1995 (4) TMI 253 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay additional purchase tax under section 15B.
2. Levy of purchase tax under section 16 for violation of form No. 19 for zinc and other items.

Detailed Analysis:

1. Liability to Pay Additional Purchase Tax Under Section 15B

The petitioner sought to quash an assessment order dated January 31, 1995, for the assessment year 1991-92, arguing that the order was illegal and ultra vires. The core issue revolved around the interpretation of "manufacture" and "resale" as defined under sections 2(16) and 2(26) of the Gujarat Sales Tax Act, 1969, respectively. The petitioner contended that their activities did not constitute "manufacture" as per the ruling in Mohta Ispat Ltd. v. Commissioner of Sales Tax [1992] 87 STC 125 (Guj), which stated that if the resultant product is not taken out of the description of "iron and steel" in Schedule II, it should be considered "resale" and not "manufacture."

The court noted that the department had accepted this interpretation and issued circulars accordingly. Despite this, the respondent-authorities erroneously held the petitioner liable to pay tax as a "manufacturer." The court found this to be an error of law, affirming that activities falling under section 2(26)(iii) (resale) must be excluded from the definition of "manufacture" under section 2(16). Consequently, the court accepted the petitioner's contention that the assessing authority erred in applying section 15B, which pertains to goods manufactured out of raw materials.

2. Levy of Purchase Tax Under Section 16 for Violation of Form No. 19 for Zinc and Other Items

The second issue concerned the petitioner's liability for purchase tax under section 16 due to alleged violations of form No. 19 for items like zinc. The petitioner argued that the zinc was used for galvanizing steel pipes sold within Gujarat, thus no purchase tax should be levied. However, the petitioner failed to provide necessary materials or evidence to support this claim.

The court referenced a similar case, Jayant Extraction Industries v. State of Gujarat [1992] 85 STC 3, where the court upheld the department's decision to levy purchase tax due to insufficient evidence from the petitioner. The court in the present case found that the third respondent acted within legal bounds by not accepting the petitioner's unsupported assertions and by adopting a pro rata method for assessing tax liability, as the petitioner did not provide positive evidence of compliance with the statutory obligations.

Conclusion

The petition was partly allowed. The court quashed the impugned order dated January 31, 1995, regarding the petitioner's liability under section 15B, affirming that the petitioner should not be considered a manufacturer. However, the court upheld the department's decision to levy purchase tax under section 16 for the violation of form No. 19, due to the petitioner's failure to provide necessary evidence. The authorities were permitted to effect recovery in line with the court's observations. No order as to costs was made.