2004 (11) TMI 528 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to condition/restriction in notification under U.P. Trade Tax Act, 1948 regarding levy of tax on stone grit/gitti, refund of tax, authority of State Government to impose conditions, interpretation of "manufacture," validity of notification under section 3-A(1)(b) of the Act.

Analysis:
The petition challenged a notification imposing tax on stone grit/gitti sold by stone crushers, seeking refund of tax paid on stone boulders. The State Government defended the notification, justifying the tax imposition at the point of sale by stone crushers. The petitioners argued against the State's authority to issue such conditions under section 3-A(1)(b) of the Act, emphasizing single-point taxation under the Act.

The Court examined the definition of "manufacture" under the Act, distinguishing between mere processing and actual manufacturing leading to a new commercial commodity. Referring to precedent, the Court held that crushing stone boulders into stone grits did not constitute manufacturing. The State's attempt to impose tax at different points of sale for the same goods was deemed impermissible under the Act.

Citing legal principles, the Court emphasized that delegated legislation must align with enabling provisions, prohibiting authorities from exceeding their powers. The State's argument to levy tax on sales to ultimate consumers was contradicted by section 3-AAA of the Act, deeming all sales as consumer sales unless for resale. The Court clarified that section 3-A(1)(b) did not grant power to issue notifications with conditions, unlike other sections in the Act.

The Court rejected the State's reliance on a Supreme Court case regarding legislative competency, noting the challenge in the present case was focused on the notification's validity. Ultimately, the Court quashed the condition in the notification, ordering the refund of any tax collected under it. The judgment highlighted the limitation on State Government's power to impose conditions beyond the scope of the Act, ensuring conformity with statutory provisions.

In conclusion, the Court allowed the writ petition, emphasizing the impermissibility of the condition in the notification dated February 16, 2004 under section 3-A(1)(b) of the U.P. Trade Tax Act, 1948. The judgment directed the refund of any tax collected based on the quashed condition, without imposing costs on the petitioners.