inconceivable that the petitioner had entered into conspiracy with the Project Vartak authority to cause loss of revenue to the State exchequer for no gain on his part. No mala fide can be attributed in the instant act.

In the case of State of Tamil Nadu and another v. Board of Trustees of the Port of Madras, the Supreme Court with reference to Section 2(d) of the Tamil Nadu General Sales Tax Act, 1959 held as follows :

"13. Now the definition of "business" in Section 2(d) and In most of the sales tax statutes is an inclusive definition and includes "trade or business or manufacture, etc.". This itself shows that the Legislature has recognised that the word "business" is wider than the words "trade, commerce or manufacture, etc.". The word "business" though extensively used, is a word of indefinite import, in taxing statutes, it is normally used in the sense of an occupation, a profession... which occupies time, attention and labour of a person, normally with a profit-motive and there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive and not for sport or pleasure-( State of Andhra Pradesh Vs. Abdul Bakhi and Bros., Even if such profit motive is statutorily excluded from the definition of "business" yet the person could be doing "business"."

In the said judgment in para 14, the Supreme Court dealt with the words "carrying on business" and observed as follows :

"14. The word "carrying on business" requires something more than merely selling or buying, etc. Whether a person "carries on business" in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily he entered into with a profit-motive. [ Board of Revenue and Others Vs. A.M. Ansari and Others, Such profit-motive may, however, be statutorily excluded from the definition of "business" but still the person may be "carrying on business"."

Yet in another case, namely, Morarji Brothers (Import and Export) Pvt. Ltd. v. State of Maharashtra [1995] 99 STC 117 Bom , the Bombay High Court with reference to Bombay Sales Tax Act, 1959 held that sale of three used motor cars by the applicant, who was a dealer carrying on the business of manufacturing, selling and supplying of chemicals, did not amount to sale within the meaning of Section 3 read with Clauses (11) and (5A) of Section 2 of the Bombay Sates Tax Act, 1959. The Bombay High Court relied upon the ratio of the State of State of Gujarat Vs. Raipur Manufacturing Company Ltd., in coming to the above conclusion.

The radio available in the above decisions clearly indicate that casual sale of any material by a dealer not carrying on the business of selling or purchasing of such goods will not be exigible to Sales tax. The ratio available has to be examined in the light of the provisions of the Assam General Sales Tax Act, 1993 as amended from time to time.

Section 2 (10) of the Assam General Sales Tax Act, 1993 defines dealer. It reads as follows :

"(10) "Dealer" means any person who carries on the business of selling or purchasing goods in the State and includes -

(i) Government and local authority ;

The definition of dealer quoted above includes government and local authority. Therefore, Project Vartak, a government organisation is a dealer. A dealer is required to pay tax as per the provisions of Section 7 of the Act if he is carrying on the business of selling or purchasing of goods in the State within the meaning of Clause (5) of Section 2. Business in Clause (5) has been defined as follows :

"(5) "Business" includes -

(I) any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with the motive to make gain or profit an,d whether or not any gain or profit accrues therefrom :

(II) the execution of any works contract or transfer of the right to use any goods for any purpose under a lease ; and

(III) any transaction including the rendering of any service in connection with or incidental or ancillary to, such trade, commerce, manufacture, adventure, concern, works-contract or lease, or to the setting up of any such business."

It would appear from the definition of business that motive to make gain or profit is an essential ingredient to constitute business within the meaning of the Act. The charging Section 7 will come into operation only when it is shown that the organisation is carrying on the business of selling or purchasing scrap materials in the State with motive to make gain or profit. In the instant case, Project Vartak is not engaged in the business of selling or purchasing scrap materials in the State with the motive to make gain or profit, its main object being the construction of roads. Disposal of unserviceable scrap materials is not relatable to the regular course of business of this organisation. Therefore, sale of scrap materials by Project Vartak, in the opinion of this Court, is not exigible to sales tax.

The insertion of Clause (10a) by the Assam General Sales Tax (Amendment) Act. 2000 which received the assent of the Governor on 6th May, 2000 indicate the legislative intent of levying tax even in case of casual transactions involving buying, selling, supplying or distribution of goods in the State whether for cash or for deferred payment or for commission, remuneration or other valuable consideration. The law was otherwise when the certificates of exemption were issued by the writ petitioner. Insertion of this clause by the Amendment Act of 2000 clarifies the position prior to Gth May, 2000. There was indeed a vacuum in respect of casual transactions which has been sought to be filled-up by this amendment.

It would, therefore, appear that the writ petitioner as Superintendent of Taxes issued the certificates of exemption in exercise of his quasi-judicial powers in favour of a government organisation engaged in construction of roads and the certificates were not inconsistent with the provisions of the Act as In force on the date of issue. Therefore, no loss as alleged has been caused to the revenue of the State. The only, fault traceable in this case is that the petitioner had issued the certificates despite administrative directions given by the Commissioner in 1985. Yet the clarification given by the Deputy Commissioner of Taxes vide letter No. C.T. 8-20/06/ 169(A) dated 28th June, 1989 is mitigating of the alleged act. The certificates were issued bona fide in exercise of quasi-judicial powers long after the clarification given by the Deputy Commissioner. In the considered opinion of this Court, the petitioner ought not to have been proceeded against and penalised as has been done in the instant case. The Administrative Tribunal in their judgment under challenge fell into error in interpreting the provisions of Clause (5) and (10) of Section 2 of the Act of 1993 and hence, the judgment warrants reversal.

In the result, the writ petition is allowed. The impugned judgment dated 26.7.2000 passed by the Assam Administrative Tribunal in Case No. 71ATA/98 stands reversed and the penalties imposed by the disciplinary authority are hereby quashed.