1994 (3) TMI 358 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of Section 6 of the Constitution (Forty-sixth Amendment) Act, 1982.
2. Applicability and scope of Entry No. 150 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959.
3. Assessment and levy of sales tax on the supply of food and drinks in hotels and restaurants.
4. Validity of tax exemption claims under Section 6(2) of the Constitution (Forty-sixth Amendment) Act, 1982.
5. Specific applicability of tax rates on sales of ice-cream.

Analysis:

1. Constitutional Validity of Section 6 of the Constitution (Forty-sixth Amendment) Act, 1982:
The petitioners contended that the Parliament under Article 368 of the Constitution of India cannot legislate on a topic relating to the State Legislature or validate a State law. The court, however, upheld the constitutional validity of Section 6, stating that the provision was within the amending powers of the Parliament under Article 368. The court cited several Supreme Court decisions, including Shankari Prasad v. Union of India and L. Jagannath v. Authorised Officer, Land Reforms, affirming that making a law constitutionally valid falls within the exclusive power of Parliament.

2. Applicability and Scope of Entry No. 150 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959:
The petitioners challenged the levy of sales tax under Entry No. 150, arguing it was beyond the legislative competency of the State Legislature. The court held that Entry No. 150 was valid and not a still-born legislation. The court noted that the provision was capable of being construed to apply to sales conforming to the definition of "sale" both before and after the Constitution (Forty-sixth Amendment) Act. The court also addressed the period between March 23, 1987, and September 19, 1987, stating that Entry No. 150 was not in force during this period due to procedural lapses in legislative implementation.

3. Assessment and Levy of Sales Tax on the Supply of Food and Drinks in Hotels and Restaurants:
The court rejected the petitioners' argument that there was no law imposing a charge or levy of sales tax on the sales of food and drinks in hotels and restaurants. It held that the general charging provisions of the Act, read with the relevant definitions, were sufficient to cover such transactions. The court emphasized that the Constitution (Forty-sixth Amendment) Act revived and resurrected the scope of the charging sections, allowing the assessment and levy of tax without needing a separate provision.

4. Validity of Tax Exemption Claims under Section 6(2) of the Constitution (Forty-sixth Amendment) Act, 1982:
The court clarified that Section 6(2) of the Amendment Act provides for an exemption from tax if the assessee proves that no tax was collected on such transactions before the commencement of the Amendment Act. The court directed that the eligibility for exemption should be considered and determined during the assessment process itself, giving due and sufficient opportunity to the assessees.

5. Specific Applicability of Tax Rates on Sales of Ice-Cream:
The court addressed the petitioners' contention regarding the tax rates applicable to sales of ice-cream. It held that the sales of ice-cream should be taxed under the relevant entries (Entry No. 24, Entry No. 150, or Entry No. 103) at the rates in force from time to time. The court directed reassessment where necessary to ensure compliance with the applicable tax rates.

Conclusion:
1. Constitutional Validity: Section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, is constitutionally valid.
2. Entry No. 150: Entry No. 150 of the First Schedule is valid and applicable, except for the period between March 23, 1987, and September 19, 1987.
3. Assessment and Levy: The general charging provisions and Entry No. 150 are sufficient for the assessment and levy of sales tax on the supply of food and drinks in hotels and restaurants.
4. Exemption Claims: Eligibility for exemption under Section 6(2) should be determined during the assessment process.
5. Ice-Cream Tax Rates: Sales of ice-cream should be taxed under the relevant entries at the applicable rates.

The court ordered reassessment and rectification of assessments where necessary, in accordance with the conclusions and directions provided. The writ petitions were partly allowed, and there was no order as to costs.