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2005 (11) TMI 464

Issues:
1. Dispute regarding assessment year 1985-86 under the U.P. Trade Tax Act.
2. Rejection of claim of exemption by the Assistant Commissioner.
3. Appeal allowed in part by Deputy Commissioner (Appeals).
4. Second appeal rejected by the Tribunal.
5. Rejection of account books by assessing authority for best judgment assessment.
6. Setting aside of assessment order due to lack of basis for fixing turnover.
7. Jurisdiction and powers of assessing authority after remand.
8. Comparison of Division Bench judgments.
9. Failure to produce account books despite opportunities.
10. Discretionary nature of first appellate authority's order.
11. Appellate authorities' role in examining account books.
12. Finality of Tribunal's direction regarding examination of account books.

Analysis:
1. The dispute in this case revolves around the assessment year 1985-86 under the U.P. Trade Tax Act. The Assistant Commissioner accepted the account books but rejected certain exemption claims, leading to subsequent appeals and orders by higher authorities.

2. The Deputy Commissioner (Appeals) partially allowed the appeal by setting aside the assessment order and remanding the case to the assessing officer with directions. The Tribunal later rejected the second appeal, emphasizing the need for detailed examination of the account books.

3. Despite multiple opportunities, the dealer failed to produce the account books for examination after remand, prompting the assessing authority to reject the books and make a best judgment assessment. This decision was challenged, leading to the setting aside of the assessment order due to lack of a basis for determining turnover.

4. The judgment delves into the jurisdiction and powers of the assessing authority post-remand, citing a Full Bench decision that outlines the authority's wide powers subject to directions from higher authorities. The comparison of Division Bench judgments highlights the specific context of each case.

5. The applicant's failure to produce the account books despite opportunities is noted, with the assessing authority reframing the assessment order under compelling circumstances. The discretionary nature of the first appellate authority's decision to grant further opportunities is emphasized.

6. The role of appellate authorities in examining account books is clarified, with the assessing authority deemed most appropriate for detailed examinations. The finality of the Tribunal's direction regarding the examination of account books is underscored, limiting the applicant's ability to insist on further examinations.

7. Ultimately, the revision is dismissed, with costs imposed, based on the lack of merit in the arguments presented and the adherence to legal principles and previous judgments.
2005 (11) TMI 463

Issues Involved:
1. Jurisdiction of reopening assessment under Section 13 of the Entry Tax Act read with Section 28 of the M.P. Commercial Tax Act, 1994.
2. Definition and determination of "local area" under the Entry Tax Act.
3. Validity of reopening assessment based on the decision of the Board of Revenue.
4. Applicability of the principle of res judicata in tax proceedings.
5. Compliance with procedural requirements for reopening assessments.

Detailed Analysis:

1. Jurisdiction of Reopening Assessment:
The petitioner contended that reopening the assessment under Section 13 of the Entry Tax Act read with Section 28 of the M.P. Commercial Tax Act, 1994, was without jurisdiction. The revisional authority had already determined that the area in question was not a local area for the assessment years 1992-93 and 1999-2000, and these orders had attained finality. The assessing officer, being subordinate to the revisional authority, could not bypass these final orders.

2. Definition and Determination of "Local Area":
The petitioner argued that the "local area" as defined under the Entry Tax Act did not include the area where the construction was being carried out. The revisional authority had relied on various documents, including certificates from local bodies, to conclude that the area did not fall within any local authority's jurisdiction. The respondents, however, contended that a notification dated March 9, 1994, declared Narmada Nagar as a local area, making the petitioner liable for entry tax.

3. Validity of Reopening Assessment Based on Board of Revenue's Decision:
The reopening of the assessment was based on the decision of the Board of Revenue in the case of Larsen & Toubro, which held that the entire State of Madhya Pradesh constituted a local area. The petitioner argued that this decision was per incuriam and had not attained finality. The reopening of the assessment was, therefore, legally incorrect.

4. Applicability of Res Judicata in Tax Proceedings:
The petitioner cited the principle of res judicata, stating that the revisional authority's previous findings that the area was not a local area should prevent the assessing officer from reopening the assessment. The respondents countered that res judicata does not strictly apply to tax proceedings, and the assessing officer could reopen the case if new facts or legal interpretations emerged.

5. Compliance with Procedural Requirements:
The petitioner argued that the reopening of the assessment lacked a proper foundation, as no new facts had come to light. The assessing officer did not record any reasons for reopening the assessment, violating the requirement for a reasonable opportunity to be given to the petitioner. The respondents maintained that the reasons for reopening were adequately provided and that the petitioner was given a reasonable opportunity to present its case.

Judgment Summary:
The court held that the reopening of the assessment was without proper jurisdiction and lacked a foundational basis. The revisional authority had already determined that the area in question was not a local area, and this finding had attained finality. The assessing officer could not bypass these final orders without new facts or legal changes. The court quashed the notice to show cause and the assessment order, stating that if the assessing officer found a change in fundamental facts, a fresh notice for reopening the assessment could be issued. The petitions were allowed to the extent indicated, with no order as to costs.
2005 (11) TMI 462

Issues:
Challenge to the constitutional validity of the second proviso to section 19 of the Andhra Pradesh General Sales Tax Act, 1957.

Detailed Analysis:

The petitioners sought a writ of mandamus to declare the second proviso to section 19(1) of the A.P. General Sales Tax Act, 1957 as arbitrary and violative of constitutional articles. They also requested the court to direct the respondent to entertain appeals against assessment orders without requiring payment of a specified tax percentage. The petitioners contested the validity of a distraint order dated December 2, 2003.

The core issue revolved around the constitutional validity of the second proviso to section 19 of the Act, which mandates the deposit of a specific tax percentage as a pre-condition for admitting an appeal. The proviso required the appellant to provide proof of payment of 12½ per cent of the tax difference between the assessing authority and the appellant. The court noted that the right of appeal is statutory and can be subject to conditions set by the Legislature.

Citing legal precedents, the court emphasized that the imposition of conditions for exercising the right of appeal is within the legislative purview. Previous judgments, such as Anant Mills Co. Ltd. v. State of Gujarat and Shyam Kishore v. Municipal Corporation of Delhi, supported the legality of requiring pre-deposit for appeals. The court highlighted that the Legislature can impose accompanying liabilities when granting the right of appeal.

Referring to the decision in Penguin Textiles Ltd. v. State of A.P., the court reiterated that the High Court may allow payment in instalments but not grant a stay of recovery during a revision. Ultimately, based on the legal principles established by the Supreme Court, the court concluded that the impugned proviso was constitutionally valid and did not suffer from any infirmities.

Consequently, the court dismissed the writ petitions, affirming the validity of the proviso and rejecting the challenge to its constitutionality. The judgment highlighted that the Legislature has the authority to prescribe conditions for exercising the right of appeal, and in this case, the proviso requiring a tax deposit was deemed valid legislation.
2005 (11) TMI 461

Issues Involved:
1. Validity of the second proviso to section 19(1) of the Andhra Pradesh General Sales Tax Act, 1957.
2. Maintainability of the writ petitions under Article 226 of the Constitution of India.
3. Legality of the impugned provisional assessment orders dated August 6, 2003.
4. Requirement of pre-deposit for filing appeals under section 19(1) of the Act.
5. Attachment of properties under the Andhra Pradesh Revenue Recovery Act, 1864.

Detailed Analysis:

1. Validity of the second proviso to section 19(1) of the Andhra Pradesh General Sales Tax Act, 1957:
The petitioners challenged the second proviso to section 19(1) of the Act, which mandates the payment of 12.5% of the disputed tax for filing appeals. They argued that this requirement is illegal and sought to have it struck down. However, the court did not find merit in this argument and upheld the validity of the proviso.

2. Maintainability of the writ petitions under Article 226 of the Constitution of India:
The court considered whether the writ petitions were maintainable given that the petitioners had an alternative statutory remedy. It was emphasized that the existence of an adequate legal remedy is a crucial factor in exercising jurisdiction under Article 226. The court cited several precedents, including British India Steam Navigation Co. v. Jasjit Singh and Assistant Collector Central Excise v. Dunlop India Ltd., to highlight that Article 226 should not be used to circumvent statutory procedures unless exceptional circumstances exist. The court concluded that the petitioners, having already availed the remedy of appeal, could not pursue parallel proceedings under Article 226.

3. Legality of the impugned provisional assessment orders dated August 6, 2003:
The petitioners contended that the provisional assessment orders were passed without proper consideration of their objections and were thus violative of principles of natural justice. The court, however, did not delve into the merits of this argument due to the petitioners' failure to comply with the pre-deposit requirement for their appeals.

4. Requirement of pre-deposit for filing appeals under section 19(1) of the Act:
The petitioners argued that the pre-deposit requirement rendered the right of appeal illusionary and onerous. The court rejected this argument, stating that the right to appeal is not diminished by the requirement of pre-deposit, which is a statutory condition. The court emphasized that statutory remedies should be pursued fully before seeking relief under Article 226.

5. Attachment of properties under the Andhra Pradesh Revenue Recovery Act, 1864:
Following the rejection of their appeals, the respondent authorities initiated recovery proceedings under the Andhra Pradesh Revenue Recovery Act, 1864, and attached the properties of the petitioners. The court did not find any fault with these actions, as they were in line with the statutory provisions for recovering due taxes.

Conclusion:
The court dismissed the writ petitions, holding that the petitioners must adhere to the statutory requirement of pre-deposit for filing appeals and cannot seek parallel remedies under Article 226 of the Constitution. The provisional assessment orders and subsequent recovery actions were upheld, and the petitioners' arguments regarding the legality of the second proviso to section 19(1) and the maintainability of the writ petitions were rejected. The court emphasized the importance of exhausting statutory remedies before invoking the writ jurisdiction.
2005 (11) TMI 460

Issues:
Challenge to notice issued under section 29A of the Kerala General Sales Tax Act, 1963.

Analysis:
The judgment of the court addressed the challenge to the notice issued under section 29A of the Kerala General Sales Tax Act, 1963. The Intelligence Inspector, along with others, challenged the judgment quashing the notice. The original petitioner, a company engaged in electrical contracts, contested the detention of goods and demanded their release on producing registration certificates. The single Judge passed an interim order allowing the release of goods on a security bond. The goods were released, but the petitioner could not be located, leading to the declaration of service completion. The petitioner argued that the goods were transported without proper documents but should still be released. However, the court found sufficient reasons for detaining the goods, as they were not declared at border check-posts, indicating a potential tax evasion attempt.

The court emphasized that suspicion is the initial stage of forming an opinion, and interference at the notice stage was not justified. The single Judge's intervention was deemed unwarranted as the authorities had valid reasons for detaining the goods. Despite attempts to issue notices to the consignor and consignee, no response was received, further supporting the suspicion of tax evasion. The judgment set aside the single Judge's decision and allowed the authorities to proceed with further action based on the notice and related proceedings. The court highlighted that the state suffered losses due to tax evasion, underscoring the importance of upholding the legal procedures outlined in section 29A of the Act.

In conclusion, the writ appeal was disposed of, and the order on the related application was dismissed. The judgment reinforced the authority of officers to detain goods under suspicion of tax evasion, emphasizing the significance of following legal procedures and respecting the powers granted under the Kerala General Sales Tax Act, 1963.
2005 (11) TMI 459

Issues Involved:
1. Tax liability on processing and supply of photographs under the Karnataka Sales Tax Act.
2. Validity of entry 25 of the Sixth Schedule to the Act.
3. Refund of taxes paid under invalidated tax provisions.
4. Application of the doctrine of unjust enrichment.
5. Timeliness of filing for refund under Section 25A of the Act.
6. Quashing of assessment orders and consequential relief.

Issue-wise Detailed Analysis:

1. Tax Liability on Processing and Supply of Photographs:
The petitioner, a dealer registered under the Karnataka Sales Tax Act, 1957, was involved in the processing and supply of photographs, photo prints, and photo negatives. The activity became taxable under Section 5B of the Act read with entry 25 of the Sixth Schedule from 1986. The petitioner was assessed and levied taxes for the assessment years 1989-90, 1990-91, and 1991-92, which were paid under the composition scheme of Section 17(6) of the Act.

2. Validity of Entry 25 of the Sixth Schedule to the Act:
The levy of tax on photography activities had been contentious, leading to chronic litigation. The Karnataka High Court, in the case of Keshoram Surindranath, Photo-mag (P) Ltd. v. Assistant Commissioner of Commercial Taxes, invalidated entry 25, leading to further legislative amendments. The State Legislature reintroduced the entry, which was again invalidated by the High Court in Pro Lab v. State of Karnataka in 2005.

3. Refund of Taxes Paid Under Invalidated Tax Provisions:
Following the invalidation of entry 25, the petitioner sought a refund of taxes paid under the now-invalid provisions by filing an application under Section 25A of the Act. The assessing authority rejected the application as it was filed beyond the five-year period, a decision upheld by the Joint Commissioner. The petitioner then filed the present writ petition seeking quashing of the assessment orders and a refund.

4. Application of the Doctrine of Unjust Enrichment:
The respondents argued that granting a refund would result in unjust enrichment, as the petitioner would have included the tax component in the price charged to customers. However, the court noted that similar refunds had been granted to other dealers, and applying the doctrine of unjust enrichment selectively would be unjust. The court rejected this defense in the petitioner's case.

5. Timeliness of Filing for Refund Under Section 25A of the Act:
The court considered the timeliness of the petition under Article 226 of the Constitution, noting that a petition filed within three years from the date of the declaration of law by the court is reasonable. The petitioner had approached the court within three years of the 1999 judgment, making the petition timely and not barred by laches.

6. Quashing of Assessment Orders and Consequential Relief:
The court quashed the assessment orders for the years 1989-90, 1990-91, and 1991-92, stating that the law enabling the levy had been declared invalid. Consequently, the court issued a mandamus directing the respondents to consider the petitioner's claim for a refund under Rule 20 of the Karnataka Sales Tax Rules, 1957, read with Section 12 of the Act. The assessing authority was instructed to pass orders for the refund within six weeks upon satisfactory proof of tax payment.

Conclusion:
The writ petition was allowed, quashing the assessment orders and directing the respondents to process the refund application upon proof of payment. The court emphasized that the law as declared by the High Court remains valid until reversed by the Supreme Court, and the petitioner's claim was timely and justified.
2005 (11) TMI 458

Issues Involved:
1. Whether the levy of tax under the provisions of the Entry Tax Act is an "annual tax."
2. Whether the exemption notification issued under the Act in the middle or end of the year, without an effective date mentioned, should be applied for the entire financial year.

Detailed Analysis:

Issue I: Whether the levy of tax under the provisions of the Entry Tax Act is an "annual tax."

The court examined the nature of the tax under the Karnataka Tax on Entry of Goods Act, 1979 (KTEG Act). The object of the Act is to levy tax on the entry of specified goods into local areas for consumption, use, or sale. Section 3 is the charging provision, authorizing the levy and collection of tax on the entry of goods into local areas. The court noted that the tax is assessed and paid based on monthly returns and annual returns. The court concluded that the taxable event under the Act is the entry of scheduled goods into local areas, known as a "transaction tax." The quantification of tax payable is done monthly and annually. Therefore, the court held that the levy under the Entry Tax Act is not an annual tax but a transaction tax.

Issue II: Whether the exemption notification issued under the Act in the middle or end of the year, without an effective date mentioned, should be applied for the entire financial year.

The court analyzed the corrigendum issued by the State Government on July 27, 2000, which provided an exemption from payment of entry tax on machinery/equipment costing more than Rs. 25 lakhs. The court noted that the corrigendum did not specify an effective date. The court referred to the meaning of "corrigendum" as a correction or rectification of a mistake, which dates back to the original notification. However, in this case, the court found that the corrigendum was not correcting a clerical mistake but was granting a new exemption. The court held that since no effective date was mentioned, the exemption should be presumed to be prospective, effective from the date of the corrigendum.

The court distinguished the case from the Supreme Court's decision in Mathra Parshad and Sons v. State of Punjab [1962] 13 STC 180, where the tax was deemed a yearly tax, and the exemption applied for the whole year. The court noted that the Entry Tax Act is different, and the Act allows for prospective or retrospective exemption notifications. The court also referred to decisions from other High Courts, supporting the view that exemption notifications without an effective date are prospective.

The court concluded that the exemption granted by the corrigendum should be effective from the date of issuance, July 27, 2000, and not from the beginning of the financial year. Therefore, the Tribunal was justified in rejecting the appeal filed by the assessee for the assessment year 2000-2001.

Conclusion:
The court confirmed the Tribunal's order and rejected the revision petition filed by the petitioner-company. The levy under the Entry Tax Act is not an annual tax but a transaction tax, and the exemption notification issued in the middle of the year without an effective date is prospective, effective from the date of issuance.
2005 (11) TMI 457

Issues Involved:
1. Whether the sale of motor vehicles to defense personnel amounts to a sale through the Canteen Stores Department (CSD) for claiming a concessional tax rate.
2. Legitimacy of the imposition of penalty for filing incorrect returns to evade tax.

Issue-wise Detailed Analysis:

1. Sale of Motor Vehicles to Defense Personnel and Concessional Tax Rate:
The primary issue was whether the sale of motor vehicles to defense personnel could be considered as sales through the CSD to claim a concessional tax rate under entry 6 of Schedule III to S.R.O. No. 1091/99. The petitioner claimed a concessional tax rate of six percent on the sale of motor vehicles, supported by certificates from the CSD. However, the assessing authority found the explanation unsatisfactory and issued a notice under section 45A of the Kerala General Sales Tax Act, 1963, for filing incorrect returns to evade tax.

The court examined the relevant provisions of Notification S.R.O. No. 1091/99 and concluded that the exemption is available only for sales effected to organizations like Military, Naval, Air Force NCC canteens, and CSD, not to individual personnel. The court noted that the sale invoices were issued in the names of individual purchasers, not the CSD, and hence, the assessees were not entitled to the concessional rate of tax. The court emphasized that exemption notifications must be interpreted strictly and that the assessees failed to produce any certificate showing that the motor vehicles were purchased by the CSD.

2. Imposition of Penalty for Filing Incorrect Returns:
The second issue was the legitimacy of imposing a penalty on the assessee for filing incorrect returns to evade tax. The learned single judge found that it was not a fit case for imposing a penalty and set aside the order imposing the penalty. The State appealed against this part of the order.

The court referred to the decision of the apex court in Hindustan Steel Ltd. v. State of Orissa, which held that penalty should not be imposed unless the party acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest. The court also cited Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, which stated that a return filed under a bona fide belief should not be condemned as false. Considering the totality of circumstances, the court agreed with the single judge that the imposition of penalty could not be sustained, as there was no deliberate intention to defy the law or conscious disregard of obligations under the Kerala General Sales Tax Act.

Conclusion:
The court held that the assessee was not entitled to the concessional rate of tax since the motor vehicles were sold directly to defense personnel and not to the CSD. The judgment of the single judge was sustained, dismissing both the appeals and the writ petition. The imposition of penalty was also set aside, recognizing that the assessee acted under a bona fide belief and there was no deliberate intention to evade tax.
2005 (11) TMI 456

Issues Involved:
1. Imposition of penalty under Section 78(5) of the Act.
2. Validity of the documents accompanying goods in transit.
3. Clerical error vs. intention to evade tax.
4. Requirement of holding an inquiry before imposing penalty.
5. Filing of revision petitions by Revenue in cases with small revenue stakes.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 78(5) of the Act:
The core issue revolves around whether the penalty imposed under Section 78(5) of the Act was justified. The assessing authority imposed a penalty of Rs. 23,618 on the respondent-assessee for carrying 100 bags of wheat with two sale bills, one of which was handwritten. The authority interpreted this as an intention to evade tax. However, both the Deputy Commissioner (Appeals) and the Tax Board found that the handwritten bill was a clerical error and not indicative of any tax evasion intent. The High Court upheld this view, emphasizing that the presence of the handwritten bill did not per se result in any evasion of tax, especially when both bills indicated the goods were sales tax paid.

2. Validity of the Documents Accompanying Goods in Transit:
Section 78(2) of the Act mandates that specific documents must accompany goods in transit. In this case, the required bill and bilty were found with the goods during transit. The High Court noted that unless these documents were proven to be false or forged, the imposition of a penalty under Section 78(5) could not be justified. The court highlighted that the assessing authority did not conduct any inquiry to determine the authenticity of the documents.

3. Clerical Error vs. Intention to Evade Tax:
The High Court agreed with the findings of the Deputy Commissioner (Appeals) and the Tax Board that the issuance of a second handwritten bill was a clerical and inadvertent mistake. The court emphasized that the mere presence of a duplicate bill did not automatically indicate an intention to evade tax. The court stressed the importance of distinguishing between a genuine clerical error and a deliberate attempt to evade tax.

4. Requirement of Holding an Inquiry Before Imposing Penalty:
The High Court criticized the assessing authority for not holding a proper inquiry before imposing the penalty. The court stated that the existence of guilty animus is essential for imposing a penalty, and this requires a thorough inquiry. The court noted that the assessing authority failed to objectively determine whether the prescribed documents were false or forged, which is a prerequisite for imposing a penalty under Section 78(5).

5. Filing of Revision Petitions by Revenue in Cases with Small Revenue Stakes:
The High Court expressed concern over the practice of the Revenue filing revision petitions in cases with small revenue stakes. The court referenced a previous judgment urging the Commercial Taxes Department to frame guidelines to avoid burdening the court with such cases. The court reiterated the need for the Revenue to consider the cost and resources involved in pursuing cases with minimal financial implications and suggested that guidelines similar to those of the Income-tax Department be adopted.

Conclusion:
The High Court dismissed the revision petition filed by the Revenue, stating that no case for imposing a penalty under Section 78(5) was made out. The court emphasized the necessity of conducting a proper inquiry before imposing penalties and cautioned the Revenue against filing revision petitions in cases with small stakes. The judgment highlights the importance of distinguishing clerical errors from intentional tax evasion and the need for procedural diligence by tax authorities.
2005 (11) TMI 455

Issues:
Legality of levy of tax under section 9-A of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994.

Analysis:
The case involves a petition challenging the levy of tax under section 9-A of the Act. The petitioner, a public limited company, was assessed and taxed for transferring the right to use motor vehicles during a specific period. The revisional authority upheld the tax levy but set aside the penalty. The court found no merit in the petition and dismissed it.

Legal Provisions:
Section 9-A of the Act, inserted in 1995, imposes tax on the transfer of the right to use specified goods. The tax is payable on the total amount realized during the year for such transfers. The provision is in accordance with article 366(29A)(d) of the Constitution of India.

Court's Decision:
The court held that tax liability under section 9-A is attracted when there is a transfer of the right to use coupled with payment realized during the year. The court rejected the argument that tax could not be levied because the possession of goods was transferred before a specific date. The petitioner failed to provide relevant material supporting their claim, and the court found reliance on certain documents to be insufficient.

Precedent and Dismissal:
The court distinguished a previous case cited by the petitioner, stating that it did not advance their case. The court emphasized that the legislative competence to tax transactions was not the issue in the present case. The petition was deemed frivolous, and costs were imposed. The court directed the security amount to be remitted for proper utilization.

In conclusion, the court upheld the levy of tax under section 9-A, finding no merit in the petitioner's arguments and dismissing the writ petition with costs.
2005 (11) TMI 454

Issues:
1. Validity of circular instructions of the Commissioner of Commercial Taxes dated June 9, 2004.
2. Exemption eligibility of skimmed milk powder from sales tax under G. O. Ms. No. 1091 dated June 10, 1957.
3. Interpretation of G. O. Ms. No. 54 dated January 31, 2000 in relation to skimmed milk powder exemption.
4. Legality of notice of provisional monthly assessment and demand dated June 30, 2004.
5. Jurisdiction of the Commissioner of Commercial Taxes under section 42 of the Act.

Analysis:
1. The petitioner challenged the circular instructions of the Commissioner of Commercial Taxes dated June 9, 2004, invoking the court's jurisdiction under Article 226 of the Constitution of India. The petitioner sought a writ of mandamus to declare the circular as ultra vires G. O. Ms. No. 1091 dated June 10, 1957. The court held that the clarification by the Commissioner that skimmed milk powder cannot be granted exemption under G. O. Ms. No. 54 dated January 31, 2000 was untenable. The court quashed the impugned proceedings dated June 9, 2004, and declared the notice of provisional monthly assessment and demand as illegal and ultra vires.

2. The court analyzed the exemption eligibility of skimmed milk powder under G. O. Ms. No. 1091 dated June 10, 1957. Referring to past judgments, the court established that skimmed milk powder qualifies for exemption as it is considered a dehydrated form of pasteurized milk. The court emphasized that the skimmed milk powder is exempted from sales tax under the Act, and any contrary view is unsustainable in law. The court concluded that the petitioner is not liable to pay tax on skimmed milk powder.

3. Regarding the interpretation of G. O. Ms. No. 54 dated January 31, 2000, the court clarified that this notification does not modify the exemption granted under G. O. Ms. No. 1091 dated June 10, 1957. G. O. Ms. No. 54 pertains to pasteurized milk sales tax exemption and does not impact the exemption for fresh milk, including skimmed milk powder. The court dismissed the argument that the petitioner was liable for tax on skimmed milk powder under G. O. Ms. No. 54.

4. The court addressed the legality of the notice of provisional monthly assessment and demand dated June 30, 2004. It held that imposing or proposing to impose tax on skimmed milk powder was illegal and ultra vires. Consequently, the court quashed the impugned proceedings and declared the petitioner entitled to relief, allowing the writ petition with costs.

5. The court also discussed the jurisdiction of the Commissioner of Commercial Taxes under section 42 of the Act. It found the impugned proceedings issued under section 42 to be unsustainable in light of previous court judgments. The court emphasized that the petitioner was not liable to pay any tax on skimmed milk powder, leading to the quashing of the impugned proceedings and the relief granted to the petitioner.
2005 (11) TMI 453

Issues:
Interpretation of Government Orders related to tax benefits for coffee curing industry under Karnataka Sales Tax Act, 1957.

Analysis:
The judgment involves a dispute regarding tax benefits for dealers engaged in the coffee curing industry under the Karnataka Sales Tax Act, 1957. The petitioners claimed entitlement to exemptions or tax benefits under Government Orders dated May 14, 1999, which were denied to them in assessment orders for the years 1999-2003. The State Government had issued industrial policies offering incentives to industries, including non-manufacturing service sector industries like coffee curing, with corresponding exemption notifications under section 19-C of the Act. The petitioners missed benefits under the initial notification dated April 1, 1996, but subsequently sought inclusion under the Government Orders of May 14, 1999, and July 31, 2001.

The High Court observed that the State Government had revised its policy to provide tax incentives and concessions for industries, including coffee curing, under the Karnataka Sales Tax Act. However, specific notifications for the coffee curing industry were not issued despite the policy coming into force on May 14, 1999. The court directed the Government to take appropriate action to provide tax concessions to the coffee curing industry within three months. The petitioners had also filed appeals challenging assessment orders, and the court directed them to file appeals within four weeks without limitations, to be decided in light of the forthcoming notification.

The petitioners, dissatisfied with an endorsement by the Finance Department denying exemption on purchase tax for coffee curing inputs, filed writ petitions seeking its quashing. The court noted that the endorsement contradicted its earlier directions and could hinder the petitioners' position before the Appellate Tribunal. The court declined to examine the endorsement's validity, stating it was unnecessary for a writ of certiorari. It advised the petitioners to pursue their contentions before the Tribunal and appellate authorities under the Act, or seek additional benefits by approaching the Government for further notifications. Consequently, the writ petitions were dismissed without interference or opinion on the endorsement's validity.

In conclusion, the judgment addresses the interpretation of Government Orders related to tax benefits for the coffee curing industry under the Karnataka Sales Tax Act, emphasizing the need for appropriate notifications to provide concessions and incentives to eligible industries. The court's directive to the Government and guidance to the petitioners on pursuing remedies through appellate channels underscore the importance of legal procedures and administrative compliance in resolving tax benefit disputes.
2005 (11) TMI 452

Issues:
Assessment orders passed by taxing authority without hearing the assessees and review of assessment orders under discretionary powers of the court.

Analysis:
The judgment pertains to four writ petitions heard together concerning identical legal issues. The petitioners, registered dealers under the Assam General Sales Tax Act, 1993, engaged in the inter-State trade of tea, faced disputes regarding turnovers for the year 2001-02. The taxing authority issued notices demanding taxes without providing an opportunity to the assessees to present their books of account, leading to the petitioners approaching the High Court challenging the assessment orders.

The central question in these cases was whether the court could review assessment orders passed by the taxing authority under the discretionary powers of Article 226, especially when the assessees had not utilized the alternative remedy available through appeal. The petitioners argued that they were not given sufficient time to produce the required documents and that the assessment was solely based on the report of the Area Inspector of Taxes.

The Additional Advocate-General contended that the assessees had been given ample opportunities to comply with the requirements, and their inaction led to the taxing authority levying taxes as per his best judgment. The court noted that the assessees had failed to furnish the necessary declarations within the prescribed time, and their conduct was deemed negligent and callous.

The court emphasized the importance of exhausting statutory remedies before seeking judicial intervention, citing provisions for appeal in the concerned Act. It was held that the assessees' failure to act in accordance with the law and their disregard for the taxing authority's directives precluded them from seeking relief through writ petitions. The court referenced relevant case laws to support its decision, highlighting that judicial review is limited to examining the decision-making process and not the correctness of the decision itself.

Ultimately, the court disposed of the writ petitions, directing the petitioners to pursue the alternative remedy of approaching the appellate forum within three weeks. The taxing authority was restrained from taking coercive measures for recovery during this period, emphasizing the importance of adhering to statutory procedures before seeking judicial intervention.
2005 (11) TMI 451

Issues Involved:
1. Legislative competence of the State Legislature to levy sales tax on rectified spirit.
2. Discrimination in subjecting rectified spirit and ethyl alcohol to different rates of sales tax.
3. Refund of excess tax collected and interest thereon.

Detailed Analysis:

Legislative Competence:
The primary contention was whether the State Legislature had the competence to levy sales tax on rectified spirit, a product of the alcohol industry regulated by the Central Government under the Industries (Development and Regulation) Act, 1951. The petitioners argued that the State lacked legislative competence based on the Supreme Court's decision in Synthetics & Chemicals Ltd. v. State of U.P. [1991] 80 STC 270. However, the court referred to a subsequent Supreme Court decision in State of U.P. v. Synthetics and Chemicals Ltd. [1992] 87 STC 289, which clarified that the State Legislature is competent to levy sales tax on alcohol under entry 54 of List II of the Seventh Schedule to the Constitution. The court held that the latter decision is binding and the State Legislature has the competence to levy such tax.

Discrimination:
The petitioners contended that rectified spirit and ethyl alcohol, being chemically identical, should not be subjected to different rates of sales tax. They argued that this differentiation was discriminatory and violated Article 14 of the Constitution. The court noted that the Legislature has the authority to classify and fix different rates of tax for different products. The classification between rectified spirit and ethyl alcohol was justified based on their commercial usage and end-users. Rectified spirit is used in the manufacture of potable liquor, whereas ethyl alcohol is used as an industrial solvent and in pharmaceuticals. The court emphasized that commercial parlance and market understanding are crucial in taxation matters, not just the chemical composition. Therefore, the differentiation in tax rates did not amount to discrimination.

Refund of Excess Tax and Interest:
The petitioners sought a refund of the excess tax collected on rectified spirit, arguing that it should have been taxed at the same rate as ethyl alcohol. They also sought interest on the refunded amount. Given the court's findings that the State Legislature had the competence to levy sales tax on rectified spirit and that the differentiation in tax rates was not discriminatory, the claims for refund and interest were dismissed.

Conclusion:
The court dismissed the writ petitions, upholding the legislative competence of the State to levy sales tax on rectified spirit and rejecting the claim of discrimination between rectified spirit and ethyl alcohol. The court also denied the request for a refund of excess tax and interest.
2005 (11) TMI 450

Issues Involved:
1. Applicability of the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 regarding tax-free goods used as packing material.
2. Justification of the Tribunal's decision on the sale of containers and bardana, etc.

Detailed Analysis:

Issue 1: Applicability of the Second Proviso to Section 5(2)(a)(ii)
The core issue was whether the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, applied to goods purchased tax-free under a certificate of registration and used as packing material for snuff, which is a tax-free item.

Facts and Arguments:
- The assessee, engaged in the manufacture and sale of snuff (a tax-free item), purchased packing materials tax-free under the registration certificate.
- The Sales Tax Officer added the value of these packing materials to the taxable turnover, asserting they were shown for resale but used for packing, invoking the second proviso to section 5(2)(a)(ii).
- The Tribunal ruled that the second proviso did not apply, as these materials were not resold but used for packing snuff.

Legal Provisions:
- Section 5(2)(a)(ii): Defines "taxable turnover" and includes sales to registered dealers of containers or packing materials for goods specified for sale.
- Second Proviso: If goods intended for resale or use as raw materials are used for another purpose, their price is included in the taxable turnover of the purchasing dealer.

Court's Analysis:
- The court noted that containers and packing materials for goods specified for sale are deductible from gross turnover.
- The court agreed with the Tribunal that the second proviso did not apply because the packing materials were not resold but used for packing snuff.
- The court found that the registration certificate under the local Act did not have a specific column for packing materials, leading to their incorrect listing under "for resale."
- The court concluded that the absence of a specific column for packing materials in the registration certificate should not penalize the assessee.

Conclusion:
The court held that the second proviso to section 5(2)(a)(ii) did not come into play, affirming the Tribunal's decision. The Tribunal was right in holding that the second proviso did not apply to the case.

Issue 2: Justification of the Tribunal's Decision on the Sale of Containers and Bardana
The secondary issue was whether the Tribunal was justified in holding that there was a sale of the goods in question, namely containers and bardana.

Facts and Arguments:
- The Tribunal had an alternative finding that even if the goods were for resale, the price charged for snuff included the price of the containers, implying their sale.
- The Tribunal referenced the Allahabad High Court decision in Commissioner of Sales Tax, U.P. v. Vanaspati Trading Company, which supported the view that packing materials could be considered sold with the main product.

Court's Analysis:
- The court noted that this issue was based on an alternative finding by the Tribunal.
- Since the primary finding was that the second proviso did not apply, the court deemed it unnecessary to address this alternative issue.

Conclusion:
The court did not find it necessary to answer the second question, as the primary issue was resolved in favor of the assessee. The Tribunal's alternative finding was rendered moot.

Final Judgment:
The reference was answered accordingly, affirming the Tribunal's decision that the second proviso to section 5(2)(a)(ii) did not apply and the issue of resale of packing materials did not need further consideration.
2005 (11) TMI 449

Issues:
Violation of principles of natural justice in passing penalty order under section 5B(2)(ii) of the Andhra Pradesh General Sales Tax Act, 1957.

Analysis:
The petitioner, a company registered under the Companies Act, 1956, engaged in the manufacture of biscuits, was declared eligible for incentives under G.O. Ms. No. 108, Industries and Commerce Department, dated May 20, 1996, entitling it to a tax holiday benefit. The petitioner also undertook job-work for manufacturing branded products of other companies. The respondent issued a show cause notice proposing a penalty of Rs. 1,42,13,160 under section 5B(2)(ii) of the Act, alleging a violation in the purchase and use of light diesel oil for manufacturing biscuits. The petitioner contended that the use of light diesel oil did not violate the Act and promptly filed an explanation. The impugned order, however, held the use of light diesel oil as a deemed sale, imposing a penalty without prior notice or opportunity for the petitioner to respond, thus violating the principles of natural justice.

The court found that the conclusion drawn by the authority in the impugned order was not part of the grounds alleged in the show cause notice, and the petitioner was not given notice of this aspect. This lack of opportunity to respond before the penalty order was passed was deemed a violation of the principles of natural justice. Consequently, the court set aside the impugned order, allowing the writ petition and emphasizing that the respondent could re-initiate proceedings after providing the petitioner with proper notice and an opportunity to be heard.
2005 (11) TMI 448

Classification of goods - Mosquito mats/coils or refills - whether the goods manufactured and marketed by the petitioners as mosquito mats/coils or refills would fall under entry titled "pesticides and insecticides" in the notifications issued u/s 3-A of the U.P. Trade Tax Act, 1948 ("the Act") - HELD THAT:- We find from the pleadings that articles/goods sold by the petitioners, though used as household articles, are nevertheless household "insecticide" which fact is also mentioned on their products. The chemical composition used in manufacturing the goods in question (though widely known and popularly understood as mosquito repellent) is allethrin which is an "insecticide". The petitioners are using chemicals for manufacturing the finished goods which have been treated as "insecticides" and under the provisions of the Insecticides Act, 1968 a certificate has been issued by Government of India, Ministry of Agriculture which leaves no scope of doubt that allethrin which is used in the product sold by the petitioners is "insecticide". Insecticides Rules, 1971 provides for the manner of labeling. Labelling/packing of the products of the petitioner is as per the aforequoted rule 19(4) of the Rules.

D-Trans "allethrin" and "pallethrin" are used in manufacturing the goods which have been described as household "insecticides " on their products as per the statutory requirement under the Insecticides Act. In the absence of any specific entry relating to mosquito repellent/mosquito destroyer and at the same time there being an entry mentioning "insecticides", it can reasonably be said that an ordinary person will ordinarily understand the product of the petitioners falling under category of the "insecticides".

These facts coupled with the principles enunciated in the decisions referred to above leave us in no doubt that the products sold by the petitioners are basically in the categories of "insecticides" particularly in the absence of any indication in the notification in question.

We are, however, unable to persuade ourselves to hold that merely because the petitioners have at various stages contended that the product is described or commonly traded as "mosquito repellent" it should not fall in the category of "insecticides". We would have accepted such a contention if there was separate or specific exclusion entry of "mosquito repellant" in the existing entry of "pesticide and insecticide". In that case there would have been no difficulty but in the absence of specific mention as indicated above, the product in question falls under the entry "insecticides". The percentage of "allethrin" used in the product, is of no consequence at all, since it is admittedly an "insecticide".

Thus, we consider it appropriate to decide the issue and matter finally at this stage and reject the objection raised by the learned counsel for the respondents, that the petitioners seeks to challenge, at this stage, show cause notice issued u/s 21(2) of the Act.

All the above Writ Petitions are allowed.
2005 (11) TMI 447

Issues Involved:
1. Definition and interpretation of "base turnover" under G.O. Ms. No. 108, dated May 20, 1996.
2. Eligibility for sales tax deferment for expanded industrial units.
3. Applicability of previous Government Orders (G.O.s) in interpreting G.O. Ms. No. 108.
4. The necessity of achieving local sales levels for tax deferral benefits.

Issue-wise Detailed Analysis:

1. Definition and Interpretation of "Base Turnover" under G.O. Ms. No. 108:
The primary issue revolves around the meaning of "base turnover" as contained in para 7 of G.O. Ms. No. 108, dated May 20, 1996, for the purpose of computing the benefit of deferral sales tax in respect of expanded industrial units. The term "base turnover" was defined as "the best production achieved during three years preceding the year of expansion or the maximum capacity expected to be achieved by the industry as per the appraisal made by the financial institution before funding the project, whichever is higher." The court emphasized that this definition signifies the best production in terms of the quantity of goods produced rather than in monetary value.

2. Eligibility for Sales Tax Deferment for Expanded Industrial Units:
The petitioners, all manufacturers in Andhra Pradesh, claimed the benefit of sales tax deferment based on their expanded production capacities. They argued that once they achieved the base production level as defined under G.O. Ms. No. 108, they should be eligible for deferment. The court agreed with the petitioners, stating that the benefit of deferment should be computed based on the best production in terms of quantity, not turnover or sales tax levels.

3. Applicability of Previous Government Orders (G.O.s) in Interpreting G.O. Ms. No. 108:
The court examined whether G.O. Ms. No. 108 should be read in conjunction with earlier G.O.s, such as G.O. Ms. No. 386 and G.O. Ms. No. 75, which provided different definitions of "base turnover." The court concluded that G.O. Ms. No. 108 is a self-contained and independent code, and there is no need to refer to earlier G.O.s for interpreting its provisions. The court noted that the term "base turnover" in G.O. Ms. No. 108 was defined differently from previous orders, emphasizing the best production achieved rather than turnover in value.

4. The Necessity of Achieving Local Sales Levels for Tax Deferral Benefits:
The departmental authorities and the Tribunal had taken the view that dealers must not only achieve the base turnover but also exceed the level of local sales tax payment to qualify for deferment. The court rejected this view, stating that G.O. Ms. No. 108 does not impose any requirement for maintaining local sales levels. The court held that the benefit of deferment is available based on achieving the base production level in terms of quantity, without any reference to local or inter-State sales levels.

Conclusion:
The court set aside the impugned orders of the Tribunal and the assessments, directing the assessing authorities to compute the benefit of deferral in sales tax based on the "base turnover" as the best production in terms of the quantity of goods produced. The tax revision cases filed by the petitioners-assessees and the writ petitions were allowed, while those filed by the department were dismissed.
2005 (11) TMI 446

Issues:
Interpretation of exemption under Incentive Scheme, 1987 for industrial units undertaking manufacturing processes outside factory premises.

Analysis:
The revision petition under section 86 of the Rajasthan Sales Tax Act, 1994 challenged the Rajasthan Tax Board's order dismissing the Revenue appeal regarding the entitlement of an industrial unit to exemption from sales tax under the Incentive Scheme, 1987. The assessing authority noted that part of the manufacturing process of polishing granite slabs and tiles was done outside the factory premises on a job basis from other industrial units. The authority argued that this disentitled the industrial unit from the exemption benefit. However, the first appeal by the assessee was allowed by the Deputy Commissioner (Appeals), and the Tax Board upheld this decision, ruling that the industrial unit could not be denied the benefit of the Incentive Scheme, 1987 despite the manufacturing process occurring outside the factory premises.

The judgment highlighted that the benefit of exemption under the Incentive Scheme, 1987 is granted to industrial units making eligible fixed capital investments within the State of Rajasthan. Eligibility for exemption is determined by competent Screening Committees at district or state levels. The power to grant, revoke, or modify exemptions lies with these Committees, not the assessing authority. The exemption from sales tax applies to goods manufactured by the industrial unit and sold within the state or in inter-State trade based on eligible investments made. Even if a part of the manufacturing process is outsourced to other industrial units due to business expediency or other reasons, the goods remain those manufactured and sold by the industrial unit, making them eligible for exemption under the Scheme.

In conclusion, the Court found no merit in the revision petition and dismissed it. The judgment emphasized that industrial units should not be denied the benefit of incentives under the Incentive Scheme, 1987, even if certain manufacturing processes are conducted outside the unit's premises. The decision reaffirmed that the industrial unit remains eligible for exemption as long as the goods are manufactured and sold by them, regardless of where specific manufacturing processes take place.
2005 (11) TMI 445

Issues: Interpretation of the term "exempted goods" under section 13-A(2) of the Rajasthan Sales Tax Act, 1994 based on a notification exempting certain goods from tax.

In this judgment, the main issue revolves around the interpretation of the term "exempted goods" under section 13-A(2) of the Act of 1994 in light of a notification issued by the State Government granting exemption on the sale of specific goods. The notification in question, S.O. 125 dated July 9, 1998, exempts the sale of stainless steel flats, ingots, and billets subject to specified conditions. The Tax Board held that goods exempted under this notification fall within the definition of "exempted goods" as provided in section 2(18) of the Act, and therefore, the turnover related to these goods, subject to fulfilling the conditions, cannot be included in the turnover on which turnover tax is levied under section 13-A of the Act.

The court analyzed the power of the State Government to grant exemptions from tax under section 15 of the Act, emphasizing that the government's authority to exempt goods is extensive and can be prospective or retrospective, conditional or unconditional. The court highlighted that the exemption granted under a notification issued in exercise of these powers implies that the goods are exempted in accordance with the provisions of the Act. The conditional nature of the exemption does not exclude the goods from being classified as "exempted goods" as per the statutory definition. The court clarified that once the conditions specified in the notification are met, the goods are considered exempted, and their turnover falls within the purview of section 13-A(2)(i) of the Act.

Ultimately, the court upheld the Tax Board's decision, stating that the turnover related to the sale of stainless steel flats, ingots, and billets exempted under the notification is indeed entitled to exclusion under section 13(2)(i) of the Act. The court found no grounds to interfere with the Tax Board's conclusion and dismissed the revision accordingly.