2003 (8) TMI 522 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to Sales Tax Tribunal's order for reassessment of dealer's turnover under U.P. Sales Tax Act, 1948 regarding purchase of machineries for producing electrical energy.

Analysis:
The Commissioner of Sales Tax challenged the Sales Tax Tribunal's order dated July 18, 1991, in second appeal No. 201 of 1990 (1984-85). The revision arose from proceedings under section 21 of the U.P. Sales Tax Act, 1948, for reassessment of the dealer's turnover. The issue revolved around the purchase of machineries worth Rs. 12,12,89,134 from B.H.E.L. against form III-D for producing electrical energy, which the department objected to, citing section 3G of the Act. The assessing officer was unsatisfied with the assessee's response to the show cause notice, claiming that the machineries were used for generating electricity, starting in 1987 and 1988. The Sales Tax Officer believed that had the machineries been purchased after September 13, 1985, the assessee would have been entitled to a concessional tax rate. The Tribunal set aside the Sales Tax Officer's order, leading to the present revision.

The High Court analyzed the amendment to section 3G on September 13, 1985, which included the words "other than electrical energy" in sub-section (2). Section 3G provided a special tax rate for certain sales to government departments or corporations, excluding goods used for manufacturing or packing, except electrical energy. Circulars issued by the government in 1977 and 1987 were relevant to the case, with conflicting opinions on concessional tax rates for plant and machinery purchases. Previous court decisions supported concessional tax rates even if machinery wasn't used for manufacturing, as long as it was purchased under the relevant circulars.

The Tribunal's decision was based on interpreting the words "use in manufacture," concluding that reassessment under section 21 was not applicable unless turnover had escaped assessment. The Tribunal correctly interpreted the term "use in manufacture" to apply to raw materials used for producing electrical energy, not the machinery itself. Since the plant and machinery were purchased in 1984-85 and electricity generation began later, the Tribunal found the purchase justified. The subsequent amendment partially removed restrictions on concessional rates for goods purchased under section 3G, specifically regarding the sale of electrical energy. Consequently, the High Court upheld the Tribunal's decision, dismissing the revision.