2008 (10) TMI 617 - HC - VAT and Sales Tax

Levy of purchase tax and the related component of interest - benefit of notification - Held that - For whatever reason the tax was not charged or collected, the operation of the said notification dated March 7, 1994 is plain and clear; and in view thereof, there would arise no question of the Revenue suggesting levy of purchase tax in the present cases. The said notification dated March 7, 1994 appears to be taking in its sweep the transactions of the present nature too and existing such notification, demand of purchase tax does not appear to be justified. There appears no illegality in the order passed by the Tax Board.

Issues Involved:
1. Whether the imposition of purchase tax on goods purchased under Form ST-17 and sold under Form ST-17B for export is justified.
2. Interpretation and applicability of the notifications dated 01.12.1986 and 07.03.1994.
3. Legality of the appellate authorities' decisions in setting aside the purchase tax.

Detailed Analysis:

1. Imposition of Purchase Tax on Goods Purchased Under Form ST-17 and Sold Under Form ST-17B for Export:
The Assessing Authority initially observed that certain handicraft items were purchased by the dealers for resale under Form ST-17 but were sold for export under Form ST-17B. The authority issued a notice to the dealers for imposing a 10% purchase tax and interest due to the opinion that the purchase on Form ST-17 was not intended for exports. The Deputy Commissioner (Appeals), Jodhpur, however, set aside the levy of purchase tax, stating that under Sections 5 and 5-A of the Rajasthan Sales Tax Act, 1954, purchase tax could not be levied as the goods were purchased from registered dealers and sold within the state to exporters. The appellate authority emphasized that the purchase tax could not be levied if the goods were used for the declared purposes as per the first proviso to Section 5-A.

2. Interpretation and Applicability of the Notifications Dated 01.12.1986 and 07.03.1994:
The notification dated 01.12.1986 directed that tax payable under Section 5 of the Act on the sale of goods manufactured in Rajasthan would be at specific points. The notification dated 07.03.1994 exempted from tax the purchase of all goods made up to 31st March 1995 by a registered dealer liable to pay tax under Section 5A, provided the goods were sold in the course of inter-State trade or commerce. The court noted that the notification dated 07.03.1994 would cover the transactions in question for the financial year 1990-91. The State Government, aware of the notification dated 01.12.1986, issued the exemption notification consciously, indicating that benefits under the notification would be available for purchases made under ST-17.

3. Legality of the Appellate Authorities' Decisions:
The Tax Board, in its decision, referred to a court ruling in CWP No. 1650/1993, which supported the dealers' stance that no tax liability arose due to the exemption provided by the notification dated 07.03.1994. The court observed that the notification's plain reading indicated an exemption from purchase tax if the goods were sold in inter-State trade or commerce. The court concluded that the demand for purchase tax by the revenue was unjustified and upheld the appellate authorities' decisions. The court dismissed the revision petitions, confirming that the appellate authorities had correctly interpreted the notifications and the provisions of the Act.

Conclusion:
The High Court dismissed the revision petitions, affirming that the imposition of purchase tax was not justified under the given circumstances. The court upheld the appellate authorities' decisions, which were based on the correct interpretation of the relevant notifications and provisions of the Rajasthan Sales Tax Act, 1954. The notifications dated 01.12.1986 and 07.03.1994 were pivotal in determining that the purchases made under Form ST-17 for resale and subsequently sold for export under Form ST-17B were exempt from purchase tax.

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