1995 (1) TMI 364 - HC - VAT and Sales Tax

Summary

Issues:
1. Taxability of wood purchase turnover under section 7-A of the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:
The judgment delivered by the Madras High Court involved the taxability of wood purchase turnover under section 7-A of the Tamil Nadu General Sales Tax Act, 1959. The assessee, a dealer in cable drums, challenged the assessment made by the assessing officer regarding the turnover of wood purchased for Rs. 79,796 in the assessment year 1980-81. The assessing officer determined the taxable turnover at Rs. 79,796 and levied tax at 4 per cent, as there was no evidence to prove that the wood purchased had already been taxed and consumed in the manufacture of cable drums. The Appellate Assistant Commissioner (Commercial Taxes) disagreed with the assessing officer, stating that the wood, bolts, and nuts used in the manufacture of cable drums had not lost their identity. Consequently, the Appellate Assistant Commissioner deleted the addition of Rs. 79,796. However, the Joint Commissioner disagreed with the Appellate Assistant Commissioner's decision and directed the assessing officer to tax the purchase turnover of wood at 5 per cent single point instead of 4 per cent. This led the assessee to appeal before the High Court.

The assessee argued that the wood purchased was not consumed in the manufacture of cable drums, as the planks from the wood remained intact in the drums, and the physical existence of the wood was not lost. The Government Advocate for Taxes, on the other hand, contended that the wood was indeed consumed and lost its identity in the manufacturing process, justifying the assessment made by the assessing officer under section 7-A of the Act.

The High Court analyzed previous judgments, such as the case of State of Tamil Nadu v. Associated Sales of India, where it was held that goods purchased and used in the manufacture of other goods would not be considered consumed if the identity of the goods remained the same. Referring to another case, the Court held that the purchase turnover of wood was not liable for tax under section 7-A since the wood purchased was merely made into frames and not consumed in the manufacture of other goods.

Ultimately, the High Court held that the Joint Commissioner was incorrect in directing the assessing officer to tax the purchase turnover of wood at 5 per cent under section 7-A. The Court set aside the order of the Joint Commissioner and restored the decision of the Appellate Assistant Commissioner, allowing the appeal by the assessee with no order as to costs.