2007 (4) TMI 653 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of liability for tax payment in inter-State sales under the U.P. Trade Tax Act, 1948 based on Central sales tax payment.

Analysis:
The judgment by the High Court of Allahabad pertains to a revision filed under section 11 of the U.P. Trade Tax Act, 1948, challenging the Trade Tax Tribunal's order setting aside a demand raised by the department against the assessee. The primary issue in question is whether the liability for tax payment during inter-State sales, where Central sales tax has been paid, is limited to one percent upon further sale, or if the liability is as per the Act when Central sales tax has not been paid. The Tribunal had set aside the demand, citing that the assessee had purchased from a registered dealer, absolving them of tax liability. However, the learned Standing Counsel argued that mere purchase from a registered dealer is insufficient; Central sales tax payment during inter-State sales is also necessary.

The High Court, in its analysis, highlighted that Central sales tax had not been paid during the inter-State sale in the present case. Consequently, the Tribunal's judgment was deemed unsustainable. Both the assessing officer and the first appellate authority had found tax liability against the assessee for the subsequent sale. The Court referenced a previous decision involving a similar issue, where it was held that purchases from a registered dealer alone are not enough; the goods purchased must be tax-paid under the Central Sales Tax Act. Relying on this precedent, the Court allowed the revision, setting aside the Tribunal's order and upholding the assessing officer's decision.

In conclusion, the High Court's judgment clarifies the requirement for tax payment liability in inter-State sales under the U.P. Trade Tax Act, emphasizing the significance of Central sales tax payment alongside purchases from registered dealers. The decision underscores that tax obligations are not solely determined by dealer registration but also by compliance with Central sales tax regulations, ensuring a comprehensive understanding of tax liabilities in such transactions.