Karnal Gur And Khandsari Industries v. State Of Haryana

P class=aplres> karnal gur and khandsari industries vs. State of haryana

The petitioner is a firm registered under the indian partnership act and carries on business at smalkha in the district of karnal. The firm is registered as a dealer under the punjab general sales tax act (hereinafter called the act) and the rules made thereunder. According to the certificate of registration issued to the petitioner on 3rd june, 1965, the petitioner - firm is a dealer in gur, khandsari, baidana, etc. , and manufacturer of khandsari and gur - sheera and is entitled to purchase gur, firewood, sajji and lime for purposes of manufacture, and gur etc. , for resale free of tax. On the basis of this registration certificate the petitioner - firm purchased gur and other goods, some of which were resold and others were used for manufacturing khandsari and gur - sheera during the assessment year ending 31st march, 1966. For that year the petitioner submitted quarterly returns of its turnover and paid the tax in accordance with the returns every quarter. According to these returns the gross sales of the petitioner - firm amounted to rs. 2,28,312. 43, out of which sales to the extent of rs. 1,87,895. 23 were of exempted goods, namely, khandsari, sales to the extent of rs. 39,652. 61 were made to registered dealers against the relevant forms supplied by them and were, therefore, exempt from the taxable turnover and the tax was payable only on the turnover amounting to rs. 765. 69. On this turnover the tax was assessed at rs. 45. 94 which was duty paid.

The assessing authority, respondent 2, issued notice to the petitioner - firm for assessment purposes under sections 11 (2) and 14 of the act calling upon the petitioner to appear before him on 20th march, 1968, with particulars regarding the purchase of gur and accounts etc. The date was changed to 27th march, 1968, and the petitioners were given to understand by respondent 2 that in his view the petitioner - firm was liable to purchase tax on the purchases of gur made by them for utilization in the manufacture of khandsari under second proviso to section 5 (2) (a) (ii) of the act. The petitioner - firm controverted the view of the assessing authority by filing a written reply stating its own contentions which were rejected by the assessing authority with the following observations :

" i have considered over the matter and i find that the arguments advanced by you in your communication referred to above regarding the non - taxability of tax liable to be imposed on the purchase of gur utilised in the manufacture of khandsari, a tax - free commodity under the punjab general sales tax act, 1948, purchased on the strength of registration certificate granted to the party under the punjab general sales tax act, 1948, under the second proviso to section 5 (2) (a) (ii) of the act ibid are not convincing. You are, accordingly, requested to furnish before me the relevant account books and also the details of purchases of gur made by your client on the strength of registration certificate under the punjab general sales tax act, 1948."

The petitioner - firm then filed the present writ petition in this court on 8th april, 1968, which was admitted on the following day but the assessment proceedings were not stayed. It was, however, directed that after assessment is made, recovery would not be made if bank guarantee is given. During the pendency of the writ petition the assessing authority passed an order of assessment on 10th april, 1968, in order to challenge which the petitioner - firm amended the writ petition after obtaining the permission of this court. The assessment order is annexure 'e' to the amended writ petition. In this assessment order the gross turnover is mentioned as rs. 2,28,312. 93. Tax has been assessed under section 5 (2) (a) (ii) of the act on rs. 1,31,522. 31 at the rate of 6 per cent. Amounting to rs. 7,891. 32. This figure of rs. 1,31,522. 31 represents the purchase value of gur consumed by the petitioner - firm in the manufacture of khandsari which is a tax - free commodity. Respondent 2 has applied the second proviso to section 5 (2) (a) (ii) of the act for the imposition of the tax. section 5 (2) (a) (ii) of the act with its proviso reads as under :

" (2) in this act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom -

(a) his turnover during that period on -

(i). .

(ii) sales to a registered dealer of goods other than sales of goods liable to tax at the first stage under sub - section (1 - a) declared by him in a prescribed form as being intended for resale in the state of punjab or sale in the course of inter - state trade or commerce or sale in the course of export of goods out of the territory of india or of goods specified in his certificate of registration for use by him in the manufacture in punjab of any goods, other than goods declared tax - free under section 6, for sale in punjab and on sales to a registered dealer of containers or other materials for the packing of such goods :

Provided that in case of such sales, a declaration duly filled up and signed by the registered dealer to whom the goods are sold and containing prescribed particulars on a prescribed form obtained from the prescribed authority is furnished by the dealer who sells the goods :

Provided further that when such goods are used by the dealer to whom these are sold for purposes other than those for which these were sold to him, he shall be liable to pay tax on the purchase thereof at such rate, not exceeding the rate of tax leviable on the sale of such goods, as the state government may by notification direct in respect of a class of dealers specified in such notification, notwithstanding that such purchase is not covered by clause (ff) of section 2. "

It is not the case of the respondents in the written statement nor has the assessing authority stated in the order of assessment that the petitioner - firm purchased gur for some other purpose and used it for the manufacture of khandsari. The registration certificate entitled the petitioner - firm to purchase gur for the manufacture of khandsari and gur - sheera free of tax. It cannot, therefore, be said that the petitioner - firm used gur purchased for the manufacture of khandsari and gur - sheera for any purpose other than that for which it was sold to it. There was thus no misuse of the registration certificate by the petitioner - firm when it purchased gur free of tax for the manufacture of khandsari and gur - sheera on the strength of the registration certificate. The proviso to section 5 (2) (a) (ii) of the act has thus no applicability to this case. The dealer or dealers, who sold gur to the petitioner - firm on the basis of this registration certificate for the manufacture of khandsari and gur - sheera, may not be entitled to deduct from its/their gross turnover the value of such sales as khandsari is a tax - free goods but the petitioner cannot be held liable to the sales tax department for the payment of sales tax on the purchase of that gur. It was open to the seller to realise it from the purchaser, that is, the petitioner, but it is not open to the department to realise it from the purchaser because it is, under the act, payable only by the seller. The levy of sales tax on the amount of rs. 1,31,522. 31 at the rate of 6 per cent. Is, therefore, liable to be quashed.

For the reasons given above, i accept this writ petition with costs and quash the order of the assessing authority, karnal, dated 10th april, 1968, in so far as it levies tax of rs. 7,891. 32 on the purchase value of gur amounting to rs. 1,31,522. 31 under section 5 (2) (a) (ii) of the act. Counsel's fee rs. 100.