1961 (12) TMI 69 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the Central Government's notification bringing section 6 of the Central Sales Tax Act into force before section 15.
2. Proper levy of tax under section 8(2) of the Central Sales Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Central Government's Notification Bringing Section 6 into Force Before Section 15:

The primary contention raised by the petitioners was that the tax levied under section 6 of the Central Sales Tax Act was invalid because section 15, which imposes certain restrictions and conditions on the tax on sales and purchases of declared goods, was brought into force only on 1st October 1958, after the assessment year in question. The petitioners argued that sections 6, 14, and 15 form a composite group and should have been enforced simultaneously to conform to the Act's underlying object. They emphasized that the preamble of the Act indicates the necessity of simultaneous enforcement of these sections to ensure the intended safeguards.

However, the court found it exceedingly difficult to follow this argument. The court noted that after the amendment of the Constitution, Parliament was empowered to legislate on taxes on sales or purchases in the course of inter-State trade or commerce (Article 286 and entry 92-A of List I). The court emphasized that Parliament's competency to legislate in this regard was unquestionable. The court explained that the Central Sales Tax Act of 1956 is a composite piece of legislation that encompasses various powers conferred upon Parliament by the Constitution, including the power to levy tax on inter-State sales (section 6) and to impose restrictions on State sales tax laws concerning declared goods (section 15).

The court rejected the argument that Parliament was bound to bring sections 6 and 15 into operation simultaneously. It clarified that these are distinct powers, and there is no constitutional requirement for their simultaneous exercise. The court stated that the notification bringing section 6 into force on a date earlier than section 15 did not invalidate the levy of tax on inter-State sales or purchases. The court further explained that section 15's restrictions on State sales tax laws would only apply from the date section 15 was brought into force, and until then, the local sales tax laws would remain valid.

2. Proper Levy of Tax Under Section 8(2) of the Central Sales Tax Act:

The petitioners contended that the levy of tax at two percent on a part of their turnover under section 8(2) of the Act was improper. They argued that the tax should be levied "in the same manner" as it would have been under the local sales tax law, which, in the case of hides and skins under the Madras General Sales Tax Act, involved a single point levy. The petitioners claimed that the tax should only be imposed if the transaction had reached the single point specified under the local sales tax law.

The court rejected this argument, stating that section 8(2) requires the tax to be calculated at the same rates and in the same manner as it would have been under the local sales tax law, but it also qualifies this requirement. The court explained that even if the dealer or transaction may not attract tax under the local sales tax law, for the purpose of section 8(2), the Central sales tax becomes leviable at the same rate as would otherwise be applicable under the local sales tax law.

Conclusion:

The court dismissed the petitions, finding no substance in the arguments advanced by the petitioners. The notification bringing section 6 into force before section 15 was deemed valid, and the levy of tax under section 8(2) was upheld. The petitions were dismissed with costs, and counsel's fee was set at Rs. 150.

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