1995 (7) TMI 419 - AT - VAT and Sales Tax

Issues Involved:

1. Entitlement to concessional rate of tax on packing materials for tax-free goods.
2. Interpretation of Section 5(1)(bb) of the Bengal Finance (Sales Tax) Act, 1941.
3. Interpretation of Rule 27A of the Bengal Sales Tax Rules, 1941.
4. Validity of the rejection of the application for declaration forms by the Commercial Tax Officer.

Issue-wise Detailed Analysis:

1. Entitlement to Concessional Rate of Tax on Packing Materials for Tax-free Goods:

The primary issue was whether the applicants, a partnership firm manufacturing tax-free hosiery goods, were entitled to purchase packing materials at a concessional rate of tax by furnishing declaration forms under Section 5(1)(bb) of the Bengal Finance (Sales Tax) Act, 1941. The applicants claimed that they were entitled to this benefit as they had been availing it until 1991. However, their application for declaration forms was rejected by the Commercial Tax Officer on April 28, 1995. The applicants argued that the packing materials were used directly in the manufacture of goods in West Bengal for sale and should qualify for the concessional rate under Section 5(1)(bb)(i).

2. Interpretation of Section 5(1)(bb) of the Bengal Finance (Sales Tax) Act, 1941:

The court examined the relevant portion of Section 5(1)(bb), which provides a concessional rate of tax of 2% for sales to a registered dealer of goods intended for use directly in the manufacture of taxable goods and for packing materials. The applicants contended that the phrase "and of containers and other materials for the packing of goods of the class or classes so specified" should be interpreted disjunctively, allowing for the concessional rate irrespective of whether the goods were taxable or tax-free. However, the court noted that the expression "so specified" refers to goods intended for direct use in the manufacture of taxable goods. Therefore, the benefit of the concessional rate is only available for packing materials used in manufacturing taxable goods.

3. Interpretation of Rule 27A of the Bengal Sales Tax Rules, 1941:

The court also analyzed Rule 27A(1a), which requires a dealer to produce relevant particulars and a declaration in form XXIVA to claim the benefit of a lower tax rate. The applicants argued that this rule supported their claim for concessional tax on packing materials for tax-free goods. However, the court found that Rule 27A(1a) must be read in conjunction with Section 5(1)(bb)(i), which limits the concessional rate to packing materials for taxable goods. The court concluded that the legislative intent was to provide the concessional rate only to dealers who manufacture taxable goods and subsequently pay tax on them.

4. Validity of the Rejection of the Application for Declaration Forms by the Commercial Tax Officer:

The court upheld the rejection of the application for declaration forms by the Commercial Tax Officer. It concluded that the officer had correctly interpreted Section 5(1)(bb) and Rule 27A(1a) by denying the concessional rate for packing materials used in manufacturing tax-free goods. The court emphasized that the expression "so specified" in Section 5(1)(bb)(i) refers to goods intended for direct use in the manufacture of taxable goods, and merely specifying the goods in the registration certificate is not sufficient.

Conclusion:

The court dismissed the application, affirming that the benefit of the concessional rate of tax under Section 5(1)(bb)(i) is available only for packing materials used in the manufacture of taxable goods specified in the dealer's registration certificate. The application for declaration forms for the purchase of packing materials for tax-free goods was rightly rejected by the Commercial Tax Officer. The judgment was agreed upon by all members of the tribunal, and the application was dismissed without any order for costs.

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