1986 (11) TMI 363 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Competence of the State Legislature to levy sales tax on works contract, hire-purchase, and lease transactions.
2. Requirement of rules for computation of turnover, taxable event, and rate of tax.

Summary:

Competence of the State Legislature:
The petitioners contended that the State Legislature was not competent to levy sales tax on works contract, hire-purchase, and lease transactions without a law enacted by Parliament pursuant to Article 286(3)(b) of the Constitution. They argued that the absence of such a law rendered the levy of tax incompetent. The Court examined the Forty-sixth Constitution Amendment Act of 1982 and Act 18 of 1985, which amended the A.P. General Sales Tax Act to include transactions involving works contracts, hire-purchase, and leases within the ambit of "tax on the sale or purchase of goods" as defined in Article 366(29A) of the Constitution. The Court held that the State Legislature was competent to enact Act 18 of 1985 and that the legislation did not suffer from any infirmity. The Court clarified that Article 286(3)(b) empowers Parliament to impose restrictions on the levy of tax but does not preclude the State Legislature from enacting laws in the absence of such restrictions.

Requirement of Rules for Computation of Turnover, Taxable Event, and Rate of Tax:
The petitioners argued that in the absence of specific rules prescribing the taxable event, rate of tax, and mode of computation, the charging section was incomplete and unenforceable. The Court held that the amendments brought by Act 18 of 1985, which expanded the definitions of "dealer," "sale," and "turnover," were sufficient to levy sales tax on materials or goods involved in works contracts, hire-purchase, and lease transactions. The Court found that the taxable event, levy point, and rate of tax had already been prescribed under the existing Sales Tax Act and that separate or fresh rules were not necessary. The Court also addressed concerns about potential inconsistencies and deficiencies in the legislative scheme, stating that these were matters to be considered during the assessment proceedings and did not affect the validity of the provisions.

Conclusion:
The Court allowed W.P. Nos. 1064, 1065, 1067, and 1400 of 1985, as the transactions in question occurred before the enactment of Act 18 of 1985 and were not exigible to tax. The remaining writ petitions were dismissed. The Court ordered no costs and set the advocate's fee at Rs. 150 for each writ petition.