1989 (9) TMI 354 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Constitutionality of the Maharashtra Sales Tax on the Transfer of the Right to use any Goods for any purpose Act, 1985.
2. Validity of Section 3 read with Section 2(10) of the impugned Act.
3. Ultra vires under Articles 269(3), 246, 286(1)(a), 286(2), and 286(1)(b) of the Constitution.
4. Retrospective application of the Act under Section 3(ii) and (iii).

Summary:

1. Constitutionality of the Maharashtra Sales Tax on the Transfer of the Right to use any Goods for any purpose Act, 1985:
The petitioners challenged the impugned Act as ultra vires the Constitution of India and prayed for a declaration that it is null and void. They contended that the Act imposes tax not only on transfers within Maharashtra but also on inter-State transfers and imports, violating Articles 269(3) and 246 read with entry 92A, List I, Seventh Schedule of the Constitution.

2. Validity of Section 3 read with Section 2(10) of the impugned Act:
The petitioners argued that Section 3, read with Section 2(10), imposes tax on transfers of the right to use goods located in another State at the time of the lease, making it ultra vires Article 286(1)(a) and 286(2) read with Section 4(2) of the Central Sales Tax Act, 1956. They also contended that the Act levies tax on transfers that occasion import into India, violating Article 286(1)(b).

3. Ultra vires under Articles 269(3), 246, 286(1)(a), 286(2), and 286(1)(b) of the Constitution:
The court examined whether the impugned Act transgressed the limitations imposed by Articles 246 read with entry 92A, List I, Article 269(1)(g), Article 286(1)(a) or (b), and the restrictions imposed by Parliament under Article 286(3)(b). The court concluded that the explanation to Section 2(10) does not result in bringing inter-State sales or sales taking place outside Maharashtra within the scope of the Act. The court held that the taxable event under the Act is the exercise or enjoyment of the right to use goods located in Maharashtra at the time of their use.

4. Retrospective application of the Act under Section 3(ii) and (iii):
The petitioners argued that Section 3(ii) and (iii) levies tax on transfers of the right to use goods effected before the Constitution (Forty-sixth Amendment) Act, 1982, making it ultra vires. The court held that Section 3(i) levies tax on the turnover of sales where the right to use is exercised on or after the appointed day, and the date of the agreement to transfer such right is irrelevant. Section 3(ii) levies tax on the price received or receivable in respect of the use from the date the Act has come into force. Therefore, none of the clauses of Section 3 purports to levy tax on deemed sales taking place prior to the appointed day.

Conclusion:
The court held that the Maharashtra Sales Tax on the Transfer of the Right to use any Goods for any purpose Act, 1985, is valid and not in contravention of Articles 269 and 286 of the Constitution. The writ petition was dismissed with costs, and the operation of the order was stayed for six weeks. The court also granted a certificate under Article 133 read with Article 134A of the Constitution.