2005 (12) TMI 282 - SC - VAT and Sales Tax

Whether the sale made by the dealer/assessee after adding colourants to the base material/paint are liable to pay sales tax/ Held that - Since in this case, no evidence was led by either of the parties and in the case decided by the Tribunal subsequently evidence has been led, we leave it to the discretion of the High Court to decide on the basis of the material already on record or remand the case to enable the parties to lead further evidence.

Summary

Issues:
Interpretation of sales tax liability on the sale of paint products with added colorants under the U.P. Trade Tax Act.

Analysis:
The appellant, a retailer of Asian Paints, faced a dispute regarding the sales tax liability on the sale of paint products with added colorants. The manufacturer introduced the "Colour World" concept in 1988, allowing customers to choose shades through the Dealer Tinting System (DTS). The assessing authority determined that the sale by the dealer, after adding colorants to the base paint, was subject to sales tax as it was considered a base material for preparing paint. This decision was upheld by the High Court of Allahabad, leading to the current appeal against the judgment.

The Trade Tax Tribunal, in a separate case, took a different view, stating that the manufacturer supplied paint itself, on which tax had already been paid, relieving the dealer from paying sales tax again after adding colorants. This divergence in opinions prompted the Supreme Court to set aside the High Court's judgment and remit the case back for a fresh decision, along with another pending case before the High Court. The Court emphasized the need to avoid inconsistent views by the same High Court benches and allowed the parties to lead further evidence if necessary.

In conclusion, the Supreme Court dismissed the intervention but granted the applicants the liberty to approach the High Court if needed. The Court highlighted the absence of evidence in the current case and the presence of evidence in the Tribunal's case, leaving it to the High Court's discretion to decide based on existing records or to remand the case for additional evidence. The appeal was disposed of without costs, emphasizing the importance of resolving the sales tax liability issue in a consistent and thorough manner.