1998 (2) TMI 561 - AT - VAT and Sales Tax

Issues Involved:
1. Whether green tea is a goods coming within the scope of entry 47 of the First Schedule of the 1941 Act.
2. Whether the imposition of penalty and demand of interest were unwarranted in the given circumstances.

Issue-wise Detailed Analysis:

1. Whether green tea is a goods coming within the scope of entry 47 of the First Schedule of the 1941 Act:

The applicant firm, engaged in manufacturing tea, claimed exemption from sales tax on sales of green tea leaves (G.T.Ls.) under entry 47 of the First Schedule of the Bengal Finance (Sales Tax) Act, 1941, arguing that G.T.Ls. are part of "plants" and hence should be exempt. The Commercial Tax Officer disallowed this claim but allowed concessional rate of sales tax on sales of G.T.Ls. to registered dealers. The appellate authority and the revisional authority upheld the assessment order, rejecting the applicant's contentions.

The Tribunal examined whether G.T.Ls. fall under the scope of "flowers and plants" in entry 47. It noted that the terms "flowers" and "plants" are not defined in the 1941 Act, and thus, their meaning should be derived from trade parlance. The Tribunal referred to previous judgments, including the Supreme Court's opinion that trade understanding is the safest guide when no statutory definition is provided. It was concluded that G.T.Ls. have a distinct identity in trade parlance as raw material for tea manufacturing, and not merely as parts of plants. Hence, G.T.Ls. do not fall under the exemption provided for "flowers and plants" in entry 47.

The Tribunal also distinguished the present case from the Supreme Court decision in Commissioner of Sales Tax, Lucknow v. D.S. Bist, which dealt with a different context under the U.P. Sales Tax Act, 1948. The 1941 Act does not have a similar provision to exclude agricultural produce from sales tax. Therefore, the Tribunal found no ground to interfere with the impugned orders regarding the imposition of sales tax on sales of G.T.Ls.

2. Whether the imposition of penalty and demand of interest were unwarranted in the given circumstances:

The applicant argued that the penalty for late submission of returns was unjustified as the returns were filed under a bona fide belief that G.T.Ls. were not taxable. The Tribunal noted that there was an undisputed delay in filing the return, and the applicant failed to provide any justification for such delay. Therefore, the penalty imposed was upheld.

Regarding the demand for interest, the applicant contended that the non-payment of tax was based on a bona fide belief that G.T.Ls. were not taxable. The Tribunal rejected this argument, stating that tea plants have a special identity, and withholding tax on the plea of non-exigibility does not exempt the applicant from the statutory obligation of paying tax. Additionally, the applicant had collected tax from registered dealers but withheld payment, which further justified the levy of interest.

Conclusion:

The Tribunal dismissed all three applications (RN-229 of 1996, RN-249 of 1996, and RN-254 of 1996) filed by the applicant firm, upholding the assessment orders, imposition of penalty, and levy of interest. The Tribunal emphasized that G.T.Ls. do not fall under the exemption for "flowers and plants" and that the penalties and interest imposed were justified given the circumstances.

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