1961 (9) TMI 44 - HC - VAT and Sales Tax

Summary

Issues:
1. Levy of sales tax on silk goods manufactured by respondent-mills.
2. Tax liability on sales from "Works Peoples Stores" operated by respondent-mills.
3. Taxability of sales of unserviceable goods by respondent-mills.

Analysis:
1. The dispute revolved around the classification of silk goods manufactured by the respondent-mills for the purpose of sales tax levy. The Sales Tax Officer imposed tax at a higher rate based on the goods being considered as textiles produced by a "mill." The respondent-mills contended that the silk goods were woven on power-looms and should be taxed at a lower rate. The Deputy Commissioner upheld the tax assessment, but the Mysore Sales Tax Appellate Tribunal ruled in favor of the respondent-mills, stating that the goods were indeed manufactured on power-looms and entitled to a refund of excess tax collected.

2. The respondent-mills operated "Works Peoples Stores" to provide goods to their employees without profit. The Sales Tax Officer and Deputy Commissioner considered this as a business activity subject to tax. However, the Tribunal viewed it as an amenity for employees, not a profit-motivated business, citing a precedent. Consequently, the Tribunal exempted the sales from "Works Peoples Stores" from tax liability.

3. The issue regarding the sale of unserviceable goods by the respondent-mills was also contested. The Sales Tax Officer deemed these sales as part of the business activities subject to taxation. In contrast, the Tribunal disagreed, emphasizing that the respondent-mills' primary objective was the manufacturing and sale of specific goods, not the sale of sundries. The Tribunal concluded that the sales of unserviceable goods were not within the scope of taxable transactions, ultimately ruling in favor of the respondent-mills in this regard.

In conclusion, the High Court upheld the Tribunal's decisions on all three issues, dismissing the State's revision petitions and affirming the entitlement of the respondent-mills to a refund on excess tax, the non-taxability of sales from "Works Peoples Stores," and the exemption of sales of unserviceable goods from taxation.