1973 (12) TMI 87 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax on chemist as a manufacturer under section 3-A of the U.P. Sales Tax Act based on turnover determination. Applicability of entry No. 39 in the notification dated 1st April, 1960, and its amendment on 11th October, 1962, regarding taxation of medicines dispensed by the chemist under section 3 of the Act.

Analysis:
The judgment by the High Court addressed the issue of assessing a chemist for sales tax as a manufacturer under section 3-A of the U.P. Sales Tax Act. The assessing officer had determined the chemist's turnover at Rs. 20,000, leading to the imposition of sales tax. However, the Additional Judge (Revisions) referred to previous court decisions, including one by the Supreme Court, which stated that for an activity to be considered manufacturing, the resulting produce must be a commercially different article. Based on this interpretation, it was held that the chemist did not manufacture a commercially different article and, therefore, was not liable to tax as a manufacturer under section 3-A.

Regarding the applicability of entry No. 39 in the notification dated 1st April, 1960, and its subsequent amendment on 11th October, 1962, the court examined whether the chemist could be taxed under section 3 of the Act for the turnover of medicines dispensed by him. The court noted that the amendment exempted medical practitioners preparing mixtures for their patients but did not change the legal position established by previous court decisions. The court emphasized that if a term like "manufacturer" had been judicially interpreted in a particular statute, the subordinate rulemaking authority could not alter that interpretation through notifications. Therefore, the amendment did not make chemists, other than medical practitioners, liable to tax as manufacturers. As a result, the court answered the question in the negative, in favor of the chemist and against the department.

In conclusion, the High Court's judgment clarified that the chemist was not liable to tax as a manufacturer under section 3-A based on the interpretation of manufacturing activity. Furthermore, the court determined that the amendment to the notification did not change the legal position established by previous court decisions regarding the taxation of medicines dispensed by the chemist under section 3 of the Act.