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1995 (2) TMI 421
Issues Involved:
1. Eligibility for grant of Eligibility Certificate (E.C.) under rule 3(66a) of the Bengal Sales Tax Rules, 1941.
2. Interpretation of clause (v)(b) of the Explanation to rule 3(66a)(i).
3. Whether the provision in clause (v)(b) is mandatory or directory.
4. Constitutionality of clause (v)(b) in light of Articles 14 and 19(1)(g) of the Constitution.
5. Eligibility for E.C. from a subsequent date after becoming the owner of the plant and machinery.
Detailed Analysis:
1. Eligibility for Grant of Eligibility Certificate (E.C.) Under Rule 3(66a) of the Bengal Sales Tax Rules, 1941:
The applicant, a small-scale industrial unit, sought an E.C. for the period from October 14, 1991, to October 13, 1992. The application was rejected by the Assistant Commissioner and the Additional Commissioner on the grounds that the applicant had obtained plant and machinery on lease from Canbank Financial Services Ltd., which was not one of the specified sources under rule 3(66a). The rule stipulated that the plant and machinery must be obtained from either the West Bengal Small Industries Corporation or the National Small Industries Corporation.
2. Interpretation of Clause (v)(b) of the Explanation to Rule 3(66a)(i):
Clause (v)(b) of the Explanation to rule 3(66a)(i) specifies that a "newly set up small-scale industry" must not be established substantially with plant and machinery obtained on hire, lease, rent, or loan from any source other than the West Bengal Small Industries Corporation or the National Small Industries Corporation. The applicant argued that this clause should be interpreted to include all financial institutions, but the Tribunal found the language of the clause to be clear and unambiguous, limiting the sources strictly to the specified corporations.
3. Whether the Provision in Clause (v)(b) is Mandatory or Directory:
The Tribunal examined whether the stipulation in clause (v)(b) was mandatory or directory. The applicant contended that the clause should be treated as directory, citing the Supreme Court's decision in Mangalore Chemicals & Fertilisers Limited v. Deputy Commissioner of Commercial Taxes. However, the Tribunal concluded that the provision was mandatory, as it was a substantive condition for qualifying as a "newly set up small-scale industry" and thus must be strictly construed.
4. Constitutionality of Clause (v)(b) in Light of Articles 14 and 19(1)(g) of the Constitution:
The applicant argued that clause (v)(b) was arbitrary and violated Articles 14 and 19(1)(g) of the Constitution by excluding other financial institutions. The Tribunal held that the specific inclusion of the West Bengal Small Industries Corporation and the National Small Industries Corporation was reasonable and had a nexus with the objective of promoting small-scale industries. Therefore, the clause was not arbitrary or unconstitutional.
5. Eligibility for E.C. from a Subsequent Date After Becoming the Owner of the Plant and Machinery:
The applicant became the owner of the plant and machinery on July 19, 1993, and argued that E.C. should be granted from that date. The majority opinion of the Tribunal held that an industry that does not qualify as a "newly set up small-scale industry" at the initial stage cannot qualify from a subsequent date. This was based on the principle that the initial disqualification could not be cured by subsequent compliance.
However, the Chairman dissented, citing previous Tribunal decisions and arguing that the applicant should be eligible for E.C. from the date it became the owner of the plant and machinery. The Chairman emphasized that the objective of the exemption was to assist newly set up small-scale industries and that denying the E.C. for subsequent periods would result in injustice.
Conclusion:
The application for the grant of E.C. was dismissed by the majority opinion of the Tribunal, with no order for costs. The operation of the judgment was stayed for eight weeks upon the applicant's request.
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1995 (2) TMI 420
Issues Involved:
1. Legality of the demand notice dated December 8, 1983.
2. Compliance with the principles of natural justice.
3. Validity of the documents (declarations in form IV and money receipts in form V) submitted by the applicant.
4. Proper opportunity for the applicant to inspect documents and cross-examine officials.
5. Whether the assessment was made according to law.
Detailed Analysis:
1. Legality of the Demand Notice Dated December 8, 1983
The applicant challenged the demand notice dated December 8, 1983, issued under section 14(3) of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1972. The notice required the applicant to pay Rs. 1,35,349.50 as tax and an equal amount as a penalty. The Tribunal noted that the applicant had paid the entry tax for the goods during the period from September 1982 to December 1982, and had been granted receipts in form V for such payment. However, the respondent contended that the applicant imported 41 consignments of television sets, out of which 11 consignments did not have the required declarations in form IV, and the money receipts in form V were tampered and interpolated.
2. Compliance with the Principles of Natural Justice
The applicant argued that the assessment and imposition of penalty violated the principles of natural justice as the applicant was not afforded a reasonable opportunity of hearing. The Tribunal found that the Entry Tax Officer did not produce the requested documents or the officials who signed the declarations and money receipts for cross-examination. Furthermore, the Tribunal noted that the applicant's representative was not given access to the office copies of the documents, which was essential for a fair hearing.
3. Validity of the Documents Submitted by the Applicant
The respondent claimed that the declarations in form IV and money receipts in form V produced by the applicant were manufactured and tampered with. The Tribunal observed that the Entry Tax Officer condemned the declarations in form IV as manufactured documents and found the money receipts in form V to be tampered and interpolated. However, the Tribunal noted that the Entry Tax Officer relied on the same documents to gather details for the assessment, which indicated an irreconcilable approach.
4. Proper Opportunity for the Applicant to Inspect Documents and Cross-Examine Officials
The Tribunal emphasized that the applicant had requested the presence of the officials who signed the declarations and money receipts for cross-examination, which was not complied with by the respondent. The Tribunal found that the Entry Tax Officer did not meet the applicant's reasonable requisition for documents and officials during the hearing, thereby violating the principles of natural justice.
5. Whether the Assessment Was Made According to Law
The Tribunal noted that the assessment should be made after inspection and verification of the goods. Since physical verification was not undertaken, the assessment should have been made to the best of the ability of the prescribed authority after examining the books of accounts and other records. The Tribunal found that the Entry Tax Officer discarded the documents produced by the applicant without providing any alternative source of information for the assessment. This lack of transparency and failure to disclose the basis of the assessment to the applicant rendered the assessment unlawful.
Conclusion:
The Tribunal set aside the impugned assessment and imposition of tax, concluding that the assessment was not made according to law and violated the principles of natural justice. The application was allowed, and the demand notice dated December 8, 1983, was quashed. The Tribunal also noted the lack of proper investigation by the respondent into the discrepancies found in the documents and emphasized the need for fair play in the assessment process.
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1995 (2) TMI 419
Issues Involved:
1. Whether the transaction of building and supplying 'one twin screw steel motor launch' was a works contract or a sale of launch.
2. Whether there was no sale of the vessel so far as then constructed and materials in preparation, despite the transfer of property in vessel and materials to the purchaser against payments made in instalments.
Issue-wise Detailed Analysis:
Issue 1: Whether the transaction of building and supplying 'one twin screw steel motor launch' was a works contract or a sale of launch.
The High Court of Bombay was tasked with determining whether the supply of a twin screw steel motor launch by the assessee to the Director-General of Supplies and Disposals, New Delhi, constituted a works contract or a sale of goods. The Sales Tax Officer had classified the transaction as a sale, subject to sales tax under the Bombay Sales Tax Act, 1959. The assessee contended that it was an indivisible works contract. The Tribunal had accepted the assessee's contention, leading to this reference.
The court examined the terms and conditions of the contract, including the system of payment and the transfer of ownership of materials. Clause 19 specified stage payments at various construction milestones, and Clause 22 stated that upon payment of the first instalment, the constructed vessel and all materials would become the property of the purchaser.
The court referred to several precedents, including decisions by the Supreme Court and the House of Lords, to distinguish between a contract of sale and a works contract. It emphasized that the main object of the contract was the transfer of property in the motor launch to the purchaser for a price of Rs. 12,10,000, with delivery afloat at Bombay harbour. The court concluded that the contract had all the essential attributes of a sale, as the property in the motor launch passed to the purchaser upon delivery.
The court rejected the argument that the mode of payment and the vesting of ownership of materials indicated a works contract. It held that these provisions were intended to form a security and did not affect the nature of the contract. The court cited the decision in Reid v. Macbeth & Grey [1904] AC 223, where a similar clause was deemed to form a security rather than a sale of materials.
Issue 2: Whether there was no sale of the vessel so far as then constructed and materials in preparation, despite the transfer of property in vessel and materials to the purchaser against payments made in instalments.
Given the court's conclusion on Issue 1, Issue 2 became moot. The court held that the transaction was a sale of the motor launch, and therefore, the question of whether there was no sale of the vessel and materials in preparation did not arise.
Conclusion:
The court answered Question 1 in the negative, ruling in favor of the Revenue and against the assessee. Consequently, Question 2 did not need to be answered. The reference was disposed of without any order as to costs.
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1995 (2) TMI 418
Issues Involved:
1. Propriety of payment of turnover tax under section 6B of the Bengal Finance (Sales Tax) Act, 1941.
2. Discrimination between auction sales and non-auction sales for payment of turnover tax.
3. Constitutional validity of section 6B and its amendments in 1987 and 1992.
4. Alleged confiscatory nature of the turnover tax.
5. Legislative competence of the State Legislature to enact section 6B.
6. Violation of Articles 14, 19(1)(g), 301, 304, and 300A of the Constitution.
Issue-wise Detailed Analysis:
1. Propriety of Payment of Turnover Tax:
The applicants challenged the imposition of turnover tax on sales of tea by private treaty by a broker member of the Calcutta Tea Traders Association (CTTA) under section 6B of the Bengal Finance (Sales Tax) Act, 1941. They argued that there was no justification for not excluding such sales from the payment of turnover tax, as is done for sales at auctions under the auspices of CTTA and Siliguri Tea Auction Committee (STAC). The Tribunal found that the imposition of turnover tax on sales by private treaty was justified and legal, as it stood on a different footing from auction sales.
2. Discrimination Between Auction Sales and Non-Auction Sales:
The applicants contended that the differential treatment between auction sales and non-auction sales for the payment of turnover tax was arbitrary and without any basis. The Tribunal held that the differential treatment was justified as it was dictated by the policy of the Government to encourage sales of tea through auctions to foster the interest of the trade. Sales of tea under private treaty were considered different from auction sales, and thus, the differential treatment was legal.
3. Constitutional Validity of Section 6B and Its Amendments:
The applicants argued that section 6B and its amendments in 1987 and 1992 were ultra vires the Constitution, illegal, and void. They claimed that the amendments were confiscatory and violated Articles 14, 19(1)(g), and 301 read with Article 304 of the Constitution. The Tribunal referred to previous decisions, including Century Spinning Mfg. Co. v. State of West Bengal and Trot Shoe Company Private Limited v. State of West Bengal, which upheld the validity and constitutionality of section 6B. The Tribunal agreed with these decisions and found that section 6B and its amendments were not confiscatory or violative of the Constitution.
4. Alleged Confiscatory Nature of the Turnover Tax:
The applicants claimed that the turnover tax was confiscatory as it required them to pay the tax from their capital, given that they could not increase their commission rate due to CTTA rules. The Tribunal referred to previous decisions, including Century Spinning Mfg. Co. and Trot Shoe Company, which held that the turnover tax was not confiscatory. The Tribunal found no factual foundation to show that the payment of turnover tax on sales by private treaty was expropriatory and concluded that the tax was not confiscatory.
5. Legislative Competence of the State Legislature:
The applicants contended that the State Legislature had no legislative competence to enact section 6B. The Tribunal referred to the decision in Century Spinning Mfg. Co., which held that the State Legislature was competent under entry 54 of List II in the Seventh Schedule of the Constitution to enact section 6B. The Tribunal agreed with this decision and found that the State Legislature had the competence to enact section 6B.
6. Violation of Articles 14, 19(1)(g), 301, 304, and 300A of the Constitution:
The applicants argued that section 6B and its amendments violated Articles 14, 19(1)(g), 301, 304, and 300A of the Constitution. The Tribunal referred to previous decisions, including Century Spinning Mfg. Co. and Afsar Rahaman Laskar v. State of West Bengal, which held that the imposition of turnover tax was not violative of these constitutional provisions. The Tribunal found that the classification between auction sales and private treaty sales bore a nexus to the object of the statute and was not arbitrary. The Tribunal also found that the imposition of turnover tax did not directly impede the free-flow of trade and was not violative of Articles 301 and 304. The Tribunal concluded that there was no violation of Articles 14, 19, 300A, 301, and 304 of the Constitution.
Conclusion:
The application was dismissed without any order as to costs, and the interim order passed by the High Court, Calcutta, was vacated. The Tribunal upheld the validity and constitutionality of section 6B and its amendments, finding that the imposition of turnover tax on sales of tea by private treaty was justified and legal.
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1995 (2) TMI 417
Issues Involved:
1. Interpretation of section 55(6)(b) and section 36(2)(c) of the Bombay Sales Tax Act, 1959.
2. Presumption of deemed concealment and its rebuttal.
3. Applicability of Explanation (2) to section 36(2)(c) when returns are filed late.
Summary:
Issue 1: Interpretation of section 55(6)(b) and section 36(2)(c)
The Tribunal held that the first appellate authority can invoke the rule of evidence contained in Explanation (2) to section 36(2)(c) and confirm the penalty levied by the Sales Tax Officer. The appellate authority has wide powers under section 55, including the ability to sustain penalties by applying any relevant Explanation, provided the assessee is given an opportunity to rebut the presumption.
Issue 2: Presumption of deemed concealment and its rebuttal
The Tribunal erred in holding that the presumption of deemed concealment was not rebutted even after acceptance of the closed and adjusted books of accounts by the Sales Tax Officer. The assessee had submitted that the tax paid was not less than 80% of the tax assessed when considering the set-off allowed. The Tribunal's interpretation that the presumption of concealment could only be rebutted by showing no turnover was liable to tax was incorrect.
Issue 3: Applicability of Explanation (2) to section 36(2)(c)
The Tribunal was not justified in holding that Explanation (2) to section 36(2)(c) is attracted even when the assessment was made on the basis of returns filed late. Explanation (2) applies only to cases where the dealer fails to submit returns within the prescribed time resulting in a best judgment assessment u/s 33(5). In this case, the returns were filed late but were accepted, and the assessment was made u/s 33(3). Therefore, Explanation (2) was not applicable, and the penalty could not be sustained under this provision.
Conclusion:
The Tribunal was not justified in confirming the penalty u/s 36(2)(c) with the aid of Explanation (2). The reframed question, "Whether under the facts and circumstances of the case, the Tribunal was justified in confirming the penalty levied on the assessee u/s 36(2)(c) of the Bombay Sales Tax Act, 1959," was answered in the negative, in favor of the assessee and against the Revenue.
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1995 (2) TMI 416
Issues Involved:
1. Whether the Tribunal erred in law in holding that the applicant could not challenge the levy of tax by way of additional grounds raised after the period of limitation of 60 days.
2. If the first question is answered in the affirmative, whether it was necessary for the Tribunal to consider if the applicant had shown sufficient cause for not preferring the additional grounds within the prescribed period of limitation.
Issue-Wise Detailed Analysis:
1. Tribunal's Error in Law Regarding Additional Grounds:
The primary issue revolved around whether the Tribunal erred in law by holding that the applicant could not challenge the levy of tax through additional grounds raised after the 60-day limitation period prescribed for filing an appeal under section 55(4) of the Bombay Sales Tax Act, 1959. The assessee, a registered dealer under the Act, initially appealed against the imposition of penalty and interest but later sought to challenge the tax levy by filing additional grounds. The Assistant Commissioner treated this application as a separate appeal and dismissed it on the grounds of limitation.
The Court emphasized that under section 55(1)(a) of the Act, there can be only one appeal against an order passed by the Sales Tax Officer. The Act does not contemplate multiple appeals against the same order. Therefore, if an assessee wishes to raise additional grounds, they must do so within the original appeal. The Court held that the Assistant Commissioner and the Tribunal committed an error of law by treating the application for additional grounds as a separate appeal and dismissing it based on limitation. The Court clarified that such an application should be treated as a miscellaneous application within the pending appeal and decided on its merits.
2. Necessity to Consider Sufficient Cause for Delay:
Given that the first question was answered affirmatively, the Court found that the second issue regarding the necessity to consider whether the applicant had shown sufficient cause for the delay in raising additional grounds did not survive. The Court held that the assessee is entitled to move the appellate authority for permission to raise additional grounds of appeal, and the appellate authority must consider the same on merits.
Conclusion:
The Court concluded that the Tribunal was not justified in holding that the assessee could not challenge the determination of tax by way of additional grounds in an appeal filed against an order of assessment. The assessee is entitled to seek permission to raise additional grounds, and the appellate authority must consider such applications on their merits. Consequently, the Court answered the first question in the affirmative and in favor of the assessee, and declined to answer the second question as it did not survive. The reference was answered accordingly, with no order as to costs.
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1995 (2) TMI 415
Issues Involved:
1. Whether computers qualify as "scientific and laboratory equipment" under the notification dated February 21, 1972, issued under section 8(5) of the Central Sales Tax Act, 1956.
2. Whether the Tribunal was justified in not considering the expert opinion tendered before it after having taken the same on record without any objection from the State.
Issue-Wise Detailed Analysis:
Issue 1: Classification of Computers as Scientific and Laboratory Equipment
The primary question addressed was whether computers sold by the assessee could be classified as "scientific and laboratory equipment" under the notification dated February 21, 1972, issued under section 8(5) of the Central Sales Tax Act, 1956. The Tribunal had previously ruled that computers did not fall under this category, referencing entries 33 and 97(a) of Part II of Schedule C to the Bombay Sales Tax Act, 1959.
The High Court examined the language of the notification and found it clear and unambiguous, stating that the benefit of reduced tax rates was applicable to all "scientific equipment and instruments" without restriction to those listed under entry 33. The Court emphasized that the notification's language did not warrant the Tribunal's restrictive interpretation.
The Court further elaborated on the definition of "scientific equipment and instruments," citing Corpus Juris Secundum, which describes such instruments as those designed for use and principally employed in any branch of science for observation, experiment, instruction, or professional practice. The Court concluded that computers fit this description, being extensively used in educational institutions, hospitals, and laboratories for scientific purposes.
Thus, the Court held that the Tribunal was not justified in excluding computers from the category of "scientific and laboratory equipment" under the notification, and accordingly answered the first question in the negative, in favor of the assessee.
Issue 2: Consideration of Expert Opinion
The second issue concerned whether the Tribunal was justified in not considering the expert opinion that had been tendered and accepted without objection from the State. Given the resolution of the first issue in favor of the assessee, the Court deemed this question academic and chose not to address it substantively.
Additional Observations:
The Court noted that the Tribunal had mentioned potential deficiencies in the declarations issued by purchasers under the notification. The Court suggested that if these deficiencies were material or substantial, the Tribunal could allow the assessee an opportunity to rectify them while implementing the Court's opinion.
Conclusion:
The High Court answered the reference in favor of the assessee, concluding that computers qualify as "scientific and laboratory equipment" under the relevant notification. The second issue was rendered academic and thus not addressed. No order as to costs was made.
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1995 (2) TMI 414
Issues Involved:
1. Whether the sale made by the assessee to M/s. Aluminium Industries Ltd. was an intra-State sale or a sale in the course of export under Section 5(1) of the Central Sales Tax Act, 1956.
2. Interpretation of the terms of the contract and the conduct of the parties to determine the nature of the sale.
3. Application of the legal principles established by the Supreme Court in similar cases.
Issue-wise Detailed Analysis:
1. Nature of the Sale:
The primary issue was whether the sale by the assessee to M/s. Aluminium Industries Ltd. was an intra-State sale in Maharashtra or a sale in the course of export under Section 5(1) of the Central Sales Tax Act, 1956. The Tribunal and the High Court concluded that the sale was an intra-State sale taxable under the Bombay Sales Tax Act. The assessee argued that the sale was on an f.o.b. basis and hence a sale in the course of export. However, the court found that the property in the goods passed to the buyer on June 14, 1980, before the goods were put on board on June 19, 1980, making it an intra-State sale.
2. Interpretation of Contract Terms and Conduct:
The court examined the terms of the contract and the conduct of the parties. The contract specified that payment was to be made through a letter of credit within 45 days after presenting specified documents, including a clean on board bill of lading. However, full payment was made before the goods were put on board. The court noted that the terms of the contract and the conduct of the parties indicated that the sale was complete in Maharashtra. The court also noted that the contracts between Kamani Engineering and Aluminium Industries, and between Aluminium Industries and the assessee, were independent contracts and did not constitute a sale in the course of export.
3. Application of Supreme Court Decisions:
The court referred to several Supreme Court decisions, including Mod. Serajuddin v. State of Orissa and State of Punjab v. New Rajasthan Mineral Syndicate, which established that for a sale to be considered in the course of export, there must be a direct cause or occasion for the export. The court found that the sale by the assessee to Aluminium Industries did not occasion the export; rather, it was the contract between Kamani Engineering and the foreign buyer that occasioned the export. The court concluded that the sale by the assessee was an intra-State sale and not a sale in the course of export.
Conclusion:
The High Court held that the sale made by the assessee to M/s. Aluminium Industries Ltd. was an intra-State sale in Maharashtra and not a sale in the course of export under Section 5(1) of the Central Sales Tax Act, 1956. The Tribunal's conclusion was justified based on the facts and circumstances of the case and the evidence on record. The court answered the reference in the affirmative, i.e., against the assessee and in favor of the revenue.
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1995 (2) TMI 413
Issues:
1. Jurisdiction of the West Bengal Taxation Tribunal over the matter.
2. Compliance with principles of natural justice in passing the impugned orders.
3. Mixing up of transactions under different tax acts in the impugned orders.
4. Clubbing of transactions for different periods in the impugned orders.
Jurisdiction of the West Bengal Taxation Tribunal:
The judgment pertains to applications under section 8 of the West Bengal Taxation Tribunal Act, 1987, which are substitutes for ones under article 226/227 of the Constitution of India. The Tribunal asserted its exclusive jurisdiction over the subject-matter, barring the High Court's jurisdiction. The Tribunal heard identical questions in RN-50 of 1995 and RN-51 of 1995, emphasizing that the applicants had previously approached the Tribunal multiple times on the same proceedings. The main grievance was the alleged non-compliance with the directions given in previous orders, leading to the matter being brought before the Tribunal repeatedly.
Compliance with Principles of Natural Justice:
The Tribunal found that principles of natural justice were not duly followed while passing the impugned orders dated January 4, 1995. It was highlighted that the applicants were not provided with essential information, such as a report from the Deputy Commissioner of Sales Tax, Bombay, before the orders were passed. The failure to disclose crucial information and the mixing up of transactions led to a lack of proper compliance with natural justice principles. The Tribunal emphasized the importance of adhering to these principles and ensuring that all parties have access to relevant information for a fair hearing.
Mixing up of Transactions under Different Tax Acts:
The issue of mixing up transactions under the Bengal Finance (Sales Tax) Act, 1941, and the Central Sales Tax Act, 1956, was raised. The State Representative argued that such a mix-up was unavoidable due to legal provisions. However, the applicants contended that the mix-up was unnecessary at that stage and should be addressed at a later point if required. The Tribunal concluded that for the purpose of deciding whether deemed assessments should be reopened, transactions under different tax acts need not be mixed up, and each set of transactions should be considered separately.
Clubbing of Transactions for Different Periods:
The Tribunal noted the clubbing together of transactions for the periods of four quarters ending March 31, 1991, and March 31, 1992, in the impugned orders. It was deemed unnecessary and something that should have been avoided. Consequently, the impugned orders were set aside, and consequential notices for fresh assessment were also revoked. The Tribunal directed the Deputy Commissioner to ensure compliance with principles of natural justice, provide necessary materials to the applicants, and conduct proceedings for the relevant periods in accordance with the law.
In conclusion, the applications in RN-50 of 1995 and RN-51 of 1995 were allowed, and the Tribunal disposed of the matter without any order for costs, emphasizing the importance of adherence to legal principles and fair procedures in tax-related proceedings.
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1995 (2) TMI 412
The High Court of Allahabad allowed the writ petition seeking to quash a circular and notices imposing sales tax on brooms made of soonk. The State Government had issued a notification exempting such brooms from sales tax, making the imposition of tax contrary to the notification. The circular and notices were quashed. (Case citation: 1995 (2) TMI 412 - ALLAHABAD HIGH COURT)
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1995 (2) TMI 411
Issues:
1. Whether sales amounting to Rs. 72,81,754 through mediators were sales in the course of export out of India under section 5(1) of the Central Sales Tax Act, 1956, exempt from sales tax?
2. Whether for an export sale under section 5(1) of the Central Sales Tax Act, there should be only two parties, an Indian seller and a foreign buyer?
Analysis:
1. The case involved a public sector undertaking selling steel worth Rs. 72,81,754 through Indian Export houses, claiming exemption under section 5(1) of the Central Sales Tax Act, 1956. The assessing officer, first appellate authority, and the Board of Revenue (Appellate Tribunal) all ruled against the assessee. The Tribunal referred to a Supreme Court decision and concluded that the sale was not in the course of export, denying the exemption.
2. The Tribunal considered the agreement between the assessee and the Indian buyer, noting that the foreign buyer was not named in the agreement. The goods were to be exported by the Indian buyer after payment to the assessee. The Tribunal relied on a Supreme Court decision and held that the sale did not qualify for exemption under section 5(1) of the Act.
3. Section 5(1) of the Central Sales Tax Act, as applicable, states that a sale shall be deemed in the course of export if it occasions such export or is effected by transfer of documents after crossing customs frontiers. The Court referred to previous decisions and emphasized the need to consider both conditions of the second limb of section 5(1) for assessing export sales.
4. The Court highlighted previous cases involving the same assessee, where it was held that the sales did not qualify for exemption under the first limb of section 5(1) but required further examination under the second limb. It was emphasized that the authorities must consider both conditions of the second limb for determining exemption eligibility.
5. The Court concluded that the Board of Revenue erred in not considering whether the sales were effected by transfer of documents after crossing customs frontiers. The matter was remanded for a fresh decision, emphasizing the importance of analyzing both conditions of the second limb of section 5(1) for assessing exemption eligibility.
6. In the final decision, the Court held that the sales tax exemption depended on whether the sales were effected by transfer of documents after crossing customs frontiers. The Board of Revenue was directed to re-hear the appeal and make a fresh decision considering both conditions of the second limb of section 5(1).
7. The Court ordered the transmission of the decision to the Board of Revenue for further action and compliance.
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1995 (2) TMI 410
Issues Involved:
1. Taxability of the sale turnover of packing materials (containers) under the Tamil Nadu General Sales Tax Rules.
2. Applicability of rule 6(cc)(ii) of the Tamil Nadu General Sales Tax Rules.
3. Relevance of previous judicial decisions on similar matters.
Detailed Analysis:
1. Taxability of the Sale Turnover of Packing Materials (Containers):
The primary issue is whether the sale turnover of packing materials, specifically containers used for petroleum products, is taxable. The assessee, M/s. Universal Agencies, contended that the sale turnover of the containers should not be taxed as the petroleum products are second sales and not taxable under the Tamil Nadu General Sales Tax Rules. The assessing officer, however, included the value of the packing materials in the taxable turnover and assessed it at 4%, a decision upheld by the Appellate Assistant Commissioner and the Tribunal.
2. Applicability of Rule 6(cc)(ii) of the Tamil Nadu General Sales Tax Rules:
The assessee argued that under rule 6(cc)(ii), the sale turnover of the containers is exempt from tax, regardless of whether the sale price of the container is stated separately in the bills. The rule specifies that in determining the taxable turnover, amounts falling under the head charges for packing, whether or not specified and charged separately, are to be deducted if the goods are not liable to tax at the hands of the assessee. The court agreed with the assessee, stating that the petroleum products being second sales are not taxable, and therefore, the sale turnover of the containers should also be exempt under rule 6(cc)(ii).
3. Relevance of Previous Judicial Decisions:
The court examined several previous decisions to determine their applicability to the present case:
- Ramco Cement Distribution Co. (P.) Ltd. v. State of Tamil Nadu [1982] 51 STC 171 (Mad.): This case dealt with the taxability of packing charges under the Cement Control Order. The Supreme Court upheld that packing charges included in the sale price are taxable. However, the court noted that this decision was concerned with rule 6(cc)(1), not rule 6(cc)(ii), and thus not directly applicable to the present case.
- Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379: This decision emphasized that the taxability of packing materials depends on whether the packing material is sold as an independent commodity. The court noted that this decision did not consider rule 6(cc)(ii) and therefore did not apply to the present case.
- State of Tamil Nadu v. V.V. Vanniaperumal & Co. [1990] 76 STC 203 [FB]: This case involved the sale of composite goods (oil in tins) and held that both the oil and the tins were taxable. The court distinguished this case from the present one, noting that petroleum products are not taxable in the hands of the assessee, making it inapplicable.
Conclusion:
The court concluded that the assessee is entitled to exemption from tax on the sale turnover of the containers under rule 6(cc)(ii) of the Tamil Nadu General Sales Tax Rules. The previous decisions cited by the department were found not applicable to the present case due to differences in the facts and the specific provisions of the rules being interpreted. The order passed by the Tribunal was set aside, and the revision filed by the assessee was allowed. No costs were awarded.
Petition allowed.
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1995 (2) TMI 409
Issues:
- Imposition of penalties for non-production of declaration under rule 89AA of Bengal Sales Tax Rules and section 14C of Bengal Finance (Sales Tax) Act.
- Interpretation of the term "first check-post" in relation to the obligation to produce declaration in form XXXC.
- Assessment of penalties at the maximum rate of 25% of the determined saleable value of goods.
Detailed Analysis:
The case involved applications challenging penalties imposed for non-production of declaration in accordance with rule 89AA of the Bengal Sales Tax Rules and section 14C of the Bengal Finance (Sales Tax) Act. Three cases were considered together, where consignments of zeera were detained for non-production of declaration. Penalties ranging from Rs. 2,31,466.25 to Rs. 2,84,560 were imposed by the C.T.O. in each case. The penalties were confirmed in revisions, leading to the present applications before the Tribunal. The applicant, a transporter, argued that due to delays in revisions, the goods were sold within West Bengal, making him liable for tax under section 14C(14) instead of penalties. Additionally, the applicant contended that the first check-post for obtaining declaration was not reached due to the route taken by the trucks. The State's position was that the transporter should have produced the declaration at the point of interception or detention, even if not obtained from the first check-post. The Tribunal interpreted the term "first check-post" as the nearest check-post from the point of entry into West Bengal, rejecting the argument that detention was illegal. The Tribunal held that the penalties were governed by section 14C(1) to (6) and not section 14C(14).
Regarding the assessment of penalties at the maximum rate of 25% of the determined saleable value of goods, the applicant argued that the saleable value was determined excessively. After hearing arguments, the Tribunal decided to reduce the penalties by 50% in each case to meet the ends of justice. The penalties were reduced to Rs. 1,40,420, Rs. 1,33,387, and Rs. 1,15,733 for the three cases respectively. Any excess amount paid by the applicant was directed to be refunded within four weeks, and if no penalty was paid, the applicant was instructed to pay the reduced amounts within the same timeframe. The sum deposited previously for obtaining declarations or transit permits was to be adjusted against the assessment of tax for the relevant transactions. The applications were disposed of without any order for costs.
In conclusion, the Tribunal allowed the applications, reducing the penalties by 50% in each case and providing instructions for refund or payment of the adjusted amounts within a specified timeframe.
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1995 (2) TMI 408
Issues:
1. Challenge to the constitutionality of the third proviso to rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957.
2. Interpretation of the substitution of "financial year" for "year" in the third proviso.
3. Justification for the requirement of separate declarations and certificates for goods delivered in different financial years.
4. Validity of reassessment under section 19(1) of the State Act based on under-assessment due to incorrect submission of "C" forms.
Analysis:
1. The petitioner, a partnership-firm engaged in the manufacture and sale of agarbatti, challenged the constitutionality of the third proviso to rule 12(1) of the Central Sales Tax Rules. The proviso required separate declarations for goods delivered in different financial years. The petitioner argued that this provision exceeded the rule-making power of the Central Government and was arbitrary.
2. The substitution of "financial year" for "year" in the third proviso was examined. The petitioner followed the calendar year as the accounting year, obtaining "C" forms based on this period. However, after the substitution, separate declarations were required for goods delivered in different financial years, leading to a conflict. The court analyzed the legislative intent behind the amendment and found the requirement for separate declarations reasonable and related to the exemption limit provided by the law.
3. The court determined that the requirement for separate declarations and certificates for goods delivered in different financial years was not arbitrary or unreasonable. It fell within the scope of "particulars to be contained" in the declaration or certificate, ensuring compliance with tax provisions and aiding the assessing authority in verification.
4. Regarding reassessment under section 19(1) of the State Act, the court held that if there was a clear breach of rules or pro forma requirements that escaped notice initially, reassessment could be justified. In this case, incorrect submission of "C" forms led to under-assessment, qualifying for reassessment under the law. The court rejected the argument that reassessment was an attempt to review the earlier order, emphasizing the broad scope of section 19(1) to cover instances of under-assessment.
5. The court dismissed the petition, upholding the validity of the third proviso and the reassessment notice issued by the tax authority. The petitioner was required to comply with the separate declaration requirements for goods delivered in different financial years, and reassessment based on under-assessment due to incorrect submission of "C" forms was deemed justified under the law.
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1995 (2) TMI 407
Issues Involved:
1. Challenge to the vires of sections 5(2)(A)(a)(1) and 5(2)(AA)(i) of the Orissa Sales Tax Act.
2. Legality of the notice issued by the Sales Tax Officer.
3. Jurisdiction of the Orissa Sales Tax Act on inter-State sales/import sales.
4. Interpretation of "taxable turnover" and "works contract" under the Orissa Sales Tax Act.
5. Applicability of the Supreme Court's decision in Gannon Dunkerley & Co. v. State of Rajasthan to the Orissa Sales Tax Act.
Issue-wise Detailed Analysis:
1. Challenge to the Vires of Sections 5(2)(A)(a)(1) and 5(2)(AA)(i) of the Orissa Sales Tax Act:
The petitioner challenged the constitutionality of sections 5(2)(A)(a)(1) and 5(2)(AA)(i) of the Orissa Sales Tax Act, arguing that these sections required a dealer to include in the gross turnover transactions with inter-State export and import elements, which should be governed by the Central Sales Tax Act, 1956. The petitioner contended that these provisions were ultra vires the State powers.
2. Legality of the Notice Issued by the Sales Tax Officer:
The petitioner challenged the notice dated May 28, 1992, issued by the Sales Tax Officer, which called upon the petitioner to submit returns for the assessment year 1991-92. The petitioner argued that the notice was arbitrary, illegal, and without jurisdiction.
3. Jurisdiction of the Orissa Sales Tax Act on Inter-State Sales/Import Sales:
The petitioner argued that the supplies made under contracts with NALCO and NTPC were inter-State sales/import sales and were covered under the Central Sales Tax Act, 1956. The petitioner contended that the local Sales Tax Act of Orissa had no jurisdiction to levy any tax on these supplies.
4. Interpretation of "Taxable Turnover" and "Works Contract" under the Orissa Sales Tax Act:
The petitioner contended that the definitions and provisions related to "taxable turnover" and "works contract" under the Orissa Sales Tax Act were unconstitutional. The petitioner argued that section 5(2)(AA)(i) of the Orissa Sales Tax Act was similar to section 5(3) of the Rajasthan Sales Tax Act, which was struck down by the Supreme Court in Gannon Dunkerley & Co. v. State of Rajasthan.
5. Applicability of the Supreme Court's Decision in Gannon Dunkerley & Co. v. State of Rajasthan to the Orissa Sales Tax Act:
The petitioner argued that the principles laid down by the Supreme Court in Gannon Dunkerley & Co. v. State of Rajasthan should apply to the Orissa Sales Tax Act. The petitioner contended that the provisions of the Orissa Sales Tax Act should be struck down as they were similar to the provisions of the Rajasthan Sales Tax Act that were declared unconstitutional by the Supreme Court.
Judgment Summary:
The court found that the challenge to the vires of sections 5(2)(A)(a)(1) and 5(2)(AA)(i) of the Orissa Sales Tax Act was not sustainable. The court held that the provisions of the Orissa Sales Tax Act were not contrary to or inconsistent with constitutional limits for exercising legislative power. The court observed that section 5(2)(AA)(i) of the Orissa Sales Tax Act was not similar to section 5(3) of the Rajasthan Sales Tax Act, which was struck down by the Supreme Court.
The court noted that the Supreme Court's decision in Gannon Dunkerley & Co. v. State of Rajasthan did not necessitate reopening the question of vires of the challenged provisions of the Orissa Sales Tax Act. The court held that the provisions of the Orissa Sales Tax Act did not suffer from any inherent defect or infirmity as to constitutional limitations.
Regarding the legality of the notice issued by the Sales Tax Officer, the court found that the challenge was premature. The court observed that it was open to the petitioner to file its show cause replies and raise all permissible points under law. The court directed the Revenue to adjudicate the matter strictly in terms of the Supreme Court's decision, ensuring that the State Legislature did not transgress its constitutional limitations.
In conclusion, the court disposed of the writ petition, holding that the provisions of the Orissa Sales Tax Act were constitutionally valid and that the challenge to the notice issued by the Sales Tax Officer was premature. The court made no order as to costs.
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1995 (2) TMI 406
Issues Involved:
1. Right to telecast through an agency of choice.
2. Government's monopoly over terrestrial signals and telecasting.
3. Conditions imposed by the Government for creating terrestrial signals and uplinking to a foreign satellite.
4. Fundamental right to freedom of speech and expression under Article 19(1)(a).
Summary:
1. Right to Telecast through an Agency of Choice:
The Supreme Court examined whether an organizer or producer of any event has the right to get the event telecast through an agency of his choice, whether national or foreign. It was held that while the right to telecast is part of the fundamental right to freedom of speech and expression under Article 19(1)(a), it is subject to reasonable restrictions under Article 19(2). The Court emphasized that airwaves are public property and must be used for the public good, which includes ensuring plurality and diversity of views.
2. Government's Monopoly over Terrestrial Signals and Telecasting:
The Court addressed whether the Government or its agencies like Doordarshan have a monopoly over creating terrestrial signals and telecasting them. It was held that such a monopoly is not per se violative of Article 19(1)(a) as long as access to the media is governed by fairness and the paramount interest of the viewers is subserved. The Court highlighted the need for an independent public authority to control and regulate the use of airwaves.
3. Conditions Imposed by the Government:
The Court considered the conditions that can be imposed by the Government for creating terrestrial signals and granting uplinking facilities to a satellite not owned or controlled by the Government. It was held that these conditions must be reasonable and in accordance with the provisions of Article 19(2). The Court noted that the Government's refusal to grant permission to uplink signals to a foreign satellite, unless justified by law made under Article 19(2), would be unconstitutional.
4. Fundamental Right to Freedom of Speech and Expression:
The Court extensively discussed the content of the fundamental right to freedom of speech and expression under Article 19(1)(a) and its implications for broadcasting. It was held that this right includes the right to acquire and disseminate information through any media, including electronic media. However, the use of airwaves, being a public property, imposes an inherent restriction on this right. The Court reiterated that any restriction on this right must be reasonable and in the interest of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency, or morality, or in relation to contempt of court, defamation, or incitement to an offense as laid down under Article 19(2).
Conclusion:
The Supreme Court concluded that the right to telecast is part of the fundamental right to freedom of speech and expression but is subject to reasonable restrictions. The Government's monopoly over terrestrial signals and telecasting is not unconstitutional per se, provided it is exercised fairly and in the public interest. The Court directed the establishment of an independent public authority to regulate the use of airwaves and ensure that the rights of viewers are protected. The civil appeals and the writ petition were disposed of accordingly.
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1995 (2) TMI 405
Issues Involved:
1. Constitutionality of Section 5(1)(vi) and the Sixth Schedule of the Kerala General Sales Tax Act (KGST Act) as amended by the Kerala Finance Act, 1994.
2. Levy of tax on "iron and steel" as declared goods.
3. Alleged violation of Article 286(3) of the Constitution of India and Sections 14 and 15 of the Central Sales Tax Act (CST Act).
4. Discrimination against "iron and steel" compared to other declared goods.
5. Impact on inter-State trade and commerce.
Detailed Analysis:
1. Constitutionality of Section 5(1)(vi) and the Sixth Schedule of the KGST Act:
The petitioners, dealers of iron and steel, challenged the constitutionality of Section 5(1)(vi) and the Sixth Schedule of the KGST Act as amended by the Kerala Finance Act, 1994. They argued that these provisions, which imposed a tax on iron and steel at all points of sale, were unconstitutional and void. The court found that the multi-point levy imposed by these provisions was contrary to Section 15(a) of the CST Act, which mandates that the tax on declared goods should not exceed 4% and should be levied at only one stage. Consequently, the provisions were held to be ultra vires the CST Act and unconstitutional.
2. Levy of Tax on "Iron and Steel" as Declared Goods:
The petitioners contended that iron and steel are declared goods under Section 14 of the CST Act, and as such, the tax on these goods should not exceed 4% at a single point of sale. The court agreed with the petitioners, stating that the new system of value-added tax (VAT) introduced by the Kerala Finance Act, 1994, imposed a multi-point levy on iron and steel, which violated the restrictions imposed by Section 15(a) of the CST Act. The court illustrated this with examples showing how the tax burden would exceed 4% at successive points of sale, thereby contravening the CST Act.
3. Alleged Violation of Article 286(3) of the Constitution of India and Sections 14 and 15 of the CST Act:
The petitioners argued that the amended provisions violated Article 286(3) of the Constitution, which imposes restrictions on the power of the State to levy tax on the sale or purchase of goods declared by Parliament to be of special importance in inter-State trade or commerce. The court noted that Article 286(3)(a) mandates that any State law imposing a tax on such goods must be subject to the restrictions and conditions specified by Parliament. Sections 14 and 15 of the CST Act, which declare iron and steel as goods of special importance and impose restrictions on the rate and stage of tax, were found to be violated by the impugned provisions. Therefore, the court held that the provisions were unconstitutional.
4. Discrimination Against "Iron and Steel" Compared to Other Declared Goods:
The petitioners contended that iron and steel were being discriminated against by being taken out of the Second Schedule (which contained other declared goods) and inserted into the Sixth Schedule (which included luxurious consumer goods). The court acknowledged that iron and steel were being treated differently from other declared goods, such as sugar, tobacco, and textiles, which were either exempted from tax or taxed at lower rates. However, the court focused on the violation of the CST Act and the Constitution rather than the discrimination aspect.
5. Impact on Inter-State Trade and Commerce:
The petitioners argued that the new levy would affect inter-State trade and commerce and restrict the freedom of trade. The court noted that iron and steel are essential commodities with significant importance in various sectors of the economy. The imposition of a multi-point levy would increase the tax burden on these goods, thereby affecting their price and availability. The court cited the Supreme Court's observation in Telangana Steel Industries v. State of Andhra Pradesh, which emphasized the need to minimize the tax burden on declared goods due to their special importance in inter-State trade and commerce. The court concluded that the impugned provisions were illegal and void.
Conclusion:
The court held that the provisions contained in Section 5(1)(vi) and the Sixth Schedule of the KGST Act as amended by the Kerala Finance Act, 1994, in so far as they relate to the levy of tax on declared goods "iron and steel," are illegal, ultra vires of the CST Act, and unconstitutional. The court quashed the impugned provisions and allowed the original petitions.
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1995 (2) TMI 404
The High Court of Kerala dismissed tax revision cases related to the assessment of a liquor manufacturer for various years. The court upheld a previous decision that cardboard cartons used for packing liquor are part of the goods sold and are taxable at the rate applicable to liquor. The petitions were dismissed summarily at the admission stage.
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1995 (2) TMI 403
Issues:
Interpretation of entries 38(iv) and 83 of the Andhra Pradesh General Sales Tax Act for taxation of biscuit baking oven.
Analysis:
The High Court of Andhra Pradesh considered the issue of whether a biscuit baking oven should be taxed under entry 38(iv) or entry 83 of the First Schedule to the Andhra Pradesh General Sales Tax Act. The assessee, a dealer in biscuit baking ovens, argued that the oven should be taxed under entry 83 as it is an accessory to the machinery for manufacturing biscuits. On the other hand, the Revenue contended that the oven should be taxed under entry 38(iv) as it falls under electrical goods. The Court analyzed both entries to determine the appropriate taxability.
Entry 38(iv) of the Act includes electrical goods like grinders, mixers, and ovens, which are independent items and not part of other machinery or accessories. In contrast, entry 83 encompasses machinery propelled by electricity, including spare parts and accessories, not specifically mentioned elsewhere. The Court noted that an item in entry 38(iv) should be independent, while an item in entry 83 can be part of or accessory to machinery. The nature and use of the goods determine their taxability under the relevant entry, following the common usage test.
The Court referred to various judgments, including State of Andhra Pradesh v. Indian Detonators Ltd., where the nature of goods was crucial in determining taxability. Additionally, the Court cited State of A.P. v. Mayur Crystal Palace, emphasizing the importance of commercial parlance in classification. Furthermore, Industrial Machinery Manufacturers Pvt. Ltd. v. State of Gujarat was referenced to highlight the significance of the purpose of the goods in taxability.
In the present case, the Court concluded that the turnover related to electrical ovens used as accessories to biscuit baking machinery should be taxed under entry 83, not entry 38(iv). The judgment of the Tribunal was upheld based on different reasoning, dismissing the tax revision cases with no order as to costs.
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1995 (2) TMI 402
Issues Involved:
1. Validity of Section 3-B(2)(b) of the Tamil Nadu General Sales Tax Act, 1959.
2. Whether the condition in Section 3-B(2)(b) results in levying tax at more than one stage.
3. Validity of Section 3-B(2)(e) of the Tamil Nadu General Sales Tax Act, 1959.
4. Whether the cost of consumables is includible in "labour charges and other like charges."
Summary:
Issue 1: Validity of Section 3-B(2)(b) of the Tamil Nadu General Sales Tax Act, 1959
The appellants contended that Section 3-B(2)(b) violates Section 15(a) of the Central Sales Tax Act and Article 286(3) of the Constitution by imposing tax at more than one stage. The Court held that the provision does not result in multi-point taxation. When a commercial commodity is transformed into another distinct commercial commodity, it becomes a separate taxable entity. Therefore, the condition that goods must be used in the same form as purchased does not violate the mandate of Section 15(a) of the Central Sales Tax Act.
Issue 2: Whether the condition in Section 3-B(2)(b) results in levying tax at more than one stage
The appellants argued that the requirement to purchase goods from registered dealers liable to pay tax under the Act results in multi-point taxation. The Court held that Section 3-B(2)(b) is a machinery provision regulating the burden of proof and does not shift the point of taxation. The provision aims to prevent fraud and facilitate administrative efficiency. The failure to comply with this provision does not result in a violation of Section 15(a) of the Central Sales Tax Act.
Issue 3: Validity of Section 3-B(2)(e) of the Tamil Nadu General Sales Tax Act, 1959
The appellants contended that Section 3-B(2)(e) limits expenses towards labour charges to actual costs, excluding the profit margin of the contractor. The Court held that the expression "labour charges and other like charges" includes the profit margin of the contractor to the extent it is relatable to the supply of labour and services. Therefore, Section 3-B(2)(e) is valid and does not exclude the profit margin of the contractor.
Issue 4: Whether the cost of consumables is includible in "labour charges and other like charges"
The appellants argued that the cost of consumables like ink and dyes used in printing and dyeing works contracts should be deductible under Section 3-B(2)(e). The Court held that the cost of consumables used in the execution of works contracts, where the property is not transferred, falls within "labour charges and other like charges." However, the determination of whether specific consumables like ink or dyes are deductible should be decided by the assessing authorities based on the materials produced by the assessees.
Conclusion:
The Court upheld the constitutional validity of Section 3-B of the Tamil Nadu General Sales Tax Act, 1959, subject to specific findings. The writ appeals and writ petitions were dismissed, and appellants were granted additional time to file appeals and objections against assessment orders.
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