2022 (7) TMI 188 - HC - VAT and Sales Tax

Eligibility for concessional rate of tax - Entry 81 of List C of the Schedule of rates under Section 5(1) of the Orissa Sales Tax Act - sale of size wood by the petitioner against declaration Form IV to a registered dealer - Whether subsequent change in use of goods purchased against declaration Form IV by the registered purchasing dealer will disentitle the petitioner s claim of concessional rate of tax under the aforesaid Entry 81 under the OST Act? - HELD THAT - In the declaration the purchasing dealer disclosed that the intention behind purchasing the size wood from the Petitioner was for manufacturing/ processing of goods for sale in mining/generation or distribution of electricity or any form of power. There was no mention of the goods having been purchased for being used as packing materials. As pointed out, even assuming the purchasing dealer was going to use the goods so purchased for any other purpose i.e. a purpose other than that disclosed in the above declaration in Form IV, the Revenue s interest would not be prejudiced since in any event the purchasing dealer would be liable to pay the differential rate of tax as per the 2nd proviso to Section 5 (1) of the OST Act. In TILAKRAJ MEDIRATTA VERSUS STATE OF ORISSA 1992 (2) TMI 338 - ORISSA HIGH COURT this Court explained that once the buying/purchasing dealer furnishes the declaration in Form IV that he intends to use the size goods for manufacture/processing of goods for sale, the legal obligation of the selling dealer ceases. Any contravention by the purchasing dealer of the above declaration would result in the purchasing dealer being made liable and not the selling dealer. Applying the ratio of the above decision to the case on hand, it is seen that the declaration in Form IV does not disclose the intention of the purchasing dealer to use the size goods purchased as packing materials . Consequently, the selling dealer cannot be saddled with any liability of tax. If indeed, the Department finds that the purchasing dealer has used the purchased goods for the purpose other than that disclosed in the declaration form, it would be open to the Department to proceed against the purchasing dealer. It is, therefore, not justified on the part of the Department to pass on that liability to the selling dealer. The sale of size goods by the Petitioner against the declaration in Form IV to the registered dealer is eligible for concessional rate of tax @ 4% under Entry 81 of Schedule C of rates under Section 5 (1) of the OST Act - a subsequent change in the use of goods purchased against declaration in Form IV by the purchasing dealer will not disentitle the selling dealer s claim for concessional rate of tax. The questions are answered in favour of the Assessee and against the Department - revision petition allowed.

Summary

Issues:
1. Interpretation of eligibility for concessional rate of tax under Entry 81 of Schedule 'C' of rates under Section 5(1) of the Orissa Sales Tax Act.
2. Impact of subsequent change in the use of goods purchased against declaration Form IV on the claim for concessional rate of tax.

Analysis:

Issue 1:
The Assessee, a registered dealer under the Orissa Sales Tax Act, sold size wood to another registered dealer against declaration Form IV, claiming a concessional rate of tax at 4% under Entry 81 of the Schedule of rates. However, the Sales Tax Officer disallowed the declaration as it contained information about goods excluded from the concessional rate after 1st April, 2001. The Assistant Commissioner of Sales Tax and the Tribunal upheld this decision. The High Court analyzed the declaration form and relevant legal provisions. It was held that the selling dealer's obligation ceases once the purchasing dealer furnishes Form IV, indicating the intended use for manufacturing/processing goods for sale. Any deviation by the purchasing dealer does not impose tax liability on the selling dealer. Citing precedent, the Court ruled in favor of the Assessee, allowing the concessional rate of tax.

Issue 2:
The second issue revolved around the impact of a subsequent change in the use of purchased goods on the claim for concessional tax rate. The Court emphasized that as long as the purchasing dealer's declaration in Form IV indicated a specific intended use, any deviation would not shift tax liability to the selling dealer. The Court clarified that if the Department found misuse of goods by the purchasing dealer, they could pursue action against the purchaser without imposing liability on the selling dealer. By applying legal principles and precedent, the Court held that a change in the use of goods purchased against Form IV does not disentitle the selling dealer from the concessional tax rate claim. Consequently, the impugned orders were set aside, and the revision petition was allowed in favor of the Assessee.

In conclusion, the High Court's judgment clarified the legal obligations of selling and purchasing dealers regarding declaration forms and the eligibility for concessional tax rates under the Orissa Sales Tax Act. The decision provided a nuanced interpretation of the law, emphasizing the importance of adhering to declared intentions and ensuring tax liability falls on the appropriate party in cases of deviation from the declared purpose of goods purchased.