1991 (6) TMI 228 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay purchase tax on wooden boxes.
2. Liability to pay purchase tax on "grasskhola."
3. Determination of whether the wooden boxes and "grasskhola" were consumable stores or resold items.
4. Penalty imposition under sections 45(1)(a) and 45(5) of the Gujarat Sales Tax Act, 1969.
5. Interpretation of section 15 and section 13(1)(B) of the Gujarat Sales Tax Act, 1969.

Detailed Analysis:

1. Liability to Pay Purchase Tax on Wooden Boxes:
The dealer purchased wooden boxes for Rs. 23,166 from unregistered dealers and used them for packing finished products, which were then sold in inter-State trade. The dealer contended that these wooden boxes were resold and thus not liable to purchase tax under section 15 of the Act. The Sales Tax Officer rejected this claim, stating that no express or implied sales of wooden boxes were proven. The Tribunal upheld this decision, noting that wooden boxes were consumable stores and "prohibited goods" under section 21 of the Act. The Tribunal concluded that there was no resale of wooden boxes, confirming the dealer's liability to pay purchase tax.

2. Liability to Pay Purchase Tax on "Grasskhola":
The dealer also purchased "grasskhola" for Rs. 9,346 from unregistered dealers using form 19 without paying tax. These were used to pack finished products for protection during transport. The dealer argued that "grasskhola" were consumable stores used in the manufacture of taxable goods and thus not liable to purchase tax. The Sales Tax Officer disagreed, stating that "grasskhola" was not consumable stores and imposed a penalty for the breach of declaration made in form 19. However, the Tribunal overturned this decision, recognizing "grasskhola" as consumable stores used in the manufacture of taxable goods, thus no breach of declaration occurred.

3. Determination of Whether the Wooden Boxes and "Grasskhola" Were Consumable Stores or Resold Items:
The Tribunal found that "grasskhola" were consumable stores used in the manufacture of taxable goods for sale. However, it held that wooden boxes, although also consumable stores, were prohibited goods under section 21 of the Act and thus could not be resold. The Tribunal relied on the dealer's admission that wooden boxes were used to pack finished goods for safe transport, which supported the conclusion that they were consumable stores and not resold items.

4. Penalty Imposition Under Sections 45(1)(a) and 45(5) of the Gujarat Sales Tax Act, 1969:
The Sales Tax Officer imposed penalties under sections 45(1)(a) and 45(5) of the Act for the breach of declaration made in form 19 regarding the purchase of "grasskhola" and wooden boxes. The Tribunal's decision to recognize "grasskhola" as consumable stores led to the annulment of the penalty for "grasskhola." However, the penalty related to wooden boxes was upheld due to the conclusion that they were prohibited goods and not resold.

5. Interpretation of Section 15 and Section 13(1)(B) of the Gujarat Sales Tax Act, 1969:
The Tribunal and the High Court examined the applicability of sections 15 and 13(1)(B) of the Act. Section 15 stipulates that purchase tax is applicable unless the goods are resold. The High Court noted that the question of whether goods used as consumable stores in manufacturing taxable goods could retain their independent character for resale purposes is a factual determination. The High Court reframed the question to focus on the specific facts of the case, concluding that wooden boxes used as consumable stores could not be resold under section 15 of the Act. The reference was answered in the affirmative, favoring the Revenue and against the dealer.

Conclusion:
The High Court upheld the Tribunal's decision that wooden boxes used for packing were consumable stores and not resold items, thus liable to purchase tax. The "grasskhola" used for packing was recognized as consumable stores, exempting it from purchase tax. The penalties imposed were partially annulled, with the penalty for wooden boxes being upheld. The interpretation of sections 15 and 13(1)(B) was clarified, emphasizing the factual nature of determining whether goods used in manufacturing could be resold.