2005 (2) TMI 791 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Section 11(3) of the Bihar Finance Act, 1981 regarding the deduction of sales tax and additional tax.
2. Application of the definition of "tax" under Section 2(x) of the Act.
3. Validity of the Commissioner's circular dated 12th July 1994.
4. Relevance of Supreme Court judgments cited by the petitioner.

Detailed Analysis:

1. Interpretation of Section 11(3) of the Bihar Finance Act, 1981:
The primary issue is whether additional tax paid at the initial stage should be deducted along with sales tax under Section 11(3) to determine the value-added sale price. The court noted that Section 11(3) explicitly mentions the deduction of "sales tax" paid at each preceding stage and not "additional tax." The court emphasized that the statutory language must be interpreted as it is, without substituting or adding provisions. Therefore, the additional tax cannot be deducted under Section 11(3).

2. Application of the Definition of "Tax" Under Section 2(x) of the Act:
The petitioner argued that the definition of "tax" under Section 2(x) includes both sales tax and additional tax, and thus both should be deducted. The court acknowledged this definition but clarified that Section 11(3) specifically refers to "sales tax" and not "tax." The court held that the rule of interpretation dictates that the specific provision in Section 11(3) prevails over the general definition in Section 2(x).

3. Validity of the Commissioner's Circular Dated 12th July 1994:
The assessment order challenged by the petitioner was based on the Commissioner's circular, which directed the deduction of only sales tax and not additional tax. The court found that the circular was consistent with Section 11(3) of the Act, which only allows the deduction of sales tax. The court concluded that the circular was valid and the assessment order was not vitiated by its application.

4. Relevance of Supreme Court Judgments Cited by the Petitioner:
The petitioner cited two Supreme Court judgments (Deputy Commissioner of Sales Tax v. Aysha Hosiery Factory (P.) Ltd. and State of Karnataka v. Sunagar Bros.) to support their case. The court distinguished these cases, noting that they dealt with different issues related to the inclusion of additional tax under separate Acts and the payment of undisputed additional tax during appeals. The court found these judgments inapplicable to the specific issue of deducting additional tax under Section 11(3) of the Bihar Finance Act.

Conclusion:
The court concluded that Section 11(3) of the Bihar Finance Act only allows the deduction of sales tax paid at each preceding stage and not additional tax. The petitioner's argument based on the definition of "tax" under Section 2(x) and the cited Supreme Court judgments were rejected. The court upheld the validity of the Commissioner's circular and dismissed the writ petition.

Judgment:
The writ petition was dismissed, with the court affirming that only sales tax, and not additional tax, is deductible under Section 11(3) of the Act.