1987 (1) TMI 464 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of Rule 62-A of the Rajasthan Sales Tax Rules, 1955.
2. Existence of a contract of sale between the petitioners.
3. Classification of the sale as inter-State trade.
4. State's power to mandate furnishing of Form No. ST-18.

Issue-wise Detailed Analysis:

1. Validity of Rule 62-A of the Rajasthan Sales Tax Rules, 1955:
The petitioners challenged Rule 62-A, introduced by a notification dated 31st October 1986, which mandated the production of a declaration in Form No. ST-18 at the check post in Rajasthan for motor vehicles exceeding Rs. 1,000 in value. The petitioners argued that this requirement was ultra vires as it extended beyond the scope of Section 22-A of the Rajasthan Sales Tax Act and the State's legislative power under Entry 54 of List II of the Seventh Schedule of the Constitution of India.

The court examined whether Rule 62-A could be justified as an ancillary or incidental provision under Entry 54. Citing Hansraj Bagrecha v. State of Bihar [1971] 27 STC 4 (SC) and Harihar Prasad Debuka v. State of Bihar [1987] 66 STC 178 (Pat), the court held that the State Legislature could not legislate for the levy of tax on inter-State transactions. Rule 62-A and the notification dated 31st October 1986 were declared ultra vires, as they imposed restrictions on inter-State trade, which was beyond the legislative competence of the State.

2. Existence of a Contract of Sale Between the Petitioners:
The court evaluated whether there was a contract of sale between Petitioner No. 1 and Petitioner No. 2. Despite the application form clauses stating that no contractual liability would be created by accepting the booking advance, the court found that the various documents, such as the sale letter, invoice, and despatch advice, indicated a clear contract of sale. The sale letter specifically mentioned the vehicle details and the customer's information, confirming the existence of a contract of sale between the parties.

3. Classification of the Sale as Inter-State Trade:
The court assessed whether the sale constituted an inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956. The court referred to several Supreme Court judgments, including Tata Iron and Steel Co. Ltd. v. S.R. Sarkar [1960] 11 STC 655 (SC) and Union of India v. K.G. Khosla and Co. [1979] 43 STC 457 (SC), which established that if the movement of goods from one State to another was a result of a contract of sale, it qualified as an inter-State sale. The court concluded that the movement of scooters from Kanpur to Rajasthan was indeed in pursuance of the contract, thus classifying it as an inter-State sale.

4. State's Power to Mandate Furnishing of Form No. ST-18:
The petitioners contended that the requirement to furnish Form No. ST-18 was beyond the scope of Section 22-A of the Rajasthan Sales Tax Act and the State's legislative power. The court noted that Section 22-A empowered the State to establish check posts and inspect goods to prevent tax evasion under the State Act. However, the court held that Rule 62-A, which required a declaration for goods purchased outside Rajasthan and brought into the State, pertained to inter-State sales and was thus beyond the State's legislative competence. The court emphasized that the State Legislature could not impose restrictions on inter-State trade and commerce, reaffirming the principles laid down in Hansraj Bagrecha's case.

Conclusion:
The court declared Rule 62-A and the notification dated 31st October 1986 ultra vires, as they exceeded the State's legislative competence by imposing restrictions on inter-State trade. The writ petition was allowed, and the requirement to furnish Form No. ST-18 was invalidated. The court did not award costs, considering the circumstances of the case.

← Previous Next →