1962 (2) TMI 65 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Applicability of purchase tax under section 10(a) of the Bombay Sales Tax Act, 1953, on butter converted into ghee.
2. Interpretation of the proviso to section 10(a) regarding the sale of goods purchased from unregistered dealers.
3. Validity of the reference made to the High Court.

Issue-wise Detailed Analysis:

1. Applicability of Purchase Tax under Section 10(a) on Butter Converted into Ghee:

The primary issue was whether purchase tax is leviable under section 10(a) of the Bombay Sales Tax Act, 1953, when butter purchased from unregistered dealers is converted into ghee and then sold. The Sales Tax Officer initially assessed the purchase turnover of Rs. 42,969, which was the value of the butter converted into ghee and sold, under the provisions of section 10(a) of the Act. This assessment was confirmed by the Deputy Commissioner and the Commissioner of Commercial Taxes in Mysore. However, the Sales Tax Appellate Tribunal set aside this assessment, directing the matter to be reopened and the exact taxable turnover to be determined.

2. Interpretation of the Proviso to Section 10(a):

The proviso to section 10(a) exempts the payment of purchase tax if the goods specified in the first eighteen entries of Schedule B, including milk products like butter and ghee, are sold by the dealer after purchase. The Tribunal held that the sale of ghee, produced from the butter purchased, fell within the ambit of the proviso, absolving the assessee of liability to pay tax on the antecedent purchase of butter. However, the High Court disagreed, stating that the proviso requires the goods sold to be the identical goods purchased. The Court emphasized that the expressions "such goods" and "such purchase" in the proviso imply that the exemption applies only if the same goods purchased are sold without undergoing any transformation. Thus, since butter converted into ghee is not the same as the butter purchased, the proviso does not apply, making the purchase taxable.

3. Validity of the Reference to the High Court:

The assessee contended that the reference made to the High Court was invalid as the application for reference was not made within the prescribed period of limitation under section 34 of the Act. The Commissioner of Commercial Taxes initially addressed a letter to the Tribunal on 27th October 1958, requesting the reference, followed by a formal application on 27th April 1959. The Tribunal considered the maintainability of the application and the assessee's objections regarding the limitation. On 5th August 1959, the assessee's pleader consented to the reference being made to the High Court. Given this consent, the High Court found that the assessee was precluded from contesting the validity of the reference.

Conclusion:

The High Court concluded that purchase tax is indeed leviable under section 10 of the Bombay Sales Tax Act, 1953, when butter purchased from an unregistered dealer is converted into ghee and sold. The reference was answered in favor of the Department, with no order as to costs.