1. Association of persons

The Allahabad High Court, while interpreting the provisions of U. P. Trade Tax Act 1948, held that merely because an individual attested the signature of another person for the purpose of opening a bank account, it cannot be inferred that a business was carried on as an association of persons. In that connection, the court also held that unless there was a volition on the part of the persons to carry on the business jointly to earn the profit, there cannot be any association of persons.

The Commissioner, Trade Tax, U. P., Lucknow vs. M/s Ambika Ply-wood & Glass Home, Mainpuri & Others. 2009 NTN (Vol. 41) – 58.

2. Determination – jurisdiction

The Lucknow Bench of the Commercial Tax Tribunal, while considering the provisions of Section 59 of the VAT Act, held that while determining a question raised in an application under Section 59, the Commissioner cannot decide an issue which was not raised in the application.

M/s Roop Narain Shyam Narain vs. Commissioner, Commercial Taxes, U.P. 2009 NTN (Vol. 41) (Tribunal – 6).

3. Entries in Schedule – Ayurvedic medicine

1. The Supreme Court, while disposing of several civil appeals in regard to the classification, held that the products in powder form was compounded with several indigenous ayurvedic material. As those products in common parlance were not described as medicinal preparation, the same were rightly held by the Tribunal as a toilet preparation. For the aforesaid purpose, the Apex Court followed its own earlier decision in the case of the very same assessee.

Commissioner of Central Excise, Nagpur vs. Shree Baidyanath Ayurved Bhawan Ltd. (2009) 54 S.T.A. – 156.

2. The Supreme Court, while deciding several appeals arising out of the order passed by Customs Excise & Gold (Control) Appellate Tribunal, New Delhi, held that Ayurvedic medicines produced under drug Licence issued under the Drugs and Cosmetics Act, were covered by Chapter 30 and not Chapter 33 of the Central Excise Tariff Act. The Supreme Court also observed that the common parlance test was not a decisive factor and merely because a product can be of cosmetic use by itself, cannot convert Ayurvedic medicine to a cosmetic product. The Apex Court in that connection also reiterated that the onus of establishing that the product was covered by a particular entry was always on the Revenue and if the Revenue did not lead evidence, then the onus was not discharged.

Commissioner of Central Excise, Delhi vs. M/s Ishaan Research Lab (P) Ltd. & Others. 2009 NTN (Vol. 41) – 71.

4. Inter-State Works Contract

The Madras High Court held that when the goods involved in the execution of works contract moved from other States at the instance of the contractor assessee for a specified works contract undertaken by him, the transaction was deductible under Section 3B(2)(a) of the Tamil Nadu General Sales Tax Act.

The State of Tamil Nadu vs. Tvl. Hindustan Dorr Oliver Ltd. 2009-10 (15) TNCTJ – 180.

5. Interpretation

The Supreme Court, while considering the amendment to the Service Tax provisions by Finance Act 2008, held that the Explanation to Section 65(19) inserted by the said Act was not clarificatory in nature and therefore the same was applicable only with prospective effect. The amendment in question introduced a new concept of imposition of tax, so as to widen the tax net. The Apex Court also held that the use of the phrase ‘for the removal of doubt’ was not conclusive in deciding the nature or the effect of the amendment.

Union of India & Others vs. M/s Martin Lottery Agencies Ltd. (2009) 17 KTR 530 (SC).

6. Inter-departmental disputes

The Allahabad High Court, by following the Supreme Court judgments in the case of M/s. Oil & Natural Gas Commission [(1995) Supplement 4 SCC 541)] & Commissioner of Income Tax vs. M/s Oriental Insurance Company Ltd (304 ITR 55), held that filing of a revision by one department against the other before High Court was not appropriate nor permissible and the disputes, if any, should be resolved through inter-departmental mechanism and should not be carried to a court of law.

M/s Hindustan Aeronautics Ltd., Lucknow & Another vs. Commissioner, Trade Tax, Lucknow & Another (2009) 34 PHT 470 (All).

7. Interest

The Haryana Tax Tribunal held that a Revisional Authority cannot charge interest for the first time while revising the order of assessment.

M/s Henkel Spic India Ltd., Rohtak vs. State of Haryana. (2009) 34 PHT 494 (HTT).

8. Lease of ATMs & Its installation

The buyers in Karnataka placed order with a seller in Pondicherry for manufacture or import of ATMs. Accordingly the machines were manufactured and thereafter handed over to a public carrier who delivered the goods at the buyers’ place in Karnataka. The technicians in Karnataka opened the consignment, checked the contents and then delivered the machines to the respective buyers. The buyers made the payment directly to the Pondicherry seller. On the above facts, the Karnataka High Court held that the case was not that of transfer of right to use goods, but was that of sale of ATMs. The movement of goods from Pondicherry to Bangalore in Karnataka was occasioned by the Purchase Orders of the respective buyers. The case was held to be squarely covered by Section 3(a) of the Central Sales Tax Act and therefore was not taxable under the provisions of Karnataka Sales Tax Act. The High Court also observed that the situs of the sale or purchase or the place of delivery was not at all decisive.

M/s NCR Corpn. India Pvt. Ltd., Bangalore vs. The Deputy Commissioner of Commercial Taxes (Intelligence) – 1, Bangalore. 2009 NTN (Vol. 40) – 345.

9. Lease of equipments

The assessee, before the Gujarat VAT Tribunal, had agreed with the local assessees to carry out mining work and transport goods so mined as per the instructions of the contractee. For such service, certain amount was charged as rent. The Tribunal considered the fact that the dumpers, road rollers and JCB machines belonging to the assessee were operated by his own personnel. Fuel required and the expenditure for wear and tear were also to be borne by the assessee. In other words, the machineries in question were used only by the assessee’s own personnel at the site of the contractee, with the result the effective control and possession continued with the assessee. The Tribunal, therefore, set aside the orders of lower authorities, levying tax on rentals so charged by the contractor.

M/s Asha Equipment vs. The State of Gujarat (Second Appeal No. 336 of 2009 decided on 21st July 2009). Source : Sales Tax Journal, August ‘09, Page 417.

10. Manufacture – Drawing of wire from rod

The Allahabad High Court confirmed the decision of the Tribunal and held that no different commodity came into existence when thin wire was drawn from wire rod.

The Commissioner, Trade Tax, U. P., Lucknow vs. S/s Kamla Wires Pvt. Ltd., Varanasi. 2009 NTN (Vol. 41) – 64.

11. Paper Core Pipes, Paper Tubes etc.

The Commercial Tax Tribunal, Lucknow Bench, held that Paper core pipes, Paper tubes, Edge protectors etc were covered by entry 90 of Part A of Schedule II of the U. P. VAT Act, 2008 as packing cases and packing material. The products were therefore liable to tax @ 4%.

M/s Sagar Enterprise vs. Commissioner, Commercial Taxes 2009 NTN (Vol. 41)

(Tribunal – 11).

12. Penal interest

The Madras High Court held that unless there was an assessment order and the tax found due remained unpaid beyond the date specified in the notice of demand, no penal interest can be levied.

M/s Kone Elevator India Pvt. Ltd., Chennai vs. The Commercial Tax Officer. 2009-10 (15) TNCTJ – 175.

13. Purchase in the course of import

The assessee, after entering into a contract with ONGC for setting up a Radio Communication System, imported the goods required to be used in such a contract. The imported goods were cleared on payment of custom duty and then removed to the site by the assessee. While the goods were in transit, the Sales Tax authorities suspected the genuineness and detained the goods. The goods were later on released on the assessee furnishing Bank Guarantee. Since the assessee did not succeed in getting any relief before both the Appellate authorities, it approached the Kerala High Court in revision. The High Court, after considering the back-to-back agreement between ONGC, the assessee and the foreign supplier, held that there was an inextricable link between the import and ultimate supply in the contract, with the result the transaction in question was held to be squarely covered by Section 5(2) of the Central Sales Tax Act. The Court also held that the Purchase Order placed by ONGC with the assessee occasioned the movement of goods from the foreign country.

M/s BPL Telecom Ltd vs. State of Kerala (2009) 17 KTR 521 (Ker).

14. Registration Certificate – Cancellation

The Punjab & Haryana High Court held that in absence of the publication in the Gazette the information on the cancellation of Registration Certificate of a particular dealer, no knowledge about such cancellation can be inferred to a third party and therefore, such a third person was entitled to the benefits available under Section 5(2)(a)(iii) of the Punjab General Sales Tax Act, 1948.

M/s N. S. Oswal Yarns, Ludhiana vs. The State of Punjab 2009 NTN (Vol. 40) – 342.

15. Review

While disposing of a Writ Petition, the Bombay High Court held that the clarification given by the Commissioner of Sales Tax was under the powers of Section 52 of the Bombay Sales Tax Act, 1959 and the same, if desired to be reviewed by the succeeding Commissioner, the provisions of Section 52(2A) containing the procedure to be adopted should be complied with.
The Bombay Tarpaulin Merchants’ Association & Another vs. The State of Maharashtra (Writ Petition No. 1015 of 2008 decided on 7th August 2009).

16. Reassessment

The Allahabad High Court held that Section 21(2) of the U. P. Trade Tax Act, 1948 provided for prior permission from the higher authority before initiation of reassessment proceeding. The High Court in that connection observed that before the sanction or approval was accorded to the proposal of initiating reassessment proceeding, the Additional Commissioner must record reasons in support of the permission. The court also held that the Additional Commissioner was required to pass order with reasons after giving opportunity to the assessee.

M/s M. A. Traders vs. The State of U. P. & Others 2009 NTN (Vol. 41) – 125.

17. Sale vis-à-vis loan

Before the Madras High Court, the assessee had a cotton textile mill. The assessee received certain quantity of cotton from their Sister concern on loan basis, because during the material time there was scarcity of a particular variety of cotton required by the assessee. The assessee thereafter returned the equal quantity of cotton to its Sister concern. The Madras High Court held that the transaction in question was a loan transaction not covered by the definition of the term ‘sale’. The High Court also observed that in a loan transaction, there was no transfer of property in the cotton so loaned and equal quantity was required to be returned to the lender. The Court also held that there was no consideration at all.

The State of Tamil Nadu vs. Tvl. Pullicar

Mills Ltd., Tiruchengode 2009-10 (15) TNCTJ

– 192.

18. Sale of Storage tank etc.

The Allahabad High Court held that supply of storage tank, apparatus and other equipments to the Petrol pump holder by M/s Bharat Petroleum Corpn. Ltd., for facilitating the sale of its products did not involve any transaction of sale, nor such supply can be treated as that of goods, especially because the storage tank and other apparatus continued to be the property of the assessee.

Commissioner, Trade Tax, U. P., Lucknow & Others vs. M/s Bharat Petroleum Corpn. Ltd., Lucknow & Others (2009) 34 PHT 469 (All).

19. TDS & consequential refund

Before the Gujarat VAT Tribunal, the contractee had deducted certain amount as TDS from the payment to contractor and issued only TDS Certificate, but no receipted copy of the Chalan was handed over to the contractor. In the absence of such a Chalan, the claim of refund by the contractor was rejected by the lower authorities. In Second Appeal, the Tribunal held that the authority, before rejecting the refund, should directly make enquiries with the contractee who happened to be a Public Undertaking and the refund claim ought not to have been rejected straightaway for non-production of the Chalan.

M/s Vijay Construction Company vs. State of Gujarat (Second Appeal No. 662 of 2007 decided on 16th July 2009).

Source : Sales Tax Journal, August 2009, Page 417).

20. Transfer of right to use

While disposing of several revisions under Section 11 of the U. P. Trade Tax Act, the Allahabad High Court considered the terms of the agreement entered into by the assessee with the U. P. State Road Transport Corporation. Under the agreement, the assessee had agreed to give buses on hire for a specified period of time for an agreed consideration as rent. Pursuant to the agreement, the buses were handed over to the Corporation and the same were used by the Corporation through its own conductors, but the drivers were that of assessee who was also responsible for normal wear and tear expenses. The agreement also provided that the buses were to be plied as per the directions of the conductors in accordance with the instructions / directions that may be issued by the Corporation. Considering the fact that the possession and effective control over the buses were to be with the Corporation, the Allahabad High Court held that the Tribunal was not justified in holding that the assessee was not liable to pay any tax under Section 3F.

Commissioner, Trade Tax, U. P., Lucknow vs. S/s Ashok Kumar Gupta, Moradabad & Others. 2009 NTN (Vol. 41) – 107.

21. Works Contract

The West Bengal Taxation Tribunal, after comparing the provisions of the West Bengal Sales Tax Act, 1994 in regard to normal sales and deemed sales, held that the principle for single point taxation was not applicable to the works contract tax levied under Section 15 of the 1994 Act.

Shri Biswanath Saraf vs. C. T. O. Cossipore Charge & Others (2009) 54 S. T. A. – 178.

22. Works Contract – TDS – Job worker

The Punjab & Haryana High Court held that when the manual work involved in excavation of trenches, opening, clearing, joining the cables etc did not involve any transfer of property in goods, the contractee was not justified in deducting the tax, merely because the printed format of the agreement covered a common clause of 2% deduction towards sales tax.

Shri Jarnail Singh vs. M/s Bharat Sanchar Nigam Ltd & Others (2009) 34 PHT 452 (P&H).

23. Works Contract or sale

The Allahabad High Court held printing and supply of lottery tickets, bus tickets and other stationery items to the Trade Tax department was not a transaction of sale but that of job work.

Commissioner, Trade Tax, U. P., Lucknow & Others vs. M/s Gyan Security Press Pvt. Ltd., Lucknow & Others. 2009 34 PHT 463 (All).

24. News from Kerala

After introduction of Value Added Tax in the State of Kerala, the Kerala VAT Appellate Tribunal Regulations have been notified under the Gazette dated 2nd June 2009.

Source : Kerala Tax Reporter, Vol. 17 Part X, Oct. 2009, Page 111.