Assessment and recovery

The West Bengal Taxation Tribunal disapproved the mechanical manner of passing the order of assessment without indicating any basis therefor. The demand notice was served on the assessee after the date mentioned therein. Copy of the order of assessment, though requested for in writing by the assessee, was not furnished. On top of it, the recovery proceedings were started against the assessee. The Taxation Tribunal on the above facts, set aside the order of assessment in entirety.

M/s. Palzer Machino Craft (P) Ltd. & Another vs. Commercial Tax Officer, Bhowanipur Charge & Others. (2007) 49 S.T.A. – 44.

Adverse inference

The Supreme Court affirmed the stand of the Revenue in drawing adverse inference for unexplained non-production of account books at the time of survey. The Supreme Court in that connection held that when the books were not readily available, it was for the assessee to give proper explanation for such non- production, because under the provisions of U. P. Trade Tax Act, 1948 it was provided that the assessee is supposed to keep true and correct accounts at the place of business.

The Commissioner of Sales Tax, U. P., vs. M/s Mohan Brickfield 2007 NTN (Vol. 33) – 9.

‘C’ Forms

The Allahabad High Court held that Rule 12(1) prescribing the financial ceiling for one particular ‘C’ form to be not exceeding Rs.25,000/-, was a mandatory provision and not a directory one as claimed by the assessee. In that connection, the Allahabad High Court held that the judgment of the Madras High Court in the case of M/s Bimetal Bearings Ltd (90 STC 128) was no more a good law, in view of the later decision of the Apex Court in the case of M/s Delhi Automobiles (P) Ltd. vs. Commissioner of Sales Tax [(1997 – (10) SCC 486)] as well as that of M/s India Agencies Vs Addl. Commissioner of Commercial Taxes 2005 NTN (Vol. 26) 343.

The Commissioner of Trade Tax, U.P., Lucknow vs. S/s Escorts Ltd., Noida. 2007 NTN (Vol. 33) – 63.

Entries in Schedule

1. Copper busbars

The assessee, before the Allahabad High Court, had sold copper busbars to telecommunication department and paid tax at the reduced rate under the entry relating to ‘All other ores, metal and scrap’. The Revenue, however, levied tax at the higher rate under entry relating to ‘electrical goods’. The Hon’ble High Court negatived the submissions made by both the sides and held that the appropriate entry would be a residuary one as unclassified items.

M/s Shreetron India Ltd., Ghaziabad vs. Commissioner of Trade Tax, U.P., Lucknow. 2007 NTN (Vol. 33) – 1.

2. Scent and perfumes

The Allahabad High Court upheld the decision of the Tribunal and held that the perfumary compound was covered by the entry relating to ‘Scent and Perfumes’ in view of the decision of the Supreme Court in the case of Commissioner of Sales Tax vs. Indian Herbs (25 STC 151). The Allahabad High Court in that connection also held that the said judgment of the Supreme Court having not been considered while passing the later judgment in the case of M/s Camphor and Allied Products (115 STC 663),

It can safely be held that the later judgment suffered from the vice of per incuriam.

The Commissioner of Trade Tax, U. P., Lucknow vs. S/s Calcutta Perfumery Works (P) Ltd. 2007 NTN (Vol. 33) – 69.

3. Badam Thandai syrup

The Allahabad High Court, after considering the rival entries, held that Badam Thandai syrup being in a concentrated form, to be used after mixing it with milk, sugar etc., was covered by the entry relating to soda water, lemonade, syrup, squash etc.

The Commissioner of Trade Tax, U. P., Lucknow vs. S/s Krishna Brothers, Agra. 2007 NTN (Vol. 33) – 92.

4. Domestic utensils

The Commissioner, under Delhi VAT Act, under section 84, held that spoons, forks, rice server, Vegetable server and kitchen knife made from ferrous or other metal were not domestic utensils and were taxable @ 12.5%. The Commissioner in that respect did not follow the prima facie opinion given by the Joint Commissioner of Sales Tax of the State of Maharashtra, holding the view that all such items were taxable at 4% as ferrous and non-ferrous utensils.

Ms Archana Arora, Commissioner, VAT, Delhi vs. M/s Kishco Ltd., New Delhi 2007 NTN (7 DPH) – 73.

5. Adult Diapers

The Commissioner under VAT Act, while deciding the determination application under section 84 of the Delhi VAT Act, held that Adult diapers which were disposable and mainly used in hospitals by patients were not covered by any entries in any of the Schedules. The contentions of the assessee that the Adult diapers were surgical products was rejected. The product in question, therefore, was held to be liable to tax @ 12.5%.

Hon’ble M/s. Archana Arora, Commissioner, VAT, Delhi vs. M/s. Bakshi & Co. & Others, New Delhi. 2007 NTN (7 DPH) – 87.

Entry Tax

The Allahabad High Court , while disposing of a series of writ petitions, held that the U. P. Tax on Entry of Goods Act, 2000 cannot be considered as compensa-tory for the purpose of Article 304 and therefore, the court upheld the challenge by the assessees.

M/s Indian Oil Corpn. Ltd., Lucknow vs. State of U. P. & Others 2007 NTN (Vol. 33) – 105.

Exemption

The Punjab & Haryana High Court held that while calculating the Notional Tax Liability, the turnover on account of export outside the country cannot be added as it, the Unit had availed the exemption on that turnover, from payment of tax.

M/s. Kagaz Print-N-Pack (India) Pvt. Ltd. vs. State of Haryana. 2007 NTN (7 DPH) – 39.

Inter-State Works Contract

The Allahabad High Court held that the movement of parts and semi-finished fabricated items to be used in the execution of a works contract from one State to another, was in the nature of inter-State transaction and therefore prior to the amendment in 2002 in the definition of the term ‘sale’ in Section 2(g) of the Central Sales Tax Act 1956, no tax can be levied on such transactions under the Central Sales Tax Act.

The Commissioner of Trade Tax, U. P., Lucknow vs. S/s Pratap Engg. Works, Gorakhpur. 2007 NTN

(Vol. 33) – 102.

Input Tax Credit

The authority for advance tax ruling under the Andhra Pradesh VAT Act held that no input tax credit can be available for tax paid on purchases of goods vehicles used for the purposes of carrying explosives manufactured by the assessee. The authority in that connection observed that such taxes can be availed of as input tax credit only by automobile dealers.

M/s. Slavo Explosives & Chemicals Pvt. Ltd. Ruling No. A.R.Com/39/2006 dated 1st November 2006.

Source: News & Views, Vol. 30, January 2007, Page 10.

Local declaration – Financial ceiling

The Gujarat Sales Tax Tribunal held that the provisions under Section 49(2) containing the condition of having transaction of more than one month period in one declaration was directory and therefore, such a declaration cannot be disallowed on that ground.

M/s. NHB Bearings Ltd. vs. The State of Gujarat.

Source: Sales Tax Journal, Vol. 45, January 2007, Page – 924.

Per Incuriam

The Allahabad High Court held that the doctrine of per incuriam was applicable to a judgment when the same was delivered without referring to a binding precedent or relevant provisions of law. Such authority, therefore, had no binding effect as a precedent.

The Commissioner of Trade Tax, U. P., Lucknow vs. S/s Calcutta Perfumery Works (P) Ltd. 2007 NTN (Vol. 33) – 69.

Refusal of supply of Forms

The Allahabad High Court held that the authorities cannot refuse to issue Form III-B solely on the ground that certain amount was due to be paid by the dealer.

M/s Darshan Agroils Ltd vs. State of Uttar Pradesh & Another 2007 NTN (Vol. 33) – 46.

Refund

The Punjab & Haryana High Court disapproved the non-grant of refund in respect of interest and penalty under the Central Act proceedings, even after the dismissal of review application filed by the assessing authority in regard to the decision in appeal. The Court in that connection observed that the reasoning of the appellate authority under the State Act was equally applicable under the Central Act, since both the appeals were heard together. Under the circumstances, the High Court directed the refund to the assessee.

M/s Jai Ganesh Rice & General Mills, Jagadhri vs. State of Haryana.

Source : Sales Tax Matters, 1st Feb. 2007, Vol. 10, Part 2, Page - 226

Reference

The Punjab & Haryana High Court, agreeing with the views of the Delhi & Andhra Pradesh High Courts under Income Tax Act, held that the issue on which the question of law was covered by the Division Bench judgment of the very same court, it was not necessary for it to direct the Tribunal to defer the question of law and thereby keep the matter pending. The Hon’ble High Court, therefore, decided the question while considering the direct reference under Section 9(2) of the Central Sales Tax Act, 1956 read with Section 22(2) of the Punjab General Sales Tax Act, 1948.

M/s Regular Traders, Ludhiana vs. State of Punjab.

Source : Sales Tax Matters, 1st Feb. 2007, Vol. 10, Part 2, Page - 229

Sale – Health care treatment

The Allahabad High Court held that the supply of medicines by a hospital as a part of the health care package for a lump sum amount was not a transaction of sale and therefore no tax was payable under U.P. Trade Tax Act, 1948. The Hon’ble High Court for that purpose referred to the recent judgment of the Supreme Court in the case of BSNL.

International Hospital Ltd., Noida vs. State of U. P. & Others 2007 NTN (Vol. 33) – 36.

Tax on hire charges

The assessee, before the Gujarat Sales Tax Tribunal, was a works contractor owning certain construction equipments. During the course of the execution of a contract, such equipments were also used by the sub-contractor for which an amount was charged as hiring charges. Considering the fact that the custody and control of the construction equipments continued with the contractor, there was no taxable event for the purpose of levying tax on lease. For the said purpose, the Tribunal relied on the Supreme Court judgment in the case of M/s Rashtriya Ispat Nigam Ltd (123 STC 114).

M/s Essar Projects Ltd., S.A. No. 42 of 1998 decided on 1-4-2003.

Source : Sales Tax Journal, Vol. 45, January 2007, Page – 922.

Works Contract or sale – other valuable consideration – meaning

The Allahabad High Court held that when a principal issue material to the contractor free of cost for the purpose of its utilisation in a Works Contract, it did not amount to a transaction of sale by the principal to the contractor. In that regard, the Allahabad High Court observed that the judgment of the Supreme Court in the case of M/s N. M. Goel was not applicable on the facts of the case.

The Hon’ble High Court also held that the settlement of rates at lesser price was not covered by the phrase ‘other valuable consideration’. In that regard, the court observed that the said expression took colour from the preceding expression ‘cash or deferred payment’ and so construed, the phrase in question would only cover other monetary payments and not the extent of lesser price.

Mukhya Rail Path Nirikshak, Saharanpur vs. The Commissioner of Trade Tax, U. P., Lucknow. 2007 NTN (Vol. 33) – 86.

News from Andhra Pradesh

The State of Andhra Pradesh amended the Central Sales Tax (A.P.) Rules, so as to bring them in consonance with the provisions of Andhra Pradesh VAT Act, 2005. By one of such amendments, the limitation period of four years from the date of filing of the return, have been provided for assessment. Those amendments have been made effective from 1st April 2005.

Source: News & Views, Vol. 30, January 2007, Page – 6.

The State of Andhra Pradesh amended the Andhra Pradesh VAT Act in regard to the provisions relating to TDS from Works Contract. By such amendments, the State have tried to remove the deficiencies pointed out by the Hon’ble Andhra Pradesh High Court in the case of M/s Larsen & Toubro Ltd., while declaring sub-section (3) & sub-section (4) of section 22 as unconstitutional.

Source : News & Views, Vol. 30, January 2007, Page – 18.

News from Maharashtra

The State of Maharashtra, by its Notification dated 11th January 2007, notified the authorities designate in compliance with the provisions of Maharashtra VAT Act, insofar as the same were applicable to the Profession Tax Act..

Source : Maharashtra Government Gazette dated 11th January 2007.

By yet another notification of the same date, the Government of Maharashtra notified the respective branches of State Bank of India at various places in the State to be appropriate treasury for the purpose of payment of Profession Tax. The Banks thus notified were Bank of India, Central Bank of India, Dena Bank, Bank of Baroda, Bank of Maharashtra, Canara Bank etc at the district places concerned.

Source: Maharashtra Government Gazette dated 11th January 2007.

Supply of material by contractee to the contractor

Cement and steel was issued by the contractee for use in its own construction work and the value thereof (at rates mutually agreed to) was adjusted against the running bills raised by the contractor. The contractee’s plea that material remained its absolute property and title thereof was not passed on to the contractor was negatived by the Court on the ground that use of materials supplied implied passing of property in the goods and by virtue of receipt of value of such transferred property by way of adjustment in the bills amounted to receipt of consideration and satisfaction of the definition of “sale”.

Tanakpur Jal Vidyut Pariyojna – (2007) 5 VST 65 (Uttaranchal)

Use of Commissioner’s circular for the purpose of interpretation

The Uttaranchal H.C. held that Commissioner’s circular interpreting a judgment could not be the basis of the finding recorded by the Court. The circular may be binding on the Commissioner. However, the interpretation of a judgment and its applicability on the facts and circumstances has to be given by the Court itself.

Tanakpur Jal Vidyut Pariyojna – (2007) 5 VST 65 (Uttaranchal)

Sale of DEPB licences – Taxability

Levy of tax on sale of DEPB licences was challenged in the light of the recent Supreme Court judgment in the case of Sunrise Associates vs. Govt. of NCT of Delhi (2006) 145 STC 576 (S.C.). The Court pointed out that in Sunrise Associates, the S.C. had prospectively overruled the earlier decision in Vikas Sales Corporation vs. CCT (1996) 102 STC 106 and moreover, had declined to give its ruling on the taxability of other intangible goods like licences since the matter related to Lottery tickets alone. Hence, the earlier decision of Vikas Sales Corporation cited supra and Philco Exports vs. S.T.O. (2001) 124 S.T.C. 503 (Delhi). Hence, past transactions till the date of the judgment in Sunrise Associates would be governed by the law laid down in Vikas Sales Corporation cited supra.

Liberty Enterprises vs. State of Haryana and Anr. 5 VST 12 (P & H)

Whether sales occasioning import is a question of fact

The Tribunal had held that goods that were imported by ship and were in unascertained stage till the customs clearance were sales in the course of import covered by the first limb of sec. 5(2) of the CST Act due to the fact that there was an inextricable link between sale and import and the question of looking whether sales were exempt by virtue of the second limb (transfer by delivery and endorsement of document of title to goods) was purely academic and not required to be discussed. The H.C. held that though there two sets of documents of letters of credit, one by the local buyer in favour of the respondent and another by the respondent in favour of the foreign supplier, the Tribunal on appreciation of totality of the facts of the case had given a finding of fact that there was an inextricable link between sale and import. Hence, the refusal by the Tribunal to refer the matter to the H.C was justified.

Commissioner of Sales Tax, Mumbai vs. Tata Iron and Steel Co. Ltd. 5 VST 137 (Bom.).

Sales against declaration in Form 15

Sale of fire extinguisher effected against declaration in Form 15 held admissible in the hands of the vendor. Levy of tax on the assumption that the purchaser could not possibly use it in the process of manufacture was set aside – it was for the purchaser to defend his recitals in the declaration.

Steel Age Industries Ltd. – S.A. No. 1392 of 2001 dt. 8-12-2006 (Special Bench of the Maharashtra S.T. Tribunal)
Notification exempting tax on computers and computer peripherals extends to parts of computers

By Notfn. dt. March 1, 2001, the Government of Karnataka had exempted the turnover tax payable under section 6B of the KST Act on turnovers relating inter alia to (8) computer software, works contract of programming and providing of computer software and leasing of computer software; (9) computers, computer peripherals, computer consumables and computer cleaning kits falling under Serial No. 20 of Part C of Schedule II to the Act. The Commissioner’s clarification permitting exemption to parts of computers issued on December 15, 2004 was subsequently withdrawn on December 23, 2004 and tax was levied. Affirming the decision of the H.C., the S.C. held that by legal fiction, the Legislature intended parts of computers to be treated on par with computers itself. The object of the Notification was to promote the I.T. industry and a lenient way was also warranted apart from the maxim that when two views were possible, the one favourable to the assessee was to be adopted. The S.C. also opined that ordinarily the word, “namely” imports enumeration of what is comprised in the preceding clause and it ordinarily serves the purpose of equating what follows with the class described before.

State of Karnataka & Others vs. Balaji Computers & Others – 5 VST 120 (S.C.)

Input tax credit on indirect inputs like diesel used in gensets used in the manufacturing process

The S.C. has ruled that input tax credit could not be denied to indirect inputs like diesel used for operating generators to generate power for use in business of manufacturing yarn. The definition of “Raw Material” included diesel and the question whether it was used directly or indirectly in the manufacturing process was irrelevant.

Decision of the S.C. in the case of Rajasthan Taxchem – Source – The Economic Times dt. January 22, 2007.

Sale by appliances by owner of brandname – Whether first sale or second sale?

The appellant company was the owner of the brandname and was getting the products manufactured from another company. In the context of section 5(3)(a) of the KST Act, the S.C. held that the sale by the manufacturing company could not be termed as first sale – the subsequent sale by the owner of the trademark was deemed to be the first sale liable to tax.

Whirlpool of India Ltd. vs. DC of Commercial Taxes JT 2007 (1) SC 1.

Surcharge collected to be deposited to “Oil Pool Account” was part of sale price and not a statutory levy

Under sec. 8(1)(a) of the Assam General Sales Tax Act, if the resale price of the goods listed in Schedule II exceed 40%, then the resale was deemed to be the first point of sale. The difference between purchase price and resale price exceeded 40% if surcharge collected and liable to be deposited into Oil Pool Account was taken into account. The S.C. held that the surcharge was not a statutory levy and was part of sale price and so the above condition was satisfied justifying levy at the point of resale. However, the S.C. said that the appellant was liable to pay only the difference in tax and the aspect whether the appellant had collected tax on the entire sale price and unduly enriched himself was required to be looked into and matter was remanded to the Assessing authority for this purpose.

Indian Oil Corporation Ltd. vs. State of Assam and Ors. (2007) 5 VST 1 (S.C.)