1997 (2) TMI 467 - SC - VAT and Sales Tax

Whether sales tax is payable on the khalli for the period 26th December, 1977 till June, 1985? Legality of a notification issued by the State Government on 31st December, 1980 in exercise of the powers conferred by section 20-A of the Bihar Sales Tax Third Ordinance, 1980 as amended? Held that - Appeal dismissed. It would appear that a point that goes to the root of the matter has been overlooked and that is that it has first to be found as a matter of fact that khalli falls outside the limited description of cattle feed that is to be found in the said explanation and this is something that has not been done. We find it too late in the day to remand the matter for such a finding and, therefore, must reject the appeal in so far as it relates to this point without referring to any of the other contentions that have been raised on behalf of the respondents. Having regard to the terms in which the notification has been worded, we are inclined to agree. The notification does not permit the dealer only to adjust the amount of tax paid within Bihar on the purchase of raw materials . It permits him to adjust the amount of tax paid on the purchase of raw materials. There is no limitation which calls for adjustment only if tax has been paid in Bihar on the purchase of raw materials

Summary

Issues:
1. Whether sales tax is payable on khalli for a specific period.
2. Interpretation of a notification regarding adjustment of tax paid on raw materials against tax payable on finished products.

Analysis:
1. The first issue in the appeal concerns the liability of sales tax on khalli, a cattle-feed product, for the period from December 26, 1977, to June 1985. The State Government issued notifications exempting certain commodities, including cattle feed, from sales tax. An amendment was made to the notification, specifying the types of cattle feed eligible for exemption. The appellant argued that khalli did not meet the description of exempted cattle feed and should be taxed. However, the Court noted that it was crucial to establish whether khalli fell outside the defined cattle feed category, which was not determined. As no factual finding was made, the appeal on this point was rejected without further consideration of other contentions raised by the respondents.

2. The second issue revolved around a notification allowing registered dealers to adjust tax paid on raw materials against tax on finished products, issued by the State Government in December 1980. The High Court interpreted the notification to permit such adjustment irrespective of where the tax on raw materials was paid, as long as the finished goods were intended for sale within Bihar. The Court concurred with this interpretation, emphasizing that the notification did not restrict the adjustment to tax paid within Bihar on raw materials. Consequently, the Court dismissed the appeal, upholding the High Court's decision on the entitlement to claim set-off under the notification for dealers who paid tax on raw materials regardless of the location of payment, provided the manufactured goods were for sale in Bihar. The appeal was dismissed with no order as to costs.