1982 (8) TMI 210 - HC - VAT and Sales Tax

Issues Involved:
1. Deduction under Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941.
2. Validity and coverage of the registration certificates of the purchasing dealers.
3. Jurisdiction and duty of the Commercial Tax Officer.
4. Compliance with the principles of natural justice.
5. Interpretation of the term "in the manufacture of goods for sale."
6. Obligation of the selling dealer to verify the correctness of the declaration forms.
7. Applicability of precedents and higher court rulings.

Issue-wise Detailed Analysis:

1. Deduction under Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941:
The petitioner, M/s. Avery India Limited, claimed deductions totaling Rs. 6,22,493.10 under Section 5(2)(a)(ii) for goods sold to registered dealers, purportedly used directly in the manufacture of goods for sale in West Bengal. The Commercial Tax Officer disallowed the deductions on grounds that the weighing and testing machines were not covered by the purchasing dealers' registration certificates and that the purpose of purchase was not indicated in the declaration forms.

2. Validity and Coverage of the Registration Certificates of the Purchasing Dealers:
The Commercial Tax Officer held that the weighing, counting, and testing machines did not fall within the description of goods in the registration certificates, which authorized the purchase of "raw materials, plant, machinery, spare parts, accessories, and component parts thereof and consumable stores as may be required in the manufacture of any goods for sale." The petitioner argued that the goods sold were indeed covered under the registration certificates and were used directly in the manufacturing process.

3. Jurisdiction and Duty of the Commercial Tax Officer:
The petitioner contended that the Commercial Tax Officer acted without jurisdiction and in violation of the principles of natural justice by not adhering to the directions given in the remand order by the Additional Commissioner. The Additional Commissioner had directed the Commercial Tax Officer to verify whether the goods sold were covered by the registration certificates and to allow the claims based on the declaration in form XXIV unless it was established that the goods were not included in the registration certificate.

4. Compliance with the Principles of Natural Justice:
The petitioner claimed that the Commercial Tax Officer failed to discharge the onus of verifying the correctness and validity of the declaration forms submitted by the purchasing dealers. The respondents argued that the reassessment was lawful and within jurisdiction, with no violation of natural justice principles.

5. Interpretation of the Term "in the Manufacture of Goods for Sale":
The petitioner argued that the weighing and testing machines were integral to the manufacturing process and thus should be considered as used "in the manufacture of goods for sale." This was supported by precedents such as the case of Phelps & Co. (Private) Ltd. v. Member, Board of Revenue, West Bengal, where goods used in the manufacturing process were deemed to fall within the meaning of Section 5(2)(a)(ii).

6. Obligation of the Selling Dealer to Verify the Correctness of the Declaration Forms:
The petitioner contended that their obligation was fulfilled by producing the necessary declaration forms from the purchasing dealers. The respondents, however, argued that the purchasing dealers' registration certificates did not cover the weighing machines for use directly in the manufacture of goods, and thus the deductions were appropriately disallowed. The case of State of Madras v. Radio and Electricals Ltd. was cited, which held that the selling dealer must rely on the representation made by the purchasing dealer and that the sales tax authority could scrutinize the certificate for genuineness.

7. Applicability of Precedents and Higher Court Rulings:
The petitioner cited several precedents, including the Supreme Court's ruling in State of Madras v. Radio and Electricals Ltd., which supported their claim that the goods sold were used in the manufacture of goods for sale. The petitioner also referred to the unreported judgment in Avery India Limited v. Assistant Commissioner of Commercial Taxes, where it was held that weighing and testing machines should be regarded as used in the making of manufactured goods.

Conclusion:
The court found in favor of the petitioner, holding that the weighing and testing machines were indeed used directly in the manufacture of goods for sale and thus fell within the meaning of Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941. The Commercial Tax Officer's disallowance of the deductions was deemed contrary to the law and the principles of natural justice. The rule was made absolute, and the petitioner's claims for deductions were upheld. The prayer for stay of operation of the order was refused.

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