1960 (7) TMI 55 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of proviso to section 5(2)(a)(ii) of the Orissa Sales Tax Act regarding exemption requirements based on purchasing dealer's certificate and resale location.

Analysis:
The case involved a dispute regarding the application of the proviso to section 5(2)(a)(ii) of the Orissa Sales Tax Act. The purchasing dealer, Messrs S. Lal & Co., bought chromium ore tax-free from another dealer in Orissa but sold it in Calcutta, not Orissa. The Sales Tax Officer assessed sales tax on these transactions, citing the proviso that specifies tax liability if goods are used for purposes other than those in the purchasing dealer's certificate. The Sales Tax Tribunal held that the proviso did not apply in this case, interpreting the rules differently.

The High Court analyzed the relevant provisions of the Orissa Sales Tax Act, emphasizing the plain language of section 5(2)(a)(ii) and the proviso. It clarified that the proviso imposes tax liability if goods are used differently from what is specified in the purchasing dealer's certificate. The Court referred to previous decisions interpreting the proviso to support this interpretation, emphasizing the importance of the certificate's specifications.

The Court criticized the Sales Tax Tribunal's reliance on rule 27(2) of the Orissa Sales Tax Rules, stating that it is merely a rule of evidence and does not modify the Act's provisions. The Court clarified that the intention specified in the purchasing dealer's certificate is crucial, not the intention behind each transaction. It rejected the Tribunal's interpretation that the purchasing dealer must intend to resell the goods in Orissa for exemption.

Additionally, the Court addressed concerns about restricting inter-State trade, stating that the Act does not hinder such trade but regulates tax liability based on the certificate specifications. It emphasized that even without a declaration under rule 27(2), the Act governs exemption claims and tax liabilities. The Court highlighted that the rule is a proof facility for the selling dealer and does not limit the Department's right to assess tax liabilities.

Ultimately, the Court held that Messrs S. Lal & Co. used the goods for purposes other than those specified in the certificate, making them liable for sales tax. It concluded that the proviso to section 5(2)(a)(ii) applies based on the facts, regardless of whether a declaration under rule 27(2) was provided. The Court answered the referred question accordingly, with each party bearing their own costs.

In conclusion, the judgment clarified the interpretation of the proviso to section 5(2)(a)(ii) and emphasized the importance of the purchasing dealer's certificate specifications in determining tax liability for transactions involving resale locations different from those specified.