2007 (11) TMI 582 - HC - VAT and Sales Tax

Taxability on sale of oxygen gas - Held that - Only respondent No. 7, TISCO, is competent to explain to the prescribed authority as to how oxygen gas, which was all along treated and mentioned as goods as per annexure B, has suddenly become raw material. In the same way, the prescribed authority alone is competent to decide about the same. Hence, the petitioner s claim, on the basis of the notification referred to above, which is quite contrary to the earlier stand, is not sustainable under law. We think it fit not to refer to any of the authorities cited by both the parties as those decisions would be of no use as the specific issue in question has not been dealt with therein. Thus as per the registration certificate issued under section 13(1)(b) of the Act, oxygen gas was treated as goods as mentioned in annexure B. The purchasing dealer has to pay sales tax at three per cent treating oxygen gas as goods mentioned in annexure B and the selling dealer has to merely collect and deposit the same as per the certificate with the Government. Unless it is established before the prescribed authority, which, in turn, will decide the nature of the goods, the purchasing dealer cannot claim payment of sales tax at the concessional rate of two per cent treating oxygen gas as raw material under the garb of the two notifications dated September 9, 1983 and February 3, 1986. Therefore, demand notices are perfectly justified. Appeal dismissed.

Issues Involved:
1. Validity of demand notices for differential sales tax.
2. Classification of oxygen gas as raw material or goods.
3. Applicability of notifications dated September 9, 1983, and February 3, 1986.
4. Jurisdiction and authority of the prescribed authority under section 13(1)(b) of the Bihar Finance Act, 1981.
5. Role and obligations of the selling dealer and purchasing dealer.

Detailed Analysis:

1. Validity of Demand Notices for Differential Sales Tax:
The petitioner challenged the demand notices issued by the Deputy Commissioner, Commercial Taxes, Jamshedpur, directing the petitioner to deposit Rs. 1,02,45,572 as the differential amount of sales tax. The court upheld the validity of these notices, stating that the petitioner was bound by the certificate issued under section 13(1)(b) of the Act, which listed oxygen gas as goods taxable at three percent. The demand for the differential amount was justified as the petitioner had no authority to unilaterally decide the tax rate without the prescribed authority's modification.

2. Classification of Oxygen Gas as Raw Material or Goods:
The court emphasized that the classification of oxygen gas as raw material or goods must be determined by the prescribed authority. The certificate issued to TISCO under section 13(1)(b) listed oxygen gas in Annexure B as goods taxable at three percent, not as raw material in Annexure A. The petitioner and TISCO had not approached the prescribed authority to reclassify oxygen gas as raw material, and thus, the court could not make this determination.

3. Applicability of Notifications Dated September 9, 1983, and February 3, 1986:
The petitioner argued that based on these notifications, oxygen gas should be taxed at two percent as it is used as raw material. However, the court found that these notifications could not be applied without the prescribed authority's modification of the certificate. The petitioner had collected and paid sales tax at three percent for years and only later claimed the lower rate without seeking proper reclassification from the prescribed authority.

4. Jurisdiction and Authority of the Prescribed Authority Under Section 13(1)(b) of the Bihar Finance Act, 1981:
The court reiterated that the prescribed authority is the sole entity empowered to classify goods and raw materials under section 13(1)(b). The selling dealer (petitioner) and purchasing dealer (TISCO) must adhere to the classification in the certificate issued by the prescribed authority. Any changes or claims for concessional rates must be processed through the prescribed authority.

5. Role and Obligations of the Selling Dealer and Purchasing Dealer:
The court clarified that the selling dealer (petitioner) is obligated to collect sales tax as per the certificate issued to the purchasing dealer (TISCO). The selling dealer cannot independently decide to collect a lower tax rate. The purchasing dealer must apply to the prescribed authority for any reclassification or concessional rates. The petitioner's actions of collecting tax at a lower rate without proper authorization were deemed inappropriate and not in compliance with the statutory provisions.

Conclusion:
The court dismissed the petition, affirming that the demand notices were justified and the petitioner's contentions lacked merit. The selling dealer must collect and deposit sales tax as per the certificate issued by the prescribed authority, and any changes in classification must be authorized by the prescribed authority. The court emphasized adherence to statutory procedures and the jurisdiction of the prescribed authority in tax matters.

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