1991 (3) TMI 341 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Tribunal was right in law in not allowing the applicant to raise the plea of set-off under rule 42 of the Gujarat Sales Tax Rules, 1970.

Detailed Analysis:

Issue 1: Tribunal's Refusal to Allow Plea of Set-Off under Rule 42

Facts of the Case:
The applicant, a limited company engaged in manufacturing and selling paper, is a registered dealer under the Gujarat Sales Tax Act, 1969, holding a recognition certificate under section 32. This certificate allowed the applicant to purchase raw and processing materials and consumable stores without prepaying tax, provided these were used in manufacturing taxable goods for sale. The applicant purchased such materials both with and without tax payment between May 6, 1970, and March 31, 1971. The manufactured paper was sold locally, inter-State, and on consignment outside Gujarat.

Assessment by Sales Tax Officer:
The Sales Tax Officer assessed the applicant on January 7, 1976, determining that 28% of the sales were unqualified (consignment sales outside Gujarat) and 72% were qualified (local and inter-State trade). Consequently, purchase tax was levied on the unqualified sales.

Appeal to Assistant Commissioner:
The applicant appealed, but the Assistant Commissioner confirmed the Sales Tax Officer's findings, citing the applicant's failure to correlate the purchased goods with the manufactured goods sold locally or inter-State.

Tribunal Proceedings:
The applicant appealed to the Tribunal, raising a new claim for set-off under rule 42 during oral submissions. However, the Tribunal did not permit this claim, as it was not raised before the lower authorities. The Tribunal confirmed the lower authorities' decisions regarding the breach of form No. 19.

Application under Section 69(1):
The applicant then applied under section 69(1) for the Tribunal to refer a question of law to the High Court. The applicant argued that the lower authorities' findings implied that 72% of the goods were tax-paid and used in qualified sales, thus entitling them to a set-off under rule 42. The Tribunal referred the question to the High Court.

High Court's Analysis:
The High Court noted that the applicant could have alternatively pleaded for set-off before the Sales Tax Officer during reassessment proceedings under section 44. The High Court found that the lower authorities had sufficient material to entertain the claim for set-off under rule 42, based on their findings that 72% of the goods were used in qualified sales. The High Court held that the Tribunal should have allowed the applicant to raise the set-off claim, as it did not require new evidence or fresh facts.

Conclusion:
The High Court concluded that the Tribunal was not justified in rejecting the set-off claim solely because it was not raised before the lower authorities. The Tribunal should have permitted the applicant to raise the plea of set-off under rule 42 or, at the very least, remanded the matter to the Sales Tax Officer for consideration based on the existing record.

Judgment:
The High Court answered the reference in the negative, holding that the Tribunal was not right in law in not allowing the applicant to raise the plea of set-off under rule 42, thus ruling in favor of the assessee and against the department. There was no order as to costs.

Reference Answered:
The reference was answered in the negative, favoring the assessee.