1982 (8) TMI 213 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of amendments to item 9 of the Second Schedule and item 5 of the Third Schedule of the Tamil Nadu General Sales Tax Act.
2. Legislative competence of the State Government to levy sales tax on sugar candy.
3. Classification of diamond sugar as "sugar" or "sugar candy" for sales tax purposes.

Detailed Analysis:

1. Validity of Amendments to Item 9 of the Second Schedule and Item 5 of the Third Schedule:

The appellant challenged the amendments made to item 9 of the Second Schedule and item 5 of the Third Schedule of the Tamil Nadu General Sales Tax Act, which subjected sugar candy to sales tax while retaining the exemption on sugar. The appellant argued that these amendments were beyond the legislative competence of the State Government and were ultra vires the State Legislature. The appellant contended that the levy of additional excise duty on sugar candy under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, precluded the State from imposing sales tax on the same goods. The appellant further argued that such double taxation would lead to unjust enrichment of the State Government.

The court held that the Central Act 58 of 1957 does not prevent a State Government from levying sales tax on goods covered by that Act. It merely states that if the State levies sales tax on such goods, it will lose its share of the contribution from the Central excise revenue. Therefore, the amendments to item 9 of the Second Schedule and item 5 of the Third Schedule do not suffer from legislative incompetence.

2. Legislative Competence of the State Government to Levy Sales Tax on Sugar Candy:

The appellant relied on the decision in Kishinchand Chellaram v. Joint Commercial Tax Officer [1968] 21 STC 367, arguing that since additional excise duty was levied on sugar, including sugar candy, the State would be estopped from levying sales tax. However, the court distinguished this case by noting that there was no dispute regarding the interpretation of any expression as in Kishinchand Chellaram. The court emphasized that the power of the State Legislature to impose sales tax on sugar candy was not questioned, and the State's classification of sugar candy as a separate article of commerce was within its legislative competence.

The court concluded that the constitutional power given to the State Legislature to legislate on sales tax cannot be said to have been affected or taken away by Central Act 58 of 1957. Therefore, the amendments brought by the State Legislature were valid, and the writ appeal was dismissed.

3. Classification of Diamond Sugar as "Sugar" or "Sugar Candy":

The main question in the two tax case petitions was whether diamond sugar sold by the assessee was "sugar" or "sugar candy." If diamond sugar was considered sugar, it would be exempt from sales tax under item 5 of the Third Schedule. If it was considered sugar candy, it would be subject to sales tax under item 9 of the Second Schedule.

The court referred to the decision in Vasantha & Co. v. State of Madras [1963] 14 STC 696, where sugar candy was considered sugar for exemption purposes. However, the court noted that the amendments in 1975 excluded sugar candy and similar articles from the definition of "sugar" for sales tax purposes. The court emphasized that the legislature has the power to classify articles for taxation and to restrict the exemption to pure sugar.

The court held that diamond sugar, though made from sugar, is a distinct commodity in commercial parlance and is treated differently from sugar. The court noted that diamond sugar is sold as a separate commodity and is not generally considered sugar by consumers. Therefore, the court upheld the orders of the Tribunal, holding that diamond sugar is sugar candy and is liable to sales tax under item 9 of the Second Schedule.

Conclusion:

The writ appeal and the two tax case petitions were dismissed. The court upheld the validity of the amendments to the Tamil Nadu General Sales Tax Act and confirmed the legislative competence of the State Government to levy sales tax on sugar candy. The court also affirmed that diamond sugar is classified as sugar candy and is subject to sales tax. There were no orders as to costs in any of these matters.

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