1964 (10) TMI 73 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of purchase tax on oil seeds used in the extraction of oil.
2. Constitutionality of taxing the same commodity twice.
3. Liability of unginned cotton purchased for export to purchase tax.
4. Deductions claimed under specific sub-clauses of the Punjab General Sales Tax Act.

Issue-wise Detailed Analysis:

1. Imposition of Purchase Tax on Oil Seeds Used in the Extraction of Oil:
The petitioner contended that raw materials used for "manufacture of goods" could be subjected to purchase tax as per clause 2(ff) of section 2 of the Principal Act, amended by Punjab Act VII of 1958. The process of oil extraction was argued to be mere extraction rather than "manufacture." The Excise and Taxation Commissioner countered that oil is a different commodity from oil seeds and is considered "manufactured" as per the amended definitions. The court referenced previous judgments which interpreted "manufacture" as bringing into existence something capable of being sold or supplied in the course of business, without necessitating complete transformation.

2. Constitutionality of Taxing the Same Commodity Twice:
The petitioner argued that under Entry 54, List II, Seventh Schedule of the Constitution, the State Legislature could not tax the same commodity twice. The State counsel responded that cotton, oil seeds, and resin listed in Schedule C of the Punjab General Sales Tax Act, 1948, are subject to both purchase and sales tax, as purchase and production or manufacture are distinct acts. Hence, the question of double taxation does not arise.

3. Liability of Unginned Cotton Purchased for Export to Purchase Tax:
The petitioner argued that taxing unginned cotton purchased for export violates Article 286 of the Constitution, which prohibits state taxation on sales or purchases in the course of import or export. The department replied that deductions are permissible if goods are disposed of as per section 5(2)(a)(vi) of the Act. Since the petitioner transferred goods to commission agents for consignment sale, the sales made by the petitioner in Punjab are considered for tax purposes.

4. Deductions Claimed Under Specific Sub-clauses of the Punjab General Sales Tax Act:
The petitioner claimed deductions under sub-clauses (ii) and (vi) of clause (a) of sub-section (2) of section 5. The court noted that sub-clause (ii) pertains to sales of goods other than those in Schedule C, while sub-clause (vi) relates to purchases within certain limitations. The court found that the Assessing Authority had not clearly distinguished between these sub-clauses in the impugned assessment order.

Detailed Analysis of Deductions:

(1) Binola or Kapas Purchased and Sold Within Six Months:
The court held that if the petitioner proves the purchase and sale of binolas to registered dealers within the prescribed time, they are entitled to the deduction. The Assessing Authority must verify these claims.

(2) Binolas Extracted from Purchased Unginned Cotton:
The court referenced a Division Bench judgment concluding that the petitioner is entitled to deductions for binolas obtained from ginned cotton and sold within the prescribed period.

(3) Cotton Purchased and Exported Through Commission Agents:
The court examined the procedure for export sales, noting that the commission agents acted as mere agents of the petitioner. The sales made by the petitioner through agents, resulting in export, qualify for deductions under sub-clause (vi). The court emphasized that sales occasioning export are exempt under Article 286, irrespective of whether the goods are stocked at Jagraon or Bombay. The court directed the Assessing Authority to determine the exact amount eligible for deduction.

Conclusion:
The court made the rule absolute, quashing the Assessing Authority's order to the extent it contradicted the court's observations. The Assessing Authority was instructed to reconsider the matter in accordance with the law and after hearing the petitioner. Each party was directed to bear its own costs.

Separate Judgment:
JINDRA LAL, J. concurred with the judgment.

Petition Allowed.