1991 (3) TMI 374 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of tax on purchases under section 4-B of the Punjab General Sales Tax Act, 1948.
2. Imposition of interest and penalty for late deposit of tax.
3. Comparison of provisions of section 4-B of the Punjab General Sales Tax Act with section 9 of the Haryana General Sales Tax Act.
4. Interpretation of the liability of tax under section 4-B of the Act.
5. Applicability of the Supreme Court decision in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71.
6. Legality of imposing penalty and interest when the tax is not validly levied.

Analysis:

The judgment of the High Court dealt with the assessment of tax on purchases under section 4-B of the Punjab General Sales Tax Act, 1948, where the petitioner, a company manufacturing high-class cables, challenged the imposition of tax, interest, and penalty by the Assessing Authority. The petitioner contended that the provisions of section 4-B were similar to the provisions of section 9 of the Haryana General Sales Tax Act, which had been struck down by the Supreme Court in a previous case. The respondent-State argued that the provisions were not similar and cited a different case to support their position.

The High Court analyzed the liability of tax under section 4-B of the Act, particularly focusing on the point in time when the tax becomes exigible. The Court referred to a Supreme Court decision in Mukerian Papers Ltd. v. State of Punjab, which emphasized that the tax under section 4-B is essentially a tax on the consignment of manufactured goods and not on the purchase of raw materials. The Court concluded that the tax liability arises only after the goods are dispatched outside the State, similar to the situation in the case of Goodyear India Ltd. where the tax on consignment of goods was held to be beyond the State Legislature's competence.

Regarding the imposition of penalty and interest, the Court held that if the Revenue was not entitled to levy the tax, there could be no imposition of penalty or interest on the unpaid amount of tax. Therefore, the actions taken under relevant sections of the Act were set aside. The Court allowed the writ petition, setting aside the orders of the Assessing Authority and the Appellate Authority, and directed the refund of any recovery made under those orders within three months.

In conclusion, the High Court's judgment focused on the legality of the tax assessment under section 4-B of the Act, the comparison with provisions of other Acts, the interpretation of tax liability, and the implications of relevant Supreme Court decisions on the case. The Court's decision to set aside the orders and refund any recovery made highlighted the importance of validly levying taxes and the consequences of wrongful imposition.