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TMI Blog2014 (11) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax on such sale would be 12 per cent and any subsequent sale which is the last sale would be leviable at four per cent. However, if the assessee's sale is to a registered dealer not for sale or to an unregistered dealer, then necessarily the assessee's liability would be 16 per cent. If the assessee has purchased it as capital goods and effecting sale of used freezers, whatever be the period of use, then tax would be payable only on the amount of such sale as indicated above. The contention that the assessee leases out the deep freezers and since the definition of "sale" includes a lease cannot hold good. The transfer of right to use resulting from a transaction of lease is taxable at the rate of eight per cent under sub-clause (iii) of sub-section (1) of section 5 of the Act. Assessment order also does not give us a complete picture. The action of the assessing officer in adding gross profit and the submission of the assessee that they are intermediary dealers within the State would make the transactions fall either under the first limb of the proviso or the second limb of the proviso; depending upon "to whom" the sale is effected. However, we also find from the reconcilia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er since, according to it, the product comes under the Fifth Schedule of the Act, exigible to multipoint levy. The assessee's purchase having not suffered tax, the fast track team found that the levy of tax is at 16 per cent. The Tribunal found the same to be in accordance with law. The assessee's counsel would urge that once the sale of the SSI unit, the first sale; was exempted, the levy occurs and there cannot be any shifting of the levy for the reason that there was exemption on the first point of sale. 3. We have heard the learned counsel for the assessee and the learned Government Pleader. The assessee contends for the position that the first point of sale having been exempted, the liability of the assessee would only be for the point of second sale and the second point of levy being the point of last sale is exigible only at four per cent as per the Fifth Schedule to the Act. It is also the submission of the assessee that the assessee purchased goods from exempted dealers and leased out the same to its franchisees; which lease rent is exigible at the rate of four per cent. This satisfies both points of levy on the goods as per the Fifth Schedule. As a still anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) of sub-section (1) of section 5 have to be examined closely. We, hence, extract sub-clause (v) hereunder along with the provisos: (v) in the case of goods specified in the Fifth Schedule at the rates and at the two points specified against such goods in the Schedule: Provided that where there are no two points of sale in the State for any goods coming under the Fifth Schedule and the first sale is to a person other than a registered dealer, the rate specified in column (8) of that Schedule shall apply to such sales: Provided further that the registered dealer effecting the last sale within the State to a person other than a registered dealer shall, pay tax at the rates shown in column (6) or in column (8), as the case may be, of the Fifth Schedule irrespective of his turnover: Provided also that where a registered dealer, after purchasing the goods on payment of the tax mentioned in column (4) of the Fifth Schedule,- (a) uses or disposes of such goods in any manner other than by way of sale within the State, or (b) despatches them to any place outside the State except as a direct result of sale in the course of inter-State trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale in the State by a dealer who is liable to pay tax under section 5; to a registered dealer for sale , and the rate is 12 per cent. The second point levy is at the point of last sale in the State by a dealer who is liable to tax under section 5 , and the rate is four per cent. The Fifth Schedule also provides that where there are no two points of sale in the State, the levy shall be at the rate of 16 per cent. The respective rates of 12 per cent, four per cent and 16 per cent are provided in the Fifth Schedule at column Nos. (4), (6) and (8), respectively and the various points of levy at column Nos. (3), (5) and (7). The second point of levy being the last sale, the Legislature visualized more than two points of sales and the multi-point levy as per clause (v), was on the first sale and the last sale. The first three provisos are not applicable to the transaction which is the subject-matter of our consideration in this revision. Admittedly, the first sale in the State was exempted, since the first seller was an SSI unit, entitled to exemption. The fourth proviso deals with instances wherein no tax is payable by a dealer effecting the first sale within the State. We are also of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted goods, if to a person other than a registered dealer or a registered dealer other than for sale, the same would be the last sale. Then the rate applicable should be that shown in column (8), being 16 per cent as applicable to sale within the State to a person other than a registered dealer or to a registered dealer other than for sale. The deemed first sale then would also be the last sale in the State. 9. The subsequent sales referred to in the first limb and second limb of the proviso are one and the same. The distinction is, in so far as a registered dealer having made a purchase, where no tax was payable, his subsequent sale if made to a registered dealer for sale would be deemed to be the first point of levy (column (3)), taxable at 12 per cent (column (4)) and then the second point of levy at four per cent (column (6)) would be on the last sale (column (5)). But, if the subsequent sale made by the purchasing dealer is to a person other than a registered dealer or a registered dealer not for sale (column (7)), then the rate applicable would be 16 per cent (column (8)), deeming the same to be the first sale, which also would be the last sale within the State. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16% 12. The reliance placed on Peekay Re-rolling Mills case [2007] 6 VST 541 (SC); [2007] 4 SCC 30 on the facts of this case as also the provisions arising for interpretation is misplaced. The controversy in Peekay Re-rolling Mills case [2007] 6 VST 541 (SC); [2007] 4 SCC 30 was the levy of tax under section 5A on the same goods that are taxable under section 5 and the essential question with which the court was concerned was whether this would amount to a tax at a second stage and, therefore, violate section 15 of the Central Sales Tax Act. To the facts of this case, more apposite would be the decision of the honourable Supreme Court in State of Tamil Nadu v. M.K. Kandaswami [1975] 36 STC 191 (SC); [1975] 4 SCC 745. Though M.K. Kandaswami's case [1975] 36 STC 191 (SC); [1975] 4 SCC 745 was referred to in Peekay Re-rolling Mills case [2007] 6 VST 541 (SC); [2007] 4 SCC 30; it was distinguished, since Peekay Re-rolling Mills case [2007] 6 VST 541 (SC); [2007] 4 SCC 30 essentially was on the prohibition under section 15 of the Central Sales Tax Act and was concerned with whether declared goods could be made liable to tax more than once. In M.K. Kandaswami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s around the sale of deep freezers and the levy of 16 per cent on turnover of ₹ 5,15,860. In the proposal, the assessing authority has noticed the alleged defect in paragraph 3 as extracted hereinbelow: You have shown fixed asset sales to be taxable at four per cent. This claim is not acceptable for the reasons that verification with purchase bills has shown that purchases for ₹ 4,53,305 are not tax suffered purchases and are purchases from exempted class of dealers. Hence this will be assessed at conceded GP 13.8 per cent at tax rate 16 per cent and balance turnover of ₹ 9,82,397 at four per cent as for last point sale. Hence the turnover of ₹ 14,98,257 freezer sales will be assessed at the following rates: 16% on Rs. 5,15,860 4% on Rs. 9,82,397 -------------- Rs. 14,98,257 -------------- 14. The assessee only disputes the levy at the rate of 16 per cent and is ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Then there would be no question of addition of gross profit. 17. Admittedly on first sale of deep freezers no tax was payable since the sale was by SSI units, eligible for exemption. The discussion above would show that if the assessee purchased it for sale, then the subsequent sale if to another registered dealer for sale, then the liability to tax on such sale would be 12 per cent and any subsequent sale which is the last sale would be leviable at four per cent. However, if the assessee's sale is to a registered dealer not for sale or to an unregistered dealer, then necessarily the assessee's liability would be 16 per cent. If the assessee has purchased it as capital goods and effecting sale of used freezers, whatever be the period of use, then tax would be payable only on the amount of such sale as indicated above. The contention that the assessee leases out the deep freezers and since the definition of sale includes a lease cannot hold good. The transfer of right to use resulting from a transaction of lease is taxable at the rate of eight per cent under sub-clause (iii) of sub-section (1) of section 5 of the Act. 18. Fundamentally, what is discernible from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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