1997 (7) TMI 619 - HC - VAT and Sales Tax

Summary

Issues Involved:
(a) Validity of retrospective amendment of rule 41D by the Bombay Sales Tax (Third Amendment) Rules, 1983 and the assessee's entitlement for set-off under rule 41D.
(b) Set-off under rule 41D before transfer of stock to the regional sales office of the assessee at Silvassa, Dadra and Nagar Haveli (Union Territory).
(c) Non-deduction of the amount of set-off under rule 41E for the purpose of computation of additional tax under section 15-A(1) of the Act.
(d) Validity of the amendment to rule 41E made by the Maharashtra Sales Tax Laws (Levy, Amendment and Repeal) Act, 1989.
(e) Set-off under rule 41E read with rule 44D in respect of purchases made by the assessee of goods specified in Schedule B of the Act which were used by the assessee in the manufacture of goods specified in the same entry of Schedule B for sale.

Detailed Analysis:

Re. point (a):
The assessee challenged the retrospective amendment of rule 41D by the Bombay Sales Tax (Third Amendment) Rules, 1983, which increased the reduction from 5% to 6% of the purchase price from July 1, 1982. The court referenced the Division Bench decision in Tata Engineering and Locomotive Company Ltd. v. State of Maharashtra, which held that such retrospective amendments were invalid unless specifically empowered by the statute. Therefore, the amendment could only take effect from the date of the government notification, not retrospectively. This point was resolved in favor of the assessee.

Re. point (b):
The assessing authority denied set-off under rule 41D for goods transferred to the assessee's branch at Silvassa, arguing that the branch was not registered under the Central Sales Tax Act, 1956. The court found that the requirement for registration under the CST Act was mandatory for claiming set-off. Since the CST Act was not applicable to Dadra and Nagar Haveli at the relevant time, the assessee could not claim set-off for the despatches to Silvassa. The court upheld the assessing authority's decision, rejecting the assessee's claim under rule 41D for these despatches.

Re. point (c):
The assessee contended that the additional tax under section 15-A(1) was wrongly computed without deducting the set-off under rule 41E. The court referred to the decision in Tata Engineering & Locomotive Company Ltd. v. State of Maharashtra, which held that additional tax should be computed on the net tax payable after adjusting for set-offs and drawbacks. This point was resolved in favor of the assessee, directing that the additional tax be recalculated accordingly.

Re. point (d):
The assessee argued that the retrospective amendment of rule 41E by the Maharashtra Sales Tax Laws (Levy, Amendment and Repeal) Act, 1989, was unreasonable and violated constitutional rights. The court noted that legislatures have the power to enact laws retrospectively, provided they are not arbitrary or unreasonable. The court found the amendment to be a clarificatory measure intended to remove ambiguities and align the law with legislative intent, thus upholding its validity. The court rejected the challenge against the retrospective operation of the amendment.

Re. point (e):
The assessee claimed set-off under rule 41E read with rule 44D for purchases of goods specified in Schedule B used in manufacturing, including by-products like scrap. The court found that the set-off should be calculated based on the purchase price, not the sale price of the scrap. However, the court clarified that the entitlement to set-off for by-products must be determined based on the amended rule 41E. The matter was remitted back to the assessing authority for recalculating the set-off in accordance with these principles.

Conclusion:
The petition was partly allowed, with the court directing the assessing authority to grant appropriate reliefs to the assessee based on the observations made in the judgment.