2007 (11) TMI 568 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case, the Trade Tax Tribunal is legally justified to hold that the plastic boxes sold by the dealer are taxable at the rate of 2.5 per cent as jewellery boxes ? Whether, on the facts and in the circumstances of the case, the Trade Tax Tribunal is legally justified to accept the account books of the dealer despite the adverse material found at the time of survey on July 24, 1998 indicating otherwise ? Held that - In the present case, there is no evidence to establish that the so-called jewellery boxes which were actually plastic boxes were being sold along with the jewellery. That could only have been so if the jeweller who was selling ornaments was selling the jewellery boxes along with the ornaments. In the absence of any evidence to establish this fact that the packing material, i.e., the alleged jewellery boxes were being sold with the jewellery, it was not justified on the part of the Tribunal to come to the conclusion that in this case the benefit of section 3AB could have been given to the assessee. Therefore, the conclusion of the Tribunal on both counts is bad and not justified. There is no finding whatsoever on record that the plastic boxes were the packing material which was being sold along with the jewellery. Therefore, hold that the order of the Tribunal is bad and not justified. Both the questions are thus answered in favour of the revisionist and against the assessee.

Summary

Issues:
1. Taxability of plastic boxes as jewellery boxes
2. Acceptance of account books despite adverse material found during survey

Analysis:

*Issue 1: Taxability of plastic boxes as jewellery boxes*

The case involved a dispute regarding the taxability of plastic boxes sold by the dealer as jewellery boxes. The Tribunal had accepted the account books of the assessee and concluded that the plastic boxes should be taxed at 2.5 per cent as jewellery boxes, citing the benefit of section 3AB of the U.P. Trade Tax Act. However, the High Court analyzed the relevant notifications and highlighted that the provisions of section 3AB apply only when goods are sold along with packing material. In this case, there was no evidence to prove that the plastic boxes were being sold along with jewellery. The Court emphasized that the benefit of section 3AB could only be given if the jewellery boxes were sold along with the ornaments, which was not established. Therefore, the Court held that the Tribunal's decision to tax the plastic boxes as jewellery boxes was not justified, and ruled in favor of the revisionist.

*Issue 2: Acceptance of account books despite adverse material found during survey*

The assessing authority had rejected the account books of the dealer and assessed tax based on adverse material found during a survey. The first appellate authority partially allowed the dealer's appeal by confirming the rejection of account books but reducing the tax rate. Subsequently, the Trade Tax Tribunal allowed the dealer's appeal and dismissed the revisionist's appeal. The Tribunal accepted the account books and considered the plastic boxes as jewellery boxes for taxation purposes. However, the High Court found that there was no evidence to support that the plastic boxes were sold along with jewellery, as required by section 3AB. The Court held that the Tribunal's decision to accept the account books and tax the plastic boxes as jewellery boxes was unjustified. Consequently, the Court ruled in favor of the revisionist, allowing the revision and overturning the Tribunal's decision.

In conclusion, the High Court's judgment addressed the issues of taxability of plastic boxes as jewellery boxes and the acceptance of account books in light of the provisions of the U.P. Trade Tax Act. The Court found that the Tribunal's decision was not supported by evidence and ruled in favor of the revisionist, highlighting the lack of justification for taxing the plastic boxes as jewellery boxes.