1991 (7) TMI 319 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality of the Gujarat Sales Tax (Amendment) Act, 1985.
2. Validity of the Constitution (Forty-sixth Amendment) Act, 1982.
3. Tax on "transfer of right to use any goods" outside Gujarat or in inter-State trade.
4. Classification and taxation of plant and machinery as immovable property.
5. Inclusion of interest and service charges in the definition of "sale price."
6. Retrospective application of the tax on leases executed prior to August 6, 1985.
7. Classification of "specified sale" and its rational basis under Article 14.

Detailed Analysis:

1. Constitutionality of the Gujarat Sales Tax (Amendment) Act, 1985:
The petitioners argued that the Gujarat Sales Tax (Amendment) Act, 1985, is ultra vires the Constitution of India. They contended that the separate definition of "specified sale" and the distinct provisions regarding the turnover of specified sales lacked a rational basis. The court found that the amendment aligned the state legislation with the constitutional amendment introduced by the Constitution (Forty-sixth Amendment) Act, 1982, thereby widening the definition of "sale."

2. Validity of the Constitution (Forty-sixth Amendment) Act, 1982:
The petitioner in Special C.A. No. 6010 of 1988 challenged the validity of the Forty-sixth Amendment, claiming it affected the basic structure of the Constitution. However, this challenge was not pressed during the hearing, as the Supreme Court in Builders Association of India v. Union of India had upheld the amendment's validity.

3. Tax on "transfer of right to use any goods" outside Gujarat or in inter-State trade:
The petitioners contended that the amendment sought to levy tax on transactions occurring outside Gujarat or in inter-State trade. The court found no substance in this contention, as the Gujarat Sales Tax Act, 1969, explicitly prohibits such taxation under Section 87. The petitioners failed to point out any provision in the Amendment Act that contravened this section.

4. Classification and taxation of plant and machinery as immovable property:
The petitioners argued that classifying plant and machinery as goods in Schedule IV for taxation was incorrect, as they are immovable property. The court held that whether plant and machinery are considered immovable depends on the facts and circumstances of each case. The court concluded that plant and machinery are typically chattel unless proven otherwise, and thus, the contention lacked merit.

5. Inclusion of interest and service charges in the definition of "sale price":
The petitioners argued that the definitions of "turnover of specified sales" and "sale price" should distinguish between the price of goods and other components like interest and service charges. The court rejected this contention, noting that it is impractical and impossible to segregate these components, as they vary from dealer to dealer. The Legislature cannot be expected to enact laws that are intractable or impossible to implement.

6. Retrospective application of the tax on leases executed prior to August 6, 1985:
The petitioners contended that taxing leases executed before August 6, 1985, was retrospective and illegal. However, this contention was not pressed during the hearing, and the court clarified that the tax was not retrospective. The court cited the Supreme Court's definition of "retrospective" and concluded that the tax did not impair any vested rights or impose new obligations on past transactions.

7. Classification of "specified sale" and its rational basis under Article 14:
The petitioners argued that the classification of "specified sale" lacked a rational basis and violated Article 14 of the Constitution. The court found that the classification was based on intelligible differentia, distinguishing transactions where ownership of goods remains with the vendor from other types of sales. The court concluded that the classification had a rational relation to the object of augmenting state revenue and administrative convenience, thereby upholding its constitutionality.

Conclusion:
The court dismissed all three petitions, upholding the constitutionality of the Gujarat Sales Tax (Amendment) Act, 1985, and the validity of the Constitution (Forty-sixth Amendment) Act, 1982. The court found no merit in the petitioners' contentions regarding the various issues raised. The rule was discharged, and the petitions were dismissed.

← Previous Next →