2012 (7) TMI 861 - HC - VAT and Sales Tax

Entry tax on purchase of plant and machinery for the purpose of expansion of unit - Held that - The petitioner is not liable to purchase tax and certainly it is not liable for entry tax because purchase of materials for expansion of business could not be said to be an activity in the course of business. Hence the order passed by the authority is contrary to law. In favour of assessee.

Summary

Issues:
Petition against tax order, liability for entry tax, distinction between expansion and new unit establishment, applicability of purchase tax, maintainability of petition.

Analysis:
The petitioner challenged an order directing the deposit of a substantial amount as tax for not paying entry tax on materials purchased for unit expansion. The authority differentiated between expansion and new unit establishment, holding the petitioner liable for entry tax. The court referred to precedents like Perfect Pottery Co. Ltd. case, emphasizing that construction activity for business purposes does not constitute business itself and is not subject to purchase tax. The court cited Satna Cement Works case to support that building materials purchased for expansion are not in the course of business, thus not justifying purchase tax. Consequently, the petitioner was found not liable for purchase or entry tax due to the nature of the materials purchased for business expansion.

The government advocate argued against the petition's maintainability due to alternative remedies. However, the court found no factual adjudication and noted a misinterpretation of the law by the authority. As the authority misapplied the law based on admitted facts, the court allowed the petition, quashing the tax order. The judgment highlighted that the petition could not be dismissed merely based on the availability of alternative remedies, especially when the authority's decision was legally flawed. The court ruled in favor of the petitioner, setting aside the tax order without imposing any costs.