2007 (12) TMI 488 - SC - VAT and Sales Tax

Constitutional validity of section 35 of the Chhattisgarh Vanijyik Kar Adhiniyam, 1994 - Held that - Appeal dismissed. High Court was right in holding that section 35 of the Act was constitutionally invalid. The direction for refund of the amount collected from the respondent under the provisions of the said section had been rightly directed to be refunded.

Summary

Issues:
Constitutional validity of section 35 of the Chhattisgarh Vanijyik Kar Adhiniyam, 1994 challenged before the Chhattisgarh High Court.

Detailed Analysis:

1. Constitutional Validity of Section 35 of the Adhiniyam:
- The respondent, an assessee, challenged the constitutional validity of section 35 of the Chhattisgarh Vanijyik Kar Adhiniyam, 1994, which corresponds to the Chhattisgarh Commercial Tax Act, 1994.
- The respondent contended that the section lacked provisions for deduction and ascertainment of the value and nature of goods supplied during the execution of works contracts, especially in the case of inter-State trade.
- The appellants, opposing the writ petition, argued that the provision was necessary to prevent contractors from evading sales tax by disappearing before assessment completion.
- The appellants cited similar provisions in Sales Tax Acts of other states and referenced a previous judgment upholding the constitutional validity of section 35.
- The High Court, referring to relevant decisions, declared the provision unsustainable, leading to the appeal before the Supreme Court.

2. Ambit and Scope of Section 35:
- The appellants argued that the High Court did not consider the full ambit and scope of section 35 in its judgment.
- They distinguished the cases cited by the High Court, mentioning that those cases dealt with different provisions of other state Acts.
- Citing the Steel Authority and Nathpa Jhakri cases, the appellants highlighted the specific issues addressed in those judgments regarding similar provisions in other state Acts.
- The Supreme Court reiterated the observations made in the Steel Authority and Nathpa Jhakri cases, emphasizing the limitations on the State Legislature's power to levy sales tax on inter-State sales, outside sales, or sales in the course of import.

3. Conclusion and Dismissal of Appeal:
- Based on the precedents set in the Steel Authority and Nathpa Jhakri cases, the Supreme Court upheld the High Court's decision regarding the constitutional invalidity of section 35 of the Act.
- The Court directed the refund of the amount collected from the respondent under the said section.
- Ultimately, the appeal was deemed meritless and dismissed by the Supreme Court, with no order as to costs.

This detailed analysis encapsulates the core issues, arguments presented, relevant legal precedents, and the final decision rendered by the Supreme Court in the case challenging the constitutional validity of section 35 of the Chhattisgarh Commercial Tax Act.