Single-point sales tax on cotton cloth and yarn applied only at the manufacturer's turnover, not later depot sales.

Under the single-point scheme for cotton cloth and yarn, Section 3A of the U.P. Sales Tax Act authorised taxation at one notified stage only. The relevant notification made goods manufactured in the State taxable at the manufacturer's point, so tax attached to the mill's turnover when goods were transferred to depots. Once the goods passed from the manufacturer to the depot, the manufacturer's role ended and the depots sold in a different commercial capacity. The fact that the depots belonged to the same company did not convert their later sales into manufacturer sales. The special arrangement for uneconomic mills did not change the single-point character of the levy, and tax on depot sales was unsustainable.

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Issues: Whether, under the single-point scheme for cotton cloth and yarn, sales tax was chargeable only on the mill's turnover on transfer of goods to depots, or also on the turnover at which the depots sold the goods to dealers and consumers.

Analysis: Section 3A of the U.P. Sales Tax Act empowered the State Government to notify a single taxable point in the series of sales. The relevant notification made cotton cloth and yarn manufactured in the State taxable at the manufacturer's point only. The mill transferred goods to depots operating under licence, and once the goods passed from the manufacturer to the depot, the manufacturer's function ceased and the depot acted in a different commercial capacity. The fact that the depots were part of the same company did not justify treating every subsequent sale by the depots as a manufacturer's sale. The notification concerning special arrangements for uneconomic mills did not alter the single-point character of the levy.

Conclusion: Tax could be levied only on the turnover of the mill and not on the turnover of the depots. The assessment on the depot sales was unsustainable.

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