1968 (11) TMI 95 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of ex-U.P. sales in the gross turnover for tax liability determination under the U.P. Sales Tax Act.
2. Interpretation of Section 27 of the U.P. Sales Tax Act in relation to Article 286 of the Constitution.
3. Applicability of Rule 8 of the U.P. Sales Tax Rules.

Detailed Analysis:

1. Inclusion of ex-U.P. Sales in Gross Turnover:
The primary issue was whether sales made outside Uttar Pradesh should be included in the gross turnover for determining the tax liability under the U.P. Sales Tax Act. The assessee argued that if the turnover of ex-U.P. sales was excluded, the remaining turnover would fall below the taxable limit, thus exempting them from tax. The Sales Tax Officer disagreed, including the ex-U.P. sales in the gross turnover but exempting them from tax under Section 27.

2. Interpretation of Section 27 and Article 286:
The court emphasized that Section 27 of the U.P. Sales Tax Act, which aligns with Article 286 of the Constitution, explicitly prohibits the imposition of tax on sales made outside the state. This section overrides other provisions of the Act, including the definitions of "sale" and "turnover" in Sections 2(h) and 2(i). The court cited the Supreme Court's ruling in A.V. Fernandez v. State of Kerala, which stated that transactions falling under Article 286 are outside the purview of the Act and cannot be included in the turnover for tax assessment.

3. Applicability of Rule 8:
Rule 8 of the U.P. Sales Tax Rules, which determines liability based on gross turnover, was also considered. The court rejected the argument that ex-U.P. sales could be included in the gross turnover to determine tax liability for other sales. The Supreme Court's ruling in A.V. Fernandez clarified that non-taxable sales should be excluded from the gross turnover calculation.

Conclusion:
The court concluded that ex-U.P. sales should not be included in the gross turnover for determining tax liability under the U.P. Sales Tax Act. The turnover of sales made outside Uttar Pradesh by the assessee cannot be included in the turnover of the dealer for the purposes of the first proviso to Section 3(1). The assessee was entitled to costs assessed at Rs. 200.

Separate Judgments:
- PATHAK, J.: Emphasized the constitutional prohibition under Article 286 and the overriding effect of Section 27 on other provisions of the Act.
- BEG, J.: Agreed with Pathak, J., and highlighted the legislative intent to exempt turnovers below Rs. 12,000 from sales tax.
- GULATI, J.: Added that Rule 8 should be interpreted to exclude non-taxable sales from the gross turnover calculation, aligning with the Supreme Court's ruling in A.V. Fernandez.

Final Decision:
The court answered the reference in favor of the assessee, stating that ex-U.P. sales cannot be included in the turnover for tax liability purposes. The assessee was awarded costs assessed at Rs. 200.