1971 (5) TMI 59 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Tax liability under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948.
2. Validity of the return filed in form S.T. VIII.
3. Machinery for the collection of tax under section 5(2)(a)(ii).

Detailed Analysis:

Issue 1: Tax Liability under Section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948
The petitioner, a registered dealer, purchased materials like yarn, dyes, and chemicals for manufacturing cloth, a tax-free item. The Assessing Authority taxed these materials under section 5(2)(a)(ii) of the Act. The petitioner argued that since they were manufacturing tax-free goods, the use of these materials should not be taxed. However, the court examined the scheme of the Act and the purpose of section 5(2)(a)(ii). It was found that the petitioner did not disclose at the time of purchase that the goods were for manufacturing tax-free items. The court noted that if the goods were disclosed for manufacturing tax-free items, sales tax would have been levied at the point of sale. The court referred to a similar case from the Patna High Court, which emphasized that the second proviso to section 5(2)(a)(ii) is intended to prevent evasion of sales tax. The court concluded that the petitioner is liable to pay tax on the materials used for manufacturing tax-free goods as per the second proviso to section 5(2)(a)(ii).

Issue 2: Validity of the Return Filed in Form S.T. VIII
The petitioner contended that the return was filed in form S.T. VIII, which is for dealers engaged in selling goods, and thus, the Assessing Authority had no jurisdiction to levy purchase tax. The court rejected this argument, stating that the tax levied is not a purchase tax but a sales tax aimed at preventing evasion. The tax should have been recovered at the time of sale but was not due to the misleading declaration by the purchaser. Therefore, the recovery of tax at a later stage is justified, and the second contention was repelled.

Issue 3: Machinery for the Collection of Tax under Section 5(2)(a)(ii)
The petitioner argued that no machinery was provided for the collection of tax under section 5(2)(a)(ii). The court noted that the tax is sales tax and the manner and form for its recovery are provided in the Act. The court referred to the Supreme Court's decision in Modi Spinning and Weaving Mills Co. Ltd. v. Commissioner of Sales Tax, Punjab, and Another, which held that the charging section is complete without the prescription of the proper form for the certificate of registration. The court concluded that there is no infirmity in the Act regarding the collection of tax due under section 5(2)(a)(ii), and the third contention was dismissed.

Conclusion
The court dismissed the petition with costs assessed at Rs. 200, upholding the tax liability under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948, and rejecting the contentions regarding the validity of the return filed in form S.T. VIII and the machinery for tax collection. The decision emphasized the purpose of section 5(2)(a)(ii) in preventing tax evasion and ensuring the recovery of sales tax that should have been levied at the point of sale.