2006 (5) TMI 454 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of purchasing printing ink at a concessional tax rate under Section 5(3) of the KGST Act.
2. Validity of the penalty imposed under Section 45A of the KGST Act.
3. Jurisdiction of the High Court under Article 226 of the Constitution of India.
4. Alleged bias and violation of principles of natural justice.
5. Availability and efficacy of the alternative statutory remedy.

Issue-Wise Detailed Analysis:

1. Legality of Purchasing Printing Ink at a Concessional Tax Rate:
The petitioner, a company engaged in printing and publishing newspapers, availed a concessional tax rate of 3% on the purchase of printing ink by furnishing a declaration in Form 18, as per Section 5(3) of the KGST Act. The first respondent issued notices (Exhibits P1 to P4) challenging the legality of this concessional rate, arguing that the printing of newspapers does not constitute a manufacturing process and that newspapers are not taxable goods. The petitioner countered that the first proviso of Section 5(3), which required finished products to be taxable, was deleted effective April 1, 2000. Therefore, the concessional rate was applicable even if the finished products (newspapers) were not taxable.

2. Validity of the Penalty Imposed under Section 45A:
The first respondent imposed a penalty under Section 45A of the KGST Act, alleging misuse of the statutory declaration. The petitioner argued that the penalty was imposed without considering the amendment to Section 5(3) and without jurisdiction. The petitioner contended that the proceedings under Section 45A are quasi-criminal and should only be invoked in cases of deliberate defiance of the law. The petitioner also claimed that the penalty orders violated its fundamental rights under Article 14 of the Constitution of India.

3. Jurisdiction of the High Court under Article 226:
The petitioner approached the High Court directly, bypassing the statutory remedy of revision, citing mala fides and violation of principles of natural justice. The court examined whether it should entertain the writ petition despite the availability of an alternative remedy. The court noted that while the High Court's jurisdiction under Article 226 is not barred by the existence of an alternative remedy, it should be exercised sparingly, especially in tax matters. The court referred to several precedents, including Bhopal Sugar Industries Ltd. v. D.P. Dube and Whirlpool Corporation v. Registrar of Trade Marks, to support this view.

4. Alleged Bias and Violation of Principles of Natural Justice:
The petitioner alleged that the impugned orders were issued to retaliate against its newspaper's exposure of corruption in commercial tax check-posts. The court acknowledged the importance of newspapers exposing corruption but found no substantial evidence to support the petitioner's apprehensions of bias. The court held that mere apprehensions were insufficient to bypass the statutory remedy. The court also noted that the lack of a personal hearing at the original stage could be cured at the revisional stage.

5. Availability and Efficacy of the Alternative Statutory Remedy:
The court emphasized that the petitioner had an effective statutory remedy of revision under the KGST Act. The court cited several decisions, including Union of India v. Hindalco Industries and Sales Tax Officer v. Louis Dreyfuss India Pvt. Ltd., to support the principle that parties should first exhaust statutory remedies before approaching the High Court. The court dismissed the writ petition, directing the petitioner to file revision petitions against the impugned orders, with the period during which the writ petition was pending to be excluded from the limitation period.

Conclusion:
The High Court dismissed the writ petition, emphasizing the availability of an alternative statutory remedy and the lack of special grounds to deviate from the usual course of requiring parties to exhaust such remedies first. The court's decision was based on legal principles, precedents, and the statutory framework of the KGST Act.