1978 (11) TMI 148 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Determination of the correct rate of tax on the sales of scrap batteries.
2. Application of the doctrine of estoppel in tax assessment proceedings.

Detailed Analysis:

1. Determination of the Correct Rate of Tax on the Sales of Scrap Batteries:
The core issue was whether the scrap batteries sold by various dealers to the assessee were taxable at the rate of 10% under entry 42B of Schedule C or at 6% under residuary entry 22 of Schedule E of the Bombay Sales Tax Act, 1959. The assessee claimed a set-off of Rs. 3,534 based on the 10% tax rate charged by the vendors. However, the Sales Tax Officer allowed a set-off only at the rate of 6%, resulting in a set-off of Rs. 2,329. The Tribunal initially sided with the assessee, allowing the set-off at the 10% rate based on the certificates provided by the selling dealers, which indicated that the sales tax was charged at 10%. The Tribunal did not independently verify whether the scrap batteries fell under entry 42B or entry 22.

The High Court emphasized that the Tribunal was directed to determine the correct rate of tax on scrap batteries as per the earlier judgment in Sales Tax Reference No. 5 of 1974. The Tribunal failed to address this directive and instead relied on the certificates from the selling dealers, which indicated a 10% tax rate. The High Court found this approach erroneous, as the Tribunal did not make an independent determination of whether the scrap batteries were covered by entry 42B of Schedule C or entry 22 of Schedule E.

2. Application of the Doctrine of Estoppel in Tax Assessment Proceedings:
The Tribunal invoked the doctrine of estoppel, suggesting that since the Sales Tax Officers had assessed the vendors at a 10% tax rate, the revenue was precluded from contending that the tax rate should be 6% when the assessee claimed a set-off. The High Court rejected this application of estoppel, citing precedents that the doctrine of estoppel does not apply in tax law. The Court referenced several cases, including *Commissioner of Income-tax v. V.MR.P. Firm, Muar* and *Mathra Parshad and Sons v. State of Punjab*, to assert that equity and estoppel cannot override statutory provisions. The Court concluded that the Tribunal erred in law by applying estoppel and failing to independently determine the correct tax rate.

Conclusion:
The High Court reframed the question to focus on whether the Tribunal was required to decide the correct tax rate for scrap batteries and whether it erred in failing to do so. The Court answered this question in the affirmative, stating that the Tribunal was indeed required to determine the correct tax rate and erred by invoking estoppel and not making an independent determination. The decision was in favor of the revenue and against the assessee, with the assessee ordered to pay the costs of the reference to the Commissioner of Sales Tax.