1959 (12) TMI 31 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay sales tax on best judgment basis.
2. Validity of reopening assessment under Section 11-A of the East Punjab General Sales Tax Act, 1948.
3. Interpretation of "manufacture" under Section 5(2)(a)(ii) of the Act.
4. Alleged violation of fundamental rights under Article 19(1)(g) of the Constitution.
5. Availability and adequacy of alternative remedies.

Detailed Analysis:

1. Liability to Pay Sales Tax on Best Judgment Basis:
The petitioner, a registered partnership concern engaged in manufacturing woollen textiles, was assessed to pay sales tax on a best judgment basis amounting to Rs. 3,625. The Assessing Authority determined this liability based on the raw material used for processing goods of third parties, which was deemed as a sale by the petitioner to himself. The petitioner contested this assessment, arguing that the raw materials were used for manufacturing goods for sale, and thus should be exempt from sales tax.

2. Validity of Reopening Assessment Under Section 11-A of the East Punjab General Sales Tax Act, 1948:
The assessment for the year 1956-57 was reopened by the Assessing Authority under Section 11-A of the East Punjab General Sales Tax Act, 1948, read with Rule 63 of the East Punjab General Sales Tax Rules, 1949. The petitioner argued that the reopening was based on a misconceived basis that the raw materials used for third-party goods should be taxed as if sold to himself. The petitioner claimed that the certificate of registration exempted such materials from tax when used for manufacturing goods for sale.

3. Interpretation of "Manufacture" Under Section 5(2)(a)(ii) of the Act:
The petitioner contended that the term "manufacture" included processing activities like bleaching, dyeing, and finishing, and thus, the raw materials used in these processes should be exempt from sales tax. However, the Assessing Authority held that the petitioner did not manufacture goods for sale but provided services for wages. The court observed that merely processing third-party goods does not constitute manufacturing for sale, as the goods remain the property of third parties.

4. Alleged Violation of Fundamental Rights Under Article 19(1)(g) of the Constitution:
The petitioner claimed that the imposition of sales tax infringed upon their fundamental right to carry on business under Article 19(1)(g) of the Constitution. The court noted that while violation of fundamental rights is a relevant factor, it does not automatically warrant interference under Article 226, especially when alternative remedies are available.

5. Availability and Adequacy of Alternative Remedies:
The court addressed the preliminary objection raised by the Additional Advocate-General regarding the availability of alternative remedies. It was argued that the petitioner had the right to appeal, revision, and reference under the Act. The petitioner contended that the appeal process was onerous as it required payment of the assessed tax as a condition precedent. The court emphasized that the discretionary remedy under Article 226 should not be invoked when adequate alternative remedies are available, especially when the petitioner had already filed an appeal.

Conclusion:
The court concluded that the petition was misconceived and that the petitioner should have pursued the statutory remedies available under the East Punjab Sales Tax Act. The court dismissed the petition with costs, reiterating that the proper course of action was to pursue the appeal and other remedies provided by the Act.