2002 (11) TMI 759 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the order dated May 27, 1991, passed by the Sales Tax Tribunal, Bench III, Agra.
2. Constitutionality of Section 12-A(2) of the U.P. Sales Tax Act, 1948, as introduced by the U.P. Sales Tax (Amendment and Validation) Act, 1991.

Detailed Analysis:

1. Validity of the Order Dated May 27, 1991, by the Sales Tax Tribunal:
The petitioner, a registered partnership firm under the U.P. Sales Tax Act, 1948, and the Central Sales Tax Act, 1956, engaged in wholesale trade and commission agency, challenged the imposition of tax on rice purchases for the assessment year 1977-78. The petitioner claimed exemption on the grounds that the purchases were made for ex-U.P. principals and thus were inter-State transactions not liable to tax under Section 3-D of the Act. The assessing authority rejected this claim due to the issuance of declaration form III-C(1) and imposed tax under Section 3-D. The appeal to the Assistant Commissioner (Judicial) Trade Tax was allowed, but the Sales Tax Tribunal later upheld the tax imposition, citing Section 12-A(2)(a) of the Act, which deemed the petitioner the first purchaser liable for tax due to the issuance of declaration forms.

2. Constitutionality of Section 12-A(2) of the U.P. Sales Tax Act:
The petitioner argued that the transactions were inter-State and thus not taxable under the U.P. Sales Tax Act, relying on the Supreme Court decision in Commissioner of Sales Tax v. Bakhtawar Lal Kailash Chand Arhti, which held that inter-State sales are taxable only under the Central Sales Tax Act. The petitioner contended that Section 12-A(2)(a) violated Articles 286(1), 269, 301, and 304 of the Constitution, as the State Legislature had no jurisdiction to tax inter-State sales. The petitioner also cited various Supreme Court decisions supporting the position that the State cannot tax inter-State transactions and that Section 12-A(2) is ultra vires.

The respondent's counsel argued that the issuance of declaration form III-C(1) by the petitioner invoked the presumption under Section 12-A, making the petitioner liable for tax as the first purchaser. The counsel cited Supreme Court decisions in McDowell & Company Limited v. Commercial Tax Officer and others, asserting that the petitioner's actions constituted an intra-State purchase.

Court's Findings:
The court found that the Supreme Court in Commissioner of Sales Tax v. Bakhtawar Lal Kailash Chand Arhti had established that inter-State sales cannot be taxed by the State Legislature. Section 12-A(2) applies only where a dealer claims exemption under Section 3-D, not for inter-State transactions. The court noted that Section 3-B of the Act, which deals with false declarations, applies only to tax evasion under the State Act, not the Central Act. The court concluded that the presumption under Section 12-A(2)(a) does not apply to inter-State transactions, and thus the imposition of tax on the petitioner was invalid.

Conclusion:
The writ petition was allowed, and the order dated May 27, 1991, of the Sales Tax Tribunal was set aside. The court did not find it necessary to address the constitutionality of Section 12-A(2) due to the conclusion that it was inapplicable to the petitioner's case. Each party was ordered to bear its own costs.