1982 (3) TMI 229 - HC - VAT and Sales Tax

Issues Involved:
1. Discrimination under Article 14 of the Constitution of India.
2. Ultra vires the powers of the State Legislature.
3. Exemption under Section 9 of the Act.
4. Turnover base for tax liability.
5. Multi-point tax imposition.
6. Applicability of Section 5-A to transactions under Section 6-A.

Issue-wise Detailed Analysis:

1. Discrimination under Article 14 of the Constitution of India:
The petitioners argued that Section 6-A discriminates between purchases from registered dealers and non-registered dealers, lacking a rational nexus with the object, thus violating Article 14. The court rejected this contention, stating that the classification is clear, consistent, and rational. The differential treatment is reasonable and has a rational relation to the object of taxation. The court cited precedents such as East India Tobacco Co. v. State of Andhra Pradesh and Tungabhadra Industries Ltd. v. State of Andhra Pradesh to support the legislative discretion in tax classification.

2. Ultra vires the powers of the State Legislature:
The petitioners contended that Section 6-A is essentially a levy on use or consumption, not on sale or purchase, making it ultra vires under entry 54, List II of the Seventh Schedule of the Constitution. The court referred to Andhra Sugars Limited v. State of Andhra Pradesh and Malabar Fruit Products Co. v. Sales Tax Officer, concluding that the tax is on the event of purchase, not on subsequent use or consumption. The court held that Section 6-A is intra vires as the act of purchase attracts the tax.

3. Exemption under Section 9 of the Act:
The petitioners argued that milk purchased from agriculturist vendors, exempt under Section 9, should not be taxed under Section 6-A. The court disagreed, stating that Section 9 provides partial, not total, exemption. Section 8, which provides total exemption for goods in the Fourth Schedule, does not apply to Section 6-A. Therefore, unless explicitly exempted, purchases under Section 6-A are not saved by Section 9. The court noted that exemptions under Section 9 do not automatically apply to Section 6-A.

4. Turnover base for tax liability:
The petitioners argued that the term "turnover" refers to amounts set out in bills by a dealer, and since agriculturist vendors are not dealers, the turnover has no purchase base. The court clarified that "turnover" means the total amount charged as consideration for the sale or purchase of goods, not necessarily by a dealer. The definition includes any sums charged by the dealer but does not limit the total consideration to dealer transactions. The court rejected the petitioners' interpretation.

5. Multi-point tax imposition:
The petitioners claimed that Section 6-A imposes multi-point tax and that the omission of specific words in clause (ii) makes it redundant. The court emphasized that Section 6-A aims to plug loopholes and prevent tax evasion. The court cited State of Tamil Nadu v. Kandaswami, explaining that Section 6-A is a distinct charging provision. The court held that each transaction under Section 6-A(i) and 6-A(ii) is distinct and not overlapping, thus rejecting the contention of multi-point tax.

6. Applicability of Section 5-A to transactions under Section 6-A:
The petitioners argued that Section 5-A, which levies additional tax on transactions under Section 5, does not apply to transactions under Section 6-A. The court agreed, stating that Section 5-A explicitly covers transactions under Section 5, and its absence in Section 6-A's language indicates legislative intent. The court concluded that Section 5-A does not cover Section 6-A transactions, rejecting the government's counter-argument.

Additional Contentions:
- Cream and Husk: The petitioners argued that cream converted into ghee should not be taxed at the purchase point since ghee is already taxed. The court cited State of Tamil Nadu v. Kandaswami, holding that the purchase of cream is taxable. Regarding husk used as fuel, the court noted that only "husk of pulses" is exempt under Item 8 of the Fourth Schedule. If the husk used is not "husk of pulses," it is taxable under Section 6-A(ii)(a).

Conclusion:
The writ petitions were partly allowed, with specific applicability of Section 6-A to be determined by appropriate authorities. The court found no substantial question of law warranting an appeal to the Supreme Court.

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