1959 Supreme(P&H) 223

PUNJAB & HARYANA HIGH COURT
Mehar Singh and I.D.Dua JJ.
Punjab Woollen Textile Mills
Versus
Assessing Authority, Sales Tax
Civil Writ No. 1050 of 1958,
Decided On : DECEMBER 8, 1959

The assessee was liable to pay sales tax on the raw material purchased by it under the certificate of registration and utilized in the manufacture (bleaching, dyeing, finishing and wrapping) of textile goods belonging to textile mills other than that of the assessee.

Headnote:

SALES TAX - Assessment - Best judgment assessment - Raw material purchased by assessee under certificate of registration and utilized in manufacture (bleaching, dyeing, finishing and wrapping) of textile goods belonging to textile mills other than that of assessee - Whether assessee liable to pay sales tax on raw material - Held, yes.

Fact of the Case:

The assessee, a partnership concern, was registered as a dealer under the East Punjab General Sales Tax Act, 1948. The assessee had a department of bleaching, dyeing and finishing of textiles, which was maintained as a separate department and was run under the name and style of Oriental Textile Finishing Mills. The assessee purchased raw material under the certificate of registration and utilized it in the manufacture (bleaching, dyeing, finishing and wrapping) of textile goods (woollen, silken and cotton) belonging to textile mills other than that of the assessee. The Assessing Authority, by an order dated 8th July, 1958, took action under Section 11-A of the East Punjab General Sales Tax Act, 1948 read with Rule 63 of the East Punjab General Sales Tax Rules, 1949 and reopening the assessee's assessment already made on 16th January, 1958, assessed the assessee on the raw material, which had been purchased by it under the certificate of registration and which raw material had been utilised in the manufacture (bleaching, dyeing, finishing and wrapping) of the textile goods (woollen, silken and cotton) belonging to textile mills other than that of the assessee.

Finding of the Court:

The Court held that the assessee was liable to pay sales tax on the raw material purchased by it under the certificate of registration and utilized in the manufacture (bleaching, dyeing, finishing and wrapping) of textile goods belonging to textile mills other than that of the assessee. The Court held that the assessee was not entitled to make tax-free purchases, on the basis of the registration certificate, of goods for use in the manufacture of articles for sale, which did not belong to him. It was also held that the assessee could not purchase raw materials free of tax for dyeing, bleaching and finishing other dealers products under Section 5 (2) (a) (ii). The Court further held that the work of bleaching, dyeing etc., done by the assessee did not fall within the purview of the term "contract" as defined in Clause (c) of Section 2 of the Act and the goods which were dyed or bleached or finished did not belong to him and there was no sale thereof by him.

Issues: Whether the assessee was liable to pay sales tax on the raw material purchased by it under the certificate of registration and utilized in the manufacture (bleaching, dyeing, finishing and wrapping) of textile goods belonging to textile mills other than that of the assessee.

Ratio Decidendi: The Court held that the assessee was liable to pay sales tax on the raw material purchased by it under the certificate of registration and utilized in the manufacture (bleaching, dyeing, finishing and wrapping) of textile goods belonging to textile mills other than that of the assessee. The Court held that the assessee was not entitled to make tax-free purchases, on the basis of the registration certificate, of goods for use in the manufacture of articles for sale, which did not belong to him. It was also held that the assessee could not purchase raw materials free of tax for dyeing, bleaching and finishing other dealers products under Section 5 (2) (a) (ii). The Court further held that the work of bleaching, dyeing etc., done by the assessee did not fall within the purview of the term "contract" as defined in Clause (c) of Section 2 of the Act and the goods which were dyed or bleached or finished did not belong to him and there was no sale thereof by him.

Final Decision: The petition was dismissed with costs.