1998 (1) TMI 499 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of circular issued by Commissioner of Commercial Taxes regarding acceptance of "G" forms for sale of beedi leaves.
2. Interpretation of Section 5-B of the APGST Act in relation to concessional rate of tax for sale of goods as raw material.
3. Jurisdiction of Commissioner to issue clarificatory instructions contrary to statutory provisions.

Detailed Analysis:

1. The petitioners challenged the legality and validity of a circular issued by the Commissioner of Commercial Taxes regarding the acceptance of "G" forms for the sale of beedi leaves. The circular stated that "G" forms cannot be accepted due to suspected misuse. The petitioners contended that the circular was contrary to the statutory provision in Section 5-B of the APGST Act, which allows for a concessional rate of tax at 4 per cent if specific conditions are met. The High Court held that while the possibility of misuse exists, a blanket ban on accepting "G" forms was not justified, as it goes against the specific provision of the law.

2. Section 5-B of the APGST Act provides for a concessional rate of tax at 4 per cent if goods are sold for use as raw material for manufacturing or processing. The petitioners argued that since abnus leaves are raw material for beedies, the tax should be levied at 4 per cent if "G" form declarations are furnished. The Court agreed with the petitioners, stating that the Corporation was not entitled to collect more than 4 per cent tax on the sale turnover of beedi leaves if the conditions under Section 5-B were met. The Court emphasized that the Commissioner's circular was in conflict with the statutory provision and lacked jurisdiction.

3. The Court held that the clarificatory instruction issued by the Commissioner, which denied the benefit of concessional tax rate to sellers and purchasers of beedi leaves, was illegal and ultra vires his powers. The Court emphasized that the law had provisions to address fraudulent practices by dealers without the need for an omnibus ban on accepting "G" forms. The Court concluded that the impugned portion of the circular was to be struck down as illegal, and directed the Corporation to accept "G" forms if they were in order. Additionally, the Court issued directions to safeguard the interests of both parties in case of false declarations, requiring the petitioners to furnish bank guarantees for differential tax amounts.

In conclusion, the High Court allowed the writ petitions, striking down the impugned portion of the circular and providing directions to ensure compliance with the statutory provisions and safeguard the interests of the parties involved.