1992 (3) TMI 322 - HC - VAT and Sales Tax

Summary

Issues:
- Writ petition seeking prohibition on assessing or collecting sales tax under the Andhra Pradesh General Sales Tax Act, 1957.
- Interpretation of section 5-C of the Act regarding retrospective effect and tax liability for transactions between February 2, 1983, and June 30, 1985.
- Application of components of a tax levy as per Supreme Court decision.
- Definition of "dealer" under the Act and its implications on tax liability.
- Challenge regarding the computation of tax under rule 5 of the Rules framed under the Act.

Analysis:
The writ petition sought to restrain the assessment and collection of sales tax under the Andhra Pradesh General Sales Tax Act, 1957, from April 1, 1983, onwards. The petitioner, a club, contested its liability to pay sales tax for food or drinks served to members. The court referred to a previous decision stating that clubs fall under the definition of a "dealer" and are thus liable to pay sales tax.

The petitioner argued that the authorities lacked the power to levy tax for transactions between February 2, 1983, and June 30, 1985, as the amendment to section 5-C enlarging the tax definition was effective only from July 1, 1985. Citing a Supreme Court case, the petitioner contended that a tax levy must clearly define the taxable event, the person liable to pay, the tax rate, and the measure for computing tax liability.

Section 5-C of the Act specifies the taxable event as the supply of food or drink, the liable person as the dealer running a restaurant, and the tax rate as five paise on every rupee. The definition of "dealer" in the Act includes clubs, satisfying the second component of a tax levy. The court found that all four components necessary for a tax levy were explicitly mentioned in section 5-C.

The petitioner raised concerns about computing tax under rule 5 of the Act's Rules, arguing that tax could only be levied based on the dealer's turnover, which was not suitably amended. However, the court held that section 5-C, with retrospective effect from February 2, 1983, clearly outlined the components for tax levy, dismissing the petitioner's contentions.

The court stated that if the petitioner had not collected tax until September 13, 1985, the assessing authority could consider this and pass appropriate orders. Ultimately, the court dismissed the writ petition, finding no grounds for interference and ordered no costs to be paid.

Conclusion:
The judgment upheld the retrospective application of section 5-C of the Andhra Pradesh General Sales Tax Act, 1957, and affirmed the tax liability of clubs for food and drink sales to members. It clarified the components necessary for a valid tax levy and rejected the petitioner's arguments regarding the computation of tax under the Act's Rules.