2002 (7) TMI 769 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to rule 8(4)(c)(ii) of the Delhi Sales Tax Rules, 1975 as ultra vires the Act and beyond legislative competence; Interpretation of the Act regarding tax liability and issuance of declaration forms; Reintroduction of rule 8(4)(c)(ii) after an amendment to section 71(2)(b); Examination of the amended rule's validity in light of rule-making powers and fundamental right to trade; Compliance with statutory requirements under section 72; Petitioners' reliance on assurance of declaration forms for tax deductions; Legal challenge to the rule's validity and its impact on tax collection; Dismissal of petitions and recall of interim relief orders.

Analysis:
The judgment delivered by the Delhi High Court addressed multiple issues concerning the legality of rule 8(4)(c)(ii) of the Delhi Sales Tax Rules, 1975. The petitioners challenged the rule as ultra vires the Act, contending that it infringed upon their vested right to transact goods without tax liability, subject to the availability of prescribed declaration forms. The court emphasized the necessity of declaration forms for each transaction to claim tax deductions, even when a party is in arrears of tax. The judgment referred to a previous case concerning the vires of the rule and highlighted the importance of compliance with statutory provisions.

Following an amendment to section 71(2)(b) of the Act, the Lt. Governor reintroduced rule 8(4)(c)(ii), leading to the present legal challenge. The court examined the amended rule's validity in relation to the rule-making authority's powers and its impact on the petitioners' fundamental right to trade. The judgment clarified that the impugned rule did not violate the petitioners' rights under article 19(1)(g) of the Constitution or section 4(2)(a)(v) of the Act. The court emphasized the objective of the Act to collect tax and the importance of declaration forms in achieving this goal.

The factual matrix of the case revealed that the petitioners relied on assurance of declaration forms for tax deductions while purchasing raw material. However, the department withheld issuing forms due to pending tax demands against the petitioners. The court dismissed the petitions, stating that there was no merit in challenging the legality of the rule. It reiterated that dealers must fulfill tax obligations to avail benefits under the Act and that the issuance of declaration forms was crucial for tax exemption during transactions. The judgment concluded by dismissing the petitions without costs and recalling interim relief orders previously granted to the petitioners.