1990 (3) TMI 336 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge to the validity of old section 13AA of the Bombay Sales Tax Act, 1959.
2. Introduction of a new section 13AA to replace the old section.
3. Validity of the new section 13AA in light of the Supreme Court judgment.
4. Validity of the validating provision under the new Ordinance/Act.
5. Granting of interim relief to petitioners regarding tax refund and payment under the new section 13AA.

Detailed Analysis:
1. The judgment dealt with the challenge to the old section 13AA of the Bombay Sales Tax Act, which imposed purchase tax on goods used in manufacturing taxable goods despatched outside the State. The Supreme Court invalidated this section, stating it was beyond the State's legislative competence as it taxed the despatch of goods, not the purchase itself.

2. Following the Supreme Court's decision, the State Government enacted a new section 13AA to replace the old one, with similar provisions regarding purchase tax on goods used in manufacturing taxable goods. The petitioners argued that the new section retained the flaws of the old one, lacking a direct nexus between the tax event and the purchase of goods.

3. The petitioners contended that the new section 13AA also suffered from the same infirmities as the old section, as it imposed tax on the despatch of goods outside the State or the non-sale of manufactured goods within the State. The judgment highlighted the resemblance between the new section and the Haryana legislation struck down by the Supreme Court.

4. The judgment scrutinized the validating provision under the new Ordinance/Act, which sought to validate past tax collections under the old section 13AA. It was argued that this validation was unsustainable as the tax collected under the old section was deemed a tax on consignment of goods, not on the purchase itself.

5. In granting interim relief, the court stayed the operation of the impugned sections of the Ordinance/Act, directed tax refunds to petitioners as per the Supreme Court's order, and allowed petitioners to pay tax under protest under the new section 13AA. The court emphasized the need for interim relief due to the legislation's failure to address the Supreme Court's concerns and the lack of legislative competence in imposing the tax.