1974 (9) TMI 102 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Stage of the taxation
2. Knowledge about the taxation
3. Exclusion from the taxation

Detailed Analysis:

1. Stage of the Taxation:
The primary issue was whether the Delhi Act complies with Section 15(a) of the Central Sales Tax Act, 1956, which mandates that tax on declared goods should not be levied at more than one stage. The petitioners contended that the Delhi Act did not specify the stage at which the tax on cotton yarn should be levied, potentially leading to multi-stage taxation. The court referred to the historical context and legislative changes, noting that prior to the 1958 amendment, the Central Act specified the last sale as the taxable event. Post-amendment, the requirement was simplified to ensure that tax is levied only at one stage, without specifying whether it should be the first or last sale. The court concluded that Section 5(2)(a)(ii) of the Delhi Act effectively ensures a single-point levy by taxing the last sale, i.e., the sale to an unregistered dealer or consumer. This interpretation aligns with the principles laid out in previous judgments, including Fitwell Engineers v. Financial Commissioner and Modi Spinning and Weaving Mills Co. Ltd. v. Commissioner of Sales Tax.

2. Knowledge about the Taxation:
The second issue was whether dealers could ascertain if the declared goods had already been subjected to tax, thereby avoiding double taxation. The petitioners argued that the Delhi Act lacked provisions to ensure that dealers are aware of prior tax payments on the goods. The court distinguished the Delhi Act from the Punjab Act, which had specific provisions leading to uncertainty. It was noted that under the Delhi Act, the tax is levied on the last sale, and it is presumed that registered dealers would know if the goods had been taxed when sold to an unregistered dealer or consumer. The court cited Rattan Lal v. Assessing Authority, emphasizing that dealers are expected to act according to the law and ascertain their tax liabilities.

3. Exclusion from the Taxation:
The third issue was whether the Delhi Act needed a provision to exclude the sale price of declared goods already subjected to tax from the gross turnover of a dealer. The petitioners referred to amendments in the Punjab Act post-Bhawani Cotton Mills' case, which provided for such exclusions. The court held that the absence of an explicit exclusion provision in the Delhi Act does not render it incompatible with Section 15(a) of the Central Act. The liability to pay tax and the assessment of such liability are distinct; since the liability itself does not arise for goods already taxed, their sale price need not be included in the gross turnover. This interpretation is supported by previous judgments, including A.V. Fernandez v. State of Kerala and State of Assam v. Ramesh Chandra Dey.

Conclusion:
The court dismissed the writ petitions filed by the assessees and allowed the writ petitions filed by the Commissioner of Sales Tax. The impugned orders by the Financial Commissioner were quashed, and the Financial Commissioner was directed to act in accordance with the observations made in the judgment. Each party was ordered to bear its own costs.