1983 (11) TMI 260 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Applicability of Section 8(1) of the Central Sales Tax Act, 1956.
2. Determination of whether the sales were made to the State Governments or the Employees State Insurance Corporation.
3. Legitimacy of the assessment of sales tax at ten per cent.
4. Scope of enquiry by the Assessing Authority regarding the ultimate use of goods.

Issue-wise Detailed Analysis:

1. Applicability of Section 8(1) of the Central Sales Tax Act, 1956:

The primary issue was whether the sales made by the petitioner-company to various State Governments for use in ESI hospitals were subject to a reduced sales tax rate of four per cent under Section 8(1) of the Central Sales Tax Act, 1956. Section 8(1) provides that sales to the Government are taxed at four per cent. The court examined the statutory provisions and concluded that the reduced tax rate applies if the State Government has the responsibility to provide medical treatment to industrial workers.

2. Determination of whether the sales were made to the State Governments or the Employees State Insurance Corporation:

The Deputy Excise and Taxation Commissioner had revised the tax rate to ten per cent, asserting that the sales were made to the Employees State Insurance Corporation, not the State Governments. The petitioner-company argued that the sales were made to the State Governments, which were responsible for providing medical care under the ESI scheme. The court noted that the State Governments, under the ESI Act, have the primary responsibility for providing medical care to insured workers. The State Governments made purchases from their Consolidated Funds, and the payments were made from the State Budgets. The certificates issued by various State authorities confirmed that the purchases were made by the State Governments. Thus, the court concluded that the sales were indeed made to the State Governments.

3. Legitimacy of the assessment of sales tax at ten per cent:

The Deputy Excise and Taxation Commissioner had assessed the sales tax at ten per cent, which was contested by the petitioner-company. The court found that the assessment at ten per cent was erroneous because the sales were made to the State Governments, which are entitled to the concessional rate of four per cent under Section 8(1) of the Act. The court quashed the orders assessing the sales tax at ten per cent and directed that the sales be taxed at the concessional rate of four per cent.

4. Scope of enquiry by the Assessing Authority regarding the ultimate use of goods:

The court addressed the scope of the Assessing Authority's enquiry into the ultimate use of the goods. It held that the Deputy Excise and Taxation Commissioner overstepped his limits by examining the end use of the goods after the issuance of Form D by the purchaser. The court referred to the precedent set in Dalmia Dadri Cement Ltd. v. State of Haryana, stating that the seller is not obligated to investigate the end use of the goods once Form D is issued. The Assessing Authority can only scrutinize the genuineness of the form and not extend the enquiry to the ultimate use of the goods.

Conclusion:

The court concluded that the sales made by the petitioner-company to the State Governments were covered under Section 8(1) of the Central Sales Tax Act, rendering them liable to a reduced tax rate of four per cent. The orders assessing the sales tax at ten per cent were quashed, and the writ petitions were accepted with costs.