GANESH PRASAD DIXIT vs. COMMISSIONER OF SALES TAX, MADHYA PRADESH

CIVIL APPEAL No. 940/1966Supreme Court[1969] 3 S.C.R. 49003 February 1969Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, A.N. GROVER7 pages
AI SummaryDismissed

What did the Supreme Court hold?

1. The Tribunal held that the terms of Rule 33 of the Madhya Pradesh General Sales Tax Rules, 1959, are not mandatory. Unless prejudice has resulted to the taxpayer due to insufficient time to show cause, proceedings are not liable to be set aside. As the appellants did not claim prejudice, the notices and assessment were not invalid. The Tribunal distinguished cases relied upon by the appellants concerning the Income-tax Act, 1922, where the provisions were held to be mandatory. 2. The Tribunal held that a person need not both purchase and sell goods to be considered a dealer; a person who carries on the business of buying is a dealer under Section 2(d). The consumption of goods in the manufacture of other goods for sale or consumption 'otherwise' makes the purchase price taxable under Section 7. Since the appellants were registered dealers, purchased taxable material in the course of business, and consumed it otherwise than in the manufacture of goods for sale, the purchase price was taxable. The Tribunal followed the Supreme Court's decision in State of A.P. v. H. Abdul Bakshi and the Madras High Court's decision in L.M.S. Sadak Thamby & Co. v. State of Madras.

What were the facts?

The appellants, a firm of building contractors registered as dealers under the Madhya Pradesh General Sales Tax Act, 1959, purchased building materials for use in their construction business. They failed to submit returns, leading the Sales Tax Officer to issue notices under Section 18(5) for best judgment assessment. The notices provided less than the ordinarily required 15 days for the appellants to show cause. The Sales Tax Officer assessed their turnover from sales as nil and levied purchase tax under Section 7 on the goods purchased for construction. Appeals to the Assistant Commissioner and Board of Revenue were dismissed. The High Court answered reference questions in favour of the revenue. The matter reached the Supreme Court via special leave appeals.

What were the issues?

1. Whether the notices issued under Section 18(5) of the Madhya Pradesh General Sales Tax Act, 1959, were invalid due to providing less than the ordinarily required 15 days for the assessee to show cause, rendering the subsequent assessment bad in law? - Assessee's contention: The notices were invalid, making the assessment illegal. - Revenue's contention: Not recorded. 2. Whether the appellants were 'dealers' under the Act, and consequently, the imposition of purchase tax under Section 7 was in order? - Assessee's contention: The appellants were not dealers as their sales turnover was nil, and the purchase tax was not leviable. - Revenue's contention: The appellants were dealers as they purchased goods in the course of business, and purchase tax was correctly imposed under Section 7 for consumption of goods otherwise than in the manufacture of goods for sale.

Which sections of the Income-tax Act were involved?

Section 18(5),Section 7,Section 2(d),Section 6

AI-generated summary — verify with the full judgment below

GANESH PRASAD DIXIT ll. COMMISSIONER OF SALES TAX, MADHYA PRADESH February 3, 1969 [J. C. SH;\11, V. R.AMASWAMI AND A. N. GROVER, JJ.] Madhya Pradesh General Sales Tax A.ct (2 of 1959), ss. 2(d) 7, 18(5) and Madhya Pradesh General Sales Tax Rules, 1959, r. 33-Notice for best judgment assessment-Time given to show cause less than 15 day~­ No prejudice to tax-payer-I/ proceedings liable to be set aside-Purchasu of building material-Material not resold but used in construction-- Building contractor if dealer-Purchase price of building maJerial ii liable to purchase-tax.

The appellants were a firm of building contractors and were registered as dealers under the Madhya Pradesh General Sales Tax, 1959. They were purchasing building materials, which were taxable under the Act, and were using them in the course of their business. The Sales-tax Olli· ·cer served notices upon. them under s. 18(5) calling upon them to show cause why best judgment assessment should not be made. The appellants did not offer any explanation for their failure to submit returns of their turnover, and the Sales~tax Officer assessed their turnover in respect of sales as nil and assessed them to pu

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