2002 (3) TMI 903 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of sales tax on Indian-made foreign liquor (IMFL) in Haryana.
2. Validity of tax demand on existing stock as of June 25, 2001.
3. Interpretation of the amended Haryana General Sales Tax Act, 1973.

Issue-wise Detailed Analysis:

1. Imposition of Sales Tax on Indian-made Foreign Liquor (IMFL) in Haryana:
The petitioners, engaged in the wholesale and retail sale of IMFL and country liquor, contested the imposition of sales tax following a notification issued by the State of Haryana on June 26, 2001. This notification amended the Haryana General Sales Tax Act, 1973, by omitting Entry 24A from Schedule "B" (which listed items exempted from sales tax) and introducing a corresponding entry in Schedule "C". The petitioners argued that the imposition of sales tax was against the terms of the contract made during the auction, where it was announced that "there would be no sales tax on the Indian-made foreign liquor".

2. Validity of Tax Demand on Existing Stock as of June 25, 2001:
The core issue was whether the petitioners were liable to pay sales tax on the stock of IMFL and beer that existed as of the midnight of June 25, 2001. The petitioners received notices demanding tax on their opening stock on June 26, 2001, and subsequent receipts of IMFL and beer until June 30, 2001. The petitioners contended that the demand for tax on these stocks was without legal authority and contradicted the terms of the contract.

3. Interpretation of the Amended Haryana General Sales Tax Act, 1973:
The court examined the relevant provisions of the Act, particularly Section 6, which outlines the incidence of tax. The first proviso to Section 6 exempts dealers dealing exclusively in goods specified in Schedule "B". Entry 24A in Schedule "B" exempted the sale of IMFL from sales tax until June 25, 2001. The amendment on June 26, 2001, omitted Entry 24A and introduced new entries in Schedule "C" specifying the stages at which sales tax would be levied on IMFL.

Analysis and Judgment:

1. Exemption and Amendment:
The court noted that the sale of IMFL was exempted from sales tax under Entry 24A in Schedule "B" until the midnight of June 25, 2001. The amendment on June 26, 2001, removed this exemption and specified new taxable stages in Schedule "C". The court emphasized that a taxing statute must be strictly construed, and the tax is leviable on the first sale in the State of Haryana, not on the first sale made after the amendment.

2. Taxable Event and Existing Stock:
The court clarified that the taxable event is the sale made for the first time in the State of Haryana by an excise licensee. Sales made before June 26, 2001, were exempt due to Entry 24A. Thus, any sale of existing stock on June 26, 2001, or thereafter would not be the first sale and would not attract sales tax. The court held that sales tax is not leviable on the stock purchased by the petitioners until the midnight of June 25, 2001, as these sales were not the first sale in the State of Haryana.

3. Reconsideration of Tax Demand:
The court directed the authority to reconsider the tax demand based on the hypothesis that sales tax is not leviable on the sale of stocks purchased by the petitioners until the midnight of June 25, 2001. The competent authority was instructed to pass the order of assessment accordingly, and the petitioners were granted the right to seek their remedy in accordance with the law.

Conclusion:
The writ petition was disposed of, with the court ruling that the demand for sales tax on the petitioners' existing stock as of June 25, 2001, could not be sustained. The authority was directed to reassess the tax demand, considering that sales tax is not applicable to the stock purchased before June 26, 2001. No costs were awarded.