LexHINDUSTAN STEEL LTD. versus STATE OF ORISSA
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• A HINDUSTAN STEEL LTD. v. STATE OF ORISSA August 4, l!J69 753 B [J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A. N. GROVER, JJ.J c D E F G H Orissa Sales Tax Act (Orissa 14 of 1947), ss. 2(c) and (g), 9 and 25(1) (a)-Per.aliy, when may be imposed-'Dea/er'-Supply of one's building material to bJJilding contractor at agreed price-Sale price includ- ing storoge chargits-Transaction if constitutes sale under the Act- Whether business in building material, can be inferred. Between the y~ars 1954 and 1959 the appellant-company was erecting its factory buildings ,.end other ancillary constructions through buildings contractors. The appellant arranged for the manufacture of bricks and sold those bricks to the building contractors for the purpose of the appel- lant's constructions. The appellant also supplied for the same purpose steel, cement and other materials which it procured and stored. The difference between the sale price and the appellant's cost price was a flat percentage of the co.st price varying with the material. The ::ale price was agreed to be adjusted against the dues under the contract between the appe11ant and the building contractors. Treating the appellant as a dealer in the building materials the sa]es· tax authorities under the Orissa Sales Tax Act, 1947, directed the appellant to pay sales tax for ten quarters ending with December 31, '!958, and a penalty, in addition to the tax, for failure to register itself as a dealer. The Tribunal agreed on the liability to pay tax, reduced the penalty, and the High Court, on reference, confirmed the Tribunal's order. In appeal to this Court on the questions : (1) Whether the appellant sold building materials to the building contractors; (2) Whether the im- position of penalty for failure to register as a 'dealelr' was justified; and (3) Whether the appellant was a 'dealer' in respect of the building mate- rial supplied by it, HELD : ( 1) The supply of building material belonging to the appel- lant for an ajll'ee,d, price constituted a 'sale' as defined in s. 2(g) of the Act as the definition. stood at the relevant time. [756 EJ (2) Under ss. 9(1) and 25(1)(al of the Act a penalty may be im- posed for failure to register as a dealer. But the discretion to impose a penalty must be exercised judicially. A penalty will ordinarily be im- posed in cases where the party acts de1iberately in defiance of law. or is guilty of contumacious or dishonest conduct, or· acts in conscious dis- regard of its obligation; but not, in cases where there is a technical 01 venial breach of the i:tovisions of the Act or where the breach flows from a bona fide belief tbt! the offender is not liable to act in the manner pres· cribed by the otaQJte. (756 E-H] In the present case, those in charge of the affairs of the appellant, in failing to register it as a dealer, acted in the honest and genuine belief that the company was not a dealet; and therefore, assuming the appellant to be a 'dealer' no case for imposing penalty was made out. [757 A] (3) Undel: the terms of the tender submitted by the building con- tractors and the schedule annexed thereto, the appellant was to charge 754 S~PREME COURT REPORTS [1970] l SC.R. certain rates for the materials supplied by it. ·rhc excess pcrcenta~c over the specific:J rate in the c:1sc of building materials other th;1n hricks was agreed to be paid by the c-.Jn!ractdrs ac; stor.1g.c chargc.'i. "Ibcrc was nothing to show th.-it the cxczss price charged by 1he appellant to it.; con1ractors for bricks v.·as also for storage charges. But nci~h:!r the Trihun:il 11or thl.! High Court haJ referred to this aspect of the sale price nan1cly v.hl!ther the excess price v.·as for storage or for profit v.·ith respect to an~· of th.= building materials. Therefore, merely because the price charg~d to the contractors cxc!cded t~! price paid by the appellant for procuring the building materials it cannot be inferred that the tnotive of t/i(! uppcl/ant was to carry on business in building nJaterials for profir. (761 B-El CIVIL APPELLATE Jt;RJSDICTJOI': Civil Appeals Nos. 883 to 892 of 1966. A u Appeals by special leave from the judgment and order dated C December 3. 1964 of the Orissa High Coun in Special Jurisdiction Case~ Nos. 44 and 53 of 1963. C. K. Daphtary and D. N. M11kherjee, .for the appellant (ln all the appeals). D. Narsaraj11 and R. N. Sachthey, for the rcspondqnt (in all the app
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