1992 (4) TMI 219 - HC - VAT and Sales Tax

Summary

Issues:
Challenge of levy of purchase tax and quashing of revisional orders, imposition of penalty under section 17(3) of the M.P. General Sales Tax Act, 1958.

Analysis:
The petitioner, a partnership firm engaged in a rolling mill business, contested the levy of purchase tax and penalty imposed for assessment years 1981-82, 1982-83, and 1984-85. The firm purchased iron scraps from registered dealers in Madhya Pradesh and imported goods from outside the state. The Additional Commissioner, Sales Tax, upheld the levy of purchase tax and penalty, leading to the petitioner challenging these orders in revision.

The petitioner argued that iron and steel sold to a registered dealer for resale or manufacturing are exempt from sales tax, hence no purchase tax should be levied. The respondent contended that while sales tax exemption exists, iron and steel remain taxable under the State Act if sold to an unregistered dealer without declaration. The respondent further explained that the conversion of iron and steel from one category to another constitutes manufacturing, supporting the imposition of purchase tax.

The definition of "manufacture" under the State Act was crucial in determining whether the conversion of iron scraps into iron rods and angles qualified as manufacturing. The Supreme Court's precedent in Devi Dass Gopal Krishnan v. State of Punjab and State of Tamil Nadu v. Pyare Lal Malhotra emphasized that such conversion processes constitute manufacturing, supporting the respondent's position.

The petitioner's argument that purchase tax could not be levied based on the definition of taxable turnover and circumstances under the State Act was rejected. The court concluded that the petitioner's purchase of scrap iron was indeed used in manufacturing its products, thus justifying the imposition of purchase tax. The court dismissed the petition, upholding the levy of purchase tax and penalty, with no costs awarded to either party.