1997 (12) TMI 633 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the recognition certificate under Section 4-B of the U.P. Trade Tax Act.
2. Definition and classification of "craft paper" as "paper" or "packing material."
3. Applicability of tax exemptions under the U.P. Trade Tax Act.
4. Conflict in judicial opinions regarding the classification of craft paper.

Issue-wise Detailed Analysis:

1. Validity of the recognition certificate under Section 4-B of the U.P. Trade Tax Act:
The petitioner, M/s. Lalji Board Industries, initially received a recognition certificate under Section 4-B of the U.P. Trade Tax Act for manufacturing mill board. Subsequently, the petitioner began manufacturing craft paper and applied for its inclusion in the recognition certificate. The Sales Tax Officer granted this request, allowing the petitioner to purchase raw materials and machinery at a concessional rate or without tax. However, the Assistant Commissioner issued a show cause notice under Section 4-B(4), questioning the inclusion of craft paper in the certificate, arguing it was "paper" and not "packing material."

2. Definition and classification of "craft paper" as "paper" or "packing material":
The core issue was whether "media craft paper" was classified as "packing material" or "paper." The petitioner argued that craft paper was used exclusively for packing and thus should be classified as packing material, citing the case of Ashoka Paper Mills v. Commissioner of Sales Tax. The respondents contended that craft paper was indeed "paper," referencing the decision in Manish Paper and Boards Mills Ltd., which held that craft paper, used mainly for packing, was still "paper."

3. Applicability of tax exemptions under the U.P. Trade Tax Act:
Under the U.P. Trade Tax Act, goods classified as "paper" were excluded from tax exemptions granted under Section 4-B. The petitioner's claim for tax exemption on the purchase of raw materials and machinery hinged on whether craft paper was classified as "packing material." The court examined various definitions and previous judgments to determine the common parlance and commercial sense of the term "paper."

4. Conflict in judicial opinions regarding the classification of craft paper:
The division Bench referred the case to a larger Bench due to conflicting opinions in previous judgments. The cases of Ashoka Paper Mills and Manish Paper and Boards Mills Ltd. presented opposing views on whether craft paper was "paper" or "packing material." The Full Bench analyzed these judgments and other relevant cases, including Mahabir Industries v. State of U.P. and Commissioner of Sales Tax v. Nav Bharat Paper Products, to resolve the conflict.

Conclusion:
The Full Bench concluded that the case of Manish Paper and Boards Mills Ltd. was correctly decided, supporting the view that craft paper is "paper" and not "packing material." The court emphasized that the term "paper" in the notification was used in a generic sense, encompassing all types of paper, including craft paper. Therefore, the petitioner's claim for tax exemption was invalid, and the recognition certificate was rightly subject to amendment. The writ petition was dismissed, and no order as to costs was made.

Judgment:
The writ petition was dismissed, affirming that craft paper is classified as "paper" under the U.P. Trade Tax Act, and thus not eligible for tax exemptions granted to "packing materials."