2019 (7) TMI 1343 - HC - VAT and Sales Tax

Whether tax can be imposed on the sales of gunny bags, drums under the entry 'Old, discarded, unserviceable or obsolete machinery, store or vehicles including waste products, when neither gunny bags and drums were old, discarded, unserviceable or obsolete nor the same are machinery, store, vehicles or waste products? HELD THAT - Merely because the assessee has been found to be a manufacturer or importer on deemed basis, it may not give rise to taxability of any sale performed by him. For the purposes of imposing tax, identification of the point of tax had to be necessarily made in terms of a pre-existing taxing entry. Insofar as, no identification has been made either by the Assessing Authority or the first appeal authority or the Tribunal of that taxing entry, it is difficult to sustain the imposition of tax on the assessee. Since all authorities have failed to examine that essential issue, no order of remand may be made at this stage as that would only amount to give second opportunity to the revenue to set up a new case. Insofar as the Assessing Authority did not find the assessee liable to tax with respect to any particular taxing entry and since appeal authority also failed to identify any pre-existing taxing entry whereunder the assessee had been subjected to tax, the assessee was not liable to suffer tax on old gunny bags, empty drums, film and rolls - Revision allowed.

Summary

Issues involved:
Tax imposition on sales of old gunny bags, empty drums, film, and rolls under a specific entry in the UP Trade Tax Act.

Analysis:
The case involved a revision against the Trade Tax Tribunal's order imposing tax on the sale of old gunny bags, empty drums, film, and rolls. The revisionist, an assessee engaged in biscuit manufacturing, disputed the tax imposition on these items, arguing they were not old, discarded, unserviceable, or obsolete goods as required by the relevant taxing entry. The assessment order imposed tax without specifying the taxing entry, leading to a series of appeals culminating in the Tribunal's decision upholding the tax liability.

During the proceedings, it was revealed that the assessee had sold these items within the State of U.P. and had not purchased them in the same form but as packing material. The revenue contended that since the assessee sold these items as old gunny bags or empty drums, it should be treated as the manufacturer or importer, justifying the tax imposition. However, the revisionist argued that the authorities failed to apply the relevant provisions of the Act or identify the specific taxing entry under which the tax was imposed, rendering the tax liability illegal.

The High Court, after hearing both parties and examining the record, concluded that none of the authorities had identified a specific taxing entry to justify the tax imposition on the assessee. Merely deeming the assessee as a manufacturer or importer was insufficient to establish tax liability without reference to a relevant taxing entry. The court emphasized the necessity of pinpointing the point of tax under a pre-existing taxing entry for imposing tax. As the authorities failed to do so, the court held that the assessee was not liable to pay tax on the sales of old gunny bags, empty drums, film, and rolls.

In the final judgment, the High Court allowed the revision, ruling in favor of the assessee and setting aside the tax imposition on the mentioned items. The court's decision highlighted the importance of correctly identifying the relevant taxing entry before subjecting an assessee to tax liability, emphasizing the need for precision and adherence to legal provisions in tax assessments.