1984 (1) TMI 286 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay purchase tax for a second power crusher that was not worked.
2. Interpretation of the U.P. Khandsari Sugar Manufacturers Licensing Order, 1967.
3. Applicability of the Full Bench decision in Satish Prakash Ajay Kumar v. Assistant Sugar Commissioner.

Detailed Analysis:

1. Liability to Pay Purchase Tax for a Second Power Crusher That Was Not Worked:
The petitioner obtained a license for two power crushers for the licensing year 1980-81 but worked only one crusher while the other remained sealed. Despite this, the respondent issued a notice demanding purchase tax for both crushers. The court examined whether the petitioner was liable to pay purchase tax for the second, non-operational crusher.

The court noted that the petitioner had exercised its option under the U.P. Sugarcane (Purchase Tax) Act, 1961, to pay tax based on the assumed purchase of sugarcane for one crusher. The authorities admitted that inspections confirmed only one crusher was operational. The court found no provision in the Licensing Order or the Act that mandated payment of purchase tax for a non-operational crusher. The court concluded that the demand for purchase tax on the second crusher was "legally untenable."

2. Interpretation of the U.P. Khandsari Sugar Manufacturers Licensing Order, 1967:
The court analyzed the definitions of "khandsari unit" and "manufacturer" under the Licensing Order, which did not impose any tax liability for non-operational crushers. Clause 6 of the Licensing Order allows for the suspension or cancellation of a license if a crusher is not worked continuously for more than three months without adequate reasons. However, this clause does not impose a tax liability for non-operational crushers. The court concluded that the Licensing Order does not require the payment of purchase tax for crushers that are not worked.

3. Applicability of the Full Bench Decision in Satish Prakash Ajay Kumar v. Assistant Sugar Commissioner:
The respondents cited the Full Bench decision in Satish Prakash Ajay Kumar's case to justify the tax demand. However, the court distinguished the present case from the Full Bench decision. In the cited case, the unit consisted of three crushers, and the option was exercised for all three. The owner worked all crushers initially but later closed two, and the court held the option irrevocable for the entire year and all crushers.

In contrast, the petitioner in the present case exercised the option for one crusher only, and the second crusher was never operational. The court found that the Full Bench decision did not apply to the present case, as the facts were different. The court concluded that the authorities misread the Full Bench decision.

Conclusion:
The court quashed the demand notice dated 15th May 1981, and the appellate order dated 29th June 1982, as the demand for purchase tax on the second, non-operational crusher was not legally justified. The petitioner was awarded costs for the writ petition.