2003 (5) TMI 494 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Vires of sub-section (4) of Section 4 of the Assam Industries (Sales Tax Concession) Act, 1986.
2. Vires of rule 2(f) of the Assam Industries (Sales Tax Concession) Rules, 1988.
3. Adjustment/refund of the amount of tax already paid.

Issue-wise Detailed Analysis:

1. Vires of Sub-section (4) of Section 4 of the Assam Industries (Sales Tax Concession) Act, 1986:
The petitioner challenged the constitutionality of sub-section (4) of Section 4, arguing it suffers from excessive delegation. The court examined whether this delegation was permissible under the law. It was noted that the Assam Industries Act of 1986 was a special legislation intended to give effect to the Industrial Policy of 1982, which included a policy of tax exemption for certain raw materials used in manufacturing. The Act delegated the power to the State Government to specify which raw materials would be excluded from tax exemption. The court concluded that this delegation was within constitutional limits because the Legislature had clearly laid down the policy and left the details to be worked out by the State Government. The court cited Supreme Court precedents, emphasizing that a Legislature can delegate ancillary powers to an administrative agency as long as it lays down the general policy.

2. Vires of Rule 2(f) of the Assam Industries (Sales Tax Concession) Rules, 1988:
The petitioner argued that rule 2(f), which excluded coal from the definition of "raw material" for tax exemption, was ultra vires. The court observed that rule 2(f) was framed under the authority of sub-section (4) of Section 4, which allowed the State Government to exclude certain raw materials from tax exemption. The court found that the rule-making power was appropriately exercised and that the rule was laid before the State Legislature, which did not suggest any changes. The exclusion of coal, a historically taxable item, was deemed neither arbitrary nor unreasonable. The court also addressed the issue of retrospectivity, noting that both the Act and the Rules came into force on August 1, 1988, and that the provisions for tax refund/adjustment were intended to apply to a period prior to the Act's commencement. The court ruled that rule 2(f) was not impermissibly retrospective and was consistent with the Act.

3. Adjustment/Refund of the Amount of Tax Already Paid:
The petitioner sought a refund or adjustment of sales tax paid on coal, arguing that coal should be considered a raw material for tax exemption purposes. The court reiterated that the benefit of tax exemption was subject to the provisions of Section 4, including the rule-making powers under sub-section (4). Since coal was excluded from the definition of "raw material" by rule 2(f), the petitioner was not entitled to a refund or adjustment of the tax paid during the specified period. The court concluded that the State Government acted within its delegated powers in excluding coal from tax concession.

Conclusion:
The court dismissed both writ petitions, upholding the constitutionality of sub-section (4) of Section 4 of the Assam Industries (Sales Tax Concession) Act, 1986, and rule 2(f) of the Assam Industries (Sales Tax Concession) Rules, 1988. The petitioner's request for a refund or adjustment of the tax paid was denied.