2011 (11) TMI 595 - HC - VAT and Sales Tax

Summary

Issues:
Sales tax exemption on computer printing paper, Second sale exemption claimed by the assessee, Rebate under Explanation to entry 106 of the First Schedule to the KGST Act.

Sales Tax Exemption on Computer Printing Paper:
The assessee, engaged in manufacturing computer printing stationery, had availed sales tax exemption for seven years on the ground of being involved in the manufacture of computer printing paper. However, after the exemption period ended, they claimed that the item sold was just paper and not subject to tax. The court noted that the product sold was a value-added computer stationery distinct from the plain paper purchased, involving processes like cutting, perforating, and embedding carbon paper. The Tribunal found the product to be commercially different and upheld the assessment disallowing second sale exemption claimed by the assessee.

Second Sale Exemption Claimed by the Assessee:
The assessee contended that the computer printing paper sold after processing did not attract tax liability as it was a second sale. The assessing officer disallowed this exemption, stating that the product sold was different from the plain paper purchased. The court upheld the Tribunal's decision, emphasizing that the product sold was a value-added item with specific use and identity, distinct from the raw material, and therefore not eligible for second sale exemption.

Rebate under Explanation to Entry 106 of the First Schedule to the KGST Act:
The Tribunal granted the assessee a rebate under the Explanation to entry 106 of the KGST Act, which allowed a deduction of tax paid on paper used in manufacturing note books against sales tax payable on the sale of note books. However, as the assessee did not produce note books from the purchased paper, the court found that the Explanation did not apply. The court allowed the State's revision cases, reversing the Tribunal's decision and confirming the assessment at the full rate of tax.

In conclusion, the court dismissed the assessee's revision cases challenging the disallowance of second sale exemption and allowed the State's revision cases by upholding the assessment at the full rate of tax, as the rebate provision did not apply in the absence of note book production from the purchased paper.