1986 (6) TMI 237 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to constitutionality of Orissa Additional Sales Tax Act, 1975
Imposition of additional tax on dealer
Restrictions on fundamental rights of dealer
Prohibition on passing tax burden to customer

Analysis:
The petitioner, a cement dealer, challenged the constitutionality of the Orissa Additional Sales Tax Act, 1975, claiming it imposed unreasonable restrictions on fundamental rights and was confiscatory. The Act increased tax liability based on turnover and prohibited dealers from passing on the additional tax to customers. The petitioner argued that the Act was ultra vires and unconstitutional, seeking its declaration as such. The State, in response, defended the imposition of the additional tax, stating it did not violate constitutional provisions and cited similar Acts upheld by higher courts in India.

The Act prescribed varying rates of additional tax based on turnover, with penalties for non-compliance, and prohibited dealers from collecting the additional tax from customers. The petitioner contended that the Act exceeded legislative powers, was unconstitutional, and unfairly burdened dealers with tax obligations regardless of profitability. The State justified the Act by comparing it to similar legislation upheld by higher courts in India.

The Court referred to a Supreme Court decision regarding the Tamil Nadu Additional Sales Tax Act, where it was held that such additional taxes were permissible and not confiscatory. The Court emphasized that the additional tax was on sales of goods and not on the income of the dealer. It was clarified that the dealer's inability to pass on the tax burden to customers did not change the nature of the tax. The Court found that the Act did not infringe on fundamental rights and was not unconstitutional, rejecting the petitioner's claims.

Ultimately, the Court dismissed the writ application, ruling that the Act did not violate fundamental rights or the Constitution. The judges concurred on the decision to reject the application, with each party bearing its own costs.