1977 (5) TMI 80 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Determination of the first point of taxation in a series of sales involving exempted sales.
2. Interpretation of Rule 15 of the Rajasthan Sales Tax Rules in relation to the first point of sale.
3. Validity of the Division Bench decision in Nagaur Sahar Kendriya Sahakari Kar Vikraya Sangh v. State of Rajasthan.
4. Application of exemptions under Section 4 of the Rajasthan Sales Tax Act, 1954.
5. Impact of administrative circulars on statutory interpretation.

Issue-Wise Detailed Analysis:

1. Determination of the First Point of Taxation in a Series of Sales Involving Exempted Sales:
The primary question was whether the sale by a second registered dealer is deemed to be at the first point of taxation if the first registered dealer is exempt from sales tax. The court held that the first point in the series of sales is determined by the first sale made by a registered dealer, irrespective of whether the sale is exempt from tax. The court emphasized that the first point of taxation does not shift to the second dealer simply because the first dealer is exempt.

2. Interpretation of Rule 15 of the Rajasthan Sales Tax Rules in Relation to the First Point of Sale:
Rule 15(1) specifies that tax is payable at the first point in the series of sales, including sales by manufacturers and importers. The court noted that Rule 15 does not exclude sales made by a manufacturer for determining the first point in the series of sales. Rule 15(3) states that exemptions under Section 4 are not affected by Rule 15. The explanation to Rule 15 clarifies that the first point in the series of sales is the first sale by a registered dealer, without any limitation regarding the category of sale.

3. Validity of the Division Bench Decision in Nagaur Sahar Kendriya Sahakari Kar Vikraya Sangh v. State of Rajasthan:
The court overruled the Division Bench decision in Nagaur Sahar Kendriya Sahakari Kar Vikraya Sangh, which held that the first point of taxation begins with the first taxable sale. The court found that this interpretation was incorrect and contrary to the plain language of Rule 15 and Section 5 of the Act. The court stated that the first point in the series of sales includes the first sale by a registered dealer, even if exempt from tax.

4. Application of Exemptions Under Section 4 of the Rajasthan Sales Tax Act, 1954:
Section 4(2) allows the government to exempt certain sales from tax. The court held that exemptions granted under Section 4 do not alter the determination of the first point of taxation under Rule 15. The court concluded that the first sale by a registered dealer, even if exempt under Section 4, remains the first point in the series of sales.

5. Impact of Administrative Circulars on Statutory Interpretation:
The court referenced a circular from the Commissioner of Excise and Taxation, which clarified that goods exempted at the first point of sale do not incur tax at subsequent points. Although the circular does not have statutory force, the court acknowledged its relevance as contemporanea expositio (contemporaneous interpretation). The court noted that long-standing administrative interpretation should not be disregarded without compelling reasons.

Conclusion:
The court concluded that the first point in the series of sales is the sale made by the first registered dealer, even if exempt from tax. The sale by the second registered dealer does not become the first point of taxation. The court overruled the decision in Nagaur Sahar Kendriya Sahakari Kar Vikraya Sangh and upheld the interpretation that exemptions under Section 4 do not affect the determination of the first point of taxation under Rule 15. The reference was answered accordingly, with no order as to costs.