1978 (11) TMI 141 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of the term "taxable goods" under section 2(33) of the Gujarat Sales Tax Act, 1969.
2. Applicability of purchase tax under section 16 of the Gujarat Sales Tax Act, 1969.
3. Validity of the certificate in form 19 provided by the assessee.
4. Examination of the end-use of the goods purchased against the certificate.
5. Implications of exemptions under section 49 of the Act.
6. Possible imposition of penalties under section 45(1) of the Act.

Issue-wise Detailed Analysis:

1. Interpretation of the term "taxable goods" under section 2(33) of the Gujarat Sales Tax Act, 1969:
The term "taxable goods" is defined in clause (33) of section 2 of the Act as "goods other than those on the sale or purchase of which no tax is payable under section 5 or section 49 or a notification issued thereunder." The court noted that this definition is broader than the previous definition under the Bombay Sales Tax Act, 1959, and includes goods exempted under section 49. The court emphasized that the exclusion clause should not be read restrictively and should include both generally and conditionally exempted goods.

2. Applicability of purchase tax under section 16 of the Gujarat Sales Tax Act, 1969:
Section 16(1) of the Act provides that purchase tax is leviable when taxable goods purchased under a certificate are used for a purpose contrary to the certificate. The court analyzed that the purpose of section 16 is to prevent tax evasion and ensure that the declaration in the certificate is adhered to. The court held that the manufactured goods must retain their taxable character until the point of sale to avoid the levy of purchase tax.

3. Validity of the certificate in form 19 provided by the assessee:
The certificate in form 19 declared that the goods purchased would be used as raw materials in the manufacture of taxable goods for sale. The court found that the assessee did not adhere to this declaration as the manufactured goods were sold to a certified electrical undertaking without tax recovery, thus breaching the certificate's terms.

4. Examination of the end-use of the goods purchased against the certificate:
The court held that the end-use of the goods is crucial in determining the applicability of purchase tax. The manufactured goods, although taxable when produced, were sold in a manner that rendered them non-taxable due to the exemption under section 49. Therefore, the court concluded that the goods were used contrary to the certificate, justifying the levy of purchase tax.

5. Implications of exemptions under section 49 of the Act:
The court examined the exemptions under section 49 and held that the exclusion clause in section 2(33) includes goods that are exempt from tax either generally or conditionally. The court rejected the assessee's argument that only generally exempted goods should be excluded from the definition of "taxable goods."

6. Possible imposition of penalties under section 45(1) of the Act:
The court clarified that the imposition of penalties under section 45(1) is discretionary and should be exercised judicially. Penalties are not automatic and should be imposed only if the dealer acted deliberately in contravention of the certificate or in conscious disregard of the declaration.

Conclusion:
The court affirmed the Tribunal's decision that the assessee was liable to pay purchase tax under section 16 for using the goods contrary to the certificate in form 19. The court answered the reference in the affirmative, favoring the revenue and against the assessee. The assessee was ordered to pay the costs of the reference to the State of Gujarat.