1981 (4) TMI 246 - SC - VAT and Sales Tax

Whether the appellants had used the raw materials for another purpose contrary to the terms of form No. 19? Held that - Appeal dismissed. The scheme of the Act appears to be that sales tax should be levied on goods which are not included in Schedule I at least once inside the State in the series of sales and purchases even though they may have been converted into manufactured goods and that is why form No. 19 requires the purchaser to state that the goods will be used by him as raw or processing materials or as consumable stores in the manufacture of taxable goods for sale by him inside the State and section 16 of the Act provides that where any dealer has purchased any taxable goods under a certificate given by him under section 12 or section 13 of the Act and contrary to such certificate the goods are used for another purpose or are not resold or despatched in the manner and within the period certified or on the resales in the course of inter-State trade or commerce, of the goods so purchased no tax under the Central Sales Tax Act is actually payable by him on account of any deductions admissible under any of the provisions of that Act, then such dealer shall be liable to pay tax on the purchase price of the goods purchased under such certificate. The deliberate alteration of the definition of taxable goods in the Act also is attributable to the said intention of the State Legislature.

Summary

Issues Involved:

1. Liability to pay purchase tax under Section 16 of the Gujarat Sales Tax Act, 1969.
2. Interpretation of "taxable goods" under Section 2(33) of the Gujarat Sales Tax Act, 1969.
3. Applicability of exemption under Section 49(2) of the Gujarat Sales Tax Act, 1969.

Issue-wise Detailed Analysis:

1. Liability to pay purchase tax under Section 16 of the Gujarat Sales Tax Act, 1969:

The main issue revolves around whether the appellants, M/s. Hindustan Brown Boveri Ltd. and M/s. Elecon Engineering Co. Ltd., are liable to pay purchase tax under Section 16 of the Gujarat Sales Tax Act, 1969. The appellants purchased raw materials by furnishing certificates in form No. 19, stating that the raw materials would be used to manufacture taxable goods sold within Gujarat. However, a part of the manufactured goods was sold to an electrical undertaking against C forms, claiming exemption under Section 49(2) of the Act. The Sales Tax Officer levied purchase tax on the ground that the undertaking in form No. 19 was violated. The appeals against this levy were unsuccessful at the Assistant Commissioner of Sales Tax and the Gujarat Sales Tax Tribunal levels. The High Court of Gujarat also ruled in favor of the revenue, leading to the present appeals.

2. Interpretation of "taxable goods" under Section 2(33) of the Gujarat Sales Tax Act, 1969:

The appellants contended that the goods manufactured and sold to the electrical undertakings were "taxable goods" and that the exemption under Section 49(2) did not change their status as taxable goods. The definition of "taxable goods" under Section 2(33) states: "taxable goods" means goods other than those on the sale or purchase of which no tax is payable under Section 5 or Section 49 or a notification issued thereunder. The court emphasized that the definition in the Gujarat Act is narrower than the previous Bombay Sales Tax Act, 1959. The court concluded that goods sold under circumstances attracting Section 49 are not "taxable goods," and thus, the appellants violated the terms of form No. 19 by using the raw materials to manufacture non-taxable goods.

3. Applicability of exemption under Section 49(2) of the Gujarat Sales Tax Act, 1969:

The appellants argued that the goods remained taxable until sold under an exempted transaction and that only the sale was exempted, not the goods themselves. The court rejected this argument, stating that the definition of "taxable goods" under Section 2(33) includes goods exempted under Section 49(2). The court noted that the scheme of the Act aims to ensure that sales tax is levied at least once inside the state, even on manufactured goods. The court also dismissed the argument that the condition in form No. 19 was satisfied upon manufacturing the goods, emphasizing that the sale to the electrical undertaking under Section 49(2) rendered the goods non-taxable.

Conclusion:

The court found no merit in the appellants' arguments and upheld the levy of purchase tax under Section 16 of the Gujarat Sales Tax Act, 1969. The appeals were dismissed with costs. The court emphasized that the deliberate alteration of the definition of "taxable goods" in the Gujarat Act reflects the legislative intent to ensure tax is levied on goods at least once within the state. The decision underscores the importance of adhering to the terms of certificates furnished under the Act and the implications of exemptions under Section 49(2).