1992 (9) TMI 337 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of purchase tax under section 16(1) of the Gujarat Sales Tax Act, 1969, on the purchase of packing materials against certificates in form 19.
2. Levy of penalty under sections 45(1) and 45(6) of the Gujarat Sales Tax Act, 1969, related to the purchase tax on packing materials purchased against form 19.

Issue-wise Detailed Analysis:

1. Levy of Purchase Tax under Section 16(1):

The applicant, a limited company engaged in manufacturing and selling conveyors and elevators, purchased certain goods tax-free using certificates in form 19. These goods were used in manufacturing items sold to the Gujarat Electricity Board and new industry, and for job-work. The Sales Tax Officer levied a purchase tax of Rs. 1,09,741 for the breach related to sales to the Gujarat Electricity Board and new industry, Rs. 6,947 for goods used in job-work, and Rs. 18,087 for wooden sizes used as packing materials, totaling Rs. 1,34,775. The applicant appealed against this order, but the Assistant Commissioner upheld the levy based on the decision in Nowroji N. Vakil & Co. v. State of Gujarat [1979] 43 STC 238, confirming the breach of recitals in form 19.

Before the Tribunal, the applicant conceded to the levy of purchase tax for goods sold to the Gujarat Electricity Board and new industry, and for job-work, based on the Supreme Court decision in Hindustan Brown Boveri Ltd. v. State of Gujarat [1981] 47 STC 376. However, the applicant contested the tax on wooden sizes used as packing materials, arguing they were consumable stores used in manufacturing, citing Vasuki Carborundum Works v. State of Gujarat [1979] 43 STC 294. The Tribunal did not entertain this contention, but the High Court found that the Tribunal should have considered it, as erroneous legal concessions by advocates are not binding.

2. Levy of Penalty under Sections 45(1) and 45(6):

The Sales Tax Officer imposed penalties of Rs. 40,898 under section 45(6) and Rs. 9,434.25 under section 45(1) due to the augmented tax liability. The Assistant Commissioner upheld these penalties, except for the penalty under section 45(1) related to purchase tax of Rs. 1,09,741, which was removed by the Tribunal.

The applicant argued that there was no specific concession regarding the penalty on wooden sizes, and the Tribunal should have considered this. The High Court emphasized that the Tribunal must decide matters justly and properly under section 65(6) of the Act, and erroneous legal concessions by advocates should not preclude the Tribunal from addressing the issues on merits. The Full Bench judgment in Commissioner of Income-tax v. Cellulose Products of India Limited [1985] 151 ITR 499 was cited, supporting the view that the subject matter of an appeal includes the entire assessment order and that new grounds can be raised if related to the same subject matter.

Conclusion:

The High Court concluded that the Tribunal should have entertained the applicant's contentions regarding both the purchase tax on packing materials and the related penalties. The erroneous concession made by the applicant's advocate should not have prevented the Tribunal from considering these issues. Therefore, the High Court answered both questions in the negative, in favor of the assessee and against the Revenue, and directed a copy of the judgment to be sent to the Gujarat Sales Tax Tribunal.