2001 (6) TMI 802 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of recovering profession tax from the salaries of employees working in the Military Engineering Service (MES).
2. Applicability of Regulation 288A of the Financial Regulations framed under the Army Act, 1950.
3. Definition and scope of "employee" under the A.P. Tax on Professions, Trades, Callings and Employments Act, 1987.
4. Competence of the State of Andhra Pradesh to levy profession tax under Article 276 of the Constitution of India.
5. Exemption provisions under the A.P. Tax on Professions, Trades, Callings and Employments Act, 1987.

Detailed Analysis:

1. Legality of Recovering Profession Tax from MES Employees:
The petitioners, employees of the Military Engineering Service Welfare Committee, challenged the recovery of profession tax from their salaries by respondents 1 and 2. They claimed that such recovery was illegal, arbitrary, and contrary to Regulation 288A of the Financial Regulations under the Army Act, 1950. The petitioners argued that they were not liable to pay profession tax under Act 22 of 1987 and sought a writ of mandamus to prevent such deductions and to refund the taxes already collected.

2. Applicability of Regulation 288A:
The petitioners contended that Regulation 288A exempts army personnel from paying profession tax and that they, being on par with army personnel, should also be exempt. Regulation 288A states that "a person subject to the Army Act, 1950... compelled by the exigencies of Army/Navy/Air Force duty to reside within the limits of the Municipality or a Cantonment, is exempted from the taxes of the following kinds: Municipal or Cantonment taxes on salaries; Municipal or Cantonment taxes on profession, trades, callings, offices or appointments." The court, however, noted that this regulation applied only when the levy was under the Municipal or Cantonments Acts and did not extend to the State's consolidated Act.

3. Definition and Scope of "Employee" under the A.P. Tax Act:
The court examined Section 2(e) of the A.P. Tax on Professions, Trades, Callings and Employments Act, 1987, which defines "employee" as a person employed on salary or wages, including employees of the Central or State Government and those in the service of bodies owned or controlled by these governments. The court concluded that the petitioners fell within this definition and were thus liable to pay the profession tax.

4. Competence of the State to Levy Profession Tax:
The State of Andhra Pradesh's competence to levy profession tax was upheld under Article 276 of the Constitution of India, read with Entry 60 of List II of the Seventh Schedule. The court confirmed that the State Government was authorized to levy and collect the tax on professions, trades, callings, and employments for the benefit of the State, not local authorities.

5. Exemption Provisions under the A.P. Tax Act:
The court referred to Section 31 of the Act, which allows the Government to exempt specified classes of assessees by notification. However, it was noted that no such notification had been issued for MES employees. The court also distinguished the case from a similar judgment by the Mumbai High Court, which had a specific exemption provision under the Maharashtra State Tax on Professions, Trades, Callings and Employments Act.

Conclusion:
The court found no merit in the petitions and dismissed them, holding that the members of the petitioners were liable to pay the profession tax under the A.P. Tax on Professions, Trades, Callings and Employments Act, 1987. The court emphasized that the exemptions under Regulation 288A of the Army Act did not apply to the State's consolidated tax provisions, and no specific exemption had been granted under the current Act. The petitions were dismissed without costs.

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