2002 (3) TMI 892 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Section 30-AA.
2. Legality of communications (annexures P7 and P8) as notices for payment of surcharge.
3. Entitlement of petitioners to exemption from payment of surcharge.

Issue-wise Detailed Analysis:

Reg. (i): Validity of Section 30-AA

The core controversy is whether the provision in Section 30-AA, which mandates that industries exempted under Section 30-A must still pay the surcharge levied under Section 5(1-C), is invalid. The petitioners argued that the levy of surcharge is unconstitutional since they were granted exemption from sales tax. The court noted that the Punjab General Sales Tax Act, 1948, allows for tax exemption in the interest of industrial development, subject to conditions. The impugned Act introduced new provisions, specifically Section 5(1-C) and Section 30-AA, which levy a surcharge on the taxable turnover of a dealer, calculated at 10% of the tax payable. The court found that the legislative intent was clear in making the surcharge applicable even to industries granted exemption under Section 30-A. The argument that the provision is a colorable exercise of power was rejected, as the State Legislature is competent to levy a tax on the sale or purchase of goods under entry 54 of List II. The surcharge, being an additional tax, is within the legislative competence and not unconstitutional. The court also held that there is a presumption in favor of the constitutionality of an enactment, and the impugned provision aims to raise extra resources within the legislative ambit. Thus, the first question was answered against the petitioners.

Reg. (ii): Legality of Communications (Annexures P7 and P8) as Notices for Payment of Surcharge

The petitioners contended that the surcharge is leviable on the tax payable, and since they were exempted from sales tax, the notices (annexures P7 and P8) were invalid. The court observed that the communications merely informed the petitioners of their liability to pay the surcharge from November 6, 2001, and ensured compliance with the Ordinance. No order of assessment or direction for recovery had been issued, and no violation of any provision was shown. Thus, the second question was also answered against the petitioners.

Reg. (iii): Entitlement to Exemption from Payment of Surcharge

The petitioners argued that the amount payable as surcharge should be included in the total amount for which exemption was granted. The court found this argument untenable, as Section 30-AA explicitly mandates that industries must pay the surcharge notwithstanding any exemption under Section 30-A. The court clarified that the surcharge is to be levied and collected on the taxable turnover, and the legislative mandate is to "pay" the surcharge despite the exemption. The court distinguished this case from others cited by the petitioners, noting that the language of the provisions in those cases was different. Thus, the third question was answered against the petitioners, holding that they are not entitled to exemption from the payment of surcharge.

Conclusion:

The court concluded that:
1. The provisions of the amending Act (sections 2 and 4) are not unconstitutional.
2. The communications at annexures P7 and P8 are not notices for payment of surcharge but merely inform the industry of its liability.
3. The petitioners are not entitled to exemption from payment of surcharge, and the amount due cannot be included in the total exemption amount.

Resultantly, the petitions were dismissed in limine.