1992 (7) TMI 309 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of entry 39 of the Orissa Sales Tax Act regarding the exemption of "distilled water."
2. Validity of reassessment proceedings under section 12(8) of the Act based on an audit report.
3. Determination of the applicable tax rate for the sale in question.

Interpretation of Entry 39:
The court analyzed whether "distilled water" falls under entry 39 of tax-free goods exempted from the Orissa Sales Tax Act. The common parlance meaning of the word "water" was crucial in this interpretation. The court held that "water" in entry 39 refers to a substance meant for human consumption, excluding distilled water, even if used for medicinal preparation or in motor vehicles. The court rejected the argument that scientific terms should be interpreted differently, citing precedent cases and emphasizing common parlance understanding.

Reassessment Proceedings under Section 12(8):
Regarding the validity of reassessment under section 12(8) based on an audit report, the court examined whether the audit report's opinion on a question of law could constitute "information" for initiating reassessment. The court referenced the Supreme Court's stance that a view expressed in an audit report on a legal matter does not amount to "information." The court differentiated between section 34 of the Income-tax Act and section 12(8) of the Orissa Sales Tax Act, highlighting the need for specific grounds for reassessment under the latter. The court concluded that the audit report's legal opinion did not qualify as valid information for reassessment under section 12(8).

Applicable Tax Rate:
Regarding the tax rate applicable to the sale in question, as there was no specific entry for distilled water, the residuary entry applied, imposing an 8% tax rate. The court dismissed the argument that a specific entry for distilled water was necessary for taxation, emphasizing that all sales are taxable unless exempted. Since distilled water was not exempted, the sale price had to be included in the dealer's return for taxation purposes. The court upheld the 8% tax rate applied in the case.

In conclusion, the court dismissed the writ petition, affirming the impugned order. The judges rejected the request for a certificate for appeal to the Supreme Court, stating that the case did not involve a substantial question of law warranting the Supreme Court's intervention.