1972 (1) TMI 96 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of tax exemption notifications for kulia khand under U.P. Sales Tax Act for assessment years 1956-57, 1957-58, 1965-66, and 1966-67.

Analysis:
The judgment by the Allahabad High Court, delivered by Justice Gulati, pertains to a reference under section 11(3) of the U.P. Sales Tax Act regarding the taxability of kulia khand for the assessment years 1956-57, 1957-58, 1965-66, and 1966-67. The primary question raised was whether kulia khand is taxable under Notification No. 4064/X-960(4)-58 dated 25th November, 1958. The assessee contended that as kulia khand is a derivative of khandsari sugar, which is already taxed at the point of sale by the manufacturer or importer, the turnover of kulia khand should not be taxed separately. The revising authority accepted this argument, stating that kulia khand is merely a different form of khandsari sugar and, therefore, not liable to tax.

In analyzing the applicability of the 1958 notification exempting certain commodities from tax, the court noted that the notification aimed to exempt specific goods from taxation rather than impose tax. Additionally, the notification came into effect from 1st July 1958, rendering it inapplicable to the assessment years in question (1956-57 and 1957-58). Consequently, the court ruled that kulia khand is not taxable under the 1958 notification for these years.

For the remaining assessment years, the court considered Notification No. 1365/X-990-1956 dated 1st April, 1960, which declared the tax liability of certain goods at a specified single point. The notification included khandsari sugar, but the tax was applicable only at the point of sale by the manufacturer or importer, at a rate of 2 paise per rupee. Since the assessee did not fall under these categories and produced kulia khand from locally purchased khandsari sugar, the court concluded that the sale of kulia khand cannot be taxed separately. Moreover, if the khandsari sugar used by the assessee was subject to additional excise duty, it would be governed by a separate notification granting exemption upon payment of such duty.

In conclusion, the court held that kulia khand is not taxable under the 1958 notification for any of the assessment years in question. The assessee was awarded costs amounting to Rs. 100. The reference was answered accordingly, in favor of the assessee, based on the interpretation of the relevant tax exemption notifications and the nature of kulia khand as a derivative of khandsari sugar.