2001 (8) TMI 1350 - HC - VAT and Sales Tax

Issues Involved:
1. Vires of the second proviso to Section 3(1) of the Tripura Sales Tax Act, 1976 and Rule 3A(2) of the Tripura Sales Tax Rules, 1976.
2. Definition and scope of "sale" under the Act.
3. Charging provision for sales tax on the transfer of the right to use goods.
4. Deduction of sales tax at source under Rule 3A(2) of the Rules.
5. Legislative competence and delegation of legislative functions.

Issue-wise Detailed Analysis:

1. Vires of the second proviso to Section 3(1) of the Act and Rule 3A(2) of the Rules:
The petitioners challenged the vires of the second proviso to Section 3(1) of the Tripura Sales Tax Act and Rule 3A(2) of the Tripura Sales Tax Rules on the grounds that there is no charging provision under the Act for levying sales tax on the transfer of the right to use goods. The court held that the statutory definition of "sale" under Section 2(g)(ii) of the Act is valid and in consonance with the Constitution of India. The second proviso to Section 3(1) of the Act is an independent charging provision for "deemed sale" by way of transfer of the right to use goods for valuable consideration.

2. Definition and Scope of "Sale" under the Act:
The court analyzed the definition of "sale" under Section 2(g) of the Act, which includes the transfer of the right to use any goods for any purpose for valuable consideration. This definition aligns with the Constitution (46th Amendment) Act, 1982. The court concluded that the amount received for transferring the right to use any vehicle is taxable, and the consideration money received is a sale price for the purpose of the Act.

3. Charging Provision for Sales Tax on the Transfer of the Right to Use Goods:
The court examined Section 3(1) of the Act, which is the charging section for levying sales tax. The second proviso to Section 3(1) specifies that the rate of tax on any transfer of the right to use goods is 4 percent of the consideration amount. The court held that this proviso is a valid charging provision for "deemed sale."

4. Deduction of Sales Tax at Source under Rule 3A(2) of the Rules:
The petitioners argued that there is no provision akin to Section 3AA of the Act for realizing sales tax by deduction at source for the amount due to be paid by ONGC/GAIL to the petitioners. The court agreed, stating that Section 3AA authorizes deduction of tax at source for transactions covered by Section 3A of the Act, not for the transfer of the right to use goods. The court held that Rule 3A(2) of the Rules, which mandates deduction at source, is ultra vires of the Act and struck it down.

5. Legislative Competence and Delegation of Legislative Functions:
The court discussed the legislative competence to levy tax and the delegation of legislative functions. It emphasized that essential legislative functions, such as identifying taxable goods and fixing the rate of tax, cannot be delegated to an outside agency. The court concluded that the provision of Rule 3A(2) of the Rules is ultra vires of the Act, as it oversteps the delegated legislative authority.

Conclusion:
The court set aside the impugned notification requiring ONGC and GAIL to deduct 4 percent from the bills of the petitioners. It held that while Rule 3A(2) of the Rules is struck down, the petitioners are still liable to pay sales tax at the rate prescribed under the second proviso to Section 3(1) of the Act and must furnish returns as required under Section 8(2) of the Act. The petitions were allowed to the extent indicated, with no order as to costs.

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