1996 (2) TMI 503 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of levy of purchase tax on building materials purchased for construction and repairs of staff huts and quarters under the M.P. General Sales Tax Act, 1958.

Analysis:
The judgment of the Madhya Pradesh High Court pertains to a reference made by the Tribunal regarding the levy of purchase tax on building materials purchased for construction and repairs of staff huts and quarters under the M.P. General Sales Tax Act, 1958. The applicant, a Corporation assessed for sales tax, had purchased explosives and materials for maintenance purposes. The assessing officer subjected the purchase price to purchase tax. The applicant filed appeals, and the Tribunal partially allowed the appeal but sustained the purchase tax on building material. The applicant then filed an application under section 44(1) of the Act, leading to the reference in question.

The Court noted that the applicant did not appear, but the Deputy Government Advocate represented the department. Despite the absence of the assessee, the Court decided to consider the reference due to the relevance of a previous decision. The Court referred to a previous case where a similar question regarding the levy of purchase tax on building materials for repairs and maintenance was addressed. In that case, it was held that the purchase tax on such materials was not justified.

The Court then analyzed the nature of construction activities in relation to the business of the assessee. It was established that construction is essential for commencing or expanding a manufacturing business and is not considered the business of the assessee for tax liability purposes. Therefore, the Court concluded that no purchase tax was applicable in this scenario. The Court found no substantial reason to deviate from the precedent set by the previous decision and ruled in favor of the assessee, answering the reference question in the negative.

Consequently, the Court decided the reference application in favor of the assessee, without imposing any costs. The order was to be forwarded to the Tribunal for further necessary action. The reference was ultimately answered in the negative, supporting the position that the levy of purchase tax on building materials for construction and repairs was not justified under the M.P. General Sales Tax Act, 1958.