1977 (5) TMI 78 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the dealings of the appellant constitute import.
2. Whether the dealings are exempted from the payment of "transaction tax."
3. Whether the levy is barred by limitation.
4. Whether the deliberations imposing the transaction tax ceased to have effect after the de jure transfer of the French territory to India.

Detailed Analysis:

1. Whether the dealings of the appellant constitute import:
The appellant contended that the machineries were imported by its main office in Cannanore, Kerala, and not directly into Mahe, thus not constituting an import into Mahe. However, the court held that the term "import" in clause 6 of the deliberations dated 25th April, 1953, means bringing goods into the territory of Pondicherry either by sea or by land from outside. Therefore, even if the goods landed at Cochin Port and were then transported to Mahe, it would still be considered an import into Mahe. The court concluded that the bringing in of machinery into Pondicherry State for use in the textile mills falls under clause 6.

2. Whether the dealings are exempted from the payment of "transaction tax":
The appellant argued that the exemption from the transaction tax granted to textile mills could not be withdrawn without a fresh deliberation and that the decision to withdraw the exemption was not approved by the Head of the State. The court found that the suspension of the levy by the Chief Commissioner was temporary and could be withdrawn by the Representative Assembly, which had the authority to suspend and resume the levy. The court held that the Representative Assembly's decision on 29th September, 1962, to revoke the suspension and direct the collection of the tax was valid, thereby making the appellant liable for the transaction tax.

3. Whether the levy is barred by limitation:
The appellant claimed that the recovery of the tax was barred by limitation, as the demand was issued after one year from the date of import. The court noted that under the law of prescription, the period of one year for claiming the tax runs only from the date when the revenue authorities could ascertain the tax, which requires the appellant to furnish necessary materials. Since the appellant had not submitted the required materials, the limitation period had not started. Therefore, the court held that the recovery of tax was not barred by limitation.

4. Whether the deliberations imposing the transaction tax ceased to have effect after the de jure transfer:
The appellant argued that the transaction tax ceased to be in force after the de jure transfer of the French territory to India on 16th August, 1962, under the French Establishments (Application of Laws) Order, 1954. The court examined the relevant provisions and concluded that the transaction tax does not correspond to customs duty under the Sea Customs Act or the Indian Tariff Act. The court found that the transaction tax, being different from import or export duties, continued to be in force under the Administration Order, 1954, and the Pondicherry (Administration) Act, 1962, until repealed or amended by a competent authority. Since there was no repeal by the Central Government, the transaction tax remained valid.

Conclusion:
The court upheld the levy of the transaction tax on the appellant, rejecting all the contentions raised. However, the court directed the respondents to quantify the tax after giving the appellant an opportunity to produce necessary documents. The appellant was given two months to submit the required materials, failing which the demand would stand as issued. The second appeal was dismissed with no costs.

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