1992 (2) TMI 337 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941.
2. Applicability of the second proviso to purchases made by a registered dealer for purposes other than resale.

Analysis:
The judgment pertains to the assessment year 1969-70 and involves a question regarding the withholding of a refund amount by the Revenue under the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941. The dealer had voluntarily registered under the sales tax law and made purchases without paying sales tax based on the registration certificate. However, following a Supreme Court decision, the dealer applied for cancellation of registration, which was granted in 1975. The dealer also sought a refund for the year 1958-59, which was partially granted. In the assessment year 1969-70, the dealer claimed exemption from tax due to the court decisions but was held liable to pay tax under section 5(2)(a)(ii) on purchases made using the registration certificate. The Revenue withheld a portion of the refund amount, leading to an appeal.

The Assistant Commissioner upheld the decision, citing the second proviso to section 5(2)(a)(ii), which requires the inclusion of the price of goods purchased but misutilized in the taxable turnover of the purchasing dealer. The Tribunal concurred, emphasizing that the dealer cannot claim non-dealer status for a refund while retaining the benefits of tax-free purchases made as a dealer. The Tribunal rejected the appeal, highlighting the interrelation between the dealer's status and tax liabilities.

The Court analyzed the applicability of the second proviso, emphasizing that purchases intended for resale but misutilized attract tax liability. As the dealer's claim of no sale to members was accepted, the purchases made using the registration certificate were deemed misutilized, invoking the proviso. The Court clarified that the liability arises from legal obligations, not equity. It concluded that the Tribunal's decision was correct, affirming the applicability of the proviso and upholding the Revenue's right to withhold the amount. The question of law was answered in favor of the respondents, who were also awarded costs.

In conclusion, the judgment clarifies the legal implications of misutilized purchases by a registered dealer under the Bengal Finance (Sales Tax) Act, 1941, and underscores the significance of compliance with registration requirements and tax obligations.