1982 (1) TMI 181 - HC - VAT and Sales Tax

Summary

Issues:
1. Imposition of penalty under section 46(1)(ii) of the Gujarat Sales Tax Act, 1969 for alleged breach of prohibition against collection of tax under section 56.
2. Interpretation of whether the sales made by the assessee were liable to tax in light of the Supreme Court decision in State of Tamil Nadu v. Pyare Lal Malhotra.
3. Refund of penalty amounts levied on the assessee.

Analysis:
The case involved an assessee registered under the Gujarat Sales Tax Act, 1969, manufacturing bars and angles from iron and steel materials purchased from registered dealers. The Sales Tax Officer imposed penalties on the assessee for allegedly breaching the prohibition against collecting tax under section 56, despite the assessee maintaining separate accounts for sales tax payments. The Assistant Commissioner of Sales Tax upheld the penalty orders, leading the assessee to appeal before the Gujarat Sales Tax Tribunal.

The Tribunal observed that the assessee had not recovered any amount as sales tax from buyers, as evident from the bills issued. Despite the separate accounting entries for sales tax, the Tribunal concluded that the assessee had not contravened section 56 and, therefore, penalty under section 46(1)(ii) was not applicable. The Tribunal also raised the issue of whether the sales of bars and angles were liable to tax based on the Pyare Lal Malhotra case.

The Tribunal remanded the matter to the Sales Tax Officer to determine the tax liability on the sales made by the assessee in light of the Pyare Lal Malhotra decision. The Tribunal's decision to remand was challenged by the assessee, leading to the High Court's involvement. The High Court disagreed with the Tribunal's approach, stating that since the Tribunal found no collection of tax under section 56, the penalty was not applicable. The High Court held that the Tribunal's remand was unwarranted, quashing the penalty orders and ordering the refund of the penalty amounts to the assessee.

In conclusion, the High Court ruled in favor of the assessee on both questions referred by the Tribunal, stating that the Tribunal's decision to remand the matter was not in accordance with the law. The High Court directed the revenue to pay the costs of the reference to the assessee.