2001 (9) TMI 1093 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the constitutional validity of specific sections of the Andhra Pradesh General Sales Tax Act, 1957 and the Central Sales Tax Act, 1956.

Analysis:
The petitioners, registered dealers under the APGST Act and CST Act, challenged the constitutional validity of certain provisions inserted by the Constitution (Forty-sixth Amendment) Act, 1982. The petitioners contended that the new sub-clause (d) in clause (29A) of article 366 of the Constitution and the amended sections of the APGST Act were ultra vires and violated articles 19(1)(g) and 300 of the Constitution. The petitioners were public limited companies engaged in finance facilities related to hire purchase and leasing transactions. They argued that the new provisions imposed taxes on the transfer of the right to use goods, affecting their business operations.

The key contention raised by the petitioners was that service contracts should not be equated with works contracts, especially in the context of the legislative amendments. However, the court rejected this argument, citing previous judgments upholding the constitutional validity of the Constitution (Forty-sixth Amendment) Act. The court emphasized that the language of sub-clause (d) of clause (29A) was clear and encompassed taxes on the transfer of the right to use goods, irrespective of ownership transfer for a specified period. The court highlighted that the distinction between works contracts and service contracts did not exclude the application of the new provisions.

The court noted that even if goods were leased for a specified period and later returned to the lessor, it did not exempt them from falling under sub-clause (d) of clause (29A). The court highlighted the inclusion of the phrase "whether or not for a specified period" in the legislative framework to cover such scenarios. The petitioners failed to demonstrate any constitutional flaw that would render the impugned provisions unconstitutional. Consequently, the court dismissed the writ petitions, upholding the validity of the challenged sections without imposing any costs on the petitioners.

In conclusion, the court's decision affirmed the constitutionality of the contested provisions under the APGST Act and the CST Act, rejecting the petitioners' arguments against the applicability of taxes on the transfer of the right to use goods under the amended legislation.