1965 (2) TMI 87 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the branch office of a partnership firm is a separate legal entity for tax assessment purposes.
2. Whether the tax assessment on baled cotton and hessian cloth contravened the Central Sales Tax Act.
3. Whether the writ petition was competent despite not availing remedies under sections 20 and 21 of the Act.

Analysis:

1. The main issue in this case was whether the branch office of a partnership firm constituted a separate legal entity for tax assessment purposes. The petitioners contended that the branch office in Bhatinda was not a distinct legal entity from the head office in Bombay, and therefore, the purchases made by the branch office for export should be exempt from sales tax under section 5(2)(a)(vi) of the Act. The court held that a partnership has no independent existence apart from its partners, and the branch office and head office should be considered as one entity. The Assessing Authority erred in not recognizing this and should have granted the exemption claimed by the petitioners.

2. Another issue raised was regarding the tax assessment on baled cotton and hessian cloth. The petitioners argued that the tax on hessian cloth should have been at the same rate as cotton, citing section 14 of the Central Sales Tax Act. The Assessing Authority had levied different rates on cotton and hessian cloth, which was alleged to contravene the provisions of the Central Sales Tax Act. The court found that the tax assessment on hessian cloth at a higher rate was incorrect, as only cotton was liable to tax at the rate of 2 per cent, not the packing material.

3. The final issue was whether the writ petition was competent despite not availing remedies under sections 20 and 21 of the Act. The respondents argued that the petitioners should have filed an appeal or revision before resorting to a writ petition. However, the court held that since the Assessing Authority had acted based on instructions from the Excise and Taxation Commissioner, rendering the appeal a mere formality, the petitioners were justified in directly filing the writ petition. Citing precedent, the court allowed the writ petition, quashing the assessment order dated 1st February, 1963.

In conclusion, the court ruled in favor of the petitioners, holding that the branch office and head office of a partnership firm should be treated as one entity for tax assessment purposes. The tax assessment on baled cotton and hessian cloth was found to be incorrect, and the writ petition was deemed competent despite not availing other remedies under the Act.