1987 (1) TMI 454 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of second proviso to section 5(2)(a)(ii) of the Act regarding tax liability on purchases made by a dealer for manufacturing goods outside Delhi.
- Application of judgment in Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax [1978] 41 STC 409 to the present case.

Analysis:
The petitioner, engaged in the business of manufacturing air-conditioners and room coolers, was registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi and the Central Sales Tax Act. The petitioner could purchase raw materials for manufacturing finished products outside Delhi until 28th May, 1972, without being taxed. However, a revision order by the Financial Commissioner in 1973 subjected dealers to tax on purchases made for resale and used for manufacturing outside Delhi. The Departmental Head instructed Sales Tax Officers to levy tax in such cases. The petitioner objected, citing the case of Fitwell Engineers, but was asked to provide details for assessment years 1969-70 to 1972-73.

The petitioner moved a writ petition under article 226 of the Constitution of India challenging the assessment. The Court allowed the assessment to be completed but stayed recovery. The petitioner relied on the judgment in Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax [1978] 41 STC 409, where the Supreme Court held that goods manufactured outside Delhi using raw materials purchased under a registration certificate and sold outside Delhi are not liable to tax under the second proviso to section 5(2)(a)(ii) of the Act. The Court, following the Supreme Court's precedent, allowed the petition, setting aside the assessments for the relevant years and directing a fresh assessment in line with the Polestar Electronic judgment.

In conclusion, the High Court allowed the petition, setting aside the assessments made by the respondent for the assessment years 1969-70, 1970-71, 1971-72, and 1972-73. The respondent was directed to conduct a fresh assessment in accordance with the Supreme Court's judgment in Polestar Electronic (Pvt.) Ltd. [1978] 41 STC 409. No costs were awarded in this matter.