1993 (2) TMI 281 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay purchase tax under section 16(1) of the Gujarat Sales Tax Act, 1969.
2. Adjustment of sales tax paid by the vendor to avoid double taxation.
3. Imposition of penalty under section 45(6) of the Act.

Issue-wise Detailed Analysis:

1. Liability to Pay Purchase Tax Under Section 16(1):
The primary issue was whether the applicant was liable to pay purchase tax under section 16(1) of the Gujarat Sales Tax Act, 1969, despite having withdrawn declarations in form 17A after the breach was committed. The applicant, a registered dealer, purchased goods worth Rs. 91,51,487 from a vendor using form 17A declarations, certifying that the goods would be resold in inter-State trade. However, goods worth Rs. 60,44,927 were transferred to branches outside Gujarat, breaching the declarations. The Sales Tax Officer imposed purchase tax and penalty, which the applicant contested, arguing that the withdrawal of declarations before assessment should nullify the tax liability. The Tribunal held that the breach of declaration attracted purchase tax under section 16(1), as the withdrawal occurred after the breach. The court upheld this view, stating that the assessment proceedings had already started, making section 16(1) applicable.

2. Adjustment of Sales Tax Paid by the Vendor:
The second issue was whether the sales tax paid by the vendor, Suhrid Geigy Ltd., should be adjusted against the applicant's purchase tax liability to avoid double taxation. The vendor paid sales tax on the turnover in question, recovering it from the applicant. The court noted that the vendor had paid sales tax and interest for late payment before the applicant's assessment. The applicant argued that the amount paid by the vendor should be adjusted against its purchase tax liability. The court agreed, stating that the amount paid by the vendor should be regarded as paid on behalf of the applicant, and thus, should be adjusted against the applicant's liability under section 16. The vendor consented to this adjustment, ensuring no claim for a refund, which dispelled concerns of double taxation.

3. Imposition of Penalty Under Section 45(6):
The third issue concerned the imposition of a penalty under section 45(6) of the Act. The applicant was initially penalized for the breach of declarations. However, with the adjustment of the sales tax paid by the vendor against the applicant's liability, the court directed the Tribunal to determine the penalty amount, if any, after necessary calculations. The court clarified that the penalty imposition would depend on the final tax liability after adjustments.

Conclusion:
The court concluded that the applicant was liable to pay purchase tax under section 16(1) despite the withdrawal of declarations. However, the sales tax paid by the vendor should be adjusted against the applicant's liability to avoid double taxation. The penalty under section 45(6) would be recalculated based on the adjusted tax liability. The court reframed and answered the questions accordingly, ensuring a fair resolution while maintaining legal integrity.