2010 (2) TMI 1090 - HC - VAT and Sales Tax

Whether, on facts and in the circumstances of the case, was the Tribunal justified in law in holding that the respondent was entitled to claim concessional rate of tax at four per cent on their sales effected to Zilla Parishad which is not a State Government on the strength of certificate in form AF within the meaning of notification entry No. 70 issued under section 41 of the Bombay Act? Whether, on facts and in the circumstances of the case, was the Tribunal justified in law in absolving the respondent from his statutory liability on the sales effected to Zilla Parishad which is admittedly not a State Government solely on the ground that the purchaser, namely, Zilla Parishad is made liable to pay purchase tax on such purchases under section 41(2) of the Bombay Act? Held that - As question (1) indirectly arises in our opinion it was not for the selling dealer to go beyond the declaration produced by the Zilla Parishad. The section as amended itself makes it clear that if it is found that such dealer was not entitled to issue such declaration then such dealer would be liable to pay the tax. In our opinion, therefore, the question will have to be answered in the affirmative namely that the Tribunal was right in holding the respondent was entitled to claim concessional rate of tax. In so far as the second question is concerned, it is merely consequential. Even otherwise considering the express language of section 41(2) once the Act itself puts a burden on the purchaser then the question of claiming from the seller or the duty being cast on the seller would not arise. The language of section 41(2) as introduced by Maharashtra Act 9 of 1988 is very clear, that in the case where a dealer is not entitled for a declaration then it is that dealer who is liable to pay purchase tax on the purchase of the goods. The section also makes provisions as to how such tax would be assessed from such dealer. In our opinion, therefore, the question of the seller being under an obligation to pay tax does not arise. The question as framed would have to be answered in the affirmative and against the Revenue.

Summary

Issues:
1. Entitlement to claim concessional rate of tax on sales to Zilla Parishad.
2. Absolving the respondent from statutory liability on sales to Zilla Parishad.

Entitlement to Claim Concessional Rate of Tax:
The case involved a dispute regarding the entitlement of the respondent to claim a concessional rate of tax on sales to Zilla Parishad under the Bombay Sales Tax Act. The Tribunal was tasked with deciding if the respondent could claim a four percent tax rate on sales to Zilla Parishad based on a certificate in form "AF" as per a specific notification. The Tribunal held that the purchaser, Zilla Parishad, was responsible for adhering to the conditions of the declaration and paying the purchase tax. The Tribunal deemed the lower authority's decision to subject sales tax against "AF" forms to be erroneous and placed the responsibility on the purchaser, not the seller, for payment of tax.

Absolving Respondent from Statutory Liability:
The second issue revolved around absolving the respondent from statutory liability on sales to Zilla Parishad. The Revenue contended that the respondent should have verified the authority of the purchasing dealer to issue the required declarations for claiming the concessional tax rate. The Tribunal noted that Zilla Parishad, not being a government entity, lacked the authority to make purchases against form "AF" and had not paid the purchase tax. However, the Tribunal emphasized that the obligation to pay tax lay with the purchaser, and the mere liability of the purchaser to pay purchase tax did not automatically absolve the respondent from tax liability. The Tribunal ultimately ruled in favor of the respondent, stating that the obligation rested with the purchaser, not the seller, regarding tax payment.

Judgment Analysis:
The judgment highlighted the significance of the provisions of section 41(2) of the Bombay Sales Tax Act, emphasizing the distinction between the responsibilities of the seller and the purchaser in tax matters. The court clarified that the seller's obligation to pay tax did not arise if the purchaser was not entitled to issue the required declaration. The court upheld the Tribunal's decision that the respondent was entitled to claim the concessional tax rate on sales to Zilla Parishad, as the responsibility for tax payment lay with the purchaser. The judgment underscored the legal framework governing tax liabilities and the importance of adherence to statutory provisions in determining tax obligations.