2002 (9) TMI 808 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the demand for sales tax at 9% on maize seeds.
2. Authority of the Commissioner of Commercial Taxes to issue directions.
3. Legal provisions regarding the assessment and demand of sales tax.

Detailed Analysis:

1. Validity of the demand for sales tax at 9% on maize seeds:
The petitioner, a seeds company, contested the demand for sales tax at 9% on maize seeds, arguing that maize seeds should be taxed at 4% as per Notification No. 1026/77/14545 dated December 26, 1977. The State contended that maize seeds are not covered by the term "cereal" under Section 14 of the Central Sales Tax Act, 1956, and thus, the applicable tax rate is 9%. The court noted that the petitioner had been paying sales tax at 4% for several years, and no final assessment had been made under Section 17 of the Bihar Finance Act, nor any action taken under Section 20 for escaped turnover.

2. Authority of the Commissioner of Commercial Taxes to issue directions:
The petitioner argued that the Commissioner of Commercial Taxes had no legal authority under the Bihar Finance Act, 1981, to issue directions to the assessing authority, which exercises quasi-judicial functions. The court agreed, stating that the Commissioner is not empowered to issue such directions under the Act and that the assessing authority exceeded its jurisdiction by demanding tax based on the Commissioner's instruction.

3. Legal provisions regarding the assessment and demand of sales tax:
The court examined various provisions of the Bihar Finance Act, 1981, including Sections 3, 4, 12, 14, 16, 17, 20, 21, and 25, which outline the procedures for tax assessment, filing returns, and recovering tax. The court emphasized that the dealer is required to file a return and pay the tax due according to the return. If the tax due is not paid, a demand notice is issued under Section 25, and penalties may be imposed for non-payment. The court cited the Supreme Court's decision in J.K. Synthetics Ltd. v. Commercial Taxes Officer, which held that a dealer cannot be penalized for paying tax according to the return, even if the final assessment determines a higher tax liability. The court concluded that the assessing authority could not demand additional tax without conducting an assessment as provided under the Act.

Conclusion:
The court quashed the impugned notices demanding sales tax at 9% on maize seeds, stating that the Commissioner had no authority to issue such directions and that the assessing authority must independently determine the tax rate through proper assessment procedures. The writ application was allowed, and the impugned notices were quashed. The court clarified that it did not express any opinion on the applicable tax rate, leaving it to the assessing authority to determine in accordance with the law.