1988 (5) TMI 357 - HC - VAT and Sales Tax

Summary

Issues:
1. Setting aside the penalty imposed under section 5C(2) of the Rajasthan Sales Tax Act.
2. Setting aside the tax and penalty imposed in respect of sales made by M/s. Sardul Textiles Mills in its canteen account under section 16(1)(c).

Analysis:
1. The revision petition challenged the order of the Rajasthan Sales Tax Tribunal, which dismissed the department's appeal. The Commercial Taxes Officer had imposed a penalty of Rs. 2,950 under section 5C(2) for the purchase of certain goods, but the Deputy Commissioner (Appeals) and the Tribunal set aside the penalty. The assessing authority did not find that the goods purchased became ingredients of the finished products, which is crucial to determine if they qualify as raw materials under the Act. The matter requires further examination to establish if the goods indeed meet the definition of raw material, as per relevant legal precedents. The Court refrained from delving into this issue, emphasizing that the Tribunal should address this question.

2. Regarding the tax and penalty on canteen sales, the Tribunal based its decision on a previous court ruling that sales by restaurants are not taxable. However, the Tribunal failed to consider the implications of the Constitution (Forty-sixth Amendment) Act, 1982, which introduced provisions related to validation and exemption of certain sales. The Tribunal should have assessed the levy of sales tax and penalty in light of the provisions of this Act. The Court highlighted the necessity of examining the issues arising from the Act and directed the matter to be sent back to the Tribunal for a fresh decision. The parties were instructed to present relevant evidence and arguments on the legal issues involved in accordance with the Act.

In conclusion, the High Court allowed the revision petition, set aside the Tribunal's order, and remanded the case back to the Tribunal for a fresh decision. Both issues raised in the revision petition regarding the penalty under section 5C(2) and the tax and penalty on canteen sales require further examination and consideration in light of the relevant legal provisions and precedents.