2001 (6) TMI 803 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of sub-section (7B) of section 7 of the Kerala General Sales Tax Act, 1963.
2. Validity of rules 22A(2) and 22A(5) of the Kerala General Sales Tax Rules, 1963.
3. Competence of the State Legislature to enact the aforementioned provisions.
4. Whether the provisions are confiscatory and violate Article 265 of the Constitution of India.
5. Whether exhibits P4, P6, P8, and P14 communications are liable to be quashed.

Detailed Analysis:

1. Validity of sub-section (7B) of section 7 of the Kerala General Sales Tax Act, 1963:

The petitioner challenged sub-section (7B) of section 7 as amended by the Kerala Finance Act, 1994, arguing it was ultra vires and beyond the legislative competence of the State. The court noted that a similar challenge had been dismissed previously, and the decision had not been appealed. The court relied on the Supreme Court's decision in State of Kerala v. Builders Association of India, which upheld the validity of similar provisions.

2. Validity of rules 22A(2) and 22A(5) of the Kerala General Sales Tax Rules, 1963:

The petitioner argued that rules 22A(2) and 22A(5) were invalid as they did not exclude the turnover covered by sections 3, 4, 5, 14, or 15 of the Central Sales Tax Act, 1956. The court found that the rules were designed to ensure the due realization of tax due and did not suffer from the vices pointed out by the Supreme Court in Steel Authority of India Ltd. v. State of Orissa.

3. Competence of the State Legislature to enact the aforementioned provisions:

The petitioner contended that the provisions were beyond the legislative competence of the State. The court held that the provisions were within the legislative competence as they were designed to facilitate the collection of tax and prevent evasion. The court emphasized that sub-section (7B) and rule 22A provided for the deduction of tax only from contractors liable to pay tax under section 5 of the Act.

4. Whether the provisions are confiscatory and violate Article 265 of the Constitution of India:

The petitioner argued that the provisions were confiscatory in nature and violated Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by the authority of law. The court found no merit in this contention, stating that the provisions were designed to ensure the due realization of tax due and were not confiscatory.

5. Whether exhibits P4, P6, P8, and P14 communications are liable to be quashed:

The petitioner sought to quash exhibits P4, P6, P8, and P14, which involved the deduction of tax from payments made to the petitioner. The court noted that these exhibits involved disputed questions of fact and law regarding whether the transactions were inter-State sales exempt from the Kerala General Sales Tax Act. The court held that such disputes could not be resolved in proceedings under Article 226 of the Constitution and should be pursued through statutory remedies.

Conclusion:

The court dismissed the petition, holding that sub-section (7B) of section 7 of the Kerala General Sales Tax Act, 1963, and rules 22A(2) and 22A(5) of the Kerala General Sales Tax Rules, 1963, were intra vires and within the legislative competence of the State. The court also found no merit in the contention that the provisions were confiscatory or violated Article 265 of the Constitution. The exhibits P4, P6, P8, and P14 were not quashed, and the petitioner was advised to pursue statutory remedies for the disputed questions of fact and law.