1983 (1) TMI 236 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of the Assistant Commissioner to enhance the quantum of purchases.
2. Jurisdiction of the Assistant Commissioner to enhance the rate of purchase tax.
3. Application of the pro rata method for determining the contravention of form 15 certificates.
4. Entitlement to full set-off of tax.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Assistant Commissioner to Enhance the Quantum of Purchases:
The applicants contended that the Assistant Commissioner had no jurisdiction to enhance the quantum of purchases from Rs. 3,52,597 to Rs. 7,69,246 while deciding the appeal. The court held that under the old sub-section (6) of section 55 of the Bombay Sales Tax Act, the appellate authority could only pass orders related to the actual subject matter of the appeal. The Assistant Commissioner had jurisdiction to decide the method of working out the percentage of contravention of certificates in form 15, and his decision to include machinery purchases in the calculation was within his jurisdiction, even though it was incorrect. Thus, the Assistant Commissioner had the power to enhance the quantum of purchases, but he was wrong in law in enhancing it from Rs. 3,52,597 to Rs. 7,69,246.

2. Jurisdiction of the Assistant Commissioner to Enhance the Rate of Purchase Tax:
The applicants argued that the Assistant Commissioner did not have the jurisdiction to enhance the rate of purchase tax from 3 percent to 5 percent. The court held that the question of liability to pay purchase tax under section 14 necessarily involves the rate at which such tax is to be paid. The Assistant Commissioner had the jurisdiction to enhance the rate of purchase tax due to the retrospective operation of sub-section (2A) of section 14 of the Bombay Sales Tax Act, as substituted by the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1973. Therefore, the Assistant Commissioner possessed the jurisdiction to enhance the rate of purchase tax from 3 percent to 5 percent.

3. Application of the Pro Rata Method for Determining the Contravention of Form 15 Certificates:
The applicants contended that the pro rata method adopted by the department was incorrect and that branch transfers should be excluded from consideration. The court referred to the judgment in Berar Oil Industries' case [1975] 36 STC 473, which upheld the pro rata method where separate accounts were not kept by the assessee. The court agreed with the applicants that the Assistant Commissioner and the Tribunal erred in including machinery purchases in the calculation. The contravention of certificates in form 15 should be worked out by applying the pro rata method to the total purchases of raw materials only, without adding machinery purchases. Thus, the contravention was in respect of goods valued at Rs. 3,52,597, not Rs. 7,69,246.

4. Entitlement to Full Set-Off of Tax:
The applicants argued that they were entitled to a full set-off of Rs. 1,26,634. The court did not provide an elaborate answer to this question due to the statement made by the department's counsel that the Commissioner of Sales Tax would give the applicants relief by way of administrative measures under the Commissioner's circular dated 21st June, 1978. Therefore, the court did not answer this question in detail.

Conclusion:
The court concluded that the Assistant Commissioner had the power to enhance the quantum of purchases and the rate of purchase tax due to the retrospective operation of the amended provisions. However, the Assistant Commissioner erred in including machinery purchases in the calculation of contravention of form 15 certificates. The contravention should be limited to purchases of raw materials valued at Rs. 3,52,597. The applicants were entitled to administrative relief as per the Commissioner's circular. There was no order as to costs, and the applicants were entitled to a refund of the fee paid.

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