1997 (2) TMI 524 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of exemption from sales tax for rural tiny industrial units under the Haryana General Sales Tax Act, 1973.

Analysis:
The judgment by the High Court of Punjab and Haryana dealt with a reference from the Sales Tax Tribunal regarding the tax liability on subsequent sales of goods when the first sale is by a manufacturer exempted from sales tax. The case involved an assessee engaged in the purchase and sale of medicines, where the manufacturer was exempted from tax under section 13 of the Act as a rural tiny industry. The dispute arose when the Assessing Authority levied tax on the subsequent sale by the assessee, despite the manufacturer being tax-exempt. The Tribunal had initially accepted the assessee's appeal, leading to the reference to the High Court for clarification.

The Court analyzed the relevant provisions of the Haryana General Sales Tax Act, particularly section 13 granting exemptions to rural tiny industrial units to promote industrial development. It was established that the manufacturer, in this case, was exempted from tax, making the subsequent dealer, the assessee, liable for tax under the Act. The Court highlighted the importance of notifications issued by the State Government specifying goods subject to tax at the first stage of sale, as per section 18 of the Act.

The judgment emphasized the notification issued by the Governor of Haryana, which included "medicines and pharmaceutical preparations" as goods liable to tax at the first stage of sale. The notification clarified that when a manufacturer, exempt from tax, sells goods for the first time within the State, the subsequent dealer becomes liable for tax. The Court reiterated that the earliest of the successive dealers would be responsible for tax payment if the manufacturer was not liable to pay tax on the first sale.

In conclusion, the Court answered the question referred by the Tribunal in the negative, ruling in favor of the department and establishing that the subsequent sale of goods, even if the first sale was by a tax-exempt manufacturer, would be subject to tax. The judgment provided a comprehensive interpretation of the relevant provisions of the Act and notifications issued by the State Government, ensuring clarity on tax liabilities for subsequent sales in such scenarios.

Conclusion:
The High Court's judgment clarified the tax liability on subsequent sales of goods when the first sale is by a tax-exempt manufacturer under the Haryana General Sales Tax Act, 1973. The ruling underscored the importance of statutory notifications specifying goods subject to tax at the first stage of sale and upheld the principle that the earliest of the successive dealers would be liable for tax payment if the manufacturer was exempt from tax. The decision provided a detailed analysis of the legal provisions and notifications, ensuring a clear understanding of tax obligations in similar cases.