2004 (12) TMI 649 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of tax entry for sales of bronze powder under the Gujarat Sales Tax Act, 1969.
Applicability of penalty under section 45(6) of the Act.

Analysis:
The case involved a reference made by the Sales Tax Tribunal under section 69 of the Gujarat Sales Tax Act, 1969, regarding the taxability of sales of bronze powder and the imposition of a penalty. The State of Gujarat raised the question of whether the sales of bronze powder should be taxed under entry 9, Part A of Schedule II or entry 13 of Schedule III of the Act, for the period July 1, 1979, to June 30, 1980. The Sales Tax Officer initially assessed the sales under entry 13 and imposed a penalty of Rs. 2,702 under section 45(6) of the Act.

The assessee, a trader in bronze powder, contended that the sales should be taxed under entry 9, Part A of Schedule II, as it is used for printing textile fabrics. The matter went through appeals, and the Tribunal ultimately allowed the appeal, holding that the bronze powder fell under entry 9, Part A. The Tribunal also found that the penalty was not sustainable as the difference between the assessed tax and the tax paid did not exceed 20%.

The Government argued that the Tribunal erred in considering the use of the goods by purchasers and contended that all possible uses of the product should be taken into account. The Tribunal's findings indicated that the bronze powder was primarily used for printing golden-colored designs on textiles, and there was no evidence to suggest significant use in other industries. The Tribunal applied the test formulated by the Supreme Court to determine the product's classification based on its functional character and consumer perception.

The Tribunal's decision was supported by the principles derived from previous cases, emphasizing that the popular meaning or the meaning known to those dealing with the subject matter should be considered. The Tribunal's findings, coupled with legal precedents, led to the conclusion that the sales of bronze powder should be taxed under entry 9, Part A of Schedule II, and the penalty imposed was unjustified. The Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue, thereby disposing of the reference with no costs awarded.

In conclusion, the judgment clarified the tax entry applicable to sales of bronze powder under the Gujarat Sales Tax Act, highlighting the importance of considering the product's functional character and consumer perception in determining its classification for taxation purposes.