1968 (8) TMI 174 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality and validity of Section 5-A of the Rajasthan Sales Tax Act.
2. Levy of purchase tax under Section 5-A.
3. Validity of reassessment notice under Section 12 of the Act.

Detailed Analysis:

1. Constitutionality and Validity of Section 5-A of the Rajasthan Sales Tax Act:
The petitioners challenged Section 5-A of the Act under Article 226 of the Constitution, arguing that it was ultra vires the Constitution, specifically Articles 286, 301, and 304. They contended that the "purchase tax" imposed by Section 5-A created an impediment in trade, commerce, and intercourse throughout India, violating Article 301. They also argued that no previous sanction of the President was obtained before introducing Section 5-A, thus contravening Article 304(b).

The court examined the relevant provisions of the Act and the Constitution. It noted that the Rajasthan Sales Tax Act received the President's assent on 22nd December 1954, and the Amending Act (No. 18 of 1960) introduced Section 5-A without the President's assent. The court referred to precedents, including Atiabari Tea Co. Ltd. v. The State of Assam and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, to conclude that regulatory measures or compensatory taxes do not violate Article 301. The court held that "purchase tax" does not operate as a restriction on the freedom of trade as contemplated by Article 301 and Article 304(b). Thus, Section 5-A was not invalid for want of the President's assent.

2. Levy of Purchase Tax under Section 5-A:
The petitioners argued that the imposition of purchase tax on goods like raw wool, cotton, and oil-seeds, which were exported, was in contravention of Article 286 of the Constitution. They claimed that these purchases were made in the course of export and should not be taxed.

The court examined whether the purchases were made in the course of export. Citing The State of Travancore-Cochin v. The Shanmugha Vilas Cashewnut Factory and The State of Madras v. Gurviah Naidu & Co. Ltd., the court held that purchases for the purpose of export are not considered as acts done in the course of export. Therefore, Section 5-A does not seek to tax purchases made in the course of export. The court left it open for the petitioners to get this question decided by the assessing authority or appellate authority.

Additionally, the petitioners in Writ Petitions Nos. 83 of 1967 and 302 of 1965 argued that the levy of purchase tax on oil-seeds and cotton contravened Section 15 of the Central Sales Tax Act. The court noted that the Rajasthan Sales Tax Rules and notifications ensured that the tax on declared goods like oil-seeds and cotton was levied at the last point in the series of sales, thus complying with Section 15(a) of the Central Act. The court found no evidence of double taxation and overruled this ground of attack.

3. Validity of Reassessment Notice under Section 12 of the Act:
The petitioner in Writ Petition No. 568 of 1966 challenged the reassessment notice issued under Section 12 of the Act, arguing that it was based on a mere change of opinion and thus invalid.

The court noted that this challenge was not raised in the writ petition but only during arguments. It held that the petitioner should have sought a writ of prohibition when the notice was served, not after the reassessment order was passed. The court allowed the petitioner to raise this issue in the pending appeal against the reassessment order.

Conclusion:
The court held that Section 5-A of the Rajasthan Sales Tax Act is neither ultra vires Articles 286, 301, and 304 of the Constitution nor in contravention of Section 15 of the Central Sales Tax Act. All writ applications were dismissed, and parties were directed to bear their own costs.

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