2002 (9) TMI 804 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of iron strips and hooks used in job-work for ginning and pressing of cotton.
2. Applicability of Section 12 of the Rajasthan Sales Tax Act, 1954 for reassessment.
3. Constitutionality and interpretation of Article 366(29A) post-46th Amendment.
4. Validity of penalty and interest imposed under Sections 16(1)(i) and 11B of the Rajasthan Sales Tax Act.

Issue-wise Detailed Analysis:

1. Taxability of Iron Strips and Hooks:
The non-applicant firm was engaged in the business of ginning and pressing cotton and used iron strips and hooks to fasten the cotton bales. The firm argued that these materials were essential for the job and should not be taxed separately. However, the court held that the transfer of property in these items to the awarder of the contract constituted a sale, making them chargeable to tax. This interpretation was supported by the Constitution (46th Amendment) Act, 1982, which included a new clause (29A) in Article 366, defining "tax on the sale or purchase of goods" to include the transfer of property in goods involved in the execution of a works contract.

2. Applicability of Section 12 of the Rajasthan Sales Tax Act for Reassessment:
The Assistant Collector issued reassessment orders under Section 12 of the Rajasthan Sales Tax Act, 1954, upon discovering that tax had not been paid on the iron strips and hooks. The Deputy Commissioner (Appeals) maintained the tax and interest but set aside the penalty. The Tax Board later dismissed the department's appeals and accepted the firm's appeals, questioning the reopening of the case under Section 12. The court ultimately upheld the reassessment, emphasizing that post-46th Amendment, the transfer of property in goods during job-work is presumed to be a sale, thus justifying the reassessment.

3. Constitutionality and Interpretation of Article 366(29A) Post-46th Amendment:
The court examined the impact of the 46th Amendment, which allowed the state to levy tax on the transfer of property in goods involved in works contracts. The amendment was validated by the Supreme Court in cases like Builders Association of India v. Union of India and Gannon Dunkerley and Co. v. State of Rajasthan. The court concluded that the transfer of iron strips and hooks in the course of job-work constituted a sale, making them taxable.

4. Validity of Penalty and Interest Imposed:
For the assessment years 1990-91 and 1991-92, the reassessment orders included tax, penalty under Section 16(1)(i), and interest under Section 11B. The Deputy Commissioner (Appeals) set aside the penalty but maintained the tax and interest. The Tax Board dismissed the department's appeals regarding the penalty and accepted the firm's appeals against the tax and interest. The court, however, upheld the reassessment and the imposition of tax and interest, citing the presumption of sale under Article 366(29A) and the validity of the reassessment process.

Conclusion:
The court dismissed the writ petitions, affirming the taxability of iron strips and hooks used in the job-work for ginning and pressing cotton. The reassessment under Section 12 of the Rajasthan Sales Tax Act was deemed valid, and the transfer of property in goods during job-work was interpreted as a taxable sale under Article 366(29A) post-46th Amendment. The penalties were set aside, but the tax and interest were upheld.