2000 (8) TMI 1064 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of sections 3-D and 3-E(1) and Parts A and B of the Ninth Schedule to the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1970.
3. Interpretation of "total turnover" and "shall" as "taxable turnover" and "may."
4. Inclusion of turnover which has already suffered tax under section 3-D.
5. Reliefs entitled to the petitioners.

Detailed Analysis:

1. Validity of Sections 3-D and 3-E(1) and Parts A and B of the Ninth Schedule to the Tamil Nadu General Sales Tax Act, 1959:
The petitioners challenged the validity of sections 3-D and 3-E(1) and the relevant parts of the Ninth Schedule, arguing that these provisions violated articles 14, 19(1)(g), and 265 of the Constitution of India. They claimed that the provisions imposed an unconscionable burden on dealers by taxing the total turnover without distinguishing between taxable and non-taxable goods. The court held that the State has the power to classify and distinguish persons or things for taxation purposes, provided there is an intelligible differentia. The court found that the provisions did not violate the Constitution, as they were within the legislative competence of the State and did not discriminate within the classified group of jewellery dealers or hoteliers. The court also noted that the subsequent amendment by Tamil Nadu Act No. 28 of 1999, which provided an option for payment, did not render the earlier provisions invalid.

2. Applicability of Section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1970:
The petitioners argued that the Additional Sales Tax Act imposes a charge only on the taxable turnover and should be construed strictly. The court held that under section 3-D, the taxable turnover is the total turnover, and thus, the total turnover assessed under section 3-D should be treated as the taxable turnover for the purposes of the Additional Sales Tax Act. The court rejected the argument that the provisions should be interpreted differently, emphasizing that the State's power to adopt any measure of tax is justified, and the levy on the total turnover is fully justified.

3. Interpretation of "Total Turnover" and "Shall" as "Taxable Turnover" and "May":
The petitioners sought to read down the expressions "total turnover" and "shall" to "taxable turnover" and "may" to avoid the burden of paying tax on non-taxable goods. The court rejected this plea, stating that sections 3-D and 3-E are independent charging sections that levy tax on the total turnover. The court emphasized that individual hardships or burdens do not affect the validity of a law if it is within the constitutional framework. The court reiterated that the total turnover does not include export sales, import sales, or inter-State sales, and the provisions are reasonable and in the public interest.

4. Inclusion of Turnover which has Already Suffered Tax under Section 3-D:
The petitioners argued that including turnover that has already suffered tax under section 3-D amounts to double taxation. The court held that sections 3-D and 3-E are independent charging sections that levy tax on the total turnover, regardless of whether the goods have already suffered tax. The court noted that the Legislature has the competence to adopt the total turnover as the measure of tax, and there is no question of double taxation in this context. The court referenced the objects and reasons for the new enactment, which aimed to minimize tax evasion and promote sales within the State.

5. Reliefs Entitled to the Petitioners:
The court dismissed all the original petitions, upholding the validity and enforceability of the impugned provisions. The court directed that the proceedings of the respective assessing authorities be upheld and left the petitioners to their statutory remedies under the Act. The court also ordered that the time taken during the pendency of the original petitions be excluded while calculating the period of limitation for filing appeals. All interim orders were vacated, and the original petitions were dismissed.

Conclusion:
The court upheld the validity of sections 3-D and 3-E(1) and Parts A and B of the Ninth Schedule to the Tamil Nadu General Sales Tax Act, 1959, and the applicability of section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1970. The court rejected the petitioners' arguments regarding the interpretation of "total turnover" and "shall," the inclusion of turnover that has already suffered tax, and the plea for alternative reliefs. The original petitions were dismissed, and the provisions were upheld as intra vires and valid.