1986 (1) TMI 377 - HC - VAT and Sales Tax

Issues Involved:

1. Constitutionality of the amended section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947.
2. Contravention of Article 286 of the Constitution of India.
3. Contravention of sections 4 and 5 of the Central Sales Tax Act.
4. Penal nature of the provision under Article 20 of the Constitution.
5. Impediment on the free flow of trade under Article 301 of the Constitution.
6. Legality under section 5(3) of the Central Sales Tax Act, 1956.

Detailed Analysis:

I. Constitutionality of the Amended Section 5(2)(A)(a)(ii) of the O.S.T. Act:

The petitioners challenged the constitutionality of the amended section, arguing that it contravened several constitutional provisions and Central legislations. The court examined the amendment, which added the words "in a manner that such resale shall be subject to levy of tax under this Act" and gave it retrospective effect. The court found that the amendment was within the legislative competence of the State Legislature under entry 54 of List II of the Seventh Schedule of the Constitution of India. The court held that the amended provision was not unconstitutional and was a valid piece of legislation.

II. Contravention of Article 286 of the Constitution of India:

The petitioners argued that the amended section contravened Article 286, which prohibits the imposition of tax on sales outside the State or in the course of export/import. The court referred to previous decisions, including [1976] 37 STC 157 (State of Orissa v. Joharimal Gajananda) and [1976] 38 STC 189 (M.M.T.C. of India Ltd. v. State of Orissa), which held that sales in the course of inter-State trade/export were not exigible to Orissa sales tax. The court concluded that the amendment did not impose tax on export/inter-State sales but ensured that resale within Orissa was subject to tax under the O.S.T. Act. Therefore, the amendment did not violate Article 286.

III. Contravention of Sections 4 and 5 of the Central Sales Tax Act:

The petitioners contended that the amended section contravened sections 4 and 5 of the Central Sales Tax Act and had no operation under Article 254 of the Constitution. The court examined the provisions and found that the amendment did not contravene the Central Sales Tax Act. The court held that the amendment was intended to ensure the single point levy of tax within the State and did not interfere with the Central legislation.

IV. Penal Nature of the Provision Under Article 20 of the Constitution:

The petitioners argued that the amended section was a penal provision and could not be retrospectively enacted under Article 20 of the Constitution. The court found that the amendment was not penal in nature but intended to ensure compliance with the tax provisions. The court held that the amendment did not violate Article 20 as it did not retrospectively make an act an offence.

V. Impediment on the Free Flow of Trade Under Article 301 of the Constitution:

The petitioners contended that the amendment imposed restrictions on the free flow of trade, violating Article 301. The court held that the amendment did not directly and immediately interfere with the flow of inter-State trade or commerce. The court found that the amendment was regulatory and did not violate Article 301.

VI. Legality Under Section 5(3) of the Central Sales Tax Act, 1956:

The petitioners argued that the amendment was illegal and unconstitutional under section 5(3) of the Central Sales Tax Act, 1956. The court examined the provisions and found that the amendment did not contravene the Central Sales Tax Act. The court held that the amendment was within the legislative competence of the State Legislature and was valid.

Judgment:

The court classified the petitions into three categories based on the type of assessments and declarations involved. For the first and second categories, where unamended declarations were given or there were violations of section 15 of the C.S.T. Act, the court quashed the assessments and imposition of tax. For the third category, where assessments were made after the amendment of form No. XXXIV, the court upheld the validity of the assessments and imposition of tax.

Conclusion:

The court allowed the petitions in O.J.Cs. 676, 677, and 1413 of 1978, 960 and 1771 of 1979, 1297, 1493, 1494, 1495, 1521, 1522, 1982, 1983, and 1984 of 1980, 1132 of 1982, and 188 and 189 of 1983, quashing the assessments and imposition of tax. The court dismissed the petitions in O.J.Cs. 411 of 1978, 1855 and 1891 of 1980, 1326, 1327, and 2429 of 1981, 363, 1131, 2360, and 1673 of 1982, and 28, 401, 402, and 1647 of 1983, upholding the validity of the assessments and imposition of tax.

← Previous Next →