1985 (1) TMI 285 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Vires of Section 4-B of the Punjab General Sales Tax Act, 1948.
2. Vires of Section 9(1) of the Haryana General Sales Tax Act, 1973.
3. Legality of show cause notices for imposing penalties in terms of Section 50 of the Haryana Act.

Summary:

1. Vires of Section 4-B of the Punjab General Sales Tax Act, 1948:
The petitioner challenged the vires of Section 4-B of the Punjab General Sales Tax Act, 1948, claiming it was ultra vires the Constitution. The petitioner relied on the judgment in Bata India Limited v. State of Haryana [1983] 54 STC 226, where an analogous provision in the Haryana General Sales Tax Act was held to be ultra vires. However, the Full Bench decision in Sterling Steels & Wires Ltd. v. State of Punjab [1980] 45 STC 438 (FB) upheld the vires of Section 4-B based on the Supreme Court decision in State of Tamil Nadu v. M.K. Kandaswami [1975] 36 STC 191 (SC). The Full Bench concluded that Section 4-B was intra vires, emphasizing that the taxing event was the purchase of goods, not their despatch outside the state.

2. Vires of Section 9(1) of the Haryana General Sales Tax Act, 1973:
The petitioners challenged the amendments to Section 9 of the Haryana Act, arguing that the provision was ultra vires as it imposed a tax on the despatch of goods outside the state, which was beyond the legislative competence of the state legislature. The Full Bench overruled the decision in Bata India Limited's case [1983] 54 STC 226, holding that the taxing event was the purchase of goods, not their despatch outside the state. The court concluded that Section 9(1) of the Haryana Act, as amended by Act No. 3 of 1983 and Act No. 11 of 1984, was intra vires the Constitution.

3. Legality of Show Cause Notices for Imposing Penalties in Terms of Section 50 of the Haryana Act:
The petitioners argued that show cause notices for imposing penalties under Section 50 were illegal as no purchase tax was payable per Bata India Limited's case [1983] 54 STC 226. The court clarified that Section 50 penalizes the misuse of goods purchased without tax for purposes other than those specified in the registration certificate, regardless of the liability to pay purchase tax. Consequently, the show cause notices were deemed legal, and the petitioners were liable to pay penalties under Section 50.

Conclusion:
The Full Bench dismissed the writ petitions challenging the vires of Section 4-B of the Punjab Act and Section 9(1) of the Haryana Act, holding both provisions as intra vires. The court also upheld the legality of show cause notices for imposing penalties under Section 50 of the Haryana Act.