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Issues:
1. Taxability of agarbatti as luxury goods for assessment years 1971-72 and 1972-73 under the Orissa Sales Tax Act. Detailed Analysis: The appeals were filed by the State challenging the first appellate Court's judgment regarding the taxability of agarbatti for the assessment years 1971-72 and 1972-73 under the Orissa Sales Tax Act. The AO initially accepted the tax payment by the dealer based on the turnover of sale of agarbatti. However, later, the AO considered agarbatties as luxury goods due to changes in the tax schedule. The AO imposed additional tax demands based on the revised tax rates for luxury goods, leading to disputes in both assessment years. For the assessment year 1971-72, the AO imposed additional tax demands by applying tax rates of 7% and 12% for different quarters, considering agarbatti as luxury goods post the changes in the tax schedule. The first appellate Court referred to a decision by the Punjab High Court and concluded that agarbatties are not luxury goods, supporting the dealer's contention. The Court emphasized that agarbatti is an article of common use and not a luxury item, aligning with the general understanding and the CIT's classification of agarbatti as grocery goods. As a result, the first appellate Court annulled the extra tax demand for the year 1971-72. In the assessment year 1972-73, the AO enhanced the purchase figures due to alleged purchase suppression by the dealer and taxed the turnover at 12%, rejecting the dealer's claim for an 8% tax rate. The State, in the second appeal, argued that the first appellate Court erred in considering agarbatti as a non-luxury item, citing the Supreme Court's decision and the intent of the legislature to treat perfumery as luxury goods. The State contended that the first appellate Court cannot challenge the tax schedule entries and must uphold the tax rates for luxury goods. The Tribunal, after considering the arguments from both parties, concluded that the first appellate Court erred in categorizing agarbatti as a non-luxury item. The Tribunal held that agarbatti falls under the category of perfumery, which is considered a luxury good under the tax schedule. Therefore, the Tribunal allowed the State's appeals, reinstating the AO's assessments and annulling the annulled extra tax demands by the first appellate Court for both assessment years.
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