1981 (2) TMI 220 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of notifications under the Central Sales Tax Act, 1956 regarding retrospective effect.
2. Validity of retrospective enhancement of tax rate on inter-State sales of pulses.
3. Applicability of section 8(5) of the Central Act in withdrawing exemptions retrospectively.

Analysis:
The case involved a petition under article 226 of the Constitution by a dealer in pulses, challenging the retrospective effect of notifications issued under the Central Sales Tax Act, 1956. The petitioner was assessed to sales tax at 2 per cent for the period from 12th November, 1977, to 31st October, 1978, under the Central Act. The State Government issued notifications on 1st April, 1978, and 6th July, 1979, which led to the withdrawal of concessions and an increase in the tax rate to 4 per cent retrospectively from 21st May, 1975. The main contention was whether the retrospective enhancement of the tax rate was authorized under section 8(5) of the Central Act.

The Court analyzed the provisions of section 8(5) of the Central Act, which allows the State Government to grant exemptions or concessions to dealers through notifications. The Court noted that while the State Government can grant retrospective exemptions or concessions, it does not have the authority to withdraw exemptions retrospectively to increase the tax rate. The notifications issued on 6th July, 1979, effectively increased the tax rate on inter-State sales of pulses from 2 per cent to 4 per cent for the period from 21st May, 1975, to 1st April, 1978. The Court held that this retrospective enhancement of the tax rate and withdrawal of concessions were unauthorized under the law.

Consequently, the Court partially allowed the petition, directing that the notifications issued on 6th July, 1979, would not be given effect to enhance the tax rate for the period from 21st May, 1975, to 1st April, 1978. The tax rate for this period of inter-State sales of pulses was to remain at 2 per cent in accordance with the notification dated 1st April, 1966. The Court made no order as to costs and ordered the refund of the security amount to the petitioners, thereby resolving the issue in favor of the petitioner regarding the retrospective tax rate enhancement.