1970 (9) TMI 97 - HC - VAT and Sales Tax

Summary

Issues:
1. Stay order validity for assessment years
2. Assessment timeline for 1960-61
3. Tax rate for assembled cycles
4. Justification of sales estimate ignoring Form 'C' purchases

Issue 1: Stay Order Validity for Assessment Years
The case involved a reference under section 11(1) of the U.P. Sales Tax Act regarding the validity of a stay order for assessment years. The Additional Revising Authority submitted questions regarding the effectiveness of the stay order for the year 1959-60 or all years. The stay order was issued in response to a direction by the Commissioner of Sales Tax to assess sales tax on the turnover of assembled cycles. The court found that the stay order applied to all pending assessment proceedings, including those for the year 1960-61. The period of limitation for assessment was extended due to the stay order, making the assessment order for 1960-61 within time.

Issue 2: Assessment Timeline for 1960-61
The assessment for the year 1960-61 was challenged by the assessee on grounds of being time-barred. The Sales Tax Officer had made the assessment order on 10th June, 1965, which the assessee claimed was beyond the limitation period. The Sales Tax Department argued that the period of the stay order should be excluded from the computation of the limitation period. The court found that the stay order covered all pending assessment proceedings, including for 1960-61, and thus the assessment order was held to be within the time limit.

Issue 3: Tax Rate for Assembled Cycles
The question arose whether assembled cycles should be taxed at 2% as an unclassified item or at 3% as manufactured cycles. The court analyzed the definition of "manufacture" and concluded that the process of assembling cycles involved a manufacturing process. Assembled cycles were considered a new commercial commodity different from their component parts, making them liable to be treated as "manufactured" cycles and taxable at 3%.

Issue 4: Justification of Sales Estimate Ignoring Form 'C' Purchases
The fourth question raised was regarding the justification of estimating sales when purchases made on Form 'C' were ignored. However, the court found that this question did not arise from the order of the Additional Revising Authority and thus did not provide an answer to it. The Commissioner of Sales Tax was awarded costs, and the reference was answered accordingly.