VARIETY STEEL INDUSTRIES Vs. STATE OF GUJARAT

JUDGEMENT

(1.) THE Gujarat Sales Tax Tribunal, Ahmedabad, at the instance of the assessee has referred the following question to this High Court for opinion under section 69 of the Gujarat Sales Tax Act, 1969 (now hereinafter referred to as "the Act ).

(2.) WHETHER, on the facts and in the circumstances of this case, this Tribunal was right in law in holding that the applicant was the manufacturer and not the reseller in respect of unfinished cupboards purchased by it from M/s. Prabhat Industries of Patan inasmuch as the unfinished cupboards (skeletons) were only purchased from M/s. Prabhat Industries and after they were brought to Vadodara the applicant gave the unfinished cupboards a coat of paint and affixed handles and locks and fixed mirrors to them and sold to customers, and whether the Tribunal was right in holding that the applicant was not entitled to claim deduction of sales made thereof as registered dealer resales under section 7 (ii) of the Gujarat Sales Tax Act, 1969 ? The assessee, Messrs. Variety Steel Industries, Baroda, deal in steel furniture at Baroda and they are registered as the dealer under the Act. The premises of the dealer were inspected by the Sales Tax Officer on November 9, 1976 and certain documents and other materials were seized. Later on, on the scrutiny of the seized materials the assessment were carried out as regards various transactions of purchase and sales for Samvat years 2031, 2032 and 2033. In the course of the assessment proceedings, the Sales Tax Officer had taken the view that the regular account books maintained by the dealer were not reliable and they were not maintained by the recognised method. The Sales Tax Officer had disregarded the claim of the dealer as a reseller and not as a manufacturer and had estimated the turnover of sales and purchase of the abovesaid three years at the figures higher than claimed by the dealer. The assessing officer had also imposed certain penalties but later on, the matters were carried before the Assistant Commissioner of Sales Tax, who had allowed the appeals partly and had reduced the amounts of turnovers and had also reduced the penalties proportionately. Anyhow, the dealer not being satisfied with the abovesaid orders, had preferred three second appeals before the Tribunal. The said appeals were disposed of by the Tribunal by common judgment dated March 29, 1982.

(3.) BEFORE proceeding further to examine the rival contentions of the learned counsel for the assessee and the learned counsel for the Revenue, it requires to be recalled the Tribunal has recorded certain findings of fact which go to the root of the question in controversy. It has been pointed out that the partner of the dealer firm had stated in the written statement given on behalf of the firm at the time of the inspection that the cupboards came to the dealer from Messrs. Prabhat Industries in a form which is popularly known as "skeleton" and thereafter, they were being painted and fitted with mirrors, handles and locks, etc. , at the expenditure of the Patan manufacturer. But the sales tax authorities had noticed that there was no evidence to warrant such a conclusion. On the contrary, it was further noticed by the Sales Tax Officer that the expenditures incurred by the dealer for the purchase and the affixing of the abovesaid material were kept out of the regular account books. Even during the written arguments submitted by the learned sales tax practitioner appearing on behalf of the assessee before the Tribunal, it was conceded that the locks and handles to the cupboards and the mirrors were fixed on the same by the dealer. It was sought to be contended before the Tribunal that the application of the paints and the fitting of the mirrors, etc. , would not constitute a separate commercial commodity distinct from the cupboard originally supplied to the assessee by the Patan manufacturer, but this contention raised on behalf of the assessee was not accepted by the Tribunal on the ground that the unfinished cupboard which are known as the skeleton have no market as ordinarily understood and that such unfinished cupboards were being purchased by the dealer of the steel furniture and after finishing the same by giving a coat of paint and affixing handles and locks and necessary mirrors, they were being sold to the customers in the market. The abovesaid findings of the fact rendered by the Tribunal therefore, would go to show very clearly that the skeleton cupboards could not be sold in the market to the customer and that certain activities, namely, the application of the paints and the affixing of the handles, the locks and the mirrors were absolutely necessary so as to complete the skeleton to cupboard, which could be sold in the market to the customer. We have to proceed further with the abovesaid findings of fact recorded by the Tribunal.