1994 (6) TMI 201 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Rule 4(3A) of the Tamil Nadu Rules.
2. Legislative competence and constitutional exclusions.
3. Burden of proof regarding branch transfers.
4. Consistency and repugnancy between state and central provisions.
5. Methodology of proof under Section 6A of the Central Sales Tax Act.

Detailed Analysis:

1. Validity of Rule 4(3A) of the Tamil Nadu Rules:
The petitioners challenged the validity of Rule 4(3A) of the Tamil Nadu Rules, arguing that it prescribes mandates such as maintaining registers, authorizations, contracts, and other documents, which they claim is an unconstitutional overreach into the area of branch transfers. They argued that this rule, enacted before Section 6A of the Central Sales Tax Act, exceeds its legislative boundaries and is inconsistent with the Central Act and its rules.

2. Legislative Competence and Constitutional Exclusions:
Article 246 of the Constitution of India deals with the distribution of legislative powers between the Union and State Legislatures. The Union Parliament has exclusive power to legislate on matters in List I and concurrent power on matters in List III, while the State Legislature has exclusive power on matters in List II, minus those in Lists I and III. The Central Sales Tax Act, 1956, was enacted under these provisions, specifically addressing taxes on inter-State sales. The court noted that branch transfers are constitutionally excluded from taxation under entry 92-A of List I of the Seventh Schedule to the Constitution.

3. Burden of Proof Regarding Branch Transfers:
Section 6A of the Central Sales Tax Act, which came into force on April 1, 1973, places the burden of proof on the dealer to demonstrate that the movement of goods was not due to a sale but was a branch transfer. The dealer may furnish a declaration in Form "F" along with evidence of dispatch to satisfy this burden. The court emphasized that this burden of proof remains on the dealer and does not shift.

4. Consistency and Repugnancy Between State and Central Provisions:
The court examined whether Rule 4(3A) of the Tamil Nadu Rules is inconsistent with Section 6A of the Central Sales Tax Act and Rule 12(5) of the Central Rules. It found no inconsistency, stating that Rule 4(3A) supplements and aids the methodology of proof under Section 6A. The court rejected the argument of implied repeal, noting that both sets of provisions can coexist without conflict.

5. Methodology of Proof Under Section 6A of the Central Sales Tax Act:
Section 6A(2) allows the assessing authority to verify the particulars in the Form "F" declaration and conduct an inquiry to determine their truthfulness. The court clarified that the assessing authority's inquiry is limited to verifying the accuracy of the declaration and any additional evidence provided by the dealer. The court also noted that non-compliance with Rule 4(3A) does not automatically negate the dealer's claim of a branch transfer; the burden of proof can be met through other evidence as well.

Conclusion:
The court concluded that Rule 4(3A) of the Tamil Nadu Rules is directory, not mandatory, and does not conflict with the Central Act or its rules. The burden of proof for branch transfers lies with the dealer, who can meet this burden through various means, including but not limited to the Form "F" declaration. The writ petitions were dismissed, and the court provided guidelines for the application of these legal principles.