JUDGMENT
M.K. Kar Gupta, Member (T)
1. The two cases in RN-244 of 1996 and RN-245 of 1996 are taken up together as the facts of the two cases and the points of law involved in the two cases are identical. These are applications made under Section 8 of the West Bengal Taxation Tribunal Act, 1987, challenging the finding of the authorities below to the effect that the transfer of sales and marketing units of the applicant-company (in RN-244 of 1996) viz., Lakme Ltd., to Lakme Lever Ltd. (applicant in RN-245 of 1996) did not amount to an absolute transfer within the meaning of Section 99 of the West Bengal Sales Tax Act, 1994.
2. The case of the applicant in RN-244 of 1996 is that Lakme Ltd., is a company incorporated under the Indian Companies Act, 1913, having its branches all over India. One such branch in West Bengal was at 8B, Middleton street, Calcutta-700 001. Hindustan Lever Ltd., a company incorporated under the Indian Companies Act, 1913, is engaged in the development, manufacture, sale and distribution of various consumer products in India. Lakme Ltd. (in short, “Lakme”) and Hindusthan Lever Ltd. (in short, “HLL”) signed a memorandum of understanding to start jointly a company called Lakme Lever Ltd., (in short, “the company”) to take over the sales and marketing unit of Lakme. The 31st December, 1995 was fixed as the date of taking over at the close of that day’s business hours. An Extraordinary General Meeting of the shareholders of Lakme and HLL was held on January 5, 1996 wherein permission was accorded to the Board of Directors’ of Lakme to transfer by sale Lakme’s sales and marketing unit relating to the cosmetic division as a going concern to the company.
3. By an assignment made on the 29th March, 1996, Lakme agreed to sell and the company agreed to take over as a going concern Lakme’s existing sales and marketing units throughout India together with the net movable tangible assets and net current assets as on December 31, 1995 for a consideration and on the terms and conditions set out therein with effect from the first day of January, 1996 or such other date which may be mutually agreed upon. Pending finalisation of all legal formalities of the assignment, parties to the assignment mutually agreed that during the interim period to keep the sale going, Lakme will act as trustee on behalf of the company, import the specified goods in its own name from its manufacturing unit at Mumbai and sell the same and deposit due taxes up to July 6, 1996 in terms of the said assignment. After the assignment, Lakme’s branch in West Bengal which is exclusively a selling unit, was transferred absolutely to the company which took over the goodwill plus net movable tangible assets and net current assets and became full and beneficial owner of the sales and marketing unit of Lakme on the 1st day of January, 1996. Thereafter, Lakme acted as a trustee of the company up to June 6, 1996 according to the terms of the said assignment. The company, Lakme Lever Ltd., started to operate in its own name from June 7, 1996.
4. By a letter No. CB/444 dated June 25, 1996 to the respondent No. 2, the Deputy Commissioner, Commercial Taxes, Corporate Division, Lakme applied for amendment of its registration certificate No. AW/1342 under the State Act in favour of Lakme Lever Ltd., with effect from January 1, 1996 in terms of Section 99 of the West Bengal Sales Tax Act, 1994. A similar prayer was made by Lakme Lever Ltd., by its letter No. CB/467 dated June 25, 1996 for amendment of the existing registration certificate of Lakme in West Bengal by substituting the name of Lakme Lever Ltd., in place of Lakme as transferee under Section 99 of the West Bengal Sales Tax Act, 1994. By a letter dated July 10, 1996 under reference No. CB/768 Lakme Lever Ltd., informed the respondents that in so far as West Bengal was concerned, Lakme Lever Ltd., had taken over the entire branch of Lakme in West Bengal as a going concern with goodwill, net movable tangible assets and net current assets. The respondents were informed that the West Bengal branch of Lakme having been absolutely transferred, Lakme Lever Ltd., should be treated as a transferee of Lakme in terms of Section 99 in so far as West Bengal was concerned.
5. By an order dated July 25, 1996, the respondent No. 3, the Assistant Commissioner, Commercial Taxes, Corporate Division rejected Lakme Lever Ltd.’s application for registration with prayer to give effect thereof from January 1, 1996, because legally all imports of goods and sales thereof, made on and from January 1, 1996, were made by Lakme as trustee on behalf of the company. The respondent No. 3 rejected the prayer made by Lakme Lever Ltd., and also rejected the prayer to treat Lakme Lever Ltd., as transferee. Respondent No. 2, the Deputy Commissioner, Commercial Taxes, Corporate Division before whom an application for revision was moved confirmed, by an order dated October 9, 1996, the order of the respondent No. 3. The applicants in these two cases have come before this Tribunal with the prayer that the orders of the Assistant Commissioner dated July 25, 1996 and the Deputy Commissioner, dated October 9, 1996 should be quashed and also praying that the respondent No. 3 should be directed to amend the certificate of registration of Lakme in favour of Lakme Lever Ltd., or to direct respondent No. 2 to grant new registration certificate to Lakme Lever Ltd., giving effect thereof from 1st January, 1996. The applicants have also prayed for an order directing the respondent No. 3 to give validity of the certificate of registration No, PS/2006 issued in favour of Lakme Lever Ltd., dated August 6, 1996 with effect from January 1, 1996 instead of July 31, 1996 as already given.
In RN-245 of 1996 the same case has been made out on behalf of M/s. Lakme Lever Ltd., and the same relief sought.
6. The respondent’s case, as available from the affidavit-in-opposition, is that Lakme Ltd., admittedly agreed to sell its existing sales and marketing units for a consideration to Lakme Lever Ltd., with effect from January 1, 1996. The ownership of the business of Lakme Ltd., has not been transferred absolutely by such sale and hence the requirement of law as contained in Section 99 of West Bengal Sales Tax Act, 1994, has not been fulfilled. The provisions of Section 99 are applicable only when the ownership of the business of the transferor, registered dealer, is absolutely transferred by a sale. In the present case the sales and marketing business only of the applicant has been transferred to Lakme Lever Ltd., and it cannot be regarded as an absolute transfer by way of sale made by Lakme. It is further submitted that in spite of the sale of “the sales and marketing business” of the petitioner Lakme Ltd., to Lakme Lever Ltd., the latter, the transferee of “the sales and marketing business” did not carry on business either in its own name or in the old name, i.e., the name of the transferor. The requirement of Section 99 is that the transferee must carry on the business. In the present case the transferor, i.e., Lakme Ltd., continued to carry on the business admittedly as the trustee of Lakme Lever Ltd., because the petitioner continued to import specified goods in its own name from its manufacturing unit at Mumbai and sell the same in West Bengal and deposit due taxes up to 6th July, 1996 in terms of article 3.23 of the deed of assignment. By merely taking over the goodwill plus net movable tangible assets and net current assets, the business of Lakme Ltd., cannot be said to have been transferred absolutely to Lakme Lever Ltd., and as such the ownership of the business of Lakme Ltd., was not transferred absolutely to Lakme Lever Ltd. The former continued to act and carry on the business of the sales and marketing unit up to July 6, 1996. Lakme Lever Ltd., started to operate or carry on the business of the said sales and marketing unit of Lakme Ltd., for the first time with effect from June 7, 1996 in its own name. Lakme Lever Ltd., started, in fact, a new business after purchasing the said sales and marketing unit of Lakme Ltd., on and from the June 7, 1996. Under the circumstances of the case, Section 99 has no application at all. It is further submitted that merely due to the reason that Lakme Lever Ltd., will be confronted with very serious problems regarding the amount of tax deposited in the name of Lakme Ltd., quoting its registration certificate number during the period from January 1, 1996 to July 6, 1996, the certificate of registration of Lakme Ltd., cannot be amended by incorporating Lakme Lever Ltd.’s name as transferee by overlooking the requirements of law contained in Section 99 of the 1994 Act. Further admittedly Lakme Ltd., carried on business of the sales and marketing unit even after purchase by Lakme Lever Ltd., till July 6, 1996, as a trustee for Lakme Lever Ltd., and, therefore, Lakme Lever Ltd., will not face any problem in spite of the amount of taxes deposited by Lakme Ltd. Assessment of taxes under the 1994 Act shall have to be made in the name of Lakme Ltd., for the period commencing from January 1, 1996 and ending on July 6, 1996 because Lakme Ltd., itself carried on the business as the trustee. When Lakme Ltd., was carrying on business of Lakme Lever Ltd. as a trustee of Lakme Lever Ltd., Lakme was the dealer and as such, it was not permissible to claim the transactions in respect of despatch of goods from Lakme’s manufacturing units at Mumbai as inter-State sales because no one can sell to oneself. It was Lakme who imported the goods from its manufacturing units in Mumbai and sold the same in West Bengal. Lakme Lever Ltd., was not even a dealer till July 6, 1996, because they did not carry on business even after purchase of sales and marketing business of Lakme. Respondent No. 3 did not reject any application for registration as such. . He, however, lawfully and rightly rejected the application for amendment of registration in favour of Lakme Lever Ltd., with effect from January 1, 1996 inasmuch as Lakme Lever Ltd., was not a dealer during the period from January 1, 1996 to July 6, 1996. Lakme was the dealer because they were carrying on the business as the trustee of Lakme Lever Ltd., for and on behalf of Lakme Lever Ltd. The respondent No. 3 was also right in refusing to treat Lakme Lever Ltd., as the transferee under Section 99 of the 1994 Act because after purchase of the business of Lakme Ltd., Lakme Lever Ltd., did not carry on the business during the said period. It is also stated that Lakme Lever Ltd.’s application for registration under the 1994 Act filed on July 11, 1996 was rejected by the Assistant Commissioner, Commercial Taxes, Central Section on July 23, 1996 and such rejection was confirmed in revision by the Deputy Commissioner, Commercial Taxes, Central Section.
7. Mr. Mukherjee, learned advocate for the applicant argued that the entire organisation in West Bengal of M/s. Lakme Ltd., was taken over by Lakme Lever Ltd., and during the period January 1, 1996 to June 7, 1996, Lakme Ltd., did not really exist as a separate entity in West Bengal. Lakme had no control over the operations but because the registration certificate continued in the name of Lakme, consignments were still sent in their name. Lakme Lever Ltd., took over the business totally and started operating on its own from June 7, 1996. In view of the terms of the agreement, during the interim period Lakme was operating only as a trustee and hence such operation of Lakme was actually operation of Lakme Lever through their trustee. Under the circumstances, there was no reason why the registration certificate of the transferor company (Lakme Ltd.) should not be allowed to be amended with effect from January 1, 1996 in favour of Lakme Lever Ltd. In this connection, he referred to the decision of the Bombay High Court in the case of Commissioner of Income-tax v. Swastik Rubber Products Ltd. [1983] 140 ITR 304. In that case there was a scheme of amalgamation of a bank with the assessee-company. Under Clauses (1), (2) and (3) of the scheme, the entire undertaking of the bank would be transferred to the assessee with effect from July 1, 1971. On petitions made to the High Court under sections 391 and 394 of the Companies Act, 1956, the High Court passed orders that with effect from July 1, 1971, the whole of the business and property and liability of the bank was transferred to the assessee without any further act or deed. However, according to Clause 15 of the scheme of amalgamation, it was provided that although the scheme of amalgamation was to be operative from July 1, 1971 it was to take effect finally from the date on which any of the sanctions from the Comptroller of Capital Issues was last obtained. In that case the High Court held that as per Clause 3 of the scheme with effect from July 1, 1971, the transferor was deemed to have been carrying on the business on account of the assessee. According to Mr. Mukherjee, in the instant case, similarly, during the period January 1, 1996 to June 6, 1996, Lakme Ltd., must be deemed to have been carrying on the business on account of M/s. Lakme Lever Ltd.
8. Mr. K.K. Saha, learned advocate for the respondents argued that during the period January 1, 1996 to June 6, 1996, it is admitted that M/s. Lakme acted as agent on behalf of Lakme Lever Ltd. They had applied for amendment of the registration certificate for the first time on June 25, 1996. In the application it is clearly stated that M/s. Lakme Lever Ltd., were “in the process of taking over” the selling and distribution business of M/s. Lakme Ltd., from January 1, 1996. This shows clearly that the process of taking over was not complete. Apart from this it must also be remembered that Lakme carried on the business in their own name even if they acted as an agent. Under the definition of a dealer in Section 2(10) of the 1994 Act, it may be seen that an agent is also a dealer. Therefore, there is no question of Lakme Lever Ltd., also being treated as a dealer for this period. It cannot be that two organisations should be considered to be dealers simultaneously in respect of the same goods. Mr. Saha also submitted that Section 99 requires two things ; firstly, there should be absolute transfer of the business and secondly, the transferee must carry on the business in their own name or any other name. The applicants say that they had to utilise the Lakme registration certificate under compulsion. But such compulsion is their own creation and the terms of a contract agreed between the two parties cannot override the legal provisions of a statute. In the instant case Lakme transferred goods, received the consignments and sold it in their own name. Registration certificate remained in their name and there was no application for amendment of the registration certificate before June 25, 1996. They are requesting for a retrospective effect being given to the amendment certificate on the basis of their mutual agreement. In the next letter dated July 10, 1996 they informed the revenue authorities for the first time that Lakme Ltd., will have no place of business in West Bengal and they have taken over the entire unit of Lakme Ltd., in so far as West Bengal is concerned. Mr. Saha stated that in their order dated July 25, 1996, the application of the two companies was disposed of on the ground that it was not a total transfer but even if it is held by the Tribunal that the transfer was an absolute one even then, according to Section 99 they were not entitled to the amendment of registration certificate because the transferee did not carry on the business in their own name or any other name. It is an admitted fact that during the period January 1, 1996 to June 6, 1996 it was the transferor who acted as an agent and under the West Bengal Sales Tax Act, 1994, an agent is a dealer. Mr. Saha referred in this connection to the judgments in the case of Bibhas Chandra Gon v. State of West Bengal [1964] 15 STC 277 (Cal) and Shethia Mining and Manufacturing Corporation Ltd. v. Commercial Tax Officer [1977] 39 STC 246 (Cal). In these two cases, Mr. Saha submitted, the scope and nature of Section 17 of the Bengal Finance (Sales Tax) Act, 1941 have been examined. He pointed out that Section 17 of the 1941 Act is the same as Section 99 of the 1994 Act. As would be seen from these judgments, Section 99, Mr. Saha submitted, categorically requires that there shall be not only absolute transfer, of the business, it is equally important that the transferee must carry on the business in their own name or any other name. In the instant case it has been admitted that the transferor continued to act as trustee for the transferee for the period January 1, 1996 to June 6, 1996 and therefore the transferee was not entitled to have the registration certificate amended in his favour with effect from January 1, 1996.
9. The Assistant Commissioner of Commercial Taxes rejected the application for amendment of the registration certificate of M/s. Lakme Ltd., by including M/s. Lakme Lever Ltd., as transferee under Section 99 of West Bengal Sales Tax Act, 1994, because, according to him, the agreement made on March 23, 1996 was an agreement of partial transfer whereby only the selling activities of Lakme were transferred to Lakme Lever Ltd. In his order dated October 9, 1996 the Deputy Commissioner, Commercial Taxes, Corporate Division held that there was (i) no absolute transfer of the ownership of the business of Lakme Ltd. ; (ii) the liabilities of Lakme Ltd., under the Sales Tax Laws before the transfer date should continue to be the liabilities of Lakme Ltd. ; and (iii) even after transfer the business of sale and purchase of the stock-in-trade between the transferor and the transferee continued and on that basis he held that the stipulations of the assignment militate against the concept of “absolute transfer of ownership of a business” envisaged in Section 99 of the West Bengal Sales Tax Act, 1994 and he accordingly rejected the revision applications and confirmed the impugned orders.
10. Section 99 of the West Bengal Sales Tax Act, 1994, is as follows :
“99. Transfer of business by registered dealers.–Where the ownership of the business of a registered dealer is transferred absolutely by sale, gift, bequest, inheritance or otherwise, or transferred by way of lease, and the transferee or the lessee carries on such business, either in its old name or in some other name, the transferee or the lessee shall, for all the purposes of this Act (except for the liabilities under this Act already discharged by such dealer), be deemed to be and to have always been registered (in the case of a lease for so long as the lease subsists) as if the certificate of registration of such dealer had initially been granted to the transferee or the lessee ; and the transferee or the lessee shall, on application to the Commissioner, be entitled to have the certificate of registration amended accordingly.”
It would be seen that what is under examination in Section 99 of the 1994 Act is the transfer of ownership of the business of a registered dealer and not the transfer of ownership of a particular company. In the instant case the application for amendment is an application for amending the registration certificate of a particular dealer. The entire activity of that registered dealer is confined to the sales and marketing business of Lakme Ltd. and the registered dealer in West Bengal does not have any connection with the manufacturing or other activities of Lakme Ltd. What was transferred by the agreement executed on the March 29, 1996 was Lakme’s existing sales and marketing unit. The branch in West Bengal which is the registered dealer in West Bengal is exclusively a selling unit. And therefore, there is no reason why the transfer of the ownership of the business of the registered dealer in West Bengal could be considered to be a partial transfer of ownership. In the agreement only the selling activities of Lakme are transferred to M/s. Lakme Lever Ltd., but the entire business of the registered dealer in West Bengal is confined to the selling activity and hence the entire unit of Lakme Ltd., was transferred to Lakme Lever Ltd., under the agreement executed on March 29, 1996. It is not clear at all why the stipulation that Lakme Ltd., would continue to be liable for all liabilities of Lakme Ltd., under sales tax laws before the transfer date should be considered to be a vitiating factor in an absolute transfer. Secondly, if after the business is sold to Lakme Lever Ltd., in West Bengal the transferee-company chooses to have commercial relations with the transferor-company, it cannot be said that the transfer is a partial one. In view of the conditions mentioned in the agreement dated March 29, 1996, it cannot be held that the transfer of business from Lakme Ltd., to Lakme Lever Ltd., in so far as it relates to the business of the registered dealer in West Bengal, is not an absolute transfer.
11. The second limb of the argument in favour of the decision rejecting amendment of registration certificate is that after the transfer, the transferee-company did not continue the business. They continued to use the agency of the transferor-company. This view is not also acceptable to us. The language of Section 99 is quite clear and wide ranging. All that is necessary in this respect is that the transferee-company should carry on the business. They may do so in the old name or in some other name. It is an admitted fact that consignments were brought in and disposed of under the name of the original transferor. The transferee-company has explained that such importation was done by them in terms of the agreement according to which the transferor would continue to act as trustees on their behalf. It is admitted by Revenue that the transferee-company has utilised the services of transferor-company as their agent. According to the Revenue, the agent is also a dealer under the 1994 Act and hence it is considered to be the dealer by the Revenue authorities. This is not a reasonable argument. It is true that under the 1994 Act an agent is also a dealer but it cannot be held that the principal who is carrying on his business through an agent cannot be considered to be involved in the business. The conditions of the agreement and the actions of the parties involved show clearly that after January 1, 1996 the transferee-company carried on the business and up to June 6, 1996 such business was carried on in the name of the transferor-company, who was required, under the conditions of the agreement, to act as trustees for the transferee-company. Under the circumstances, it cannot be held that (a) the transfer is not an absolute one and (b) that the transferee-company did not carry on the business after such transfer in its old name or in some other name. Hence, the conditions laid down in Section 99 of the 1994 Act have been satisfied in this case and the amendment in registration certificate prayed for by the transferee-company should be allowed.
12. Thus, the application is allowed. The order dated July 25, 1996, passed by the respondent No. 3 and the order dated October 9, 1996 passed by the respondent No. 2 are set aside. Respondent No. 3 is directed to amend the certificate of registration of M/s. Lakme Ltd., in favour of M/s. Lakme Lever Ltd., with effect from January 1, 1996 as prayed for by them.
J.GUPTA, Member (J)
13. I agree .