1992 (12) TMI 209 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the constitutionality of section 12(3) of the Andhra Pradesh General Sales Tax Act, 1957 as amended by Act 10 of 1986.
Validity of the impugned notice requiring registration under section 12(3).
Competence of the State Legislature to enact section 12(3) in light of the Rice Milling Industry (Regulation) Act, 1958.

Analysis:
The petitioners, rice and flour mills, challenged the constitutionality of section 12(3) of the Andhra Pradesh General Sales Tax Act, 1957, as amended by Act 10 of 1986, seeking a writ of mandamus. They argued that the amendment was introduced to collect more money illegally and would burden their business, infringing on their right to carry on business under Article 19(1)(g) of the Constitution. The Commercial Tax Department required them to register under section 12(3), citing their sales of bran and husk as taxable transactions. The Department contended that the provision aimed to prevent tax evasion and was within the State Legislature's competence under entry 54 of List II of the Seventh Schedule. They also highlighted that after registration, any grievances could be addressed through remedies provided by the Act.

The main contention revolved around the competence of the State Legislature to enact section 12(3) in light of the Rice Milling Industry (Regulation) Act, 1958, enacted by the Parliament under entry 52 of List I. The Court noted that the Central Act governed the field of rice milling industry, thus limiting the State Legislature's jurisdiction in that area. The State Act, dealing with taxes on sales and purchases, did not seek to tax rice milling itself, but aimed to prevent tax evasion. The Court referenced precedents to support the legislative competence of the State in enacting provisions to prevent tax evasion.

The Court clarified that registration under section 12(3) was for checking tax evasion and did not automatically impose tax liability. Tax liability arose based on fulfilling the requirements of the charging section, not just registration. The definition of "dealer" under the Act determined tax liability, whether registered or not. The Court emphasized that at the registration stage, tax liability did not automatically arise; authorities had to determine the facts before concluding tax liability. The judgment dismissed the writ petitions, upholding the constitutionality of section 12(3) and the validity of the registration notices, granting the petitioners eight weeks to comply with the notices.