2006 (2) TMI 616 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of sales tax assessment on empty gelatin capsules for different assessment years.

Analysis:
The petitioner, a sales tax assessee, dealt with empty gelatin capsules purchased from manufacturers outside the State and sold to local drug manufacturers. The dispute arose when the Commercial Tax Officer assessed the capsules at 10% tax for the year 2001-02 under entry 37 of the Sales Tax Act, while the appellate authority considered them falling under entry 19(iv) and subject to 4% tax. The assessing authority initially accepted the 4% tax for 2000-01 but later revised it to 12% under entry 37, leading to a challenge by the petitioner.

The High Court considered whether the department could change its stance on taxation for the same commodity across different years. Citing a Supreme Court judgment, the Court emphasized that if a fundamental aspect has been accepted in previous and subsequent years without challenge, it should not be changed in a subsequent year. Applying this principle, the Court held that the department's varying tax rates for the same commodity with the same assessee were not justified.

Consequently, the Court set aside the revised assessment order levying 12% tax and allowed the writ petition, emphasizing consistency in tax treatment across assessment years. The judgment highlighted the importance of maintaining a consistent approach in taxation matters to avoid arbitrary changes in tax rates for the same commodity and assessee.