1962 (4) TMI 67 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of provisos (a) and (b) to rule 5(1)(vii) of the Bombay Sales Tax Rules, 1952.

Analysis:
The case involved questions regarding the interpretation of provisos (a) and (b) to rule 5(1)(vii) of the Bombay Sales Tax Rules, 1952. The references were made by the Additional Collector of Sales Tax, Bombay, concerning the assessment of a dealer for two periods. The issue revolved around whether the price of goods purchased by the dealer should be included in their taxable turnover. The specific focus was on whether the case fell under proviso (a) or proviso (b) of the rule. The respondents, a wholesale business dealing in art silk cloth, purchased goods for bleaching, dyeing, and printing, intending to sell them outside the State of Bombay. The Sales Tax Authorities included the price of these goods in the dealer's taxable turnover, leading to a dispute. The Tribunal upheld the dealer's contention, prompting a reference to the High Court.

The main contention centered on the interpretation of the term "such manufacture" in proviso (a) of rule 5(1)(vii). The Advocate-General argued that "such manufacture" referred to manufacturing goods for sale within the State of Bombay, aligning with the definition of "sale" in the Sales Tax Act. The dealer's counsel contended that the sale of manufactured goods should not be considered part of the manufacturing process itself. The court analyzed the language of the rule and concluded that proviso (a) applied when the dealer failed to meet the conditions of utilizing purchased goods for manufacturing goods to be sold within the State of Bombay. Proviso (b) was deemed applicable when no general tax was payable on sales of manufactured goods, even if they were not sold within the State of Bombay.

The court emphasized the strict interpretation of taxing statutes, stating that any ambiguity should benefit the taxpayer. In this case, the court found no ambiguity in the language of proviso (a) and ruled that it applied when the dealer breached conditions related to manufacturing goods for sale within the State of Bombay. The judgment clarified that proviso (b) was relevant in situations where no general tax was payable on sales of manufactured goods, irrespective of the sales location. Ultimately, the court answered the reference question by defining "such manufacture" as "manufactured for sale" within the State of Bombay. The respondents were directed to pay the costs of the applicant.

In conclusion, the High Court's judgment provided a detailed analysis of the interpretation of provisos (a) and (b) to rule 5(1)(vii) of the Bombay Sales Tax Rules, 1952, clarifying the application of these provisions in determining taxable turnover for dealers.