1987 (9) TMI 379 - SC - VAT and Sales Tax

Whether as a fact the appellant has paid sales tax on the purchase of sun-baked bricks from the seller as claimed and the appropriate declaration has been produced in the assessment proceedings? Whether bricks used in the notification of 1973 covered sun-dried bricks? Held that - Appeal allowed. It is not disputed by the appellant s counsel that the sale price of bricks which had been purchased as sun-dried bricks and sold for the price of Rs. 1,49,600.92 were burnt by the appellant. On the finding that the appellant had further treated the sun-dried bricks and produced goods of added value, we do not think it would be proper to extend the benefit of total exemption for the turnover of sale of bricks from tax. The notification of the State Government is somewhat misleading; it would thus be appropriate to allow set-off of the tax paid at the time of the purchase of the sun-dried bricks out of the tax exigible on the taxable turnover of burnt bricks. While setting aside the judgment of the High Court we would direct that until appropriate amendment to the notification is made, the State should adopt the modality indicated above. In the instant case if it is found that the appellant had paid sales tax to Sardool Singh, the amount of tax then paid should be given credit and the balance should be recovered.

Summary

Issues:
1. Whether sun-dried bricks are covered under the definition of "brick" for sales tax deduction.
2. Whether the appellant is entitled to claim deductions for sales tax on sun-dried bricks.

Analysis:
1. The appellant, a registered dealer under the Haryana General Sales Tax Act, claimed deduction for sales tax on sun-dried bricks purchased. The High Court rejected the claim based on the definition of "brick" in the Haryana Control of Brick Supply Order, 1972. The Supreme Court analyzed various definitions of "brick" from dictionaries and concluded that sun-dried bricks are an intermediate stage of bricks but are goods in the ordinary sense and a commercial commodity. The Court held that the High Court erred in solely relying on the Order's definition and that sun-dried bricks are a class of "brick" covered under the Act.

2. The appellant argued that since sun-dried bricks are included in the generic term "brick," they should be eligible for deduction under the notification of the Act. The Court agreed, stating that both sun-dried and oven-baked bricks are included in the term "brick," although they serve different purposes and have different prices. The Court suggested amending the notification to ensure proper taxation, allowing deduction for tax paid on sun-dried bricks and levying tax on the sale price of burnt bricks. The Court directed that until the notification is amended, the State should follow this approach.

3. Regarding the appellant's claim for deductions, the Court acknowledged that the appellant had further treated the sun-dried bricks before selling them for a higher price. The Court held that total exemption for the turnover of burnt bricks would not be appropriate, and set-off of tax paid on sun-dried bricks should be allowed against the tax on the taxable turnover of burnt bricks. The Court allowed the appeal in part, directing the State to adopt the suggested modality until the notification is amended and recover any balance tax after giving credit for the tax paid on sun-dried bricks.

4. The judgment highlighted the importance of considering common parlance meanings of terms in the absence of statutory definitions and emphasized the need for proper taxation mechanisms to prevent revenue loss. The Court's decision aimed to balance the interests of the appellant and the State, ensuring fair taxation practices while protecting revenue.