1990 (3) TMI 329 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the definition of "sale" in section 2(o) of the Rajasthan Sales Tax Act, 1954, was automatically amended by the Forty-sixth Constitutional Amendment Act.
2. Whether it was necessary for the State Legislature to amend the definition of "sale" to align with clause (29A) of article 366 of the Constitution of India.
3. Validity of sales tax levied on the supply of food and drinks by hotels and restaurants between February 3, 1983, and April 1, 1987.
4. Entitlement of the petitioner to a refund of sales tax paid during the assessment year 1983-84.

Detailed Analysis:

1. Automatic Amendment of Definition of "Sale":
The primary issue was whether the definition of "sale" in section 2(o) of the Rajasthan Sales Tax Act, 1954, stood automatically amended by the Forty-sixth Constitutional Amendment Act, which introduced clause (29A) in article 366 of the Constitution of India. The court held that the definition of "sale" as given in section 2(o) of the Act did not stand automatically amended by the Forty-sixth Constitutional Amendment. The amendment only enabled the State Legislature to legislate on the matter but did not itself amend the definition of "sale" in the State Act.

2. Necessity for State Legislature to Amend the Definition:
The court emphasized that it was necessary for the State Legislature to amend the definition of "sale" to bring it in conformity with clause (29A) of article 366. The insertion of clause (29A) and section 6 of the Forty-sixth Constitutional Amendment Act did not automatically amend the definition of "sale" in the Rajasthan Sales Tax Act. The court referred to several judgments, including Hotel Dwaraka v. Union of India, Sree Annapoorna v. State of Tamil Nadu, and Padmaja Commercial Corporation v. Commercial Tax Officer, which supported the view that legislative action was required to amend the definition of "sale" in the State laws.

3. Validity of Sales Tax Between February 3, 1983, and April 1, 1987:
The court concluded that from February 3, 1983, when the Forty-sixth Constitutional Amendment came into force, until March 31, 1987, the definition of "sale" under section 2(o) of the Rajasthan Sales Tax Act did not include the supply of food and drinks by hotels and restaurants. Therefore, no sales tax was payable on such supplies during this period. The court noted that the definition of "sale" was amended by Act No. 7 of 1987 with effect from April 1, 1987, to include such supplies.

4. Entitlement to Refund:
Regarding the refund of sales tax paid during the assessment year 1983-84, the court directed the assessing authority to conduct an inquiry to determine whether the petitioner had collected sales tax from its customers. If it was found that the sales tax was not collected from customers and was paid from the petitioner's own resources, the petitioner would be entitled to a refund. Conversely, if the sales tax was collected from customers, the petitioner would not be entitled to a refund.

Conclusion:
The writ petition was partly allowed. The court held that no sales tax was payable on the supply of food and drinks by hotels and restaurants between February 3, 1983, and April 1, 1987, under the provisions of the Rajasthan Sales Tax Act. The matter of refund was to be determined based on the inquiry conducted by the assessing authority. Costs were made easy.

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