2012 (1) TMI 153 - HC - VAT and Sales Tax

Purchase assessment u/s 43B of the Punjab General Sales Tax Act quashed Whether the Tribunal was right in directing the Assessing Authority to levy sales tax in place of purchase tax limited to the amount of purchase tax liability Held that - The transaction of purchase of empty bottles and packing material had two facets - under the first facet, it was whether purchase tax u/s 4B of the Act was or was not leviable on empty bottles and packing material and secondly if no purchase tax was leviable whether it was exigible to sales tax at the time of sale thereof along with the manufactured goods - at the same time, the transaction it is liable to sales tax at the time of sale thereof along with manufactured product which liability of the assessee is shown to exist - The Tribunal has only directed the assessing authority to levy sales tax on the bottles and packing material to the extent of quantum of tax which had been imposed by the assessing authority in the original assessment order thus, the order of the Tribunal is upheld Decided against petitioner. Liability to pay sales tax - Export duty recoverable in respect of spirit exported to other States or Union Territories in India, forms part of turnover Held that - manufacture and export duty is the liability of the buyer - once that is so, the contention of the learned counsel for the petitioner loses its weight in McDowell And Co. Limited Versus Commercial Tax Officer 1985 (4) TMI 64 - SUPREME Court it has been held that it was primarily a burden which the manufacturer had to bear - intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of the excise duty is too broadly stated - The duty was primarily a burden which the manufacturer had to bear and even if the purchasers paid the same under the Distillery Rules, the provisions were merely enabling and did not give rise to any legal responsibility or obligation for meeting the burden - the provisions of rules 80, 81, 82, 83 and 84 do not militate against the conclusion that the payment of excise duty is a liability exclusively of the manufacturer - In these rules detailed provisions have been made regarding obtaining of distillery pass, correct calculation and full payment of excise duty, the manner of depositing such duty and ultimately issue of the spirit under the pass from the distillery - these rules do not detract from the position that payment of excise duty is the primary and exclusive obligation of the manufacturer and if payment be made under a contract or arrangement by any other person it would amount to meeting of the obligation of the manufacturer and nothing more Decided against petitioner. Jurisdiction of the authorities upon the vires of provision or notification Whether the Tribunal was right in framing assessment at the rate of four per cent having regard to the notification dated April 6, 1973, December 20, 1973 and July 3, 1975 issued under section 4B of the Punjab General Sales Tax Act - Held that - In K.S. Venkataraman and Co. (P.) Ltd. v. State of Madras 1965 (10) TMI 11 - SUPREME Court - The Act does not confer any such right on them - Their jurisdiction is confined to the assessment of the income and the tax under the provisions of the Act - the jurisdiction conferred upon the High Court by section 66 of the Income-tax Act is a special advisory jurisdiction and its scope is strictly limited by the section conferring the jurisdiction - as the Tribunal is a creature of the statute, it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act - The question of ultra vires is foreign to the scope of its jurisdiction - If an assessee raises such a question, the Tribunal can only reject it on the ground that it has no jurisdiction to entertain the said objection or decide on it - the notification dated July 3, 1975 had enhanced the rate of purchase tax from three per cent to four per cent by incorporating it in the notification dated April 6, 1973 - Thereafter by corrigendum dated June 19, 1979 the same was incorporated in notification dated December 20, 1973 which had superseded notification dated April 6, 1973 - the validity of notification cannot be challenged before the authorities under the statute and, thus, the petitioner cannot escape from its liability thereunder Decided against petitioner.

Issues Involved:
1. Validity of the Tribunal's direction to levy sales tax in place of purchase tax.
2. Inclusion of export duty in the taxable turnover.
3. Validity of notice issued under section 11(2) of the Punjab General Sales Tax Act.
4. Legality of framing assessment at the rate of four percent based on specific notifications.

Issue-wise Detailed Analysis:

Issue 1: Validity of the Tribunal's direction to levy sales tax in place of purchase tax

The petitioner argued that no purchase tax was leviable on the bottles as they were packing material for country liquor, which was exempt under entry 37 of Schedule B of the Act. The appellate authority quashed the purchase tax but directed the assessment of sales tax on the sale price of bottles and packing material. The Tribunal modified this order, restricting the fresh determination to the amount of tax liability already determined. The court upheld the Tribunal's decision, stating that the transaction had two facets: whether purchase tax was leviable and whether sales tax was exigible at the time of sale. The Tribunal's direction to levy sales tax to the extent of the original tax liability was found to be appropriate.

Issue 2: Inclusion of export duty in the taxable turnover

The petitioner contended that the export duty on country liquor was the liability of the buyer and should not be included in the taxable turnover. The court referenced Rule 11(a) and (b) of the Punjab Liquor Permit and Pass Rules, Para 1B of the Punjab Excise Fiscal Orders, and Rule 120 of the Punjab Distillery Rules to conclude that the "manufacture and export duty" was the primary liability of the manufacturer. The court relied on the Constitution Bench judgment in McDowell & Company Limited v. Commercial Tax Officer, which held that excise duty is a burden on the manufacturer, even if paid by the buyer. Consequently, the court ruled that the export duty was part of the taxable turnover.

Issue 3: Validity of notice issued under section 11(2) of the Punjab General Sales Tax Act

The petitioner did not wish to press this question, and it was returned unanswered by the court.

Issue 4: Legality of framing assessment at the rate of four percent based on specific notifications

The petitioner argued that the notification dated April 6, 1973, was superseded by a subsequent notification dated December 20, 1973, and the retrospective imposition of tax at four percent by the notification dated July 3, 1975, was not permissible. The court noted that the corrigendum notification dated June 19, 1979, corrected the reference to the appropriate notification. The court held that the validity of the notification could not be challenged before the authorities under the statute, and the charging of tax at four percent was legally valid.

Conclusion:

The court answered the questions against the petitioner. It upheld the Tribunal's direction to levy sales tax in place of purchase tax, included the export duty in the taxable turnover, and validated the imposition of tax at four percent based on the corrected notification. The reference was disposed of accordingly.

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