1984 (4) TMI 256 - HC - VAT and Sales Tax

Interpretation of Purchase Tax Rates under Bombay Sales Tax Act: Tribunal Decision Upheld

The Court upheld the Tribunal's decision regarding the interpretation of the Bombay Sales Tax Act. It ruled that the rate of purchase tax for goods ... - Issues Involved:1. Interpretation of Section 15 read with Section 14 of the Bombay Sales Tax Act, 1959.2. Determination of the applicable rate of purchase tax for goods covered by entry 22 of Schedule E.Detailed Analysis:1. Interpretation of Section 15 read with Section 14 of the Bombay Sales Tax Act, 1959:The primary issue was whether the Tribunal was correct in holding that the rate of purchase tax leviable was 3 percent as prescribed in column 5 of entry 22 of Schedule E, and not 6 percent as prescribed under Section 14.The Court examined the relevant provisions of the Bombay Sales Tax Act, 1959. Section 15 deals with the liability of a dealer to pay purchase tax upon discontinuation of business if they hold unsold stock purchased under a declaration. Section 14 outlines the scenarios where a dealer becomes liable to pay purchase tax, particularly when goods are used contrary to the purpose stated in the purchase certificate.The Court noted that Section 15 introduces a legal fiction, treating the dealer as if they had contravened the terms of the certificate under Section 14, thereby becoming liable to pay purchase tax. However, Section 15 specifies that the purchase tax should be levied 'at the relevant rate of purchase tax applicable thereto,' which is the rate specified in column 5 of Schedule E.2. Determination of the Applicable Rate of Purchase Tax for Goods Covered by Entry 22 of Schedule E:The goods in question were covered by entry 22 of Schedule E, which prescribes a rate of 3 percent for purchase tax in column 5. The Tribunal accepted the dealer's contention that the applicable rate was 3 percent, not 6 percent as contended by the Revenue.The Court rejected the Revenue's argument that the legal fiction introduced by Section 15 should lead to the application of the aggregate rate of sales tax and general sales tax (6 percent). The Court emphasized that the words 'at the relevant rate of purchase tax applicable thereto' in Section 15 must be given effect, meaning the rate specified in column 5 of Schedule E (3 percent) should apply.The Court also highlighted that the purpose of the legal fiction in Section 15 is to establish the liability to pay purchase tax, not to alter the rate specified in Schedule E. The Court clarified that while Section 14(2A) prescribes the aggregate rate for certain scenarios, this does not override the specific rate mentioned in column 5 of Schedule E for the purpose of Section 15.Conclusion:The Court concluded that the Tribunal was correct in its interpretation and application of the relevant provisions. The rate of purchase tax applicable to the goods in question, as per entry 22 of Schedule E, was indeed 3 percent.Judgment:The question referred to the Court was answered in the affirmative and against the Revenue. There was no order as to the costs of the reference, as the dealer was not represented before the Court.