1964 (1) TMI 35 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the assessment order passed by the Sales Tax Officer.
2. Interpretation of Section 8(2) of the Central Sales Tax Act.
3. Applicability of exemptions under the U.P. Sales Tax Act to the Central Sales Tax Act.
4. Correct rate of tax on the turnover of packing materials.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Passed by the Sales Tax Officer:
The petitioner sought certiorari to quash an assessment order dated 24th March, 1962, by a Sales Tax Officer and an order by the Sales Tax Commissioner dated 23rd October, 1961. The petitioner was a dealer in khandsari sugar and was assessed for sales tax for the year 1957-58 on the turnover of inter-State sales of khandsari sugar. The court examined whether the assessment was valid under the Central Sales Tax Act.

2. Interpretation of Section 8(2) of the Central Sales Tax Act:
Section 8(2) of the Central Sales Tax Act states, "The tax payable by any dealer in any case not falling within subsection (1) shall be calculated at the same rates and in the same manner as would have been done if the sale had, in fact, taken place inside the appropriate State." The petitioner argued that this provision meant that the manner of calculation, including exemptions under the U.P. Sales Tax Act, should apply. The State contended that the dealer should be deemed liable to pay tax under the State Act, ignoring any exemptions.

The court found that the manner of calculating the State tax payable by a dealer includes not only the procedure prescribed in section 7 but also the consideration of other provisions, such as section 4, which exempts turnover on certain goods. The court held that the tax payable under the Central Act should be calculated after considering these exemptions.

3. Applicability of Exemptions Under the U.P. Sales Tax Act to the Central Sales Tax Act:
The petitioner contended that under the Central Sales Tax Act, the exemptions under the U.P. Sales Tax Act should also apply. Specifically, a notification under section 4 of the U.P. Sales Tax Act exempted khandsari sugar sold by non-manufacturers and non-importers from tax. The court agreed with the petitioner, stating that if the turnover of khandsari sugar is exempt under the State Act, it should also be exempt under the Central Act. The court emphasized that the legal fiction in section 8(2) meant that the dealer is deemed liable to pay the State tax, but the exemptions for certain goods should still be considered.

4. Correct Rate of Tax on the Turnover of Packing Materials:
The petitioner also questioned the rate at which the turnover of packing materials used in packing khandsari sugar was taxed. Section 8(3) of the Central Sales Tax Act specifies that containers or materials used for packing goods mentioned in the certificate of registration are taxed at 1% if sold to the Government or a registered dealer. However, in this case, the petitioner did not sell to such entities. Therefore, the court held that the tax on packing materials should be calculated according to the rates mentioned in the State Act, and the Sales Tax Authorities had applied the correct rate.

Conclusion:
The court concluded that the petitioner should not have been assessed under the Central Act for the turnover of khandsari sugar, as it was exempt under the U.P. Sales Tax Act. However, the petition was dismissed because the petitioner had an alternative remedy through an appeal. The court emphasized that certiorari should not be used to bypass the departmental remedy. The petition was dismissed without any order as to costs.

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