1997 (7) TMI 636 - HC - VAT and Sales Tax

Summary

Issues:
Levy of tax on denatured and rectified spirit under the United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939. Interpretation of section 3(1)(c) of the Act regarding tax liability. Effect of the amendment in section 3-A of the U.P. Trade Tax Act on tax imposition for manufacturers.

Analysis:
The judgment by the High Court of Allahabad delves into the tax liability of a public limited company engaged in manufacturing denatured and rectified spirit under the United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939. The court notes that the tax levy under the Act is on the first purchaser, not on the manufacturer of such spirits. This interpretation is supported by previous court decisions, emphasizing that tax is imposed on the dealer, not the manufacturer. The court highlights that prior to the 1995 amendment, no tax was to be imposed on denatured and rectified spirit.

Furthermore, the judgment discusses section 3(1)(c) of the Act, which specifies the tax levy at the point of first purchase of alcohol in the State. The court emphasizes that the tax liability falls on the purchaser, not the manufacturer. The revisionist argues that no tax is leviable on the denatured and rectified spirit sold by manufacturers, as reiterated by previous court decisions. The court also considers the amendment in section 3-A of the U.P. Trade Tax Act, which allows for tax imposition on declared goods at specified rates. However, it clarifies that this provision is only effective upon notification by the State Government regarding the point and rate of tax.

In the final analysis, the court agrees with the revisionist's argument that no tax liability arises for manufacturers of denatured and rectified spirit under the current legal framework. The judgment sets aside the previous order, ruling in favor of the revisionist. The court concludes that manufacturers are not liable to pay tax under the Central Sales Tax Act, based on the notification excluding alcohol as defined in the 1939 Act. The revision is allowed, and no costs are awarded.

This comprehensive analysis of the judgment showcases the court's interpretation of tax liability for manufacturers of denatured and rectified spirit under relevant Acts and amendments, providing clarity on the legal obligations in this context.