1982 (7) TMI 254 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the order under section 22 of the U.P. Sales Tax Act.
2. Classification of water pumping sets as agricultural implements.
3. Retrospective application of amendments to the U.P. Sales Tax Act.

Detailed Analysis:

1. Validity of the Order Under Section 22 of the U.P. Sales Tax Act:
The petitioner, M/s. Patwala Sales Corporation, challenged the order passed by the Sales Tax Officer on 29th September 1975, which revised the sales tax on pumping sets from 3% to 6% for the assessment year 1970-71. The original assessment dated 29th January 1975 had correctly assessed the turnover of pumping sets at 3% as agricultural implements. The appellate order by the Assistant Commissioner (Judicial) on 20th November 1976 upheld the revised tax rate of 6%, which was found to be erroneous by the High Court.

2. Classification of Water Pumping Sets as Agricultural Implements:
The petitioner argued that water pumping sets should be classified as agricultural implements and taxed at 3%. This was supported by Notification No. S.T. 3609/X-900(21)-69 dated 1st July 1969, which taxed agricultural implements at 3%. The Full Bench decision in Engineering Traders v. State of U.P. [1973] 31 STC 456 (FB) held that water pumping sets used for pumping water to fields are agricultural implements. The High Court affirmed that the original assessment was correct in treating pumping sets as agricultural implements taxable at 3%.

3. Retrospective Application of Amendments to the U.P. Sales Tax Act:
The 1971 Amendment Act and the 1974 Amendment Act introduced changes affecting the tax rates and classification of goods. Section 9 of the 1974 Amendment Act amended the First Schedule to classify water pumps as machinery rather than agricultural implements, retrospectively. However, the High Court clarified that this retrospective effect could not apply before the First Schedule's introduction in 1971. The decision in Basant Industries, Agra v. Commissioner of Sales Tax, U.P. [1975] 36 STC 209 was interpreted to not affect the Full Bench decision for periods before the 1971 Amendment Act.

Conclusion:
The High Court concluded that the original assessment by the Sales Tax Officer was correct, and the turnover of pumping sets for the assessment year 1970-71 should be taxed at 3% as agricultural implements. The orders enhancing the tax rate to 6% were quashed. The respondents were directed to refund the excess tax collected. The petition was allowed, and parties were directed to bear their own costs.