1967 (3) TMI 94 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner to amend the registration certificate under Section 7(4) of the Bengal Finance (Sales Tax) Act, 1941.
2. Interpretation of Section 5(2)(a)(ii) of the Act regarding the inclusion of "paper and ink" as materials for packing or for use in the manufacture of goods for sale.

Detailed Analysis:

I. Jurisdiction of the Commissioner to Amend Registration Certificate

Issue:
Whether the Commissioner has the jurisdiction to amend a registration certificate under Section 7(4) of the Bengal Finance (Sales Tax) Act, 1941, based on grounds other than those specified in Section 16.

Analysis:
Sub-section (1) of Section 7 of the Act mandates that no one can carry on business as a "dealer" without a registration certificate. Sub-section (4) allows the Commissioner to amend any certificate of registration based on information furnished under Section 16 or otherwise received. Section 16 specifies three contingencies for amendment: change in ownership, discontinuance of business, and change in the name or class of goods dealt with.

The petitioner argued that the phrase "otherwise received" should be construed to relate only to the three contingencies mentioned in Section 16. However, previous rulings (Bhartia Electric Steel Co. v. Commercial Tax Officer and Merchant & Traders v. State of West Bengal) and the Supreme Court's interpretation of similar provisions in the Income-tax Act suggest that "information" can include the officer's own knowledge and does not need to be limited to the contingencies in Section 16.

The Court concluded that Section 7(4) empowers the authority to amend the certificate based on any information requiring an amendment, whether received from the dealer or any other source, including the authority's own knowledge. This interpretation avoids conflict with Section 20(4), (5), which deals with the review of orders, by considering the amendment of a certificate a matter of lesser importance, safeguarded by statutory remedies of revision and appeal.

Conclusion:
The Commissioner's jurisdiction to amend the registration certificate under Section 7(4) is upheld, and the petitioner's contention is rejected.

II. Interpretation of Section 5(2)(a)(ii) of the Act

Issue:
Whether "paper and ink" used by the petitioner qualify for deduction under Section 5(2)(a)(ii) as materials used in the manufacture of goods for sale or as packing materials.

Analysis:
Section 5(2)(a)(ii) allows deduction from taxable turnover for sales to a registered dealer of goods specified in the registration certificate for resale or for use in the manufacture of goods for sale, including containers and packing materials.

The petitioner claimed that "paper and ink" should be deductible either as materials used in the manufacture of finished products or as packing materials. The revising authority rejected this claim, interpreting that packing materials cannot be intended for "the manufacture" of finished products.

The Court noted that Section 5(2)(a)(ii) has two parts: one for goods used in the manufacture and another for packing materials. The revising authority's reasoning ignored the independent category of packing materials, constituting an "error apparent on the face of the record." The Court directed a fresh finding on whether "paper and ink" qualify as packing materials.

Regarding the use of "paper and ink" in the manufacture, the Court referred to Supreme Court rulings (Indra Singh v. Sales Tax Officer, Indian Copper Corporation v. Commissioner of Commercial Taxes, and J.K. Cotton Spinning v. Sales Tax Officer) which distinguished between goods necessary for the manufacturing process and those merely facilitating it. The Court concluded that "paper and ink" do not qualify as materials used in the manufacture of goods for sale.

Conclusion:
The claim that "paper and ink" are used in the manufacture of goods for sale is rejected. However, the revising authority's error in interpreting "paper and ink" as packing materials necessitates a fresh disposal of the revision petition.

Final Judgment:
The Rule is made absolute. The impugned order at annexure 'H' is quashed regarding the claim of "paper and ink" as packing materials. The revising authority is directed to re-evaluate the revision petition in accordance with the law and the Court's observations. No order as to costs.