The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK STREV No.46 of 2002 M/s. Hindustan Lever Ltd., Cuttack Petitioner M/s. S. C. Lal and associates, Advocates …. Order No. 05. -versus- State of Orissa, represented through the Commissioner of Sales Tax, Orissa …. Opposite Party
Legal Reasoning
Mr. S. S. Padhy, ASC for Revenue Department CORAM: THE CHIEF JUSTICE JUSTICE R. K. PATTANAIK
Decision
ORDER 21.03.2022 Dr. S. Muralidhar, CJ. 1. The following four questions of law were framed by this Court while admitting this revision petition by the Assessee on 10th July, 2006: “i. Whether the Tribunal was justified in upholding the decision of the Ld. Assistant Commissioner in applying Orissa Sales Tax @12% on the sale of huggies? ii. Whether the Tribunal was justified in upholding the finding of the Ld. Assistant Commissioner regarding claim of deduction of the trade discount while at the same time holding that “law permits such a deduction on account of trade discount and whether such finding is contradictory? iii. Whether in the facts and circumstances of the case, while the revenue had failed to discharge its burden by showing the details of the consignment alleged to be purchase suppression by making a cryptic reference to the same in the turnover by alleged fraud report and enhancing Rs.1,01,58,560.00 i.e., by 10 times, the tribunal was the Page 1 of 5 justified Commissioner? in confirming the finding of the Assistant iv. Whether the Tribunal was right in not allowing the tax adjustment paid at the check gate in respect of tricycle, freezer, pushcart and stablizer?” 2. The first question is an issue concerning classification. The case of the Assessee is that the product in question i.e. ‘huggies’, which are actually diapers, falls under Entry 84 of List C of Schedule to the Orissa Sales Tax Act, 1947 which reads “Hosiery goods and Readymade garments” and are exigible to 4% sales tax. 3. In rejecting such contention, the Assistant Commissioner of Sales Tax (ACST), Cuttack has noted that another product of the Assessee, ‘kotex’, which is a sanitary napkin, has been treated as such and classified as falling under the residual entry making it exigible to 12% tax. The ACST has concluded that given the nature of the function performed by the diapers i.e. huggies, they would be no different from sanitary napkins inasmuch as, they are meant to absorb body fluids. 4. The Orissa Sales Tax, Cuttack (Tribunal) has in the order dated 7th October, 2002 concurred with the above view of the ACST. 5. Learned counsel for the Petitioner urges that ‘huggies’, which are diapers, should be treated as ‘readymade garments’ although they may not be ‘hosiery’. This Court is unable to agree with such submission. Such diapers are usually worn as under garments and Page 2 of 5 cannot be properly understood even in commercial parlance, as ‘readymade garments’. Consequently, the Court is unable to agree with the contention of the Assessee that ‘huggies’ should be classified as ‘Hosiery goods and Readymade garments’. Question (i) is therefore answered in favour of the Department and against the Assessee by holding that the Tribunal was justified in upholding the order of the ACST in this regard. 6. Question (ii) concerns the claim for deduction of trade discount. Reliance is placed by learned counsel for the Assessee on the decision of the Supreme Court of India in IFB Industries Ltd. v. State of Kerala AIR 2012 SC 1468, which supports the contention of the Assessee. 7. In fact, the Tribunal has in the impugned order accepted the plea of the Assessee but in the operative portion of the order on this issue has upheld the order of the Sales Tax Officer (STO) declining deduction of the trade discount. Clearly, this is an internally illogical conclusion of the Tribunal. Consequently, question (ii) is answered in favour of the Assessee and against the Department by holding that the Tribunal was not justified in upholding the finding of the ACST and the STO who declined the claim for deduction of trade discount. 8. As regard question (iii), learned counsel for the Assessee submits that of the 45 consignments which were sent by way of branch Page 3 of 5 transfer, explanation could not be offered by the Assessee by producing documents in respect of one container. It is seen that despite opportunities, the Assessee could not produce evidence to explain the branch transfer in respect of that container. It is seen that the AO has enhanced the turnover by 10 times by treating this as ‘fraud’. The Court is of the view that enhancement by 10 times may be disproportionate and, therefore, modifies the impugned assessment order, as affirmed by the ACST and the Tribunal, from 10 times to 5 times the turnover. The question (iii) answered accordingly. 9. As regards question (iv), while learned counsel for the Department refers to Section 9(3) of the Orissa Sales Tax Act, 1947 (OST Act), which mandates the incorporation of the goods being dealt with by the dealer in the Registration Certificate (RC), learned counsel for the Assessee refers to the 3rd proviso of Rule 36 of the Orissa Sales Tax Rules, 1947 (OST Rules), which permits adjustment of the tax paid at the check-post or barrier against the admitted tax payable by the dealer. It is submitted that in this case, the tax on the tricycle, freezer, pushcart and stabilizer paid by the Assessee at the check-post was wrongly refused to be adjusted by the AO and both the ACST and the Tribunal erroneously affirmed such order. 10. The Court is unable to agree with the above submissions of the Assessee. Although the RC of the Assessee incorporates ‘ice Page 4 of 5 cream’ which the Assessee deals in, it does not contain the above 4 items viz., tricycle, freezer, pushcart and stabilizer. While this may be incidental to the selling of ice cream, unless these items are specifically incorporated in the RC, the 3rd proviso to Rule 36 will not stand attracted. Consequently, the Court is unable to agree with the submission of the Assessee and upholds the findings of the AO as affirmed by the Tribunal. Question (iv) accordingly answered against the Assessee and in favour of the Department. 11. The revision petition is disposed of in the above terms. Issue urgent certified copy of this order as per rules. Chief Justice (Dr. S. Muralidhar) M. Panda (R. K. Pattanaik) Judge Page 5 of 5