1991 (12) TMI 266 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the vires of section 3 of the Assam Taxation Act regarding classification of petroleum coke for taxation under article 286(3) of the Constitution and the Central Sales Tax Act.

Analysis:
The petitioners challenged the classification of petroleum coke into raw and calcined categories for taxation purposes under the Assam Taxation Act. M/s. India Carbon Limited purchased raw petroleum coke, manufactured calcined petroleum coke, and sold it in interState trade. The Superintendent of Taxes refused to refund the tax, citing the distinction between the two types of petroleum coke as different commercial commodities.

Before the 1986 amendment, the Assam Act levied tax on petroleum coke without distinction. Post-amendment, it classified petroleum coke into raw and calcined categories. The petitioners argued that this classification violated constitutional provisions and Central Sales Tax Act sections 14 and 15.

The key issue was the competency of the Assam Legislature to classify petroleum coke into raw and calcined categories. Article 286 of the Constitution imposes restrictions on state taxation of goods declared for interState trade. The Central Sales Tax Act lists coal and coke as declared goods, encompassing all forms of coke. The Supreme Court precedent established that petroleum coke falls under the definition of coke in all its forms, including raw and calcined varieties.

Section 15 of the Central Act restricts state taxation on declared goods, limiting tax rates and stages of taxation. The State law cannot tax declared goods at more than one stage. The Assam Act's classification of raw and calcined petroleum coke as separate commodities conflicted with the Central Act's provisions, leading to unconstitutional taxation at multiple stages.

To rectify the classification's unconstitutionality, the Court applied the doctrine of "reading down" and modified the entry for calcined petroleum coke to align with constitutional requirements. The petitioners were entitled to a refund of taxes paid on raw and calcined petroleum coke under the Assam and Central Acts, respectively.

The Court allowed the petition, quashed the communication denying tax refunds, and directed adjustments of refunds towards any outstanding taxes before refunding the balance to the petitioners within six months. The judgment was concluded with these directions, disposing of the petition without costs.