2002 (9) TMI 800 - HC - VAT and Sales Tax

Issues Involved:
1. Validity and legality of section 10A of the Assam General Sales Tax Act, 1993, and rule 19A of the Assam General Sales Tax Rules, 1993.
2. Alleged favoritism towards the Institute of Chartered Accountants, Guwahati Branch.
3. Compulsory audit based on gross turnover versus taxable turnover.
4. Inclusion of inter-State trade and commerce under section 10A.
5. Duplication of audit requirements under different statutes.
6. Absence of penal provisions for non-compliance with section 10A and rule 19A.

Issue-wise Detailed Analysis:

1. Validity and legality of section 10A and rule 19A:
The petitioners challenged the validity of section 10A of the Act, which mandates an audit for dealers with a gross turnover exceeding Rs. 40 lakhs, and rule 19A, which specifies the audit certificate format and submission deadline. The court noted that the petitioners did not contest the legislative competence of the State of Assam in enacting these provisions. The court found that the provisions were incorporated after proper examination and were in the greater interest of the State and its revenue.

2. Alleged favoritism towards the Institute of Chartered Accountants:
The petitioners argued that section 10A was introduced to benefit members of the Institute of Chartered Accountants, Guwahati Branch. The court dismissed this claim, stating that the mere receipt of a representation from the Institute does not invalidate the provisions unless they are beyond the competence of the Legislature or ultra vires the Constitution.

3. Compulsory audit based on gross turnover versus taxable turnover:
The petitioners contended that the audit requirement based on gross turnover was bad in law since the tax under the Act is payable on taxable turnover. The court clarified that the Act's provisions are not limited to dealers liable to pay tax and that compulsory registration and audit based on gross turnover are valid. The court referenced Fernandez's case, which supports the inclusion of gross turnover for registration and audit purposes without affecting tax liability.

4. Inclusion of inter-State trade and commerce under section 10A:
The petitioners argued that section 10A improperly includes sales and purchases under the Central Sales Tax Act, which does not provide for such an audit. The court noted that the State Government is empowered to assess and collect taxes under the Central Sales Tax Act and that including transactions under this Act in the audit requirements does not levy any additional tax. The inclusion is intended to prevent tax evasion and is legally permissible.

5. Duplication of audit requirements under different statutes:
The petitioners highlighted the burden of undergoing multiple audits under different statutes, such as the Income-tax Act and the Sales Tax Act. The court acknowledged this concern and suggested that the audit conducted under the Income-tax Act should suffice for compliance with section 10A, provided additional information required under rule 19A is furnished. This approach avoids unnecessary duplication and aligns with the legislative intent.

6. Absence of penal provisions for non-compliance with section 10A and rule 19A:
The petitioners pointed out the lack of penal provisions for non-compliance with section 10A and rule 19A, rendering these provisions optional. The court agreed that this oversight should be addressed by the respondent authorities but concluded that the absence of penalties does not invalidate the provisions. The court suggested that the authorities consider incorporating penalties similar to those in the Income-tax Act to ensure compliance.

Conclusion:
The court disposed of the writ petitions, upholding the validity of section 10A and rule 19A while recommending that the audit requirements under the Income-tax Act be deemed sufficient for compliance with section 10A, provided additional information is submitted. The court also urged the authorities to address the absence of penal provisions to enforce compliance effectively.

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