1989 (10) TMI 216 - HC - VAT and Sales Tax

Summary

Issues involved:
Interpretation of entry (10) of a notification under the Punjab General Sales Tax Act regarding tax liability on leather sheets; determination of whether the manufactured commodity qualifies as dressed hides and skins.

Detailed Analysis:

The judgment by the High Court of Punjab and Haryana concerns a series of General Sales Tax References and Civil Writ Petitions related to the tax assessments of a company engaged in the manufacture and sale of leather board. The Assessing Authority revised the tax rates applied by the company, leading to additional demands and penalties for various assessment years. The company's appeals and revision petitions were consistently dismissed by the authorities and the Sales Tax Tribunal, prompting the company to seek a reference to the High Court for two key questions of law.

The primary issue revolved around the interpretation of entry (10) of a notification issued under the Punjab General Sales Tax Act, which specified the tax rate for hides and skins in raw or dressed state. The company argued that the manufactured commodity, leather sheets, did not fall under the category of dressed hides and skins as per the notification. The court examined the detailed manufacturing process provided by the company, which involved crushing waste leather cuttings, refining the powder, and forming sheets through a series of processes involving latex and drying.

The court analyzed expert opinions and definitions related to hides, skins, and leather to determine the essential characteristics of dressed hides and skins. It was established that dressed hides and leather retain their fibrous structure and undergo tanning and curing processes to maintain specific properties. The court compared the manufacturing process of the company to established definitions and expert opinions to ascertain whether the resulting commodity qualified as dressed hides and skins.

The court rejected the company's argument that the manufactured commodity should be considered leather sheets and not dressed hides and skins based on common parlance understanding. Despite evidence provided by registered dealers and descriptions in bill books, the court held that the manufacturing process altered the fundamental characteristics of hides and skins, leading to a conclusion that the commodity produced did not qualify as dressed hides and skins as per the notification.

Consequently, the court answered the first question in the affirmative, ruling in favor of the tax department. As a result, the Civil Writ Petitions filed by the company were dismissed, and the reference was answered in the affirmative. The judgment highlighted the importance of the manufacturing process and the essential characteristics of dressed hides and skins in determining tax liability under the Punjab General Sales Tax Act.