2014 (7) TMI 740 - HC - VAT and Sales Tax

Disallowance of rebate under the Haryana General Sales Tax Act - Assessee contends that packaging material such as corrugated boxes, etc., and other material for packing of crockery is purchased after payment of sales tax and as this packing material is exigible to tax at the first stage of sale in terms of section 18 of the Act, it is entitled to rebate under rule 24(3) of the Haryana General Sales Tax Rules, 1975 - thus, the assessee is entitled to rebate - Whether the manufacturer is entitled to rebate of sales tax paid on purchase of material used for packing of crockery manufactured by it under provisions of the Act - Held that - crockery items manufactured by the petitioner need to be packed in durable packing to ensure that they withstand and survive the rigours of transportation. It is also not in dispute that polythene bags, tissue papers and corrugated boxes, etc., are purchased by the petitioner after paying sales tax for packing of its products. Section 15A deals with reduction or refund of tax in certain cases . The last two lines of this Explanation have been underlined to emphasize the significance thereof. There does not remain any doubt that packing material used for packing of manufactured goods has also been included in the term the goods used in manufacture on the same terms as raw material, processing material, fuel or lubricants which are actually used in the manufacturing of goods. - After going through the Explanation (appended to section 15A of the Act) which became available for benefit of the dealer retrospectively, there does not remain any dispute that adjustment, on the purchase made by the petitioner against payment of tax at the first stage, is very much available retrospectively from May 27, 1971. The Tribunal did not have the benefit of the amendment. The State has not contested the amendment of section 15A of the Act - Decided in favour of assessee.

Summary

Issues:
- Writ of certiorari for quashing impugned order and notices regarding disallowance of rebate under the Haryana General Sales Tax Act
- Entitlement to rebate of sales tax paid on purchase of material used for packing of crockery manufactured

Analysis:
The petitioner sought a writ of certiorari to challenge an order and notices related to the disallowance of rebate under the Haryana General Sales Tax Act for assessment years 1985-86 and 1987-88. The petitioner, a manufacturer of melamine crockery, argued that packing material costs were included in their rates and hence, they were entitled to rebate on sales tax paid for purchasing packing materials. The Revenue contended that since packing material was not used in the manufacture of crockery, the petitioner was not eligible for the rebate.

The main issue was whether the manufacturer was entitled to a rebate of sales tax paid on the purchase of material used for packing crockery. The Tribunal initially rejected the petitioner's claim for rebate for the assessment year 1985-86 but quashed the interest imposed for the year 1987-88 while maintaining the levy of tax. The Tribunal's decision was based on the interpretation of rule 24(j) of the Haryana General Sales Tax Rules, which allowed for a deduction of the purchase value of goods subject to tax at the first stage if used in the manufacture of goods.

During the proceedings, a significant amendment was highlighted, adding an Explanation to section 15A of the Principal Act with retrospective effect from May 27, 1971. This Explanation clarified that goods used in manufacture included containers and packing materials used for packing manufactured goods. The court found that the Tribunal's restrictive interpretation was nullified by this amendment, allowing for the adjustment of sales tax paid on packing material purchases against tax liability retrospectively.

Consequently, the court allowed the writ petitions, quashed the impugned orders and recovery proceedings, and directed the Assessing Officer to calculate the adjustment of sales tax paid on packing material purchases in accordance with the law. The judgment emphasized the retrospective application of the amended provision, ensuring the petitioner's entitlement to the rebate on packing material purchases for packing manufactured goods.