1992 (8) TMI 268 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of the phrase "the amount of sales tax or of general sales tax or, as the case may be, of both recovered separately under the Act" in rule 42(B)(i)(a) of the Gujarat Sales Tax Rules, 1970.
2. Determination of whether the set-off should be based on the amount of tax legally recoverable or the amount actually recovered.

Issue-Wise Detailed Analysis:

1. Interpretation of the Phrase in Rule 42(B)(i)(a):
The core issue revolves around the interpretation of the phrase "the amount of sales tax or of general sales tax or, as the case may be, of both recovered separately under the Act" in rule 42(B)(i)(a) of the Gujarat Sales Tax Rules, 1970. The Tribunal had interpreted this phrase to mean the amount of tax legally recoverable under the Act, rather than the amount actually recovered. The assessee contended that this interpretation was incorrect and that the phrase should be interpreted to mean the amount actually recovered by way of tax.

2. Determination of Set-Off Based on Tax Legally Recoverable or Actually Recovered:
The assessee, a registered dealer, had paid purchase tax at the rate of 8% on various products and claimed set-off at the same rate in its returns for the years 1973 to 1977. However, a determination order later classified the goods under a different entry, subjecting them to a lower tax rate of 3% up to July 31, 1975, and 4% thereafter. Consequently, the Sales Tax Officer allowed set-off only at these lower rates, despite the assessee having paid tax at the higher rate of 8%.

The Tribunal upheld the Sales Tax Officer's decision, leading the assessee to file second appeals, which were also dismissed. The assessee then moved the Tribunal under section 69 of the Act, leading to the present reference to the High Court.

The High Court examined the legislative intent and the statutory definition of "tax" under section 2(32) of the Act, which defines "tax" as sales tax, general sales tax, or purchase tax payable under the Act. The Court noted that the object of granting set-off is to lighten the tax burden on the ultimate consumer and to maintain a single point levy of sales tax on goods.

The Court referred to previous decisions, including Prabhat Solvent Extraction Industries Pvt. Ltd. v. State of Gujarat and others, which emphasized that set-off is a statutory deduction meant to adjust the tax burden. The Court concluded that interpreting "tax" as the amount legally recoverable would defeat the purpose of the set-off provision, leading to unjust results and retaining excess amounts paid by the assessee.

The Court also distinguished the present case from the Supreme Court decision in D.R. Kohli v. Atul Products Ltd., where voluntary payment of excise duty was not regarded as payment under the relevant Act. The Court held that the scheme and language of the Gujarat Sales Tax Act justified treating the amount paid as tax for the purpose of set-off, even if it exceeded the legally due amount.

The Court rejected the Revenue's argument that such an interpretation would delay assessment proceedings, stating that the purchasing dealer's assessment need not be kept pending till the vendor's assessments are finalized.

Conclusion:
The High Court concluded that the word "tax" in rule 42(B)(i)(a) should be interpreted to mean the amount of sales tax or general sales tax actually paid and recovered, not just the amount legally recoverable. The Court answered the referred question in the negative, in favor of the assessee, and against the Revenue, thereby allowing the assessee to claim set-off based on the actual amount of tax paid. No order as to costs was made.