1989 (5) TMI 301 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of deductions under Punjab General Sales Tax Act, 1948 for sales of cotton seeds, validity of deductions claimed by the dealer, authority of Assessing Authority to examine genuineness of sales, interpretation of provisions for deductions under the Act, applicability of saving provisions under section 65 of the Haryana General Sales Tax Act, 1973.

Analysis:

The judgment by the Punjab and Haryana High Court involved a case where a registered dealer, M/s. Jiwan General Mills, claimed deductions under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948 for sales of cotton seeds. The dealer's claim for deductions was accepted except for specific transactions where the cotton seeds were sold to manufacturers of oil. The Deputy Excise and Taxation Commissioner (Appeals) found that the Assessing Authority had not provided the dealer with a proper opportunity to establish that the sales were for resale. Consequently, the case was remanded for further inquiry to determine if the cotton seeds were purchased for resale or for use in manufacturing edible oils.

Subsequently, the Sales Tax Commissioner, Haryana, allowed the dealer's appeal, emphasizing that the dealer's obligation was only to ensure sales were made to registered dealers with valid declarations in form S.T. XXII. The Tribunal also held that if the declarations did not indicate the goods were for purposes other than resale, the selling dealer was not liable to pay tax. The Tribunal suggested that the department could take action against the purchasing dealers for tax recovery.

The High Court addressed the question framed by the Tribunal regarding the entitlement of the dealer to deduct sales of cotton seeds to crushing units based on declarations provided. The State contended that the Assessing Authority had the power to examine the genuineness of sales and declarations, citing provisions under the Haryana General Sales Tax Act, 1973. However, the Court clarified that such examination was warranted only if there were doubts regarding the genuineness of the sales.

The Court highlighted that there was no indication of the sales being non-genuine or collusive to evade tax. Referring to a similar case, the Court reiterated that if the declarations indicated goods were intended for resale and no collusion was evident, the dealer was entitled to deduct sales from the taxable turnover. Ultimately, the Court affirmed the dealer's right to deduct sales of cotton seeds to registered dealers based on valid declarations, answering the question in the affirmative.

In conclusion, the judgment clarified the dealer's entitlement to deductions under the Punjab General Sales Tax Act, 1948, emphasizing the importance of valid declarations for resale purposes. It underscored that the Assessing Authority's examination of sales genuineness should only occur if doubts exist, and collusion or tax evasion are not apparent.