1990 (9) TMI 331 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability of a dealer to pay purchase tax on goods purchased from cultivators when tax has already been collected from the cultivators at the check gate.

Detailed Analysis:
The case involved a reference under section 24(1) of the Orissa Sales Tax Act, 1947, regarding the liability of a dealer who purchased black gram from cultivators to pay purchase tax, even though tax had already been collected from the cultivators at the check gate. The dealer contended that since tax had been paid by the cultivators, there was no scope for levy and collection of tax from the dealer. The Tribunal held the dealer liable to pay tax as the first purchaser, leading to the reference to the High Court.

The Court analyzed the provisions of the Act and highlighted that tax can only be levied and collected from the dealer after the taxing event, which, in the case of goods liable to purchase tax, occurs at the time of purchase. The Court emphasized that the State Government cannot collect tax before the purchase is completed, as it would contravene the constitutional provision under Article 265. However, the Act authorized the collection of an amount at check gates to prevent tax evasion, but it was not intended for double taxation. The Court noted that a dealer could adjust the amount paid at the check gate with the admitted tax payable by obtaining a certificate from the Sales Tax Officer.

Furthermore, the Court examined Rule 36 of the Act, which allowed a dealer to adjust the tax paid at the check gate against the admitted tax payable before filing a return. The Court interpreted the rule to allow adjustment not only for payments made by the dealer but also for payments made by any person in respect of the goods for which the dealer is liable, subject to certain conditions being met.

Regarding the timing of adjustment, the Court rejected the argument that adjustment could only be made before filing a return and not at the time of assessment. The Court held that a dealer could adjust the amount paid even during assessment, and any excess amount paid would be refunded or demanded based on the assessment outcome.

Ultimately, the Court concluded that the tax paid by the cultivators, for which receipts were provided to the dealer, should be adjusted against the dealer's tax liability. The Court directed the dealer to indicate the purchase turnover in the return and adjust the payments made at the check gate to determine the taxable turnover, thereby reducing the balance tax liability.

In conclusion, the Court answered the reference by stating that the dealer was liable to pay purchase tax on the turnover of purchase, even though tax had been collected from the cultivators at the check gate, emphasizing the adjustment of such tax payments to reduce the balance tax liability.