1989 (10) TMI 215 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of entry 2-B of Schedule D and section 17 of the Haryana General Sales Tax Act, 1973.
2. Validity of the instructions dated May 15, 1985, issued by the Commissioner, Excise and Taxation, Haryana.
3. Legality of the orders/notices passed/issued by the authorities based on the instructions.

Issue-Wise Detailed Analysis:

1. Constitutional Validity of Entry 2-B of Schedule D and Section 17 of the Haryana General Sales Tax Act, 1973:
The petitioners challenged the constitutional validity of entry 2-B of Schedule D and section 17 of the Haryana General Sales Tax Act, 1973, arguing that these provisions were vague and violated Articles 14 and 286 of the Constitution. They contended that the provisions did not clearly specify the taxing event and the person liable to pay the tax. The Court, however, found that the requirements of a valid charging section were incorporated in the impugned provisions. The commodity to be taxed, the circumstances under which tax is to be levied, the stage of levy, and the person liable to pay tax were all clearly defined. The Court referenced the Apex Court's decision in Bhawani Cotton Mills Ltd. v. State of Punjab, where similar provisions were upheld as constitutional after amendments. Thus, the Court held that the impugned provisions were legal, valid, and constitutional, and did not violate Articles 14 or 286 of the Constitution or section 15 of the Central Sales Tax Act.

2. Validity of the Instructions Dated May 15, 1985, Issued by the Commissioner, Excise and Taxation, Haryana:
The petitioners argued that the instructions dated May 15, 1985, influenced the authorities under the Act and precluded them from making independent decisions. The Court examined the instructions and found that they were merely an elucidation of entry 2-B of Schedule D to the Haryana Act. The instructions emphasized thorough scrutiny of sales transactions to exempted units and allowed the authorities to draw conclusions based on merits. The Court concluded that the instructions did not hinder or restrict the discretion vested in the authorities under the Act and did not encroach upon their jurisdiction or influence their decisions. Therefore, the instructions were deemed legal in every respect.

3. Legality of the Orders/Notices Passed/Issued by the Authorities Based on the Instructions:
The petitioners contended that the orders/notices issued by the authorities were based on the instructions and, therefore, invalid. The respondents argued that the petitioner had shown sales of paddy to an exempted unit, which was found to be engaged in only paper transactions. The Court noted that the authorities were not debarred from examining whether the sales to exempted dealers were genuine and bona fide. If the sales were found to be paper transactions, the authorities could ignore them and hold the selling dealer liable to pay tax. The Court found that a finding had been recorded by the Assessing Authority that the sales to the exempted units were not genuine and were only paper transactions. Consequently, the petitioners were given an opportunity to file appeals within one month, and the respondents were instructed not to raise the question of limitation.

Conclusion:
The Court partly allowed the writ petitions, holding that dealers exempted from payment of tax under section 13 still remain dealers liable to pay tax under the Act. However, since the transactions of sales to such dealers were found to be paper transactions, the petitioners were afforded an opportunity to file appeals within one month. The respondents were instructed not to raise the question of limitation, and the petitioners were allowed to raise all available defenses before the Assessing Authorities.