1989 (2) TMI 378 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notification levying sales tax on bardana sales at the first stage, entitlement to refund sales tax collected illegally, validity of notification annexure P-2, exemption under rule 29, taxation on bardana sales to the Government, scheme of sales tax.

Analysis:
The petitioners sought to quash a notification by the Government of Punjab levying sales tax on bardana sales at the first stage. The notification specified the stages at which the tax would be levied, including sales within Punjab and from outside the state. The petitioners contended that they should not be taxed on sales of bardana used for bagging rice supplied to the Government under Levy Orders, as they had already paid tax on separate sales to the department. However, the court held that the sales to the Government, being a second sale within the state, were not liable for tax under the notification. Any tax collected by the petitioners on such sales was deemed illegal and subject to refund to the department.

The petitioners argued that the notification, annexure P-2, was ultra vires as it did not provide exemptions for goods supplied to certain organizations like the military or children fund. They claimed that the levy of tax at the first stage was against the principles of natural justice. The court rejected this argument, stating that the levy on bardana sales was valid and not discriminatory. The court emphasized that the scheme of sales tax allows for taxation at single or multi-points, and in this case, the Government had chosen a single-point taxation system for bardana sales, which was within its authority.

Furthermore, the petitioners contended that since their sales to the Government were not taxable, their purchases should also be exempt from tax. The court disagreed, stating that such an interpretation would disrupt the sales tax scheme, which allows for different tax points based on the nature of goods. Ultimately, the court found the writ petition to be without merit and dismissed it, upholding the validity of the notification and the levy of sales tax at the first stage on bardana sales.

In conclusion, the court rejected the petitioners' arguments challenging the notification levying sales tax on bardana sales at the first stage. The court upheld the legality of the tax imposition, deemed any tax collected on subsequent sales to the Government as illegal, and dismissed the petition for lacking merit.