2000 (1) TMI 956 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of the Tamil Nadu General Sales Tax (Third Amendment) Act, 1999 (Act 27 of 1999).
2. Constitutionality of the Tamil Nadu Additional Sales Tax (Amendment) Act, 1999 (Act 37 of 1999).
3. Validity of the demand notices issued for differential tax/additional sales tax under Act 27 of 1999 and Act 37 of 1999.

Detailed Analysis:

1. Constitutionality of the Tamil Nadu General Sales Tax (Third Amendment) Act, 1999 (Act 27 of 1999):

The petitioners contended that Act 27 of 1999, which levied a flat rate of Rs. 60 per metric tonne on sugarcane retrospectively from April 1, 1997, was unconstitutional and violated Articles 14, 19(1)(g), and 301 of the Constitution of India. They argued that the flat rate was irrational and resulted in hostile discrimination against mills with lower sugar recovery rates.

The court found that the Act was enacted following a policy decision to fulfill the request of sugar mills to levy tax on a weight basis, thereby enabling them to recoup the tax element in the levy sugar price. The court held that the classification based on the State average recovery rate of 9.4% was neither capricious nor irrational. The court also noted that retrospective taxation is permissible and does not automatically violate Article 19(1)(g) unless it is arbitrary or confiscatory.

2. Constitutionality of the Tamil Nadu Additional Sales Tax (Amendment) Act, 1999 (Act 37 of 1999):

The petitioners argued that Act 37 of 1999, which retained the ad valorem basis for additional sales tax, was unconstitutional. They contended that no turnover was acquired due to the specific levy by Act 27 of 1999, and therefore, the explanation in Act 37 of 1999 was invalid.

The court upheld the validity of Act 37 of 1999, stating that the Act clearly retained the ad valorem basis for additional sales tax on sugarcane. The court found no infirmity in the Act and held that the total turnover of sugarcane, as calculated on an ad valorem basis, should be included in the dealer's total turnover for the purpose of levying additional sales tax.

3. Validity of the demand notices issued for differential tax/additional sales tax:

The petitioners challenged the demand notices issued for differential tax/additional sales tax without following the proper assessment procedures under Sections 12 and 13 of the Tamil Nadu General Sales Tax Act, 1959.

The court quashed the demand notices, stating that the authorities must follow the provisions of the Act and Rules for assessment and recovery of tax. The court held that for completed years of assessments, the assessing authority must finalize the assessment under Section 12, and for the year 1999-2000, provisional demands must be revised under Section 13(3) and Rule 18(4).

Conclusion:

The court dismissed the petitions challenging the constitutionality of Act 27 of 1999 and Act 37 of 1999, upholding their validity. However, the court allowed the petitions challenging the demand notices, quashing them and directing the authorities to follow the proper assessment procedures.