1984 (4) TMI 255 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of clause (b) of sub-section (2A) of section 14 of the Bombay Sales Tax Act, 1959.
2. Applicability of the exemption notification under section 41(1) to the rate of purchase tax.
3. Determination of the correct rate of purchase tax for medicines covered by entry 22 of Schedule E.

Issue-wise Detailed Analysis:

1. Interpretation of Clause (b) of Sub-section (2A) of Section 14 of the Bombay Sales Tax Act, 1959:
The primary issue was whether the Tribunal was justified in concluding that the rate of purchase tax on the turnover of purchases should be 3 percent instead of 6 percent. The respondent, dealing in medicines and chemicals, was found liable to pay purchase tax under section 14 of the Act for breaching the terms of a certificate issued under section 12. The Sales Tax Officer levied a purchase tax of 6 percent on these goods, relying on sub-section (2A) of section 14 and entry 22 of Schedule E. The Tribunal, however, held that the rate should be 3 percent, considering the exemption notification under section 41(1).

2. Applicability of the Exemption Notification under Section 41(1) to the Rate of Purchase Tax:
The assessee contended that the exemption from general sales tax under section 41(1) should render the rate of general sales tax as "nil" for the purpose of calculating the purchase tax. However, the court noted that section 41 deals with exemptions from payment of tax and does not affect the rate of tax specified in column 4 of Schedule E. The notification under section 41(1) only exempts the dealer from paying the tax but does not alter the rate of tax mentioned in the schedule. Therefore, the exemption notification does not impact the rate of purchase tax, which should be the aggregate of the rates specified in columns 3 and 4 of Schedule E.

3. Determination of the Correct Rate of Purchase Tax for Medicines Covered by Entry 22 of Schedule E:
The court emphasized that sub-section (2A) of section 14 clearly states that the rate of purchase tax should be the aggregate of the rates specified in columns 3 and 4 of Schedule E. The notification under section 41(1) does not amend the rate of general sales tax in column 4 to "nil." The rate of purchase tax for the medicines in question, which fall under entry 22 of Schedule E, should thus be 6 percent (3 percent + 3 percent). The court found that the Tribunal's interpretation was incorrect and that the correct rate of purchase tax is 6 percent.

Conclusion:
The court concluded that the Tribunal was not justified in determining the rate of purchase tax as 3 percent. The correct rate, as per sub-section (2A) of section 14, should be the aggregate of the rates in columns 3 and 4 of Schedule E, amounting to 6 percent. The court answered the question in the negative and in favor of the department, with the respondents liable to pay the costs.