2006 (4) TMI 482 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability and constitutionality of Section 5A of the Kerala General Sales Tax Act (KGST Act) concerning declared goods.
2. Interpretation of "levy" under Section 15 of the Central Sales Tax Act (CST Act) and Article 286 of the Constitution.
3. Validity of the notices issued under Section 19(1) of the KGST Act for escaped assessment.

Issue-Wise Detailed Analysis:

1. Applicability and Constitutionality of Section 5A of the KGST Act:
The appellant, a registered dealer under the KGST Act, challenged the applicability of Section 5A, which imposes a purchase tax on declared goods, arguing that it violates Section 15 of the CST Act and Article 286 of the Constitution. The appellant contended that declared goods, such as iron and steel, could not be taxed at more than one point and at a rate higher than four per cent, as stipulated by Section 15 of the CST Act. The appellant argued that Section 5A should be read down to exclude declared goods from its ambit.

The court referred to several precedents, including Shanmuga Traders v. State of Tamil Nadu [1999] 114 STC 1 (SC), where it was held that declared goods could only be taxed at a single point. The court also considered State of Tamil Nadu v. M. K. Kandaswami [1975] 36 STC 191 (SC), which established that Section 5A of the KGST Act is an independent charging section. The court concluded that Section 5A does not violate Section 15(a) of the CST Act or Article 286 of the Constitution, as it imposes tax only when no tax is payable under Section 5 of the KGST Act.

2. Interpretation of "Levy" under Section 15 of the CST Act and Article 286 of the Constitution:
The appellant argued that the term "levy" should include both imposition and collection of tax. The court examined the meaning of "levy" in the context of various constitutional provisions and judicial interpretations. It referred to Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. AIR 1972 SC 2563, where "levy" was interpreted as encompassing both imposition and assessment, but not collection. The court also considered Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Company Limited [1996] 3 SCC 434, which distinguished between imposition and collection of tax.

The court concluded that "levy" in the context of Section 15(a) of the CST Act includes imposition and collection. Therefore, the imposition of tax under Section 5A of the KGST Act, conditioned on the non-payment of tax under Section 5, does not violate the prohibition against multi-point taxation of declared goods.

3. Validity of Notices Issued under Section 19(1) of the KGST Act:
The appellant challenged the notices issued under Section 19(1) of the KGST Act for escaped assessment, arguing that the State cannot impose tax at more than one point on declared goods. The court noted that the learned single Judge had directed the appellant to file objections to the notices and raise all contentions before the authorities.

The court held that the appellant's contention regarding the unconstitutionality of Section 5A may not be available in proceedings under the State Act. However, the court proceeded to consider the merits of the appellant's argument and found no violation of Section 15(a) of the CST Act or Article 286 of the Constitution. Consequently, the court dismissed the writ appeals, upholding the validity of the notices issued under Section 19(1) of the KGST Act.

Conclusion:
The court dismissed the writ appeals, holding that Section 5A of the KGST Act is not ultra vires Section 15(a) of the CST Act or Article 286 of the Constitution. The imposition of purchase tax under Section 5A, conditioned on the non-payment of tax under Section 5, does not constitute multi-point taxation of declared goods. The notices issued under Section 19(1) of the KGST Act for escaped assessment were found to be valid.