J K JAIN’S “VAT REPORTER

SIR,

CASE LAW DIGEST OF SUPREME COURT IS GIVEN HEREUNDER.

J.K.JAIN’S “VAT REPORTER” : Vol. 9– Part 12 dated 24.6.2008 containing Case Laws of Supreme Court/High Court,

Notifications/Circulars issued by Rajasthan Govt. on

Value Added Tax together with its Index and Comments from Editor

SUBJECTWISE INDEX TO JUDGEMENTS THE

VAT REPORTER

VOLUME 9 2008

SUBJECTWISE INDEX TO JUDGEMENTS REPORTED

AmortisationMeaning ofAmortisation means writing off, of cost of an asset over a period of timeMoriroku UT India (P) Ltd. v. State of U.P. & Ors (SC) ….. 126

AssessmentEscapement of taxTime limit of assessmentAssessment on account of escapement of tax must be completed within the period contemplated u/s 10B, 12, RST Act, 1954Assessment made beyond the period of limitation was set asideC.T.O. Special Circle, Sriganganagar v. Uma Oil & General Mills (RAJ) …. 162

[Corresponding related provisions in Raj. VAT Act, 2003:S.26(1) and 26(3)]

AssessmentEscapement of taxTime limit of assessment upon breach of conditions of Exemption Certificate, the case could be treated as the one of Escapement of tax under clause 9(b), Raj. Sales Tax Incentive Scheme, 1987However, the assessment on account of escapement of tax must be completed within the period contemplated u/s 10B, 12, RST Act, 1954Assessment made beyond the period of limitation was set asideC.T.O. Special Circle, Sriganganagar v. Uma Oil & General Mills (RAJ) …. 163

[Corresponding related provisions in Raj. VAT Act, 2003:S.26(1) and 26(3)]

AssessmentRemand of matter to AAClassification of CapacitorsFunctional/user test, Operating Principle are not permissible to decide the classification of goods when capacitors have been specifically included in the list prepared by the Electronic CommissionRemanding of matter by Tribunal to AA on the basis of functional/user test, Operating Principal was held to be ill founded and High Court was justified in entertaining the Revision PetitonState of Andhra Pradesh & Anr. v. Concap Capacitors, Balanagar, Hyderabad & Ors (SC) …. 90

[Corresponding related provisions in Raj. VAT Act, 2003:S. 84]

[Corresponding related entry in Sch. Appended to Raj. VAT Act, 2003Sch. IVPart-A, entry 16]

Burden of ProofSince the classification adopted by the assessee has been accepted by the revenue for a long time, the onus would on the revenue to show as to why a different interpretation should be resorted to, particularly in absence of no change in the statutory provisionsMauri Yeast India Pvt. Ltd. and another v. State of U.P. and another (SC)…. 190

Circulars and ClarificationsBinding forceCirculars/Clarification issued by Board of Revenue are binding on AA. Whereas the Courts and the assessee are not bound by themState of Kerala & Ors v. Kurian Abraham Pvt. Ltd. & Anr (SC) ….. 170

Circulars and clarificationsBinding force on the assesseeAssessee is not bound by the circulars & clarifications issued by the Commissioner/Board. In case the terms and conditions of exemption notfn are satisfied by the assessee, he would be entitled to the benefits mentioned therein irrespective of any circular issued by the Commissioner/Board Padinjarekara Agencies Limited v. State of Kerala (SC) ….. 167

CircularsBinding forceSpecific exclusion laid down under Chapter Heading will prevailCBEC circular No. 17/90 CEX IV dated 9.7.1990 clarifying that transmission elements, switches, gears, gearing etc. when they are specially designed for use in the vehicles of section XVII of the Central Excise Tariff Act, 1985, do not fall under chapter heading 84.83, is not relevant in view of specific exclusion of these items per chapter note 2(f) which governs chapter 87 Intel Design Systems (India) P. Ltd. v. Commissioner of Customs & Central Excise (SC) …. 110

CircularsPowers of Board/Commissioner to issue circularTo provide fair & just administration of the Act, in the matter of imposition and collection of tax, the Board/Commissioner is empowered to grant administrative relief to business. Taking administrative decisions include the authority to grant Administrative ReliefsS.3(1A), Kerala GST Act, 1963State of Kerala & Ors v. Kurian Abraham Pvt. Ltd. & Anr (SC) ….. 170

Classification of goods:

All kinds of chemicals“Yeast” is a ‘chemical’ since it has a chemical composition/formula and has been so classified by the Central Govt., in a circular issued under CST Act, 1956Mauri Yeast India Pvt. Ltd. v. State of U.P. & another (SC) ….. 190

Animal driven vehicles (ADV)Whether Agriculture implementsImplements are usually regarded as “tools” used by human beings with their hands/legs/or driven by animal/power. ADV carts used for transporting sugarcane from the agriculture field to the sugar factory are not “agricultural implements” since such ADV carts are not part of agriculture operations as these ADV carts begin their activity of transpiration only after the agriculture operations are over and accordingly cannot be regarded as “tool”U.P. Trade Tax Act, 1948U.P. State Agro Industrial Corpn. Ltd v. Kisan Upbhokta Parishad (SC) …. 1

Comments From Editor(1) The judgment so far as it laid dawn that ADV are not “agriculture implements,” is not applicable to category of “Agricultural implements” prescribed under entry 1-Sch.-I, Raj. VAT Act, 2003, which specifically includes under item b(24), “Animal Driven Carts” under the category of “agricultural implements.”

(2) Based on this judgements, the ‘tools’ of “trolley of tractor” will fall under the category of “Agricultural implements” and will accordingly be exempt from tax. It has been laid down in C.T.O. v. Lila Brothers (1987) 64 STC 372 (Raj) that parts of tractors purchased from the dealer subsequent to the purchase of tractor will be taxed at the rate applicable to tractor under the entry “tractor and spare parts thereof” (Refer page C65

point No.25 of the J.K.Jain’s book on “Law of Value Added Tax in Rajasthan”-2006 Edn.). Based on the same analogy, the spare parts and accessories of Trolley of tractor will be exempt from tax under entry No.1 of Schedule I, to the Raj VAT Act, 2003 which describes the following goods to be exempt from tax;

“Agriculture implements, spare parts and accessories thereof” and under sub-item (c) of this entry, ‘Trolley of tractor’ has been included as “agricultural implements”.

Departmental determination in the case of A.N.G Auto Ltd., Ajmer reported at page No.20 of this magazine also supports this view.

Bubble-gumBubble-gum is neither a “Sweetmeat/Mithai” nor a “product of sugar confectionery item” as it is not so called in common parlance. Bubble-gum is a type of chewing gum and is used as a mouth freshenerEntry No. 48, notfn dated 7.9.1981, 31.3.1992 & 1.10.1994 issued under U.P. Sales Tax ActCommissioner of Trade Tax, U.P. v. Associated Distributors Ltd. (SC) …. 213

Bullion and Specie (gold)Use of word ‘gold’ in bracket after the phrase “Bullion and Specie” is referable to the both bullion as well as specie since it is one single phrase and can not be bifurcatedAccordingly held that silver bullion is excluded under this entry No. 20, Sch.I, AP GST Act, 1957Orient Traders v. Commercial Tax Officer, Tirupati (SC)..... 134

[Corresponding related entry in Sch. appended to Raj. VAT Act, 2003Sch.III-entry 1]

Capacitors“Capacitors” specifically included in the list prepared by the Electronic Commission & as such the tax can be levied only on the basis of such classification. In such cases, functional test, operating principle or user test are not to be applied in regard to classification of commoditiesState of Andhra Pradesh & Anr. v. Concap Capacitors, Balanagar, Hyderabad & Ors (SC) …. 90

Comments from EditorCapacitor is like a battery connecting the terminals to two metal plates separated by non-conducting substance. It stores electrons and can release them later according to the needs of the system where it is used.

Copper/Brass SheetsCopper/Brass sheets fall within the scope of entry “Copper” and “Brass” since these metals are produced in rolling mills in the form of sheets, circles, ingots, strips, rods and are being sold in the market in one of these formsEntry Nos.116A, 116D of Sch-I to Kerala GST Act, 1963Kalidas Sheet Metal Industries P. Ltd. v. State of Kerala (SC) ….. 120

Interpretation of notfnCommon Parlance testWords used should be understood in ordinary parlance in the area in which the law is in forceCommissioner of Trade Tax, U.P. v. Associated Distributors Ltd. (SC) …. 213

Multifunctional digital copier machineEntry No.3-Part ‘A’-Schedule IV, Raj. VAT Act, 2003Commodity is required to be classified based on its main use keeping in view of its prevalent trade and common parlance. ‘Digital Copier’ is known as “Copier machine” in trade parlance and its main use is copying. Fax, printer and scanning are its additional work. It is neither a “computer system and its peripherals” since the copying and fax functions are carried out without the aid of computer. It can not be called a computer printer since printing is only one of its functions out of four functions.As such Multifunctional Digital Copier does not fall within the purview of entry No. 3 of I.T. Products, viz.,“Computer system and peripherals, computer printers and electronics diaries”Ricco India Ltd. v. Additional Commissioner (Law), Commercial Tax, Jaipur (TBDB) ….. 262

Parts and accessories of motor vehiclesPlastic name plates for motor vehicles are “Accessories of motor vehicles” under chapter Heading 87.08 & 87.14, Central Excise Tariff Act, 1985, and are not classifiable as ‘Articles of Plastics’Pragati Silicons Pvt. Ltd v. Commissioner of Central Excise, Delhi (SC) …. 143

Parts and accessories of motor vehiclesRail Assembly front seat (omni), Adjuster/ Assembly Slider seat, Rear Back lock Assembly are only adjuncts to improve the efficiency and convenience of the ‘Seat’ in a motor vehicle and cannot be termed to form “parts of the seat” under Sub-Heading 9401, Central Excise Tariff Act, 1985 Since ‘seats’ are complete in themselves without these mechanisms. They are covered by the expression “accessories of motor vehicles” under Sub-Heading 8708Commissioner of Central Excise, Delhi v. Insulation Electrical (P) Ltd. (SC) …. 139

Roasted (dry/oil) Cashew nuts, Peanuts, AlmondHSN (Harmonised System of Nomenclature) is a safe guide for the purpose of deciding issues on classification of goods. It contains list of goods that are traded irrespective of the fact whether they are manufactured and taxable or not. Accordingly, Roasted Cashew nuts, Peanuts, Almonds after their salting/seasoning are classifiable as “Preparation of nuts” under heading 20.01 in chapter 20 of the Central Excise Tariff Act, 1985Commissioner of Customs & Central Excise, Goa v. Phil Corporation Ltd. (SC) …. 81

Roasted (dry/oil) peanuts, pista, cashew nuts & almondsHSN (Harmonised System of Nomenclature) is a safe guide for the purpose of deciding issues on classification of goods. Accordingly, Roasted Peanuts, Pista, Cashew nuts, Almonds after their salting/seasoning are classifiable as “Preparation of nuts” under heading 20.01 in Chapter 20 of the Central Excise Tariff Act, 1985 and this activity is deemed to be ‘manufacture’ u/s 2(f)(ii)SKB Dryfruits Marketing Co. Pvt. Ltd. v. Commissioner of Central Excise, New Delhi (SC) …. 220

Satilon/tuflon coated cookwareSatilon/tuflon coating makes the aluminium articles non-sticky and are not covered by the term “Aluminium house hold utensils made of aluminium and aluminium alloys.” In common parlance too, aluminium cookware with such coating are not understood as aluminium wareEntry 5, 104-First Schedule to Kerala GST Act, 1963 Hawkins Cookers Limited v. State of Kerala (SC) …. 216

Switches, Control Box and other electrical apparatus manufactured as per drawing & design supplied by Ministry of Defence and used in Tank and Armoured fighting vehiclesWhether parts of plant and machinery or Electrical GoodsTerms of Heading and Section/Chapter notes will decide the classification of excisable machinery and equipment falling under chapter 85. Switches, Control Box etc. are goods used for switching/protecting electrical circuits for making connections to or in electrical circuits and are specifically covered under Chapter Heading 85.36CSH 8536.90 of Central Excise Tariff Act, 1985. As such these items are not covered as “Parts of Armoured Vehicles” under Chapter Heading 871 even though they are used solely with the Armoured Vehicles. These goods classifiable under CSH 8536.90 as “Parts of Electrical equipments”Intel Design Systems (India) P. Ltd. v. Commissioner of Customs & Central Excise (SC) …. 110

Comments from EditorAlso see Rajasthan High Court case:Assistant Commissioner v. Ramnarayan & Brothers (2007) 8 Vat Reporter 293.

“Vaseline white Petroleum jelly”“White Petroleum Jelly (Non perfumed)” was held to be Drug in view of its inclusive wide definition given under the Drugs and Cosmetics Act, 1940, consistent interpretation as ‘Drug’ by the revenue for several assessment years and placing no material on record by the revenue for a different classification of

the productU.P. Trade Tax Act, 1948Ponds India Ltd. (Merged with H.L. Ltd.) v. Commissioner of Trade Tax, Lucknow (SC) ….. 239

Concessional rate of taxThe assessee, a manufacturer of cement, purchased Iron & Steel (which where included in R.C.) for erection, repairs and maintenance of Plant and Machinery employed for manufacturer of cement, at concessional rate of tax against Declaration Form ‘C’Held that purchase falls within the ambit of rule 13, CST (Regn. & Turnover) Rules, 1957 read with S.8(3)(b), CST Act, 1956 and penalty u/s 10A, CST Act for misuse of declaration form, is not imposableC.T.O., Spl. Circle, Ajmer v. Shree Cement Ltd., Beawar (RAJ) …. 70

Declaration Form ST 17Penal consequencesGoods purchased at concessional rate of tax against Declaration form ST 17. Sale of those goods took place prior to their use in the mining operation of the petitionerHeld that the petitioner is guilty of giving wrong declaration and is liable to pay the difference amount of taxS.10(1), 10(2), RST Act, 1994Hindustan Zinc Ltd. v. Commercial Taxes Officer, Special Circle, Udaipur (RAJ) ….. 179

Declaration formsUse of forms after 3 yearsRule 23, RST Rules, 1995All the transactions have been duly recorded in the books of the assessee and there is no intention to evade tax which is the prime objective of the Act. Use of declaration forms beyond the permissible time limit is nothing but a technical error, which does not warrant imposition of additional tax & interestC.T.O. v. Ramkishore & Company (TBDB) …. 27

Declared GoodsEffect of exemption under State ActExemption operates after the levy and does not negate the liability to tax and as such the liability to tax u/s 5, Kerala GST Act, 1963 remains unaffected by an exemption u/s 10. Therefore, the respondent cannot validly shift the burden of tax on the purchaser u/s 5A of the State Act, since by virtue of S.15, CST Act, once goods made liable to tax cannot be made to suffer additional tax liabilityPeekay Re-rolling Mills (P) Ltd. v. The Assistant Commissioner & Anr. (SC) …. 222

Doctrine of Unjust enrichmentAn assessee is not permitted to retain a benefit to which he was not entitled to. Accordingly, excess amount collected from customers towards tax has to be deposited in the Govt. treasuryState of Andhra Pradesh & Anr. v. Concap Capacitors, Balanagar, Hyderabad & Ors (SC) …. 90

GoodsInternet software sold on floppyReady to use starter kitUse of floppy/compact disk in selling self developed Internet software, is only incidental.In fact it is the “Internet facility”, which is being sold and is not goods liable to sales taxAssistant Commissioner (A/E) v. Data Infosys Ltd. (TBDB) …. 261

Escaped Assessment/Re-assessmentAssessment done based on circulars issued treating field latex and centrifugal latex as the same commercial commodity. Re-assessment based on subsequent judgment of High Court treating both the commodities as different commodities, is not permissible since AA are bound by the circulars issued by the departmentS.3(1A), Kerala GST Act, 1963 and Entry 110, Sch.I, KGST Act, 1963State of Kerala & Ors v. Kurian Abraham Pvt. Ltd. & Anr (SC) ….. 170

[Corresponding related provisions in Raj. VAT Act, 2003:S.26]

Escaped AssessmentTime limitBreach of conditions of Raj. Sales Tax Incentive Scheme, 1987Assessee awarded benefits under the Incentive Scheme during the year 1998-99 and therefore time limit of 5 years per S.30, RST Act, 1994 for proceeding to make escaped assessment expired on 31.3.2004. As such no action can be taken by AA to comply with the order dated 16.5.2005 of Addl. Commissioner (AE)Aone Marble Mill Pvt. Ltd. v. Additional Commissioner (AE), Jaipur (TBDB) …. 50

Corresponding related provision in Raj. VAT Act, 2003:S.26(3).

Evasion of TaxPenalty proceedings by check-post officialsBonafide dispute about interpretation of taxability of commodityExercise of powers at check-post should have a reasonable nexus with the attempt of evasion of taxPapers were transported from Ludhiana to Delhi. Goods were intercepted by the check-post officials who started penalty proceedings on the ground of mis-classification of goods by the assessee as ‘Paper’ under 1% category instead of “card board” under 4% category as claimed by the check-post officials. The assessee produced all the requisite documents showing full disclosure of facts about commodity without any concealment. The AA himself upheld the stand of the assessee, before and evenafter detention of goods, by accepting goods as “duplex paper” under 1% CST categoryHeld that bonafide contention against taxability raised by the assessee with fill disclosure of goods in the bill etc. was tenable and cannot be equated to attempt at evasion of tax.. Therefore initiation of penalty proceedings by the check-post officials on the ground of evasion of tax by resorting to different classification of commodity was held to be without jurisdictionS.51, Punjab Vat Act, 2005, Art.226 of Constitution of IndiaMakin Paper Mills v. State of Punjab and Ors. (P&H) ….. 257

Exemption“Certified and truthfully labelled seeds”Appellant after purchasing chillies, paddy and sun-flower from unregistered dealers, sold those goods as “certified and truthfully labelled seeds” and claimed exemption under notfn G.O.Ms. No 604 dated 9.4.1981 issued by A.P.Govt which was declined on the ground that the assessee should establish and prove that the seeds in question are certified seeds as well as truthfully labelled seeds.Though no such condition was there in the notfn of the Govt. still the assessee should justify its claim for exemptionMatter remanded to Tribunal to examine the factual aspect of claimShakthi Seeds Pvt. Ltd. v. Dy. Commissioner (CT) (SC) …. 17

Exemption/concession & Exigibility to taxInterpretation adopted in a classification dispute (exigibility to tax as per language of a taxing Statute) need not be same as interpretation of exemption notfnPadinjarekara Agencies Limited v. State of Kerala (SC) ….. 167

Exemption notfnClarificatory notfn to take effect from the date of original notfnNotfn No. 169/98/ID dated 24.11.1998 issued under Kerala GST Act, 1963Secretary to Government & Ors v. Peekay Re-Rolling Mills (P) Ltd. (SC) …. 233

Exemption notfnUnder Art. 162, Constitution of India, the State Govt. had authority to withdraw the tax exemption on account of acute power shortage in the State and withdrawal applies across the board to all units which became power intensive unitsNotfn dated 26/27.11.1993 issued under Kerala GST Act, 1963Secretary to Government & Ors v. Peekay Re-Rolling Mills (P) Ltd. (SC) …. 233

Indivisible contract versus composite contractA composite contract may consists of different elements attracting varied nature of levy as contradistinguished from an indivisible contractImagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes & Ors. (SC)

…. 29

Input Tax Credit (ITC)Low Sulpher Heavy Stock (LSHS) and Liquefied Petroleum Gas (LPG) are neither “Fuels” specified under rule 20(2)(b), A.P. VAT Rules, 2005 nor “Petroleum Products” listed in Schedule VI to A.P. VAT Act, 2005 and as such ITC will be allowed to the assessee u/s 13, A.P. VAT Act, 2005 on LSHS & LPG purchased locally from public sector companiesAGI Glaspac v. Assistant Commissioner (CT)-IV, Hyderabad (AP)

….. 255

Interpretation of EntriesKerala VAT Act, 2003Mosquito repellantsKerala VAT Act is aligned with Custom Tariff which in turn is aligned with HSN and consequently each product is required to be seen in the context of HSN codeWhile setting aside the judgement of High Court, the matter remitted to High Court for fresh consideration inaccordance with law. Advance clarificatory order dated 7.4.2006 of the Commissioner, will apply for the period 7.4.2006 onwardsReckitt Benckiser (India) Ltd. v. Commissioner, Commercial Taxes & Ors. (SC) …. 218

Interpretation of EntriesWhere a statute merely provides for different rates of tax, application of the principles of strict interpretation may not be appropriatePonds India Ltd. (Merged with H.L. Ltd.) v. Commissioner of Trade Tax, Lucknow (SC) ….. 239

Interpretation of entries in ScheduleBullion and SpecieCommon parlance test is to be applied while interpreting entries in Schedules. The word “Bullion” in the popular sense means gold or silver in mass, in bars, plates etc., in uncoined form and the word “Specie” means coined form of gold or silver or other metalOrient Traders v. Commercial Tax Officer, Tirupati (SC) ….. 134

Interpretation of entries in ScheduleWhen two views are possible, one which favours the assessee should be adopted. When there is a conflict between the two entries, one leading to an opinion that it comes within the purview of the tariff entry and another the residuary entry, the former should be preferredMauri Yeast India Pvt. Ltd. and another v. State of U.P. and another (SC) …. 190

Interpretation of exemption notificationclear and unambiguous intention of the legislatureLiteral constructionUnits undertaking expansion/diversificationExemption from sales tax is granted on the turnover in excess of base production by notfn dated 27.7.1991 issued under UP Trade Tax Act, 1948Held that the turnover of the entire assessment year is to be worked out and if it exceeds the base year production then the unit is entitled for exemption. Monthly filing of returns and payment of tax would be subject to adjustment at the time of finalisation of

assessmentCommissioner of Trade Tax, U.P. v. Malviya Chemical and Pharmaceutical Pvt. Ltd. (SC) …. 8

Interpretation of Exemption notfnStrict interpretationPonds India Ltd. (Merged with H.L. Ltd.) v. Commissioner of Trade Tax, Lucknow (SC) ….. 239

Interpretation of Exemption rulesStrict interpretationAmendment in Eligibility CertificateCertificate was granted for the manufacture of monochrome monitors and black and white TV sets. The assessee requested for addition of colour monitors in the eligibility certificateAfter setting aside the order of Tribunal & the High Court, which directed the department to add ‘color monitors’ in the eligibility certificate by liberal interpretation of rule the matter remitted to the High Court for fresh consideration under rule 28A, Haryana GST Rules, 197, wherein the words used are “for manufacture of the same product”State of Haryana v. Samtel India Ltd (SC) ….. 165

Interpretation of notfnDifference between Hindi & English versionIn case any difference is found between notfns in English and Hindi, the Hindi version of the notfn will prevail since official language of the State of U.P. is HindiCommissioner of Trade Tax, U.P. v. Associated Distributors Ltd. (SC) …. 213

Legislative Competence of StateLevy of Professional Tax on different branches by treating each branch as a separate personThe State Legislature is competent to define the term ‘person’ for the purpose of each of its enactment differently from the definition of the same term in S.3(42), General Clauses Act, 1897. Accordingly S.2(j) and Explanation I to first Schedule of Andhra Pradesh Tax on Profession, Trade, Callings and Employment Act, 1987 defining the person to include every branch of a Firm, Company, Corporation or other Corporate body, any Society, club or Association is valid and Profession Tax can be levied per S.2(b) on each assessee, viz., on each branch subject to the restrictions provided for under Art. 276(2), of the Constitution of IndiaKarnataka Bank Ltd. v. State of A.P. (SC) …. 97

Levy of interestInterest is leviable for delay in payment of tax leviable/payable and in that situation, the payment is not dependent upon passing of any order by the AAS.58, RST Act, 1994Hindustan Zinc Ltd. v.. Commercial Taxes Officer, Special Circle, Udaipur (RAJ) ….. 179


Levy of penaltyMens reaWhen no discretion is conferred upon the adjudicating authority to levy or not to levy penalty, the principle of mens rea will be held to be imperative to levy penalty. In cases where discretion is conferred upon the adjudicating authority, the principle of mens rea may not be held to be so having regard to the purport & object thereofIn the present case the assessee purchased scrap & sold 9.47% of scrap at a concessional rate of tax instead of utilizing it in manufacturing process as per undertaking given by the assessee to the AA. Neither any proof was submitted in regard to its inability to use in the mfg. process nor the AA was informed for such a derivation. In view of these facts mens rea on the part of the assessee was held to be evident and appeal of the assessee is dismissedS.4B, U.P. Trade Tax Act, 1948Bharjatiya Steel Industries v. Commissioner, Sales Tax, U.P. (SC) ….. 113

Levy of tax on packing materialSingle transfer for one sale priceTaxability There should be transfer of property in packing material for consideration referable to the transfer of property in packing material. Different items of expenses, which makes the sale price of the commodity as one single unit, cannot be splitted for the purpose of taxability of packing materialS.5(1), RST Act, 1954Commercial Taxes Officer, Special Circle, Alwar v. Tele Tubes Electronics Limited (RAJ) …. 67

Levy of VAT-Advertising AgencyCharges collected towards the services for evolution of prototype conceptual design, on which service tax has been paid is not liable to VAT. Service Tax & VAT are mutually exclusive and leviable to their respective parameters as envisaged in a composite contract as distungnished from an indivisible contractArt 366(29A), 246, Constitution of IndiaImagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes & Ors. (SC) …. 29

Levy vis-a-vis CollectionLevy & collection of tax are not synonymous. Levy of tax is a constitutional concept and means charging or imposing of tax, whereas collection of tax is a statutory concept. Tax levied is collected subsequentlyArt. 265 of Constitution of India Peekay Re-rolling Mills (P) Ltd. v. The Assistant Commissioner & Anr. (SC) …. 222

Packing materialImplied SaleSale of packing material, viz., bottles of IMFL (liquor) is not taxable, in the absence of its separate sale being proved by the RevenueCommercial Taxes Officer v. Baramati Grape Industries Ltd. (Raj) ….. 264

[Corresponding provisions in the Raj. VAT Act, 2003:–S.2(35)]

Penalty u/s 78(5), RST Act, 1994:

Inadvertent mistake in writing the word “tax paid” on invoicesInter-State taxable sales duly recorded in the books of account of assessee & tax liability was assessed by AAPenalty levied u/s.78(5) was set asideBadri Lal Kedar Lal Agrawal v. Assistant Commercial Taxes Officer (RAJ) …. 38

[Corresponding related provisions in Raj. VAT Act, 2003:S.76(5).]

Movement of goods with blank/incomplete supportive forms prescribed u/rule 53, RST Rules, 1995Penalty u/s 78(5) has been prescribed for contravention of statutory obligation u/s 78(2) regarding goods transported and proceedings u/s 78(5) are neither criminal nor quasi criminal in nature. As such mens rea or guilty intention is not an essential condition for imposing penalty where movement of goods were carried with blank declaration forms 18/18A/18C or material particulars like description of goods were not filled in. S.78(5) provided penalty for loss of revenue to the State and its object is not to punish offenders for committing economic offenceCase remanded to the appellate authority to decide the appeals after giving opportunity of hearing to the assesseeACTO, Flying Squad, Ajmer v. Anandeshwar Textiles Pvt. Ltd., Kishangarh (RAJ) …. 74

Movement of goods without accompanying supportive documents/forms and/or false/forged documents/declarationSuch cases will be decided in the light of judgement of Supreme Court in the case of D.P.MetalsIn case of false/forged documents/declaration, mens rea will be presumed and opportunity will be given to the assessee to rebut it. In case of movement of goods without accompanying supportive documents/forms, penalty is leviable for non compliance of S.78(2)(a)Case remanded to the appellate authority to decide the appeals after giving opportunity of hearing to the assesseeACTO, Flying Squad, Ajmer v. Anandeshwar Textiles Pvt. Ltd., Kishangarh (RAJ) …. 74

Corresponding related provisions in Raj. VAT Act, 2003:S.76(2), 76(5).

Corresponding related provisions in Raj. VAT Rules, 2006:R.53, 54.

Transportation of Tobacco ProductsSince Luxury Tax Act itself has been declared ultra vires, the levy of penalty u/s 78(5), RST Act is out of question for alleged evasion of Luxuries TaxAssistant Commercial Taxes Officer v.

Vijaivergiya & Company, Phulera, District Jaipur (RAJ) …. 49

[Corresponding related provisions in Raj. VAT Act, 2003:76(5).]

Where the goods were not accompanied by documents required u/s 78(2)(a) and/or fabricated/forged documents or non production of documents or production of documents after checkingSuch cases are covered by the judgement of Hon’ble Supreme Court in D.P.Metals’ caseCases remanded to the appellate authorityACTO, F/S., Sriganganagar v. Dev Trading CoACTO, F/S., Sriganganagar v. Dev Trading Co. (RAJ) …. 40

Where the goods were exempted/not notified and accordingly forms 18A/18C were not required to be accompanied and where the goods were accompanied by other documents required per S.78(2)(a), RST Act, 1994Such cases remanded to the appellate authority to objectively consider that in cases of exempted/not notified goods, the requirement of form 18A/18C was not there and where other documents per S.78(2)(a) were there, penalty will not be imposed. Otherwise the matter will be decided as per guidelines of D.P.Metals’ caseACTO, F/S., Sriganganagar v. Dev Trading Co. (RAJ) …. 40

Where the goods were not accompanied by forms 18A/18C or the forms were blank/incomplete with or without the deficiencies of papers required u/s 78(2)(a)Such cases are covered by the judgement of Hon’ble Supreme Court in Guljug Industries’ caseCases remanded to the appellate authorityACTO, F/S., Sriganganagar v. Dev Trading Co. (RAJ) …. 40

[Corresponding related provisions in Raj. VAT Act, 2003:S.76(2), 76(5).]

[Corresponding related provisions in Raj. VAT Rules, 2006:R.53, 54.]

Purchase PriceSugar MillsPurchase Tax is leviable on consideration for effecting the purchase. In the instant case, it is the State Advised Price (SAP) which has been paid by the respondent to the sugarcane growers, and accordingly SAP is liable to Purchase TaxS.6, Karnataka Sales Tax Act, 1957, S.4, Sale of Goods Act, 1930State of Karnataka and Ors v. Sri Chamundeswari Sugar Ltd. (SC) …. 201

Rectification of mistakesMistakes apparent from the record are rectifiable. Decision on point of law/fact and/or failure to apply the law to a set of facts which remains to be investigated and/or cases where review or revision of order is intended will fall outside the scope of rectification of mistakesAssessment Order rectified based on Court decision to tax Aluminium powder as unclassified item. It is not a mistake

apparent from the record and it amounts to substitution of orderS.22, U.P. Trade Tax Act, 1948Deva Metal Powders Pvt. Ltd v. Commissioner, Trade Tax, U.P. (SC) …. 4


Revisional jurisdiction of High CourtRevisional jurisdiction of High Court is limited to the “Question of law” which is precisely required to be stated and formulated while exercising such jurisdictionMatter remitted to High Court to decide the question of law, if anyS.11, Uttar Pradesh Trade Tax Act, 1948Rashtriya Audyogik Sansthan v. Commissioner of Trade Tax (SC) …. 14


Revisional JurisdictionTime limit for invocationWhen no period of limitation has been prescribed in the statute for invoking jurisdiction, the revisional authority must exercise its revisional jurisdiction within a reasonable period which should ordinarily be three years having regard to the purport of Punjab GST Act, 1948. In any event , it should not exceed five yearsS.21, Punjab GST Act, 1948State of Punjab and Others v. Bhatinda District Coop. Milk Producers Union Ltd. (SC) …. 158

Corresponding related provisions in Raj. VAT Act, 2003:S.85.

Comments.Under S.85, Raj. VAT Act, 2003, for revisional jurisdiction the period of limitation has been prescribed as five years.

SaleDEPB LicenceAuction of Duty Entitlement Pass Book Licence by the petitioner from its Head Qrs. at Bhubaneswar, Orissa. For the purpose of exports, Vishakapatnam port in Andhra Pradesh was used by them were they are having mercantile office and DEPB licences were also registered at that portHeld that no sale could take place in the State of A.P. The conclusion by the Tribunal that there was intra-State sale within the State of Orissa was set aside for want of relevant material in this regard and it was not the subject matter of disputeNational Aluminium Co. Ltd. v. The State of A.P. & Ors. (SC) …. 108

Comments from EditorIn this case intra-State of sale of DEPB licence was not the subject matter of dispute before the Tribunal/Court and further there was no material to show the sale of DEPB licence. Earlier also the Supreme Court in the case of Sunrise Associate v. Govt. NCT of Delhi

(2006) 5 Vat Reporter 181 has not commented specifically about taxability of exim scrips/DEPB licences etc. which was not an issue before the Hon’ble Court, we feel that these licences and scrips confer valuable right to import goods and as slips of paper or memoranda evidence the entitlement and right to import goods of the category and value from outside the country into his country and are therefore goods, capable themselves of being bought or sold in the market. They are not actionable claims. These licences and scrips are movable property and the premium or the price received/paid on their sale/purchase is taxable under the VAT Act. Since the taxable event is the sale or transfer of the licences and scrips by a document to be executed coupled with the handing over of the original licences and scrips, there can be no difficulty in fixing the situs of the sale with the place of such sale or transfer. The sales to or purchases by the designated banks of these licences and scrips are also liable to VAT.

SaleExplosives supplied by the petitioner to his contractor deducting its value from the bills of contractor, for use in the mining area of the petitionerHeld that it was a sale under S.2(38)(ii), RST Act, 1994 since the goods were delivered to the contractor for a consideration and it is immaterial that the contractor remained only a custodian of such material & used them in the petitioner’s mining operation and there were restrictions on sale of explosives under the Explosive Act, 1984Hindustan Zinc Ltd. v. Commercial Taxes Officer, Special Circle, Udaipur (RAJ) ….. 179

[Corresponding related provisions in Raj. VAT Act, 2003:S.2(35)]

SaleIllegal transaction of saleImpact on taxationEven where the transfer of property in goods is not permitted by statutory or other Act, the transaction satisfying the ingredients of sale under S.2(38)(ii), RST Act, 1994, is taxableHindustan Zinc Ltd. v. Commercial Taxes Officer, Special Circle, Udaipur (RAJ) ….. 179

SaleLease rentTransfer of right to use GoodsFor the purpose of taxability, the place where the “right to use” is transferred is to be determined with reference to the place where contract is executed. In case of oral contracts the situs of transfer may be where goods are deliveredIn this case “Letter of intent”, produced after 12 years without any explanation for extra-ordinary delay & not producing it by the assessee despite opportunity being given by AA, was held to be made out to evade taxS.3F, U.P. Trade Tax Act, 1948Goa Carbon Ltd. v. Commissioner of Trade Tax (SC) ….. 123

Sale PriceAmortisation cost of moulds etc. given by the buyers to facilitate manufacture of Auto Components by the assessee as per specification of buyer was held to be not includible in the sale price of Auto ComponentsS.3, 2(i), 2(h), U.P. Trade Tax Act, 1948Moriroku UT India (P) Ltd. v. State of U.P. & Ors (SC) ….. 126

SaleSingle point taxSale of tax paid goods within the StateSubsequent sale is not liable to tax since there is one time tax per S.4, RST Act, 1994Hindustan Zinc Ltd. v. Commercial Taxes Officer, Special Circle, Udaipur (RAJ) ….. 179

Sales tax and Excise dutyDifferenceThe taxable event in the case of excise law, is “manufacture” and excise duty is leviable on ‘assessable value’ of manufactured goods per section 4, Central Excise Act, 1944 read with rule 6, Central Excise valuation (Determination of Price of Excisable Goods), Rules, 2000. Excise duty is not concerned with the ownership or sale of goods. In contrast, taxable event in the case of sales tax law is “sale”, actual or deemed and the sales tax is leviable on ‘consideration’ for transfer of property in goods from seller to buyer. Deeming fictions and notional additions of excise laws are totally irrelevant for sales tax purposesMoriroku UT India (P) Ltd. v. State of U.P. & Ors (SC) ….. 126

Sales Tax Incentive/deferment schemesLavy of Purchase TaxNew Industrial Policy, 1996 of the State of Karnataka specifies Sales Tax Exemption/deferral by the specified industries and the exemption notfn issued refers to the tax leviable u/s 5, Karnataka Sales Tax Act, 1957 on the goods manufactured and sold by an industrial unitHeld that the assessee is liable to pay purchase tax/turnover tax/cess u/s 6, 6-B and 6-D, KST Act, 1957 and the notfn issued is in no way contrary to the Industrial Policy of the State GovtMalnad Areca Processing & Marketing Ltd v. Dy. Commissioner of Commercial Taxes (Assessment) (SC) …. 150

SurveyLevy of penaltyAt the time of physical checking, the actual weight of bags was not taken and therefore proceedings initiated for discrepancy in stock was set aside by D.C.(Appeals) and Tax Board. The High Court did not find any ground to interfere with the impugned orderC.T.O., A/E., Pali v. Ramdev Oil Mills (RAJ) …. 69

SurveyLevy of tax, interest and penalty on the basis of doubtS.65, 77(3), RST Act, 1994Not in accordance with lawTax cannot be levied on the basis of doubtfacts relating to purchase/sales are required to be proved beyond doubtCommercial Taxes Officer, Chittorgarh v. Shivshankar Marble, Chanderia (TBSB) …. 78

Taxable turnoverRaw material purchased by the assessee from exempted units is deductible from gross turnover since exemption given to eligible units is only qua payability (i.e., the calculated tax gets appropriated towards the

scheme entitlement) and not in the matter of assessmentS.5(1-A), 5(2) Punjab GST Act, 1948, Rule 29(xii), Punjab GST Rules 1949, read with notfn dated 25.7.1990State of Punjab & Others v. Perfect Synthetics (SC) …. 153

Value Added TaxWorks contract executed through sub-contractorsTaxable eventSs. 2(28), 2(45), 4(7), 13(5), A.P. VAT Act, 2005, Rule 17(1)(a), (c), (e), A.P. VAT Rules, 2005 and Art. 366(29A) (b), 14, Constitution of IndiaSub-Contractor is only an agent of contractor and the property in goods passes directly from the sub-contractor to the contractee. Therefore while excluding works contract through sub-contractor, there shall be only one taxable event of sale recognized by legal fiction created under Art.366(29A) of Constitution of IndiaTo levy and collect tax from both the subs-contractor and contractor by treating two taxable events of saleone from contractor to sub-contractor & other from sub-contractor to contractee, would be violative of Art. 14 of the constitution of India. [The Hon’ble Court did not declare any of the provisions of A.P. VAT Act as unconstitutional but declared that these provisions must be understood as explained in the judgment. The court further declared that it is open for the State to frame appropriate rules to collect tax either from the sub-contractor or from the contractor and not from both.]Larsen & Toubro Ltd. v. State of A.P. and Others (AP) …. 56

Corresponding related provisions in Raj. VAT Act, 2003:Ss. 2(35) (ii), 2(44), 4(1), 20(2).

Corresponding related provisions in Raj. VAT Rules, 2006:22(2)

Corresponding notfns issued under Raj.VAT Act, 2003:Notfns dated 11.8.2006 [S.Nos. V84, V85, V86].

Works ContractComposition of TaxS.17(7), Karnataka Sales Tax Act, 1957 introduced w.e.f. 1.4.2002 restricted the benefit of composition of tax by excluding purchases or receiving of goods from outside the State for execution of works contract within the StateHeld that branch transfers are covered by the expression ‘receiving of goods’ and the date of entering of agreement for the execution of works contract is irrelevant since for exercising of option for composition of tax, an application u/r 8-B(1), KST Rules, 1957, within the prescribed period from the date of commencement of each year/business is required to be submitted to the AA for seeking permission for composition of tax payable. As such the dealer executing works contract by branch transfer of goods from outside the State of Karnataka falls within the purview of S.17(7) and is ineligible for composition benefit w.e.f. 1.4.2002 irrespective of the fact that the date of entering of agreement for the execution of works contract is prior to 1.4.2002Indian Dairy Machinery Co. Ltd. v. Assistant Commissioner of Commercial Taxes (SC) …. 53

Writ JurisdictionWrit Petition is maintainable where the authority has exercised power without jurisdictionArt.226 of Constitution of IndiaMakin Paper Mills v. State of Punjab and Ors. (P&H) ….. 257

Words & Phrases:

Agriculture implements and toolsImplements are usually regarded as “tools” used by human beings with their hands/legs/or driven by animal/powerU.P. State Agro Industrial Corpn. Ltd v.. Kisan Upbhokta Parishad (SC) …. 1

Apparent from record“Apparent” means visible, capable of being seen, obvious, open to view, plain, evident, appearing as real and true, conspicuous, manifestDeva Metal Powders Pvt. Ltd v. Commissioner, Trade Tax, U.P. (SC) …. 4

“Having suffered tax” and “subjected to tax” elaboratedState of Punjab & Others v. Perfect Synthetics (SC) …. 153

“Consumables”Explosives used in mining operation are not consumbles like water, electricity or fuelHindustan Zinc Ltd. v. Commercial Taxes Officer, Special Circle, Udaipur (RAJ) ….. 179

In the manufacture or processing of goodsIt the goods are used for keeping the plant and machinery in a fit and running condition, they are indirectly used “in the manufacture or processing of goods”C.T.O., Spl. Circle, Ajmer v. Shree Cement Ltd., Beawar (RAJ) …. 70

‘Includes’The word ‘includes’ enlarges the meaning of the words or phrases occurring in the StatuteKarnataka Bank Ltd. v. State of A.P. & Ors. (SC) …. 97

IncludesUse of the word “includes” makes the definition extensive and enlarges the words or phrases occurring in the statutePonds India Ltd. (Merged with H.L. Ltd.) v. Commissioner of Trade Tax, Lucknow (SC)

J K JAIN’S “VAT REPORTER

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