1995 (11) TMI 410 - HC - VAT and Sales Tax

Issues Involved:
1. Imposition of tax on pieces of cast iron and steel angles.
2. Imposition of tax on bagasse.
3. Rejection of account books in respect of the petrol unit.

Detailed Analysis:

1. Imposition of Tax on Pieces of Cast Iron and Steel Angles:

The primary issue revolves around whether the Tribunal was justified in imposing tax on pieces of cast iron and steel angles when tax had already been paid on these commodities at the point of purchase. The revisionist argued that these items were declared goods under section 14(iv) of the Central Sales Tax Act, for which tax was paid at the point of purchase, and thus no additional tax should be levied on their sale under section 15 of the Central Sales Tax Act. However, the assessing authority treated these items as new commodities and levied sales tax on their sale.

The court examined the provisions of sections 14 and 15 of the Central Sales Tax Act, which declare certain goods of special importance and restrict the tax on such goods to a single stage, not exceeding 4%. The court referenced several Supreme Court rulings, including *State of Tamil Nadu v. Mahi Traders* and *Gujarat Steel Tubes Ltd. v. State of Kerala*, which supported the notion that the processed or residual forms of declared goods should not be treated as different commodities for tax purposes.

The court concluded that the cut pieces of iron and steel continued to have the same identity as the original declared goods, and thus, no additional tax should be levied on their sale. The Tribunal's decision to impose tax on these items was deemed an error of law and was set aside.

2. Imposition of Tax on Bagasse:

The second issue concerned whether bagasse, a residue of sugarcane, should be treated as a different commodity subject to sales tax. The revisionist contended that since purchase tax on sugarcane had already been paid under the U.P. Sugarcane (Purchase Tax) Act, 1961, no additional tax should be levied on the sale of bagasse. The Tribunal, however, treated bagasse as a different commodity attracting sales tax.

The court referenced section 13 of the U.P. Sugarcane (Purchase Tax) Act, which exempts transactions involving sugarcane from sales tax. Additionally, the court cited the Supreme Court's decision in *Commissioner of Sales Tax, U.P. v. Prag Ice and Oil Mills*, which held that residues of processed commodities should not be treated as different taxable commodities.

The court concluded that bagasse, being a residue of sugarcane, should not be treated as a different commodity for tax purposes. The Tribunal's decision to impose tax on bagasse was found to be incorrect and was set aside.

3. Rejection of Account Books in Respect of Petrol Unit:

The third issue involved the Tribunal's rejection of the assessee's account books for the petrol unit based on the non-preparation of a bill for a credit memo at the time of a survey. The revisionist argued that it was common practice to issue credit memos and prepare bills later, either monthly or quarterly.

The court examined the relevant provisions of the U.P. Sales Tax Act and Rules, which require the maintenance of true and correct accounts but do not mandate the immediate preparation of bills for credit sales. The court found that the Tribunal's rejection of the account books based on the non-preparation of a bill for a single credit memo was unreasonable and not justified.

The court concluded that the rejection of the account books was unjustified and illegal. The Tribunal was directed to accept the account books and reassess the matter based on them.

Conclusion:

The revision was allowed, and the impugned judgment dated January 15, 1993, passed by the Tribunal in Second Appeals Nos. 664 and 665 of 1988, was set aside. The Tribunal was directed to rehear and decide the appeals afresh based on the findings and observations made by the court, as expeditiously as possible.

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