2002 (10) TMI 753 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the validity of Notification No. FTX. 60/93/Pt/44 dated December 13, 1993 issued by the Government of Assam regarding the levy of tax on tea brokers at the rate of two paise in the rupee.

Analysis:

1. Validity of Notification:
The petitioners challenged the validity of the notification on various grounds. Firstly, they argued that Section 9(3) of the Assam General Sales Tax Act does not provide for levying tax but only for providing exemption. Secondly, they contended that the impugned notification violates Article 14 of the Constitution. Lastly, they argued against giving retrospective effect to the notification.

2. Tax Levy on Tea Brokers:
The sales tax on the sale of tea is usually levied at the point of last sale within the State. However, the impugned notification shifted the tax burden to brokers at the rate of two paise in the rupee for tea sold in auction at Guwahati, except for orthodox tea. This tax burden was then passed on to the petitioners by the brokers. Although the brokers were made parties in the petitions, none of them challenged the imposition of the tax.

3. Policy Decision and Legal Arguments:
The petitioners argued that purchasing tea directly from tea gardens incurred a lower tax rate compared to purchasing through brokers due to the additional tax imposed by the impugned notification. They highlighted the historical context where set-off provisions existed under the old Act but were omitted in the 1993 Act, only to be reintroduced in 1997. The respondent-State justified the tax imposition as a means to generate revenue and explained the policy shift regarding exemptions and set-offs.

4. Exemption and Legislative Power:
The court examined Section 9(3) of the Act, which allows for exemptions or reductions in tax rates. The State's decision to reduce the tax rate for tea sold at auction markets was considered within the scope of this provision. The court emphasized that the State has the authority to grant or revoke exemptions as per its policy decisions.

5. Constitutional Validity and Dismissal of Petitions:
The court concluded that the impugned notification did not violate Article 14 of the Constitution. It reiterated that the legislative power to levy taxes and grant exemptions lies with the State. The absence of previous exemptions under the new Act did not render it ultra vires. Consequently, the court found no merit in the writ petitions and dismissed them.

In summary, the High Court upheld the validity of the notification imposing a tax on tea brokers, emphasizing the State's legislative authority in tax matters and policy decisions regarding exemptions and set-offs. The court dismissed the petitions challenging the notification, ruling that it did not contravene constitutional provisions and fell within the legal framework of the Assam General Sales Tax Act.