1988 (4) TMI 417 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of provisions of Act No. 42 of 1980 regarding liability for sales tax pre-nationalization and post-nationalization.

Analysis:
The case involved M/s. National Company Ltd., engaged in jute products manufacturing and sales, which was nationalized by the Central Government under the Industries (Development and Regulation) Act, 1951. The undertakings of the company were transferred to the Jute Corporation of India Limited and subsequently to a new Government company. The State sales tax authorities assessed the company for sales tax for a period prior to nationalization and demanded payment. The petitioner, the new Government company, challenged this assessment through a writ petition.

The petitioner relied on Section 7 of Act No. 42 of 1980, which states that liabilities of the company pre-nationalization remain enforceable against the company and not the Central Government or the acquiring Government company. The petitioner argued that the State Government cannot collect sales tax from the new Government company as per this provision. The Court observed that the Act provided for the appointment of a Commissioner for payments and the allocation of funds for liabilities, indicating that the State's attempt to collect sales tax from the petitioner was against the Act's mandate.

The petitioner contended that Section 17 of the A.P. General Sales Tax Act, relied upon by the State authorities, did not apply to them as they were not transferees under that section. The Court referenced judgments from the Calcutta High Court and the Madras High Court supporting the petitioner's stance. Ultimately, the Court held that the demand for sales tax against the petitioner was not valid based on the language of Act No. 42 of 1980.

In conclusion, the Court allowed the writ petition, directing the State sales tax authorities to pursue payments through the Commissioner as outlined in Act No. 42 of 1980. The judgment emphasized the supremacy of parliamentary enactments over State laws in cases of conflict, ensuring that the petitioner, as a new Government company, was not liable for sales tax pre-nationalization.