1990 (1) TMI 275 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of "service pool charges" in relation to sale price under the Bombay Sales Tax Act, 1959.
2. Compliance with provisions of section 11(1A) and form 15 regarding use of raw materials in manufacturing taxable goods for sale.

Analysis:
1. The first issue pertains to the interpretation of "service pool charges" as part of the sale price under the Bombay Sales Tax Act, 1959. The Tribunal held that these charges did not form part of the sale price. The Court referred to a previous decision in Commissioner of Sales Tax v. Premier Automobiles Ltd. [1985] 59 STC 147 (Bom) and upheld the Tribunal's decision in favor of the assessee.

2. The second issue involves compliance with section 11(1A) and form 15 requirements regarding the use of raw materials in manufacturing taxable goods for sale. The assessee had purchased goods with a certificate under section 25 of the Act, allowing concessional purchase tax if used for manufacturing taxable goods for sale. The department contended that retaining some manufactured cars for the assessee's business violated the undertaking given under section 11(1A) and form 15. However, the Tribunal ruled in favor of the assessee, stating that the use of cars for the assessee's business did not breach the provisions. The department argued that any use other than sale contravened the certificate and attracted differential tax under section 14(1).

3. The Court analyzed the provisions of sections 11(1A) and 14(1) of the Act. Section 11(1A) requires goods purchased with a certificate to be used in manufacturing taxable goods for sale. Section 14(1) imposes liability if goods purchased under a certificate are used for another purpose contrary to the certificate. The Court emphasized that actual use, not intention at the time of purchase, determines liability under section 14(1). Citing a previous judgment, the Court clarified that any use other than sale triggers the provisions of section 14(1), irrespective of the initial intention at the time of purchase.

4. The Court distinguished a Gujarat High Court decision involving free distribution of medicines from the present case, where motor cars were used for the assessee's business. The Court held that the Gujarat decision was not applicable as it did not consider section 14(1) and the use of cars for the business did not have a direct nexus with sales promotion. Relying on precedent, the Court ruled in favor of the Revenue, stating that section 14(1) applied in this case due to the actual use of manufactured articles.

5. Ultimately, the Court answered the second question in the negative and in favor of the Revenue, concluding that the provisions of section 14(1) were indeed attracted in this case. The references were answered accordingly, with no order as to costs.