1. Lease – Lease tax not applicable when possession and control of asset not parted with

Bus transport service from residence to factory and back was provided for employees of a company. Driver and conductor were provided by the Bus Transporter. It was held following BSNL’s case (2006) 145 STC 91 (S.C.) that as no possession and control of buses was parted at any time, there was no transfer of right to use goods and U.P. Trade Tax Act was not applicable.

Commissioner of Trade Tax, U.P. vs. Prince Tourists Bus Service (2008) 13 VST 412 (All)

2. Branch Transfer or Inter-State Sale

On the facts of the case, the H.C. held that the inter-State movement of goods was by way of inter-State sale and not branch transfer in view of the evidence that there were Agreements between the assessee and the parties to whom the goods were sold by the depots and in the Stock Transfer Memos and the Sale Invoices raised from the depot, the same Agreement numbers were mentioned.

Modi Spinning & Weaving Mills vs. Commissioner of Trade Tax, U.P. (2008) 13 VST 432 (All.)

3. Branch Transfer or Inter-State Sale

Factory of the assessee was situated in Orissa and goods were transferred to branch at Kolkata under “Self” Railway Receipts. The branch office in turn endorsed the R.Rs in favour of their appointed Clearing and Forwarding Agents, who after taking delivery transferred the cement to various dumps/depots taken on rent by the branch office for storage purposes. The cement was then purchased by the stockists appointed by the company. The inter-State movement was held by the Tribunal as inter-State sales on the ground that the goods were destined for pre-identified stockists. The HC held that the burden lay on the Revenue to dispute the contention of the assessee by proving that there was an inseparable link between the dispatch and the sale to the stockists. The lower forums had not examined the transactions in detail before rejecting the claim of branch transfer and the movement was held as branch transfer.

Associated Cement Company vs. State of Orissa (2008) 13 VST 90. (Orissa)

4. Classification – Handkerchief not a textile fabric simpliciter

Handkerchiefs are not exempt as textile fabric since handkerchiefs are made out of textile fabrics but were not textile fabrics simpliciter. Hence, they will fall in residuary entry during the period, 1-5-2005 to 31-1-2006 under the West Bengal VAT Act. Under the 1994 Act, handkerchiefs along with other similarly placed items had been included in textile fabrics by an inclusive clause thereby making it clear that these items do not normally fall within the meaning of “Textile fabrics”.

Murli & Brothers vs. ACST (2008) 13 VST 46 (WBTT)

5. Photography activity – Whether Works Contract?

The photographic activity of taking photographs, developing of the film and printing of the photograph on paper constitutes works contract liable to tax following ACC’s. Rainbow Colour Lab and C.K. Jidheesh & Co.’s cases were not followed.

Johny Joseph vs. State of Kerala (2008) 13 VST 64 (Kerala)

6. Reference Applications – Applicability of Limitation Act

Sec. 5 of the Limitations Act was held as not applicable vis-a-vis time limit within which Reference Applications were to be filed. Thus, the BST Act has expressly or by necessary implication excluded the power of the High Court to condone delay in filing the Reference Application beyond the statutory time limit of 90 days.

CST vs. N.H. Polymers (2008) 13 VST 73 (Bom.)

7. Retrospective amendment to Schedule entry

Retrospective amendment treating paper based decorative laminates as covered by Schedule C-II-61 (Laminated sheets of all kinds) and not under Schedule C-II-9 (Paper) was held as not being arbitrary as the amendment was merely of a clarificatory nature.

Neoluxe India P. Ltd. 13 VST 157 (Bom.)

8. Commissioner’s Circular – Binding on whom?

The S.C. has ruled that Rules of Interpretation which apply to classification of items in a taxing statute can differ in appropriate cases from the terms and conditions of Exemption Notification. Interpretation adopted in a classification dispute need not be the same as interpretation of an exemption notification under the same Act. One cannot confuse the terms used in the Notification by comparing the language of the Notification with the language of the taxing statute. Since Circulars are not binding on the assessee, it is open to the assessee to claim the benefit of exemption/ concession de hors the directions contained in the Circular.

Padinjarekara Agencies Ltd. vs. State of Kerala (2008) 13 VST 151 (S.C.)

9. Penalty – Existence of mens rea whether necessary to levy/sustain penalty

The assessee purchased steel scrap on “As is where is” basis in one lot by using Recognition certificate which stipulated that the goods were to be used in manufacture of goods. The assessee sold 10% of the scrap instead of using it in manufacture. The assessee while defending himself against penalty contended that the sales were effected since he could not use the scrap. However, it was found that the purchaser had used the said scrap for melting. The S.C confirmed the penalty on the ground that mens rea existed in the present case as the assessee had failed to inform the assessing authority that he could not comply with the Recitals in the Declaration issued in pursuance of the Recognition certificate. However, while confirming the penalty, the S.C. negatived the contention of the Revenue that under no circumstances absence of mens rea would not be a plea for levy of penalty. If an assessing authority had been conferred with a discretionary jurisdiction to levy penalty, existence of mens rea or otherwise would be a relevant factor

Bharjatiya Steel Industries vs. CST, U.P. (2008) 13 VST 514 (S.C.)

10. Bullion and Specie (Gold) – Meaning

The S.C. held that the Notification issued under the APGST Act reducing the rate of sales tax in respect of “bullion and specie (gold)” would be applicable only to gold in two forms – gold bullion and gold specie only – and not to silver bars. The S.C. thus confirmed the principle that Exemption Notifications were to be construed strictly and if the intention of the Legislature was clear and unambiguous, it was not open to the Courts to add words in the Exemption Notification to extend the benefit to other items which did not find mention in the Notification.
Orient Traders vs. CTO (2008) 13 VST 530 (S.C.)

11. Yeast – Whether a chemical or fungus or living organism?

The Supreme Court has held that yeast, which is used in baking, is a chemical and not fungus or a living organism.

Mauri Yeast India Ltd vs. State of UP, – Source: Business Standard, 28-4-2008.

12. Branch transfers/inter-State sale

The Central Sales Tax Appellate Authority held that once the stock transfers from one branch to another, were held to be inter-State sales, the appropriate State (from where the movement of goods commenced) only can levy tax. In view of that position in law, the sales tax authorities of the transferee States cannot levy tax on such transaction as local transaction. The taxes, if any, collected by those States were directed to be refunded.

M/s Siddhartha Apparels (Pvt) Ltd., Chennai vs. Secretary, Commercial Tax Department, Chennai & Others [VSTI 2008 B-133].

13. Deduction on second sale

The assessee before the Supreme Court had purchased raw material for manufacture of saleable goods on payment of sales tax and the same was allowed deduction from the gross turnover. However, where the goods were purchased from Units exempted from payment of tax, the same was denied by the Revenue. The Apex Court, disapproving the denial, held that the phrase “the purchase value of goods which have been subjected to tax” would also take in its sweep the sale by exempted Units also. For the above conclusion, the Apex Court referred to the scheme of the Punjab Act of 1948.

State of Punjab & Others etc. etc. vs. M/s Perfect Synthetics etc. (2008) 31 PHT 352 (SC).

14. Exemption

1. Retrospective withdrawal

The Supreme Court held that the exemption cannot be withdrawn retrospectively. The Supreme Court in that connection observed that the retrospective withdrawal amounted to increasing the tax liability. Such an action was therefore held to be illegal and invalid.

State of U. P. & Others vs. M/s Deepak Fertilizers & Petrochemical Corpn. Ltd. (2008) 16 KTR 141 (SC).

15. Interpretation

The Supreme Court held that the notification granting exemption need to be liberally interpreted. The assessee in that case was a Small Scale Industrial Unit duly certified by the Director of Industries. It was engaged in re-packaging of the material in small packing for retail sales. The Revenue, however, interpreting the term ‘manufacture’ based on Excise law, denied the exemption. The Apex Court held that the Revenue was bound to honour the certificate of exemption granted with an open eye about the activities carried on by the Unit. The reliance on Excise law for interpreting the term ‘manufacture’ was also held to be erroneous.

M/s Pondicherry State Co-op. Consumer Federation Ltd vs. Union Territory of Pondicherry. (2008) 16 KTR 152 (SC).

16. Effect of Amendment – Packing material

The Supreme Court held that when the amending Act expressly mention the date of its coming into force, it cannot be construed as a retrospective one and therefore such an amendment did not apply to the period prior to the date of it being brought into force.

M/s Co-operative Company Ltd vs. Commissioner of Trade Tax, U. P. (2008) 16 KTR 158 (SC).

17. Entries in Schedule

1. Purified water

The Punjab VAT Tribunal held that purified water was neither mineral water nor distilled water or packaged water. Therefore, the water sold by the assessee was held to be exempt from sales tax under entry 56 of Schedule A to the Punjab VAT Act.

M/s Aman Pure Drinks, Muktsar vs. State of Punjab (2008) 31 PHT 367 (PVT).

2. Cotton tape

The Allahabad High Court held that when for the last several years the disputed cotton tapes were being treated by the revenue as cotton fabric, there was no basis for changing such a classification. The High Court, therefore, held that the cotton niwar, with 30 mm width, was covered by the word ‘cotton fabric’ and therefore exempt from tax.

The Commissioner, Trade Tax, U. P. vs. S/s Shankar Enterprises, Varanasi. [VSTI 2008 B-131].

3. Ferrous & Non-ferrous wire

The Commissioner, while considering the entries under the U.P. VAT Ordinance 2007, held that:

i) Wire of different diameters made from ferrous and non-ferrous metals with extrusion method was taxable @ 4%.

ii) Press-tressed concrete poles, electric poles or pillars made of cement and concrete were taxable @ 4% under entry relating to electrical goods.

iii) In-line connector and cable terminal – both the items were taxable @ 4% under Entry 236 of Schedule 2 relating to electrical goods.

Source : National Tax News & Views, Vol. 36 Part 7, April 2008, Page Nos. 44, 46, 52, 58 & 63.

18. Entry Tax

The Supreme Court held that the Municipality had neither the power nor competence to levy entry tax on vehicles and therefore, the Cantonment Board cannot levy such a tax.

M/s Ramgarh Cantonment Board & Another vs. State of Jharkhand & Others [VSTI 2008 B-120].

19. Format of Debit/Credit Notes

The Kerala High Court held that the prescription of a particular format for issue of Debit Note/Credit Note, when the goods were returned by the buyer to seller, was a part of the rules and was not ultra vires.

M/s Pipe Distributors vs. Commercial Tax Officer (2008) 16 KTR 171 (Ker).

20. Jurisdiction

The Central Sales Tax Appellate Authority held that its jurisdiction was circumscribed by the provisions of the Central Sales Tax Act itself and therefore in a case where the Supreme Court directed the High Court to re-examine the case in the light of its decision, the proper jurisdiction would lay before the High Court and the Appellate Authority cannot consider such a matter.

M/s Macwin Explosives & Accessories Pvt. Ltd. vs. Secretary, Commercial Tax Department, Chennai & Others (2008) 31 PHT 360 (CSTAA).

21. Limitation – Applicability of section 5 of the Limitation Act

The Supreme Court, after considering the language of section 35(1) of the Central Excise Act 1944, held that when the legislature intended the appellate authority to condone the delay in submission of appeal only up to a period of thirty days after expiry of the prescribed period of sixty days, there was complete exclusion statutorily of section 5 of the Limitation Act, with the result neither the Commissioner nor the High Court can have any power to condone the delay beyond the statutory period of thirty days.

M/s Singh Enterprises vs. Commissioner of Central Excise, Jamshedpur.

Source : Sales Tax Matters, Vol. 11 Part 4, Page 392.

22. Recovery

1. Forcible collection

The West Bengal Taxation Tribunal disapproved the recovery by coercive measures without ascertaining the service of demand notice and the copy of assessment order on the assessee.

Mr Ashok Ladsaria vs. C. T. O., Chandnichowk Charge & Others (2008) 51 S. T. A. – 147.

2. Exemplary cost

The West Bengal Taxation Tribunal deprecated the unauthorised act of sealing the business place, preventing the assessee from access to its books of account and from carrying on business. The Taxation Tribunal held that such an illegal act, not only lowered the prestige of the assessee, caused financial loss to it, but also infringed the fundamental right guaranteed by the Constitution of India. The Tribunal, therefore, granted an exemplary damage cost of Rs. 1,000/- to be paid by the Revenue within a period of three months.

M/s Vikash Iron & Steel Pvt. Ltd & Another vs. C.T.O., Jorasanko Charge & Others (2008) 51 S. T. A. – 132.

3. Doctrine of corporate veil

The Allahabad High Court held that even when a sick company was being rehabilitated, during the period of rehabilitation it was fully liable to pay tax.

However, such tax dues of the company cannot be recovered from the personal assets of the Director of the company.

M/s Meekin Transmission Ltd., Kanpur Nagar & Another vs. State of U. P. & Others. 2008 NTN (Vol. 36) – 107).

23. Writ Petition

The Punjab & Haryana High Court dismissed a writ petition submitted by the assessee, on the same cause of action after the earlier petition was allowed to be withdrawn without any permission to file a de novo one.

M/s Shivalik Plastichem (India) Ltd vs. State of Punjab & Others (2008) 31 PHT 348 (P&H).