2009 (12) TMI 883 - HC - VAT and Sales Tax

Levy of tax separately - Held that - Bureau of Indian Standards (BIS) prescribes criteria for adding chemical for colour quoting is mainly for purpose of standardizing so as to avoid any accusation of adulteration. In such cases, the dealers may avoid facing litigation in supplying adulterated kerosene. Similarly, relying upon the notification under the Essential Commodities Act has no place, so long as the commodity is an essential commodity and private marketing system is introduced by the Parliament through a delegated legislation to safeguard the interest of kerosene supply under the public distribution system. Therefore, it cannot be said that the State Legislature lacks power in taxing kerosene different from that of SKO or white kerosene oil. The attack of discrimination thus must fall to ground in the light of the above legal precedents as set out above. The second contention that exemption notification under section 17(1) will continue to be in operation notwithstanding the amendment to the entry in the Schedule because the same term continues to be in use in the amendment notification cannot also be accepted. Though such an argument is attractive, it does not stand to legal scrutiny in the light of the judgment of the Supreme Court in Sales Tax Officer, Sector IX, Kanpur v. Darling Dairy Products 1994 (5) TMI 213 - SUPREME COURT OF INDIA What applies to surcharge is also applicable to resale tax. Further, once legal issues are settled regarding the separate tax for SKO/white kerosene under a different entry in the Eleventh Schedule, the dealers are bound to pay the said rate of levy of tax and also surcharge and resale tax, which are also applicable notwithstanding the so-called exemption under section 17(1). Appeal dismissed.

Summary

Issues Involved:
1. Levy of higher sales tax on superior kerosene oil (SKO) compared to regular kerosene.
2. Levy of resale tax and surcharge on SKO.
3. Validity of bifurcation of kerosene into two separate taxable items.
4. Applicability of exemption notifications to SKO.
5. Challenges to individual assessment orders.

Issue-wise Detailed Analysis:

1. Levy of Higher Sales Tax on SKO:
The court examined the legislative power to classify and tax different commodities under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act). The charging section for the levy of tax is section 3(2C), which specifies tax rates for goods listed in the Eleventh Schedule. The court noted that the term "kerosene" was initially taxed at 4% but was later bifurcated into "kerosene other than white kerosene (superior kerosene oil)" and "white kerosene (superior kerosene oil)" with different tax rates. The court upheld the legislative power to impose different tax rates on SKO and regular kerosene, emphasizing the distinction in their usage-domestic versus industrial.

2. Levy of Resale Tax and Surcharge on SKO:
Sections 3H and 3I of the TNGST Act provide for the levy of resale tax and surcharge, respectively. The court found that the exemption from resale tax and surcharge initially applied to kerosene did not extend to SKO after the legislative bifurcation. The court upheld the validity of the notification and the subsequent amendment, which imposed resale tax and surcharge on SKO from March 21, 2003.

3. Validity of Bifurcation of Kerosene into Two Separate Taxable Items:
The court rejected the petitioners' argument that kerosene and SKO are the same commodity and should be taxed at the same rate. It held that legislative classification is permissible and that the bifurcation of kerosene into two separate taxable items was valid. The court cited various judgments to support the principle that different tax rates can be imposed on commodities based on their usage and market conditions.

4. Applicability of Exemption Notifications to SKO:
The petitioners argued that the exemption notifications under section 17(1) of the TNGST Act, which applied to kerosene, should also apply to SKO. The court disagreed, stating that the exemption notifications were specific to the class of goods defined at the time of issuance. Once SKO was separately classified and taxed, the exemption no longer applied. The court relied on precedents to assert that an exemption notification does not automatically extend to newly classified items unless explicitly stated.

5. Challenges to Individual Assessment Orders:
The court declined to address the factual disputes related to individual assessment orders, emphasizing that such matters should be resolved through the statutory appellate remedies available under the TNGST Act. The court's focus was on deciding the legal and constitutional issues regarding the tax liability on SKO and the applicability of surcharge and resale tax.

Conclusion:
The court dismissed all the writ petitions, upholding the legislative amendments and notifications that imposed higher sales tax, resale tax, and surcharge on SKO. The petitioners were directed to bear their own costs, and the connected miscellaneous petitions were closed. The court granted liberty to the petitioners to challenge the individual assessment orders before the appropriate statutory forums under the TNGST Act.