1970 (3) TMI 114 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of Section 3-A of the U.P. Sales Tax Act to the turnover of bricks.
2. Validity of notifications issued under Section 3-A.
3. Interpretation of "series of sales by successive dealers."
4. Impact of the U.P. Sales Tax (Amendment and Validation) Ordinance, 1970.

Issue-wise Detailed Analysis:

1. Applicability of Section 3-A of the U.P. Sales Tax Act to the turnover of bricks:
The core issue was whether the turnover of bricks could be assessed to tax under Section 3-A of the U.P. Sales Tax Act. The petitioners contended that bricks are sold directly by manufacturers to consumers without any middlemen, thus not fitting within the scope of Section 3-A, which contemplates a series of sales by successive dealers. The court agreed, noting that "according to the normal trade structure prevailing in the State of Uttar Pradesh, bricks are directly sold by the manufacturers to the consumers and there are no middlemen like distributors, wholesalers or retailers."

2. Validity of notifications issued under Section 3-A:
The petitioners argued that the notifications issued under Section 3-A were ultra vires as they imposed a higher tax rate than the general rate prescribed under Section 3. The court found this contention valid, stating that "notifications issued under section 3-A with regard to bricks are invalid." The court emphasized that Section 3-A was intended to provide relief to the business community and consumers, not to impose higher taxes.

3. Interpretation of "series of sales by successive dealers":
The court delved into the interpretation of "series of sales by successive dealers," concluding that a series must necessarily have more than two sales. The court cited Dr. Sukh Deo v. Commissioner of Sales Tax, where it was observed that "a notification under section 3-A is meant for an article which is expected to be sold more than once." The court further noted that the State Government must show that the commodity in question passes through more than one sale by dealers in the normal trade channels, which was not the case with bricks.

4. Impact of the U.P. Sales Tax (Amendment and Validation) Ordinance, 1970:
The Ordinance amended Section 3-A by substituting the words "at such single point in the series of sales by successive dealers" with "at such single point of sale." The court held that even after the amendment, the State Government is required to make a selection of a single point of sale, which implies plurality of sales. The court stated, "even under the amended section 3-A, even though there may not be a series of sales by successive dealers, yet there must be more than one sale by dealers." The court concluded that bricks would still be outside the purview of Section 3-A after its amendment by the Ordinance.

Conclusion:
The court held that the notifications issued under Section 3-A with regard to bricks are invalid and that the turnover of bricks is taxable at the general rate provided in Section 3 of the Act. The court directed that the respondents shall not assess the petitioners on their turnover of bricks under Section 3-A or the notifications issued thereunder. The petitions were allowed with costs. In cases where assessment proceedings were pending, the respondents were directed to assess under Section 3, and in cases where assessments had already been made, the respondents were directed to suitably modify the assessments.