1986 (11) TMI 368 - HC - VAT and Sales Tax

Summary

Issues:
- Assessment of sales tax at different rates under the Sales Tax Act
- Interpretation of section 8 of the Central Sales Tax Act
- Applicability of rates based on sales to registered and unregistered dealers
- Challenge based on extension of Bengal Finance (Sales Tax) Act, 1941 to Delhi
- Delegation of legislative functions under section 8(2A) of the Central Sales Tax Act
- Imposition of penalties under the Central Sales Tax Act

Assessment of Sales Tax Rates:
The petitioners, who are dry fruit dealers, challenged the differential taxation rates imposed on their sales under the Sales Tax Act. The tax rates varied between 3% and 10% based on whether the sales were made to registered or unregistered dealers. The rates were determined under section 8 of the Central Sales Tax Act, which specified different rates for sales to different categories of dealers.

Interpretation of Section 8 of the Central Sales Tax Act:
Section 8(2)(b) of the Central Sales Tax Act stipulates that the tax rate for goods, other than declared goods, sold to unregistered dealers should be calculated at 10% or at the rate applicable within the state, whichever is higher. Section 8(2A) exempts goods from tax if they are exempt or taxed at a rate lower than 3% under the local sales tax law. The petitioners argued that the tax should have been levied at 3% for all sales, citing the Supreme Court's decision in B. Shama Rao v. Union Territory of Pondicherry.

Challenge Based on Extension of Bengal Finance Act:
The petitioners contended that the extension of the Bengal Finance (Sales Tax) Act, 1941 to Delhi in 1951 was invalid. They argued that this extension and the subsequent imposition of tax under the Sales Tax Act of 1941 were flawed. However, this argument was dismissed in light of the Supreme Court's ruling in In re Delhi Laws Act, which upheld the extension of the Act to Delhi.

Delegation of Legislative Functions:
The petitioners raised concerns about the delegation of essential legislative functions under section 8(2A) of the Central Sales Tax Act. The Supreme Court's decisions in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. Assistant Commissioner of Sales Tax and International Cotton Corporation (P.) Ltd. v. Commercial Tax Officer, Hubli were cited to support the contention. The court held that the provisions of section 8(2A) did not constitute an impermissible delegation of legislative functions.

Imposition of Penalties:
Regarding the penalties imposed under the Central Sales Tax Act, it was noted that the Act follows the same penalty procedures as the local Sales Tax Act under section 9. Consequently, the court found no grounds for remission of the penalties. The writ petition was dismissed, and no costs were awarded.

In conclusion, the court upheld the differential tax rates based on sales to registered and unregistered dealers under the Central Sales Tax Act. The challenges regarding the extension of the Bengal Finance Act and delegation of legislative functions were rejected, and penalties imposed under the Act were deemed valid.