# ' THE STATE OF ORISSA AND ANOTHER v. M/s. CHAKOBHAI GHELABHAI AND COMPANY

- **Citation:** [1961] 1 S.C.R. 719
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appea.1 No. 710of1957
- **Bench:** S. K. Das, M. Hidayatullah, K. c. DAS GUl'TA, J.C. SHAH a.nd N. RAJAGOPALA AYYANGAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-state-of-orissa-and-another-v-m-s-chakobhai-ghelabhai-and-company-2215
- **Pages:** 9

## Headnote

Sales Tax-Sales tax autlwrities-Whether courts~Levy of
fees on memorandum of appeal and application for revision-Whether taxes-Legislative competence-Place where sale effected-Question of law o~ fact-Issue of one notice for several quarters-Legality
-Orissa Sales Tax Act, z947 (Orissa I4 of I947), ss. 2(g), z2(5),
29(2)(s)-Orissa Sales Tax Rules, z947, rr. 20, 59-Government of
India Act, z935 (25 & 26 Geo. 5, Ch. 42). Seventh Schedule, List II,
Items I, 48, 54.
The respondent firm, which had its headquarters in Madhya
Pradesh and was, during the years 1948 to 1951, engaged in collecting bidi leaves from certain forest areas in Orissa and despatching them to various destinations outside the State of
Orissa, did not get itself registered as a dealer under the Orissa
Sales Tax Act, 1947, and did not submit a return in spite of the
notice issued to it. It was asked to show cause why a penalty
should not be imposed under s. 12(5) of the Act. The assessing
authority then proceeded to assess the tax to the best of its
judgment and determined the taxable turnover for each of the
twelve quarters, the first quarter ending on June 30, 1948, and
the last quarter ending on March 31, 195r. A penalty of Rs. 500
for each quarter was also imposed. The respondent's appeal to
the Assistant Collector of Sales Tax against the JJrders of assessment and penalty was dismissed, and the revision petition was
rejected by the Collector of Commercial Taxes as having been
filed out of time. One of the pleas taken before the appellate
authority was that the respondent was not a dealer in Orissa
inasmuch as the sales of bidi leave·s were not effected in Orissa,
but at the hearing of the appeal it wa..admitted by the respondent's pleader that the sales were completed in Orissa. The High
Court, on a writ petition filed by the respondent, set aside the
the orders of assessment and penalty on the grounds, inter alia,
(1) that the assessment orders were bad because of the repeal of
the second proviso to s. 2(g) of the Act defining " sale ", by the
Adaptation of Laws Order, 1950, (2) that the levy of fees on the
memorandum of appeal and the application in revision on a
graded scale under r. 59 read with s. 29(2)(s) of the Act amounted to the imposition of a tax which was beyond the competence
of the State, and (3) that the notice issued nnder s. 12(5) of the
Act was not in accordance with law, inasmuch as separate notices were not issued for each quarter.
92
September 20 .
Stall of Orissa
v.
CAahobhai
Gh•l•bhai e.. Co.
S. K. Das J.
720
SUPREME COURT REPORTS
(1961]
Held, (1) that the question as to where a sale was completed depended on facts and was not a pure question of law and,
therefore, the admission made by the respondent's pleader was
binding on the respondent; and that as the admission brought
the sales within s. 2(g) of the Act, it was unnecessary to consider
the second proviso to s. 2(g) and the sales were liable to tax ;
(2) that the sales-tax authorities including the Assistant
Collector of Sales Tax and the Collector of Commercial Taxes,
though they exercised quasi-judicial functions under the Act,
were not courts in the strict sense of the term "Court " ;
(3) that fees levied under r. 59 read with s.-29(2)(s) of
the Act were not taxes but were imposed for services rendered
by a governmental agency. Section 29(2)(s) was not' invalid on
the ground of legislative incompetence and r. 59 did not go
beyond what was permitted under that section;
The Con1missianer, Hindu Religious Endowments, Madras v,
Sri Lakshmindra Thirtha Sttamiar of Sri Shirur Mutt, [1954)
S.C.R. 1005, relied on.
(4)
that the issue of one notice under s. 12(5) of the Act
for several quarters was not contrary to law as the section
makes refe.rence to a period which might consist of more than
one quarter.

## Text

•
;;;
1 S.C.R. SUPREME COURT REPORTS
719
'
THE STATE OF ORISSA AND ANOTHER
v.
M/s. CHAKOBHAI GHELABHAI AND
COMPANY
(S. K. DAS, M. HIDAYATULLAH, K. c. DAS GUl'TA,
J.C. SHAH a.nd N. RAJAGOPALA AYYANGAR, JJ.)
Sales Tax-Sales tax autlwrities-Whether courts~Levy of
fees on memorandum of appeal and application for revision-Whether taxes-Legislative competence-Place where sale effected-Question of law o~ fact-Issue of one notice for several quarters-Legality
-Orissa Sales Tax Act, z947 (Orissa I4 of I947), ss. 2(g), z2(5),
29(2)(s)-Orissa Sales Tax Rules, z947, rr. 20, 59-Government of
India Act, z935 (25 & 26 Geo. 5, Ch. 42). Seventh Schedule, List II,
Items I, 48, 54.
The respondent firm, which had its headquarters in Madhya
Pradesh and was, during the years 1948 to 1951, engaged in collecting bidi leaves from certain forest areas in Orissa and despatching them to various destinations outside the State of
Orissa, did not get itself registered as a dealer under the Orissa
Sales Tax Act, 1947, and did not submit a return in spite of the
notice issued to it. It was asked to show cause why a penalty
should not be imposed under s. 12(5) of the Act. The assessing
authority then proceeded to assess the tax to the best of its
judgment and determined the taxable turnover for each of the
twelve quarters, the first quarter ending on June 30, 1948, and
the last quarter ending on March 31, 195r. A penalty of Rs. 500
for each quarter was also imposed. The respondent's appeal to
the Assistant Collector of Sales Tax against the JJrders of assessment and penalty was dismissed, and the revision petition was
rejected by the Collector of Commercial Taxes as having been
filed out of time. One of the pleas taken before the appellate
authority was that the respondent was not a dealer in Orissa
inasmuch as the sales of bidi leave·s were not effected in Orissa,
but at the hearing of the appeal it wa..admitted by the respondent's pleader that the sales were completed in Orissa. The High
Court, on a writ petition filed by the respondent, set aside the
the orders of assessment and penalty on the grounds, inter alia,
(1) that the assessment orders were bad because of the repeal of
the second proviso to s. 2(g) of the Act defining " sale ", by the
Adaptation of Laws Order, 1950, (2) that the levy of fees on the
memorandum of appeal and the application in revision on a
graded scale under r. 59 read with s. 29(2)(s) of the Act amounted to the imposition of a tax which was beyond the competence
of the State, and (3) that the notice issued nnder s. 12(5) of the
Act was not in accordance with law, inasmuch as separate notices were not issued for each quarter.
92
September 20 .
Stall of Orissa
v.
CAahobhai
Gh•l•bhai e.. Co.
S. K. Das J.
720
SUPREME COURT REPORTS
(1961]
Held, (1) that the question as to where a sale was completed depended on facts and was not a pure question of law and,
therefore, the admission made by the respondent's pleader was
binding on the respondent; and that as the admission brought
the sales within s. 2(g) of the Act, it was unnecessary to consider
the second proviso to s. 2(g) and the sales were liable to tax ;
(2) that the sales-tax authorities including the Assistant
Collector of Sales Tax and the Collector of Commercial Taxes,
though they exercised quasi-judicial functions under the Act,
were not courts in the strict sense of the term "Court " ;
(3) that fees levied under r. 59 read with s.-29(2)(s) of
the Act were not taxes but were imposed for services rendered
by a governmental agency. Section 29(2)(s) was not' invalid on
the ground of legislative incompetence and r. 59 did not go
beyond what was permitted under that section;
The Con1missianer, Hindu Religious Endowments, Madras v,
Sri Lakshmindra Thirtha Sttamiar of Sri Shirur Mutt, [1954)
S.C.R. 1005, relied on.
(4)
that the issue of one notice under s. 12(5) of the Act
for several quarters was not contrary to law as the section
makes refe.rence to a period which might consist of more than
one quarter.
CIVIL
APPELLATE JURISDICTION : Civil Appea.1
No. 710of1957.
Appea.l from the judgment a.nd order da.ted September 5, 1955, of the Orise& High Court in 0. J.C. No. 92
of 1954.
N. 0. Chatterjee, H.J. Umrigar a.nd T. M. Sen, for
the a. ppella.n ts.
J. M. Thakar a.nd J. B. Dadachanji for the respondents.
R. Gopalakriahnan a.nd J. B. Dadachanji, for the
Intervener.
1960. September 20. The Judgment of the Court
wa.s delivered by
S. K. D.+.s J.-This is a.n a.ppea.l on a. certificate
granted by the High Court of Orissa..
The a.ppella.nts
a.re the Sta.te of Orissa. a.nd the Collector of Commercia.l Ta.xes, Orissa..
The respondent is a. pa.rtnership
firm ca.lied Messrs. Cha.kobha.i Ghela.bha.i a.nd Compa.ny
dealing in 'bidi' lea.ves.
The short fa.cts a.re these. The respondent firm ha.s
its hea.dqua.rters in Ba.gbehera. in Ma.dhya. Pra.desh.
1 S.C.R. SUPREME COURT REPORTS
721
During the years 1948 to 1951 it was engaged in
'960
collecting 'bidi' leaves from certain forest areas in State of Orissa
Orissa. The leaves so collected were made up into
v.
bundles and stored in the respondent's godowns in
Chakobhai
Orissa. They were then sold and despatched tp Ghelabhai .s. Co.
various destinations outside the State of Orissa. The
--
respondent did not get itself registered as a dealer
5· K. Das J.
under the Orissa Sales Tax Act,, 1947 (Orissa Act XIV
of 1947), hereinafter called the Act. On July 21, 1950;
a notice was issued to the respondent by the Assistant Sales Tax Officer, Patna Circle, requiring it to
submit a return in Form No .. IV showing separately
the particulars of its turnover for each of the quarters
commencing October, 1947, and upto June 30, 1950.
The respondent .was also asked to•show cause why a
penalty should not be imposed on it under s. 12(5) of
the Act. To this notice the respondent sent a reply
to the effect, substantially, that it carried on no
selling business in Orissa and was, therefore under no
liability to register itself as a dealer in Orissa or to
pay sales tax under the ·Act. Thereafter, the respondent took no part in the assessment proceedings and
made no appearance before the assessing authority
exQept on June 30, 1951, when one of its partners
Narvaram Popatbhai appeared and said tha.t the
accounts were at Bagbehera and the despatches of
. 'bidi' leaves from Orissa were mixed up with other
despatches and, therefore, he was not in a position to
give a correct account of the business in Orissa. It
was admitted, however, that the 'bidi' leaves were
collected in Orissa, were processed and manufactured
for sale and then stored in godowus in Orissa; they
were then sold and despatched to different customers
outside Orissa.' The assessing authority held on the
materials before it that the transfer of property in
the 'bidi' leaves sold and despatched to customers as
aforesaid was completed in Orissa and the respondent
wilfully failed to get itself registered and to submit a
return of its turnover. The assessing authority then
proceeded to assess the tax to the best of its judgment
and determined the taxable turnover to be Rs. 61,250
for each of the twelve quarters, the first quarter ending
•
722
SUP.i<.EME COURT REPORTS
[1961]
on June 30, 1948, and the !&st quarter ending on
5101, of Oms• March 31, 1951. It also imposed a penalty of Rs. 500
v.
for each quarter. The orders of assessment were made
Chakobhai
on two dates-on July 4, 1951, for four quarters and
G1"1abhai <So Co. on August 29, 1951, for thr remaining eight quarters.
S. K. Das j. Against these orders of assessment the respondent
went up in appeal to the Assistant Collector of Sales
Tax, Sambalpur. One of the pleas taken before the
appellate authority was that the respondent was not
a dealer in Orissa inasmuch as the sales of' bidi 'leaves
were not effected in Orissa.. In the course of the
hearing of 'the appeal this plea was given up, and it
was admitted by the respondent's pleader that "the
sales were completed in Orissa ". The appeal was
then heard on the contentions that (1) the turnover
determined was excessive, and (2) that no penalty
should have been imposed. These contentions were
rejected by the appellate authority. The respondent
then moved in revision, but the revision pet.ition
having been filed out of time was rejected by the
Collector of Commercial Taxes, Orissa.
The respondent then moved the High Court of
Orissa. by means of a writ petition in which it was
contended that (I) the respondent was not a dealer in
Orissa ; (2) that the sales of the post-Constitution
period were sales within the meaning of the Explanation to Art. 286(l)(a) as it then stood and Orissa could
not tax them ; (3) that the notice under s. 12(5) of the
Act wa.s bad on various grounds; (4) that the fees
levied under rule 59 of the OriBBa Sales Tax Rules,
1947, on the respondent's memorandum of a.ppeal and
revision applica.tion were not justified in law; and
(5) that the assessment was illegally made and so also
the penalty under s. 12(5) of the Act. On these contentions the respondent a.sked for a. writ quashing the
assessment proceedings and the notices of dema.nd
and for a direction for a refund of the fees pa.id. The
High Court a.llowed the petition by its judgment and
order da.ted September 5, 1955. It set a.side the
a.ssessment orders, directed a. refund of the fees paid
and further made an order that the respondent shall
be directed " to furnish a. return of its transactions
1 S.C.R. SUPREME COURT REPORTS
723
under s. 11 for the period for which it had been served
i96o
with a. notice under s. 11(1) of the Act". In support
h ,, JI
State of Orissa
of its orders the High Court ca.me to t e iO owing
v.
findings: (1) that the assessment orders were bad
Chakobhai
because of the repeal of the second proviso to s. 2(g) Ghelabhai .s. Co.
of the Act defining "Sa.le'', by the Adaptation of
Laws Order, 1950; (2) that the levy of fees on a graded
5· K. Das J.
scale amounted to the imposition of a tax which was
unwarranted and beyond the rule ma.king power of
the State.Government; and (3) that the notice issued
under s. 12(5) was not in accordance with law.
On behalf of the appellants it has been .contended
that the High Court was in error in respect of all the
three findings at which it had arrived. As to the
finding of the High Court that the assessment orders
were bad because of the repeal of the second· proviso
to s. 2(g) of the Act, we think that the High Court
was clearly in error. In view of the admission ma.de
on behalf of the· respondent, it was quite unnecessary
to deal with the second proviso s. 2(g) of the Act or
to consider the effect of its repeal by the Adaptation
of Laws Order, 1950, or the effect of the saving clause
in para.graph 20 thereof. The admission on behalf of
the respondent, made in very clear terms as riicorded
by the appellate authority, was that the sales were
completed in Orissa. Section 2(g) of the Act states :
" S. 2(g)---:" sale " means, with all its grammatical
variations and cognate expre~sions, any transfer of
property in goods for cash or deferred payment or
other valuable consideration; including a transfer of
property· in goods involved in the execution of contract but does not include a mortgage, hypotheca.tion,
charge or pledge."
The admission made in this case clearly brings the
sales of' bidi' leaves within s. 2(g) of the Act; and as
the sales were completed in Orissa, they were liable to
tax under the Act. It was quite unnecessary to go to
the second proviso to s. 2(g) in view of the admission
of the respondent.
Learned Counsel for the respondent suggested that
the admission made by the respondent's pleader was
an admission on a question of law and, therefore, not
State of Orissa
v.
Chakobhai
Ghelabhai 6- Co.
S. K. Das j.
724
SCPRE.ME COURT REPORTS
[1961]
binding on the respondent. We do not agree. The
question where a sale is completed depends on facts
and is not a pure question of law. It is worthy of
note that at no stage sub•equent to the admission did
the respondent repudiate it or challenge its correctness.
Even in the w~it petition it was not stated
that a wrong admission had been ma.de ; on the contrary the appellate authority's order in which the
admission was set out was an annexure to the writ
petition. It is indeed true that is paragraph 13(a.) of
the writ petition a cont~ntion was raised with regard
to the sales of the post-Constitution period and a· refer.
ence was ma.de to the Explanation to Art. 286(l)(a.) as
it then stood. But the necessary a.verments to attract
the Explanation were not ma.de, and nowhere was it
stated that the goods were despatched outside Orissa.
for the purpose of consumption in the delivery State.
In other words, no foundation was la.id for making a
distinct.ion between the pre-Constitution and post-Constitut.ion sales, and with regard to a.II of them it was
admitted that they were completed in Orisea.-a.n admission which was never repudiated or challenged·. We
are, therefor!', of the opinion that the High Court. was
clearly in error in its first finding as to the unconstitutionality of the assessment orders made.
We think that the High Coun was also in error iu
its finding as to the legality of the fees levied on the
memorandum of appeal and the application in revisiun. Section 29 of the Act deals with the rule ma.king
power. It states:
"S. 29(1)-The State Government may, subject
to the condition of previous publication, make rules
for carrying out the purposes of this Act.
(2) In particular and without prejudice to the
generality of the foregoing power, such rules may
prescribe-
..................................................................
..................................................................
(s) the procedure for and other matters (including
fees) incidental to, the disposal of appeals and applications for revision and review under s. 23."
Rule 59 of tho Orissa Sales Tax Hules, 1947, so far as
it is relevant for our purpose says:-
' I
1 S.C.R. SUPREME COURT REPORTS
725
"R. 59. Fees-Subject to the provisions of rule
60 the following fees shall be payable:-
(i) ...........................
. ............................. !
(ii) On. a memorandum Five per cent of the
of appeal against an order· amount in dispute calof assessment or penalty or culated to the nearest
both or an application for rupee subject to a mini.
revision or review of such mum of one rupee and
order.
maximum of one hundred r·upees.
(iii) . . . . .. .. . . . ... . . . . . . . .. . . . . .............................. .
(iv) On an application One rupee. "
for revision.
The first question is if s. 29(2)(s) in so far as it empowers the State Government to make a rule prescrib.
ing fees for appeals and applications in revision was
within the legislative competence of the Provincial
Legislature. The Act. was enacted in 1947 and the
source of legislative power must be found in the
Government of India Act, 1935. Item 48 of List II
(Proviricial Legislative List) in the Seventh Schedule
of the ·said Act related to "Taxes on the sale of
goods " and item 54 read : " Fees in respect of any of
the matters in this list, but not including fees taken
in any court". Item 1 related inter alia to" constitution and organisation of all courts except the Federal
Court, and fees taken therein." The High Court held
that the assessing authorities including the Assistant
Collector of Sales Tax and the Collector of Commercial Taxes, Orissa, were not courts in the strict sense
of the term "Court", though they exercis.ed quasi.
judicial functions under the Act. We think that that
is a correct view .. But it does not necessarily follow
that the fees imposed under r. 59 read with s. 29(2)(s)
are illegal. U oder items 48 and 54 the then Provin.
cial Legislature had power to make a law for taxes on
the sale of goods and for fees in respect th')reof. Even
with regard to Court.fees, the Provincial Legislature
had power to make a law under item I. We do not
think that s. 29(2) (s) can be held to be bad on the
ground of legislative incompetence. Nor do we think
that r. 59 goes beyond what is permitted 'under
s. 29(2)(s).
The fees imposed a.re not taxes; they
State of .Orissa
v.
Chakobhai
Ghelabhai & Co.
S. K. Das].
726
SUPREME COURT REPORTS
[1961]
z96o
come within the expression " other matters (including
fees) incidental to the disposal of appeals and applicaState of Orissa
v.
tions for revision etc-".
We are unable to agree with
Chakobhai
the High Court that the word 'incidental' has referGh<labhai .s. Co. ence to a matter of casual nature only. The·procedure
for disposal of an appeal includes as a necessary incis. K. Das J. dental matter the filing of an appeal on a proper fee.
The distinction between a tax and a foo was considered by this Court in The Commissioner, Hindu Religious Endowments, Madras
v.
Sri
Lakshmindra
Thirtha Swamiar of Sri Shirur Mutt (1) and it is
unnecessary to repeat what was said there.
We consider that the fees imposed by r. 59 are for services
rendered by a Governmental agency and though ordinarily fees are uniform, there may be various kinds of
fees and it is not possible to formulate a definition
that would be applicable to all cases.
Now, the last finding of the Hfgh Court is that the
notice under s. 12(5) wa.s not in accordance with law.
Here again we think that the High Court was in
error. The notice was issued in Form no. VI, which
is a combined form for the purposes of ss. 11 and 12.
A foot-note appended to the form required the aBSessing authority to score out unneceBSary words. The
High Court points out that this was not done. We
are, however, unable to agree with the High Court
that the failure to score out unnecessary words made
the notice bad in law. The respondent sent a reply
to the notice and claimed that it was not a dealer in
Orissa. Obviously, the respondent had no difficulty
in understanding that the notice was one under
s. 12(5) of the Act. The notice stated in terms that the
respondent should show cause why a penalty should
not be imposed under s. 12{5) of the Act. Section 12(5)
as it stood at the relevant tinie was in these terms :
"S. 12(5). If upon information which has come
into his possession, the Collector is satisfied that any
dealer has been liable to pay tax under this Act in
respect of any period and has nevertheless wilfully
failed to apply for registration, the Collector shall,
after giving the dealer a reasonable opportunity of
being heard, assess, to the best of his judgment, the
- (1) [19,4) S.C.R. 1005,
"
l S.C.R. SUPREME COURT REPORTS
727·
amount of tax, if any, due from the dealer in respect
'960
of such period and all subsequent periods and the State of Orissa
Collector may direct that the dealer shall pay, by way
v.
of penalty, in addition to the amount so assessed, a
Chakobhai
sum not exceeding one and a -half times that amount." Ghetabhai 6- Co.
It has been argued before us that one notice was
issued for several quarters and an assessment was
5· K. Dr1;s f.,
made for each quarter sepaJ"ately-four quarters on
July 4, 1951, and eight quarters on August 29, 1951.
This, it is contended, was illegal. We are unable to
accept this contention· as correct. Section 12(5) talks
of a period, and the period may consist of more than
one quarter. The return has, however, to be submitted
in Form IV which read with r. 20 of the Orissa Sales
Tax Rules, 1947, requires the assessee to furnish
details of his turnover for each quarter. The assessment must, therefore, be made on the taxable turnover of each quarter.
Lastly, it has been argued that there was no notice
under s. 12(5) for the last three quarters and, therefore,-for those' quarters the assessment orders must be
held to be bad. The appellate authority has pointed
out that even for the last three quarters the assessing
officer, after he had made his orders of assessment in
the first five quarters, had directed the respondent to
produce his accounts, but no accounts were produced.
Section 12(5) enables the assessing authority to make
a best judgment assessment for "all subsequent
periods " after giving the dealer a reasonable oppor- '
tunity of being heard. Such an opportunity was
given in the present case even in respect of the last
three quarters, and we are. unable to hold that the
assessment for the last three quarters was bad.
For the reasons given above, we must allow this
appeal, set aside 'the judgment and order of the High
Court dated September 5, 1955, and disll).iss the writ
petition of the respondent. The appellants will be
entitled to their costs of the proceedings in the High
Court and in this Court.
Appeal allowed.
93