1983 (8) TMI 242 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legislative competence of the State Legislature to levy tax on the despatch of manufactured goods outside the state.
2. Validity and constitutionality of the Haryana General Sales Tax (Amendment and Validation) Act, 1983.
3. Interpretation of the constitutional amendments made by the Constitution (Forty-sixth Amendment) Act, 1982.

Summary:

Issue 1: Legislative Competence of the State Legislature
The core issue was whether the mere despatch of manufactured goods to a place outside the State is synonymous with the "consignment of goods in the course of inter-State trade or commerce" as per entry No. 92-B of List I of the Seventh Schedule to the Constitution, inserted by the Constitution (Forty-sixth Amendment) Act, 1982. The petitioners argued that the Haryana Legislature lacked the competence to levy such a tax, which should fall under the exclusive domain of Parliament.

Issue 2: Validity and Constitutionality of Haryana Act No. 3 of 1983
The Haryana General Sales Tax (Amendment and Validation) Act, 1983, was challenged for imposing a tax on the despatch of manufactured goods to a place outside the State, which was argued to be beyond the legislative competence of the State Legislature. The petitioners contended that the amendment in section 9(1)(b) of the Act, which included the despatch of manufactured goods to a place outside the State, was unconstitutional.

Issue 3: Interpretation of the Constitution (Forty-sixth Amendment) Act, 1982
The Court examined the intention behind the Forty-sixth Amendment, particularly the insertion of entry No. 92-B in List I and the amendments to article 269. The Court interpreted that the legislative power to tax consignment transfers of goods in the course of inter-State trade or commerce is now exclusively vested in the Union of India, to the total exclusion of the States.

Judgment:
The Court held that the mere "despatch of goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce" is synonymous with the "consignment of goods either to the person making it or to any other person in the course of inter-State trade or commerce" as specified in article 269(1)(h) and entry No. 92-B of List I of the Seventh Schedule to the Constitution. Consequently, the levy of sales or purchase tax on such a despatch or consignment of goods and matters ancillary thereto is within the exclusive legislative competence of Parliament.

The impugned amendment to section 9(1)(b) of the Haryana General Sales Tax Act, introduced by Haryana Act No. 3 of 1983, was declared unconstitutional and struck down. The retrospective validation of the notification and all actions taken thereunder were also quashed. The writ petitions were allowed, and the parties were left to bear their own costs.