2013 (4) TMI 676 - HC - VAT and Sales Tax

Sales Tax section 44 of the M.P. General Sales Tax Act The respondent was assessed to tax in relation to the item drift eliminator under the provisions of M. P. General Sales Tax. The A.O. while making the assessment applied the rate of 12% applicable to residuary items and accordingly framed the assessment. Respondent submitted that the item in question is in fact iron and steel and hence liable to be taxed accordingly at the rate of 4% in place of 12% as wrongly assessed by the assessing officer under the residuary clause of the Schedule. Respondent filed various appeals to the authorities and succeeded in the same. Department aggrieved by the order file the appeal before the High Court. Since none appeared for the respondent/assessee despite repeated notices sent to them in last more than 15 years. Court do not wish to keep this reference pending anymore. Held that - Having heard the learned counsel for the State and on perusal of the record of the case (statement of case), court are inclined to answer the referred question in negative i.e. against the Revenue and in favour of the assessee.

Summary

Issues:
Interpretation of tax liability on the conversion of angle iron into a steel structure under the M.P. General Sales Tax Act.

Analysis:
1. The Sales Tax Reference involved a question of law related to the tax liability of an assessee in a case where angle iron was converted into a steel structure. The issue was whether this conversion amounted to a manufacturing process and thus attracted a tax rate of 12% or was to be taxed at 4% under the specific entry for "iron and steel" in the Schedule of the Act.

2. The respondent, a contractor supplying "drift eliminator" made of steel and angle iron, contested the tax assessment at 12% by the assessing officer. The Commissioner of Sales Tax (Appeals) ruled in favor of the respondent, taxing the item at 4% as "iron and steel." The Board of Revenue upheld this decision, emphasizing that the item did not undergo a manufacturing process and retained its original identity.

3. The State, dissatisfied with the Board's decision, argued that the item underwent a manufacturing process, losing its original identity and thus should be taxed at 12%. However, the respondent did not appear in court despite repeated notices, leading to a decision based on the evidence available.

4. The High Court, after considering the arguments and the factual findings, ruled against the Revenue and in favor of the assessee. It noted the absence of evidence demonstrating a systematic manufacturing process and upheld the Board's finding that no such process occurred, leading to the item retaining its original identity.

5. The Court distinguished a previous case where an extensive manufacturing process resulted in a new commodity, unlike the present case where no evidence supported such a transformation. The judgment was based on the factual findings and the absence of evidence to support the State's contentions.

6. The Court clarified that its decision was specific to the case at hand and not a general precedent, emphasizing that the "drift eliminator" was correctly taxed at 4% under the "iron and steel" entry, as the conversion from angle iron did not constitute a manufacturing process attracting the 12% tax rate.

7. The Court directed the original order to be maintained in the records, providing clarity on the tax liability issue for the connected Sales Tax References. No costs were awarded in the matter.