1989 (8) TMI 320 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction and validity of reassessment under section 12(8) of the Orissa Sales Tax Act.
2. Taxation point and rate differentiation between "cement" and "white cement."
3. Adjustment of tax paid by petitioners to their sellers.
4. Competence of the State to prescribe different tax rates for commodities of the same category.
5. Maintainability of writ applications in the presence of an alternative remedy.

Detailed Analysis:

1. Jurisdiction and Validity of Reassessment under Section 12(8):
The petitioners challenged the reassessment orders made under section 12(8) of the Orissa Sales Tax Act, asserting that "cement" and "white cement" are the same commodity. They argued that they had rightly paid tax at the first point of sale to their sellers, making the initiation of reassessment proceedings without jurisdiction. The court referred to the Allahabad High Court decision in [1974] 33 STC 556 (Commissioner of Sales Tax, U.P., Lucknow v. Mango Mal Nanak Ram), which held that in common parlance and commercial sense, the word "cement" includes all varieties of cement. The court agreed with this view, indicating that the reassessment initiation lacked proper jurisdiction.

2. Taxation Point and Rate Differentiation:
The petitioners contended that Rule 93-H of the Orissa Sales Tax Rules provides that "cement" is to be taxed at the first point of sale, and "white cement," being a category of cement, should not be taxed at the last point of sale. They also questioned the legality of different tax rates for the same commodity. The court found that the legislature has the authority to levy different rates of tax for different commodities, even if they belong to the same category. This was supported by the Supreme Court's decision in Arya Vaidya Pharmacy v. State of Tamil Nadu [1989] 73 STC 346; AIR 1989 SC 1230, which stated that economic policy considerations could justify different tax rates. Therefore, the contention that two rates of tax could not be provided for cement and white cement was without substance.

3. Adjustment of Tax Paid:
The petitioners argued for the adjustment of tax paid to their sellers, asserting that the State should not collect more than what is legally due. The court noted that the petitioners' assertion of having paid tax was undisputed and no counter-affidavit was filed. Citing the doctrine of unjust enrichment, the court held that the State should not retain tax amounts beyond what is legally due. The court directed the assessing officer to allow the petitioners to adduce evidence of tax payments to their sellers and to adjust the amounts accordingly.

4. Competence of the State to Prescribe Different Tax Rates:
The petitioners challenged the State's competence to prescribe different tax rates for commodities belonging to the same category. The court referred to the decision in Arya Vaidya Pharmacy and other relevant cases, affirming that the legislature or the State Government, if authorized, could select different rates of tax for different commodities. However, there must be a rational basis for such discrimination. Since the petitioners did not pursue this challenge further, the court did not adjudicate on this issue but reiterated the principle established by the Supreme Court.

5. Maintainability of Writ Applications:
The Revenue raised a preliminary objection regarding the maintainability of the writ applications, arguing that the petitioners had an effective alternative remedy by way of appeals. The court held that the rule of exhaustion of statutory remedies is a self-imposed limitation and not an inflexible rule. Given the complexity of the legal points involved and the time elapsed since the notices of admission and hearing were issued, the court decided to entertain the writ applications to avoid a miscarriage of justice.

Conclusion:
The court quashed the orders of assessment and remitted the matter back to the assessing officer for reconsideration, allowing the petitioners to provide evidence of tax payments for adjustment. The writ applications were disposed of accordingly, with no order as to costs.

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