M/s. John Shalex Paints (Private) Limited, Bangalore vs State of Karnataka

These writ petitions have been filed praying to quash the assessment orders passed for the years 1983-84 and 1984-85 both dated 23-6-1993 (Annexures-A and B), passed by the respondent-Assistant Commissioner of Commercial Taxes, rejecting ''C'' form furnished by the petitioner and levying consequential taxes.

The petitioner is a manufacturer of cement paints and has set up a factory in Bangalore for that purpose. It has entered into an agreement with a renowned paint manufacturing company by the name M/s. Garware Paints Limited. The agreement inter alia provides that the petitioner shall manufacture cement paints in accordance with the company''s specifications and that the entire production from the factory shall be marketed under the Garware brand name "Bluker". The contractor i.e., the petitioner herein was required to give an undertaking that it will not use this facility to interfere with the marketing arrangements of the company. The agreement further provides that all the raw materials required for the manufacture of cement paint will be procured by the contractor in accordance with the detailed monthly requirements specified by the company. Sales tax returns for the years 1983-84 and 1984-85 were submitted by the petitioner showing certain stock transfers to have taken place from its factory premises at Bangalore to its Branch offices located in different States. The Assessing Authority, however, by two separate orders both dated 25-3-1988 brought to tax these transfers of stock treating the same to be inter-State sales.

Aggrieved by the orders passed by the Assessing Officers the petitioner filed two appeals before the Appellate Authority namely the Deputy Commissioner of Commercial Taxes, Bangalore. It was urged in support of these appeals that the transactions in question were not taxable as they were simple transfers of stock from the factory to its branches which did not attract the payment of any tax under the Sales Tax Act. The Appellate Authority, however, by a common order dated 18-2-1993 dismissed the appeals holding that the so-called transfers of stocks were in fact sales in favour of M/s. Garware Paints. The petitioner, thereafter, went up in appeal before the Karnataka Appellate Tribunal, Bangalore, which dismissed the appeals by the common judgment impugned in the present revision petitions, upholding other views taken by the Assessing Authority and the First Appellate Authority. Anyhow, the Tribunal, at the same time, directed the Assessing Authority to consider ''C'' form declaration produced before Appellate Authority, in accordance with law and grant the benefit of concession rate of tax, if admissible.

Then the petitioner has preferred Sales Tax Revision Petition Nos. 104 and 105 of 1992, before this Court which was also dismissed by the order dated 15-6-1994. In the meantime, pursuant to the directions of the Appellate Authority, the Assessing Officer on 26-3-1994, examined the ''C'' form produced by the petitioner. On examination it transpired that though the entire sales were effected to Madras, Calcutta and Hyderabad Branches of Garware Paints Limited, but the ''C'' form had been issued by its Bangalore Office. Accordingly, he brought the said defect to the notice of the petitioner requiring him to file his explanation/objections, whereupon, the learned Advocate appearing for the petitioner filed an objection dated 1-12-1992 inter alia stating that:

"My clients M/s. John Shelex Paints are called upon to furnish valid ''C'' forms furnished by M/s. Garware Paints, Bangalore are defective. I am directed to submit that the ''C'' forms are valid and complete in all respects to be accepted in full as your demand for ''C'' forms separately from M/s. Garware Paints (P) Ltd., Madras, Cochin and Hyderabad both in fact and in law are not sustainable".

Again, the proposition notice in Form 31-A was issued to the petitioner on 12-2-1993 proposing to reject the ''C'' form furnished by it and determine the turnover and tax liability as proposed in the said notice. According to the statement made in statement of objections, the said proposition notice was served upon the petitioner on 22-2-1993, but the petitioner did not opt to file any further objection and as such the impugned orders were passed.

The learned Counsel appearing for petitioner has assailed the impugned orders on the following grounds:-

(i) The Assessing Officer has passed the said orders while the revision applications were still pending before this Court;

(ii) No reasonable opportunity of hearing was granted to the petitioner before passing of the impugned orders;

and (iii) The form ''C'' issued by the Bangalore office was valid in law and as such the petitioner was entitled to avail the benefit of concessional rate of tax as provided in Central Sales Tax Act.

So far as the first ground is concerned it is suffice to state that admittedly no order had been passed by this Court restraining the Assessing Officer from carrying out the directions given by the Appellate Authority and the Tribunal during pendency of the revision petition before this Court. Moreover, this Court has ultimately affirmed the orders passed by the 2nd Appellate Authority. Therefore, this ground is of no consequences for assailing the impugned orders.

So far as the second ground is concerned, from the records and statement of objections as also the records of the case produced before this Court, it is quite clear that the petitioner was given sufficient opportunities either to file the valid ''C'' forms or to substantiate that the forms filed by it were valid in law for claiming concessional rate of tax. But, the petitioner failed to substantiate his case in either manner. Therefore, the ground taken that no reasonable opportunity was granted to the petitioner, to meet the objections is also not sustainable.

So far as the third ground is concerned, it is based on Rule 12(6) of the Central Sales Tax (Registration and Turnover) Rules, 1957, which read as under:

"12(6). Form ''C'' referred to in sub-rule (1), or, as the case may be, Form ''F'' referred to in sub-rule (5), shall be the one obtained by the purchasing dealer, or, as the case may be, the transferee in the State in which the goods covered by such form are delivered. Explanation.-Where, by reasons of the purchasing dealer not being registered under Section 7 in the State in which the goods covered by Form ''C'' referred to in sub-rule (1) are delivered, he is not able to obtain the said form in the State, Form ''C'' may be the one obtained by him in the State in which he is registered under the said section".

The bare reading of the above rule and explanation thereto, clearly show that it will apply only in such case where the purchasing dealer is not registered in the State in which the goods covered by such form are delivered. In the present case it has nowhere been pleaded and substantiated by the petitioner that M/s. Garware Paints Limited, was not registered at Madras, Calcutta and Hyderabad.

For the said reasons, in my opinion, the petitioner is not entitled to claim any relief in the present writ petition. Accordingly, these writ petitions are dismissed with consolidated costs assessed at Rs. 5,000/- to be recoverable as arrears of tax.