1992 (12) TMI 211 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the petitioner under the Haryana General Sales Tax Act, 1973.
2. Vires of Section 26(2) of the Haryana General Sales Tax Act, 1973.
3. Applicability of the Supreme Court judgment in Gannon Dunkerley & Co. v. State of Rajasthan.
4. Procedural requirements for appeal under the Haryana General Sales Tax Act, 1973.

Detailed Analysis:

1. Liability of the Petitioner under the Haryana General Sales Tax Act, 1973:
The petitioner, engaged in the design, manufacture, sale, supply, and commissioning of sugar plants, entered into agreements with two co-operative sugar mills in Haryana. For the assessment year 1990-91, the assessing authority determined the petitioner's liability to the tune of approximately one crore rupees. The petitioner sought exemption from depositing the assessed tax and penalty before its appeal could be entertained, but this application was rejected by both the first appellate authority and the Sales Tax Tribunal, Haryana.

2. Vires of Section 26(2) of the Haryana General Sales Tax Act, 1973:
The petitioner challenged the vires of Section 26(2) of the Act, arguing that it was ultra vires the Constitution because it imposed tax on the total turnover of the works contract, including goods that could not be taxed under the Central Sales Tax Act. The petitioner relied on the Supreme Court's decision in Gannon Dunkerley & Co. v. State of Rajasthan, which held that the State Legislature could not impose tax on deemed sales constituting inter-State trade or commerce, outside sales, or sales in the course of import/export.

The court, however, found that Section 26(2) of the Act did not impose a tax on the total turnover but provided a mode of calculation for fixing the total tax in lieu of the tax payable under the Act. The option to pay tax at a fixed rate of 2% on the total value of the works contract was given to contractors to avoid procedural hassles. This was deemed to be within the legislative competence of the State.

3. Applicability of the Supreme Court Judgment in Gannon Dunkerley & Co. v. State of Rajasthan:
The petitioner argued that the provisions of Section 26(2) should be struck down based on the Supreme Court's judgment in Gannon Dunkerley & Co. The court distinguished the provisions of Section 26(2) from those of Section 5(3) of the Rajasthan Sales Tax Act, which was struck down by the Supreme Court. The court held that the Haryana Legislature had not exceeded its legislative jurisdiction as the 2% tax on the total value of the works contract was a mode of calculation and not a tax on the total turnover.

4. Procedural Requirements for Appeal under the Haryana General Sales Tax Act, 1973:
The petitioner was required to deposit the assessed tax before its appeal could be entertained. The court upheld this requirement, noting that the petitioner could pursue its remedies on other issues under the Act before the prescribed authorities. The court also extended the period for the petitioner to deposit the tax due from one week to four weeks, allowing the petitioner to approach the Supreme Court in SLP and obtain appropriate orders.

Conclusion:
The writ petition was dismissed with the court finding no merit in the challenge to Section 26(2) of the Haryana General Sales Tax Act, 1973. The petitioner was permitted to pursue its remedies on other issues under the Act before the prescribed authorities. The interim injunction regarding the recovery of tax was modified to allow the petitioner to deposit the tax within four weeks.