2000 (1) TMI 949 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notices for levy of tax under section 3-B of the U.P. Sales Tax Act, 1948 for assessment years 1985-86 and 1983-84.

Analysis:
The petitioner, an iron and steel merchant, purchased old railway wagons from the railways, which were taxable on sale to consumers under a specific notification. The petitioner issued form III-A to the railways, certifying that the goods were purchased for resale in the same form and condition. The assessing officer alleged that the petitioner avoided tax on iron scrap purchases by issuing form III-A, leading to the issuance of notices for tax levy. However, the petitioner argued that the purchased wagons were sold in the same condition and form, justifying the issuance of form III-A. The petitioner contended that a circular by the Commissioner supported their position regarding the tax liability on old railway wagons. The counter-affidavit claimed that the purchased commodity was scrap, taxable at the point of sale by the manufacturer or importer, and form III-A should not have been issued. Section 3-B imposes liability if a false certificate or declaration causes tax avoidance, but the petitioner maintained that the conditions for tax liability were not met as they did not change the form or condition of the goods.

The judgment analyzed the issue of whether the wagons purchased by the petitioner constituted old and discarded machinery or iron and steel scrap. It highlighted the evolving opinions through circulars issued by the Commissioner regarding the tax treatment of such goods. The assessing officer's reliance on the petitioner's bills alleging the sale of iron and steel scrap was countered by the need to consider the condition of the goods at the time of sale. The judgment emphasized the factual determination required in each case to ascertain the nature of the goods post-removal of excluded items. It critiqued the lack of basis for the allegation that the form III-A declaration was false and reiterated that tax liability did not cease solely due to the issuance of the form. The judgment refuted the contention that the petitioner avoided tax on purchases and sales, emphasizing that some sales were made against form III-A and others were exempt due to the nature of the purchasers.

In conclusion, the Court found the notices for tax levy without jurisdiction and justification, leading to their quashing. The writ petitions were allowed, and the notices were thereby quashed.