2009 (10) TMI 845 - HC - VAT and Sales Tax

Sariya manufacture - Whether only two per cent tax will have to be charged from the assessee ? Held that - In the instant cases, the revisionist has purchased raw material from the units which were enjoying the tax exemption under section 4A of the Act. Thus, the revisionist has paid nil tax on the raw material. To bring at par as per the notification dated May 21, 1994, the A. O. has rightly levied the tax at four per cent on the finished goods manufactured by the revisionist. Ultimately, the Government will have to charge four per cent tax on the iron and steel rods (sariya) manufactured by the revisionist-assessee. Appeal dismissed.

Summary

Issues:
Levy of trade tax on finished goods purchased from units enjoying tax benefits under section 4A of U.P. Trade Tax Act, 1948.

Analysis:
The revisionist-assessee, engaged in manufacturing and selling iron and steel rods, challenged the tax assessment for the year 1997-98. The Assessing Officer (A.O.) had levied a four percent tax on the finished goods purchased from units enjoying tax benefits under section 4A. The revisionist argued that since other manufacturers paid two percent tax on raw material and two percent on finished goods, they should also be charged at two percent. The Department, however, relied on an Office Memorandum stating that the tax on sariya is leviable at four percent. The Department contended that the revisionist paid "nil" tax on raw material, justifying the four percent tax on finished goods.

The legal dispute centered on the interpretation of tax liabilities for iron and steel products. The Department cited a Supreme Court case and a High Court case to support the tax imposition on finished goods. The Court observed that the tax liability arises at the point of manufacturing or importing iron and steel. In this case, the revisionist purchased raw material from tax-exempt units, leading to a tax liability of four percent on the finished goods. In contrast, other manufacturers paid two percent tax on raw material and two percent on finished goods, totaling four percent tax.

The Court upheld the Tribunal's order, dismissing the revisionist's claim for a lower tax rate. Considering the facts and legal provisions, the Court concluded that the revisionist must pay a four percent tax on the iron and steel rods manufactured. The judgment emphasized the equality in tax treatment and upheld the tax assessment based on the applicable laws and notifications.

In conclusion, the Court sustained the Tribunal's decision, affirming the four percent tax liability on the revisionist for the iron and steel rods. The judgment highlighted the importance of consistent tax treatment and adherence to statutory provisions in determining tax liabilities for manufactured goods.