1975 (4) TMI 129 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the deletion of packing materials from the sales tax registration certificate.
2. Adequacy of the opportunity provided to the petitioner to contest the deletion.
3. Interpretation of section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi.
4. Relevance of instructions issued by the Commissioner of Sales Tax to the assessing authorities.

Issue-wise Detailed Analysis:

1. Validity of the Deletion of Packing Materials from the Sales Tax Registration Certificate:
The petitioner sought to quash the order of the Assistant Sales Tax Officer, which deleted certain packing materials from the registration certificate issued under section 7 of the Bengal Finance (Sales Tax) Act, 1941. The petitioner argued that these materials were essential for the packing and transportation of their fragile crockery products, and their cost was included in the manufacturing expenses and final sale price. The court noted that the registration certificate initially included packing materials, nails, and packing cases, which were added on 18th January 1962. However, the Assistant Sales Tax Officer's order did not provide reasons for the deletion, and the show cause notice only stated that these items were erroneously specified and were neither raw materials nor intended for resale. The court found that the deletion did not consider the crucial part of section 5(2)(a)(ii), which includes "containers or other materials for the packing of goods."

2. Adequacy of the Opportunity Provided to the Petitioner to Contest the Deletion:
The petitioner contended that they were not given a real opportunity to show cause against the deletion. The show cause notice and the subsequent deletion order were issued on the same date, and the petitioner's accountant received the notice while at the office for another matter. The court examined the cyclostyled forms of the show cause notice and deletion order, noting that the content of the forms contradicted the respondents' claim that the petitioner was given sufficient opportunity to present their case. The court rejected the respondents' assertion that the petitioner had appeared and made submissions, as evidenced by the identical language used in the forms, which indicated a lack of genuine consideration of the petitioner's objections.

3. Interpretation of Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941:
The court analyzed the relevant provisions of the Act and the Delhi Rules framed thereunder. Section 5(2)(a)(ii) allows deductions for sales to a registered dealer of goods intended for resale or use as raw materials in manufacturing, including "containers and other materials for the packing of goods." The court noted that the registration certificate should specify the class or classes of goods for these purposes. The court agreed with the observations made in a previous case (Dabur (Dr. S.K. Burman) Pvt. Ltd. v. Commercial Tax Officer) that packing materials form an independent category necessary for the sale of manufactured goods. The court found that the deletion of packing materials from the registration certificate was inconsistent with the statutory provisions and the established practice of including packing costs in the manufacturing expenses.

4. Relevance of Instructions Issued by the Commissioner of Sales Tax:
The petitioner argued that the deletion was made pursuant to a policy decision and instructions issued by the Commissioner of Sales Tax, which interfered with the quasi-judicial functions of the assessing authorities. The court did not delve into this aspect, as the primary issue was the lack of a proper hearing and consideration of the petitioner's objections. However, the court acknowledged the petitioner's contention that such instructions could potentially undermine the independent exercise of quasi-judicial functions by the assessing authorities.

Conclusion:
The court quashed the show cause notice and the order of cancellation, directing that a fresh finding be given after issuing a new show cause notice, if necessary, and providing the petitioner with an adequate opportunity to present their case. The writ petition was accepted, and the petitioner was awarded costs. The judgment emphasized the need for proper procedural fairness and adherence to statutory provisions in the assessment and registration processes under the sales tax law.

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