2001 (8) TMI 1363 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement of the dealer for exemption of turnover representing the sale of ball point pen holders.
2. Legality of the assessment based on material collected by the department without providing copies to the dealer.
3. Interpretation of G.O. Ms. No. 130, Revenue, dated February 14, 1989, regarding the exemption for ball point pens.

Issue-wise Detailed Analysis:

1. Entitlement of the dealer for exemption of turnover representing the sale of ball point pen holders:
The dealer, a public limited company engaged in the manufacture and sale of plastic articles, claimed exemption for the turnover representing the alleged sale of ball point pens for the assessment year 1996-97. The assessing officer denied this exemption, and subsequent appeals to the Appellate Deputy Commissioner and the Tribunal were unsuccessful. The Tribunal found that the dealer only manufactured ball point pen holders, not complete ball point pens, and thus was not entitled to the exemption under G.O. Ms. No. 130, Revenue, dated February 14, 1989. The Tribunal concluded that "ball point pen holders without refills cannot be called as ball point pens by any stretch of imagination."

2. Legality of the assessment based on material collected by the department without providing copies to the dealer:
The dealer argued that the department conducted inquiries behind its back and used material from these inquiries without providing copies, which is contrary to settled principles of law. The dealer cited a judgment in the case of Machilipatnam Central Consumer Co-operative Stores Limited v. Commissioner of Commercial Taxes to support this contention. However, the Tribunal found that the assessment was considered on merits and not solely based on the material collected by the department. The Tribunal noted that the evidence at the check-post established the movement of granules from Mumbai to Hyderabad and ball point pens from Hyderabad to Mumbai, indicating that the assessment was not adversely influenced by undisclosed material.

3. Interpretation of G.O. Ms. No. 130, Revenue, dated February 14, 1989, regarding the exemption for ball point pens:
The dealer claimed exemption under G.O. Ms. No. 130, which exempts "educational items such as bio-visual products like rexine charts, maps and globes, pencils, pens and 'ball point pens', dusters, erasers and instrument boxes." The Tribunal found that the dealer only manufactured ball point pen holders without refills, which do not qualify as ball point pens. This finding was supported by a statement from one of the directors of the dealer, who confirmed that they did not purchase or manufacture refills. The Tribunal's interpretation was that the exemption applies to complete ball point pens, not just the holders.

Additional Consideration:
The dealer's counsel later referenced a Supreme Court judgment in the case of State of Kerala v. V. Padmanabhan, arguing that ball point pen holders should be treated as ball point pens for exemption purposes. However, the Supreme Court in that case determined that a refill alone does not constitute a pen and must be part of a complete ball point pen. This reinforced the Tribunal's decision that the dealer's ball point pen holders without refills do not qualify for exemption.

Conclusion:
The High Court affirmed the Tribunal's order, agreeing that the dealer's manufactured ball point pen holders without refills do not qualify for exemption under G.O. Ms. No. 130. The tax revision case was dismissed, and the Tribunal's interpretation and findings were upheld.

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