2002 (10) TMI 754 - HC - VAT and Sales Tax

Summary

Issues:
- Whether retail dealers of medicine are liable to register under section 11 of the AGST Act, 1993?
- Whether dealers can claim exemption from tax on the ground of sale at second or subsequent point?
- Whether registration of dealers is necessary to prevent tax evasion?

Analysis:

1. Issue 1: Retail Dealers' Liability to Register
The petitioners, two dealers associations, argued that retail and wholesale sellers of medicine are not liable to pay sales tax under sections 7 and 9 of the Act. They contended that as second sellers, they are not required to register under section 11. However, the respondents argued that the liability to pay tax exists even if the goods were previously taxed, as per section 8(3)(ii). The court held that the obligation to register is separate from the obligation to pay tax. The court dismissed the petitions, stating that dealers must register even if their goods are exempt from further taxation.

2. Issue 2: Claiming Exemption from Tax
The respondent-State argued that dealers cannot claim outright exemption from tax based on sales at second or subsequent points. The court referenced section 8(3)(ii) to emphasize that dealers must prove that goods were previously taxed in the state. The court held that the liability to pay tax exists even if goods were already taxed once, emphasizing the distinction between tax exemption and registration obligations.

3. Issue 3: Necessity of Registration to Prevent Tax Evasion
The respondents argued that registration of dealers is essential to prevent tax evasion and ensure proper tax collection. The court referred to section 12(1) of the Act, which empowers assessing officers to require registration from liable dealers. The court highlighted that registration is necessary to monitor tax payments and prevent illegal tax collection. The court dismissed the petitions, emphasizing the importance of registration to curb tax evasion.

In conclusion, the court held that retail dealers of medicine are liable to register under the AGST Act, even if their goods are exempt from further taxation. Registration is crucial to monitor tax payments and prevent tax evasion, highlighting the distinction between tax liability and registration obligations. The petitions were dismissed, affirming the necessity of dealer registration for effective tax administration.