2009 (3) TMI 941 - HC - VAT and Sales Tax

Whether once the Tribunal s orders are confirmed by this court relegating the appellants to face assessment, there is no justification to challenge the circular in writ proceedings? Held that - We do not find any justification to uphold circular which interferes with the scheme of assessment and exemption granted to large dealers in the State. Going by the Department s own stand the appellant is not liable to pay sales tax on centrifuged latex as it is not a rubber product. As already found centrifuged latex continues to be rubber taxable at last purchase point. So much so the conversion of field latex into centrifuged latex cannot be treated as manufacture of a rubber product for the purpose of levy of tax under entry 39 of the First Schedule. Since the Department has not treated centrifuged latex as a rubber product at the hands of either the seller or purchaser there is no justification to demand tax at the purchase point of field latex. In view of the findings the writ appeal allowed and quash exhibit P33 circular to the extent it says that centrifuged latex is a rubber product up to March 31, 1988.

Issues:
1. Interpretation of sales tax laws regarding rubber products.
2. Validity of Circular No. 16/98 issued by the Board of Revenue.
3. Assessment and exemption granted to dealers in the State.
4. Classification of centrifuged latex as a rubber product.
5. Liability for sales tax on different forms of rubber.

Interpretation of sales tax laws regarding rubber products:
The judgment addressed the interpretation of sales tax laws concerning rubber products. The appellant, engaged in processing rubber latex to centrifuged latex, was granted exemption on field latex purchased and the sale of centrifuged latex under entry 38 of the Sales Tax Act. The court analyzed the original entries in the Act and subsequent amendments, emphasizing the taxable nature of rubber in various forms. The assessment years 1976-77 to 1986-87 were under scrutiny due to the treatment of centrifuged latex as taxable at the last purchase point. The court highlighted the distinction between field latex and centrifuged latex, emphasizing the former as a raw material for various rubber products.

Validity of Circular No. 16/98 issued by the Board of Revenue:
The judgment delved into the validity of Circular No. 16/98 issued by the Board of Revenue. The circular's basis was a previous court decision, indicating that centrifuged latex was not considered rubber until April 1, 1988. However, the circular's applicability was questioned, especially regarding the treatment of centrifuged latex as a rubber product for tax purposes. The court scrutinized the Department's inconsistent stance on the classification of centrifuged latex, leading to confusion in the assessment and exemption processes.

Assessment and exemption granted to dealers in the State:
The judgment examined the assessment and exemption granted to dealers in the State. The court discussed the perpetual contest faced by the appellants against sales tax assessments dating back 20 to 30 years. The court emphasized the need for finality in challenging the circular to resolve the ongoing disputes effectively. The assessment process, including the treatment of field latex and centrifuged latex, was analyzed to ensure consistency and fairness in tax liabilities.

Classification of centrifuged latex as a rubber product:
The judgment focused on the classification of centrifuged latex as a rubber product. The court rejected the notion that centrifuged latex should be considered a rubber product, highlighting its status as preserved latex used in manufacturing various rubber items. The court emphasized that the conversion of field latex into centrifuged latex did not alter its fundamental nature as rubber taxable at the last purchase point. The Department's inconsistent approach to treating centrifuged latex as both a raw material and a taxable product was deemed unjustifiable.

Liability for sales tax on different forms of rubber:
The judgment addressed the liability for sales tax on different forms of rubber, particularly field latex and centrifuged latex. The court concluded that centrifuged latex should not be classified as a rubber product for tax purposes, maintaining its status as a raw material taxable at the last purchase point. The court invalidated Circular No. 16/98 to the extent that it categorized centrifuged latex as a rubber product until March 31, 1988, emphasizing the need for consistency in tax assessments and exemptions.

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