1987 (4) TMI 453 - HC - VAT and Sales Tax

Issues Involved:
1. Classification of goods as packing material under the Rajasthan Sales Tax Act.
2. Jurisdiction of the assessing authority to reassess based on an audit report.
3. Validity of reassessment under Section 12 of the Rajasthan Sales Tax Act.
4. Constitutional validity of Sections 11B, 12, 23, 23-B, and 23-C of the Rajasthan Sales Tax Act.
5. Levy of interest under Section 11B of the Rajasthan Sales Tax Act.

Issue-wise Detailed Analysis:

1. Classification of Goods as Packing Material:
The appellant firm contended that waterproof paper, PVC bags, and poly propylene bags were packing materials covered under item No. 8(g) of the State Government notification dated July 1, 1975. The Assistant Commercial Taxes Officer reassessed the tax rate, arguing these items should be taxed at higher rates (7% and 8%) instead of 4%. The court analyzed whether the list of packing materials in the notification was exhaustive or illustrative, concluding it was exhaustive. Thus, items not specifically listed, such as butter paper, were not eligible for the concessional tax rate.

2. Jurisdiction of the Assessing Authority:
The appellant argued that the assessing authority had no jurisdiction to reassess based on a mere change of opinion or an audit report. The court held that Section 12 of the Rajasthan Act allows reassessment if the original assessment was at too low a rate. The reassessment was initiated based on the audit report pointing out the discrepancy in tax rates applied to the appellant's sales, which provided a prima facie reason for reassessment.

3. Validity of Reassessment under Section 12:
The court examined whether the reassessment was valid under Section 12. It concluded that the reassessment was justified as the original assessment had taxed certain goods at too low a rate. The court noted that the reassessment was not merely based on a change of opinion but on the audit report's findings, which indicated that the goods were not correctly classified under the concessional rate category.

4. Constitutional Validity of Sections 11B, 12, 23, 23-B, and 23-C:
The appellant challenged the constitutional validity of these sections, arguing they were discriminatory and arbitrary. The court referred to the Supreme Court's decision in Khazan Chand v. State of Jammu and Kashmir, which upheld the validity of similar provisions. The court found no merit in the appellant's challenge, holding that the provisions were not discriminatory or arbitrary.

5. Levy of Interest under Section 11B:
The appellant contended that the levy of interest under Section 11B was unconstitutional. The court, citing the Supreme Court's decision in Khazan Chand, held that the levy of interest for default in tax payment is a method of ensuring compliance and is within the legislative power of the state. The court upheld the validity of Section 11B and the interest levied under it.

Conclusion:
The court partly allowed the appeal, quashing the reassessment order to the extent that it levied additional tax on waterproof paper and PVC/poly propylene bags for certain periods. The reassessment for butter paper was upheld. The court also restrained the recovery of interest on the quashed tax amounts, leaving the parties to bear their own costs.

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