1989 (7) TMI 311 - HC - VAT and Sales Tax

Summary

Issues:
1. Reassessment of sales tax rate on aerated water.
2. Distinction between aerated water and carbonated water for tax purposes.
3. Interpretation of the term "aerated water" under the Punjab General Sales Tax Act, 1948.

Analysis:
The judgment pertains to a case where a registered dealer engaged in the sale of aerated water challenged the reassessment of sales tax by the Assessing Authority. The original assessment levied tax at 6%, which was later discovered to be under-assessed at 10%. The dealer contended that the previous assessment was legal, but the Assessing Authority rejected the plea and created an additional tax demand. The subsequent appeals before the Deputy Excise and Taxation Commissioner and the Tribunal were also unsuccessful, leading the dealer to seek a reference to the High Court under section 22(2) of the Act.

The primary contention revolved around the distinction between aerated water and carbonated water for tax purposes. The dealer argued that there was a difference in the manufacturing process between carbonated water and aerated water, hence tax should not be levied at an enhanced rate on carbonated water. However, the Tribunal had held that aerated water and carbonated water were interchangeable terms, leading to the framing of the assessment. The High Court was tasked with determining whether carbonated water fell within the definition of "aerated water" under the Punjab General Sales Tax Act, 1948.

During the proceedings, the Court considered the definitions of aerated water and carbonated water as per the Prevention of Food Adulteration Rules, 1955. The Court noted that the term "aerated water" was not explicitly defined in the Act, and therefore, its common meaning had to be considered. The dictionary meaning of "aerate" indicated the process of putting air or carbon dioxide into water, aligning with the description of carbonated water impregnated with carbon dioxide under pressure. Additionally, referencing the Supreme Court judgment in Bhim Sen v. State of Punjab, the Court highlighted that the requirement of sugar in sweetened carbonated water did not necessarily apply to all aerated waters, indicating that carbonated water and aerated water could be considered interchangeable terms.

Ultimately, the Court answered the reference in the affirmative, concluding that carbonated water fell within the definition of aerated water under the Act. The judgment did not award costs due to the peculiar circumstances of the case, thereby settling the issue regarding the tax treatment of carbonated water as aerated water under the Punjab General Sales Tax Act, 1948.