1986 (2) TMI 327 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Jurisdiction of the Sales Tax Officer to issue notice for cancellation of recognition certificate.
2. Classification of the petitioner's product as "paper" or "packing material" under the notification.
3. Entitlement of the petitioner to tax exemption on the purchase of raw materials.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Sales Tax Officer to issue notice for cancellation of recognition certificate:

The petitioner challenged the notice dated 5th September 1985, issued by the Sales Tax Officer (respondent No. 2), arguing that it was without jurisdiction. The petitioner contended that the exemption from tax on the purchase of raw materials was available under clause 2 of the notification, read with item 4 of annexure III. The court concluded that the Sales Tax Officer did not have the jurisdiction to issue the impugned notice (annexure 3) and directed respondent No. 2 not to pursue the notice and not to take any action on its basis.

2. Classification of the petitioner's product as "paper" or "packing material" under the notification:

The petitioner manufactures waterproof packing rolls and sheets by sandwiching bitumen between craft paper and hessian or polythene. The court had to determine whether this product could be classified as "paper" under clause 3 of the notification or as "packing material" under item 4 of annexure III. The court held that the product could not be regarded as paper in appearance or use and was specifically used for waterproof packing. Therefore, it was classified as "packing material" and not as "paper."

3. Entitlement of the petitioner to tax exemption on the purchase of raw materials:

The petitioner argued that it was entitled to full exemption from tax on the purchase of raw materials required for the manufacture of packing materials under clause 2 of the notification. The court found that the petitioner was engaged in the manufacture of packing materials, as envisaged by item 4 of annexure III, and was thus entitled to the tax exemption. The notice issued by respondent No. 2 was deemed without jurisdiction, and the petitioner was allowed to continue availing the tax exemption benefits under the recognition certificate issued under section 4-B of the U.P. Sales Tax Act, 1948.

Conclusion:

The writ petition was allowed, the notices dated 5th September 1985, and 29th August 1985, were quashed, and respondent No. 2 was directed not to cancel the recognition certificate and to allow the benefit of tax exemption to the petitioner on the purchase of raw materials required for the manufacture of waterproof packing rolls. The parties were directed to bear their own costs.