1991 (6) TMI 231 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Rate of tax applicable under section 8(2)(b) of the Central Sales Tax Act, 1956.
2. Inclusion of additional tax under section 4A of the Gujarat Sales Tax Act, 1969 in the rate of tax.
3. Interpretation of amendments to section 4A and definitions of "tax" and "additional tax" in the Gujarat Act.
4. Legislative competence and constitutional validity of additional tax.

Issue-wise Detailed Analysis:

1. Rate of tax applicable under section 8(2)(b) of the Central Sales Tax Act, 1956:

The Court analyzed the provisions of section 8 of the Central Act, which determines the rate at which tax shall be levied on inter-State sales. Specifically, section 8(2)(b) stipulates that tax on inter-State sales of goods not falling under section 8(1) shall be at ten per cent or at the rate applicable for sales inside the appropriate State, whichever is higher. The Court emphasized that the legislative policy underlying this provision is to ensure that the rate of Central sales tax is not less than the rate of local sales tax applicable in the State.

2. Inclusion of additional tax under section 4A of the Gujarat Sales Tax Act, 1969 in the rate of tax:

The Court addressed the controversy regarding whether the additional tax levied under section 4A of the Gujarat Act should be included in the rate of tax applicable to inter-State sales. The Tribunal had held that the rate of tax applicable to the sale of goods inside the State would not include additional tax. However, the Court disagreed, stating that additional tax is also a tax under the Gujarat Act and is a tax on the sale and purchase of goods. Therefore, it should be included while computing the rate of tax applicable to inter-State sales.

3. Interpretation of amendments to section 4A and definitions of "tax" and "additional tax" in the Gujarat Act:

The Court examined the amendments to section 4A and the definitions of "tax" and "additional tax" in the Gujarat Act. The amendment excluded additional tax from the definition of "tax," but the Court held that this exclusion does not change the character of additional tax as a tax on the sale and purchase of goods. The Court emphasized that additional tax remains a commodity tax and a tax on the sale and purchase of goods, even after the amendment. The legal fiction created by the amendment does not alter the fundamental nature of the additional tax.

4. Legislative competence and constitutional validity of additional tax:

The Court referred to decisions of the Supreme Court, including S. Kodar v. State of Kerala and Ashok Service Centre v. State of Orissa, which upheld the legislative competence of State Governments to impose additional sales tax. The Court reiterated that additional tax is a tax on the sale and purchase of goods and falls within the purview of entry 54 of List II of the Seventh Schedule to the Constitution. The Court rejected the argument that additional tax is a tax on tax or a tax on the dealer, emphasizing that it is a tax on the sale and purchase of goods.

Conclusion:

The Court concluded that the additional tax levied under section 4A of the Gujarat Act should be included in the rate of tax applicable to inter-State sales under section 8(2)(b) of the Central Act. The interpretation adopted by the Tribunal was incorrect, and the correct interpretation is consistent with the provisions of both the Central and Gujarat Acts. The reference was answered in the negative, in favor of the Revenue and against the assessee, with no order as to costs.