1986 (9) TMI 384 - SC - VAT and Sales Tax

Whether the assessment made under section 5(2)(a)(ii) of the State Act is bad since it is inconsistent with the provisions of section 15(a) of the Central Sales Tax Act, 1956 and violative of article 286(3) of the Constitution of India? Held that - Petition allowed. While quashing the assessment orders, we leave open freedom to the assessing authority to reassess the petitioners for the years in question, after ascertaining whether the petitioners have suffered liability by way of sales tax for the goods in question at any one stage. If they have been assessed before, they will not be assessed further. If they have not been assessed, assessment can be made making it clear in the assessment orders that the goods in question will not suffer any assessment further within the State.

Summary

Issues:
Challenge to assessment orders under Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi based on inconsistency with Central Sales Tax Act, 1956 and violation of Article 286(3) of the Constitution of India.

Analysis:
The petitioners, engaged in the sale of bright-bars, sought to quash their sales tax assessment orders for the years 1973-74 and 1974-75, contending that the assessment under section 5(2)(a)(ii) of the State Act was contrary to section 15(a) of the Central Act and infringed upon Article 286(3) of the Constitution. The Supreme Court noted that the petitioners directly approached the Court without exhausting statutory remedies. However, citing a previous case, it was established that a similar challenge was upheld, leading to the setting aside of the assessment order.

The Court emphasized that section 15(a) of the Central Act imposes restrictions on the tax levied on declared goods, limiting it to 3% of the sale price and prohibiting taxation at more than one stage. It was highlighted that the State Act lacked guidance on the stage at which sales tax should be imposed on declared goods within the State, as stipulated by the Central Act. The absence of a notification specifying the point of taxation for goods by successive dealers led to the conclusion that the assessment orders in question should be quashed.

While the assessment orders were set aside, the Court clarified that this did not absolve the petitioners from their sales tax liability. The Revenue contended that the petitioners must demonstrate whether they had already paid tax on the goods at an earlier stage to avoid double taxation. Acknowledging the merit in this argument, the Court granted the assessing authority the freedom to reassess the petitioners for the relevant years, ensuring that no further tax is imposed on the same goods within the State if already assessed. The judgment directed the assessing authority to proceed accordingly, allowing the petitions and providing clear instructions for reassessment.

In conclusion, the petitions challenging the assessment orders were allowed by the Supreme Court. The judgment underscored the importance of aligning State tax laws with Central regulations to prevent double taxation on declared goods. The decision provided clarity on the reassessment process, emphasizing the need for evidence to avoid duplicate taxation and directing the assessing authority to act in accordance with the Court's directives.