1974 (5) TMI 95 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Validity of the Sales Tax Officer's assessment order dated 26th June 1973.
2. Validity of the Sales Tax Officer's refusal to rectify the assessment order dated 13th December 1973.
3. Applicability of Section 8(2A) of the Central Sales Tax Act.
4. Interpretation of the exemption notification under Section 4-A of the U.P. Sales Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Sales Tax Officer's assessment order dated 26th June 1973:

The petitioner-company, which manufactures toughened glasses and mirrors, was assessed to tax under the Central Sales Tax Act by the Sales Tax Officer on 26th June 1973. The petitioner contended that, based on a notification dated 9th January 1970 issued under Section 4-A of the U.P. Sales Tax Act, the turnover of mirrors and toughened glasses manufactured at its Allahabad factory was exempt from payment of sales tax for three years starting February 1969. Consequently, the petitioner argued that it was not liable for Central sales tax either, as per Section 8(2A) of the Central Sales Tax Act.

2. Validity of the Sales Tax Officer's refusal to rectify the assessment order dated 13th December 1973:

The petitioner applied for rectification of the assessment order under Section 22 of the U.P. Sales Tax Act, read with the Central Sales Tax Act. However, the Sales Tax Officer rejected the application on 13th December 1973, stating that the turnover of sales of toughened glasses and mirrors was not generally exempt from payment of sales tax under the U.P. Sales Tax Act. Therefore, the petitioner could not benefit from Section 8(2A) of the Central Sales Tax Act.

3. Applicability of Section 8(2A) of the Central Sales Tax Act:

Section 8(2A) of the Central Sales Tax Act stipulates that if the sale or purchase of any goods by a dealer is exempt from tax generally under the sales tax law of the appropriate State, then the tax payable under the Central Sales Tax Act shall be nil. The court examined whether the petitioner's turnover of mirrors and toughened glasses was exempt from tax generally under the U.P. Sales Tax Act. The explanation to Section 8(2A) clarifies that a sale or purchase of goods is not considered exempt from tax generally if it is exempt only in specified circumstances or under specified conditions.

4. Interpretation of the exemption notification under Section 4-A of the U.P. Sales Tax Act:

The court analyzed the notifications issued under Sections 3-A and 4-A of the U.P. Sales Tax Act. Section 3-A allows the State Government to specify the point at which sales tax is levied on certain goods. Section 4-A provides for exemption from sales tax to increase production of any goods. The notification dated 9th January 1970 exempted the petitioner's turnover of mirrors and toughened glasses from sales tax for three years starting February 1969. The court concluded that this exemption was not conditional and did not fall under the specified circumstances or conditions mentioned in the explanation to Section 8(2A) of the Central Sales Tax Act.

The court held that the exemption granted under Section 4-A was unconditional and for a specified duration, and thus, the turnover of mirrors and toughened glasses manufactured by the petitioner was exempt from tax generally. Therefore, the petitioner was not liable to pay Central sales tax on these goods.

Conclusion:

The petition was allowed with costs. The court quashed the Sales Tax Officer's orders dated 26th June 1973 and 13th December 1973, holding that the turnover of mirrors and toughened glasses manufactured by the petitioner was exempt from tax generally and not liable to Central sales tax.