2009 (9) TMI 897 - HC - VAT and Sales Tax

Exemption from payment of purchase tax under section 13AA and consequent penalties and interest under section 36 as levied by respondent No 3. claimed - Held that - We are really not concerned with the import of goods which is taxable separately. We are only concerned with SIL licences which was purchased by the petitioners and it was used for import of the goods whether at Mumbai or Delhi. There is no dispute that the petitioners purchased the licence in Mumbai. These licences have not been sold by the petitioners. As such the purchase tax under section 13AA becomes due and payable. After the judgment in Devi Dass 1994 (4) TMI 312 - SUPREME COURT OF INDIA and knowing what the position in law would be, it will be difficult to hold that imposition of penalty and interest was without jurisdiction. That contention must be rejected

Issues Involved
1. Challenge to assessment orders and notices of demand.
2. Exemption from payment of purchase tax under Section 13AA and related penalties and interest under Section 36 of the Bombay Sales Tax Act, 1959.
3. Refund of moneys collected unauthorizedly with interest.
4. Interpretation of the phrase "unless the goods so purchased are resold" and its applicability to Special Import Licence (SIL).
5. Constitutional validity of Section 13AA of the Bombay Sales Tax Act, 1959.
6. Classification of SIL as "goods" under Section 2(13) of the Act.
7. Applicability of purchase tax under Section 13AA to SIL.

Detailed Analysis

1. Challenge to Assessment Orders and Notices of Demand
The petitioners challenged the assessment orders dated October 6, 1997, and October 23, 1998, and the notices of demand dated October 7, 1997, and October 31, 1998, for the periods 1994-95 and 1995-96 under the Bombay Sales Tax Act, 1959. The court upheld the assessment orders and notices of demand, stating that the purchase tax under Section 13AA was applicable.

2. Exemption from Payment of Purchase Tax under Section 13AA and Related Penalties and Interest under Section 36
The petitioners sought exemption from the purchase tax levied under Section 13AA and the consequent penalties and interest under Section 36. The court rejected this plea, noting that the SIL, being classified as "goods," attracted purchase tax under Section 13AA. The court also upheld the imposition of penalties and interest, as the petitioners were aware of the legal position post the Supreme Court judgment in Devi Dass Gopal Krishan Pvt. Ltd. v. State of Punjab [1994] 95 STC 170.

3. Refund of Moneys Collected Unauthorizedly with Interest
The petitioners requested a refund of moneys collected by respondent No. 4 unauthorizedly with interest at the rate of 21% per annum from September 22, 1997, until payment. The court did not grant this relief, as the collection of taxes was found to be lawful under the applicable provisions of the Bombay Sales Tax Act.

4. Interpretation of the Phrase "Unless the Goods So Purchased Are Resold"
The petitioners argued that the phrase "unless the goods so purchased are resold" should exclude SIL. The court, however, held that SIL qualifies as "goods" and, therefore, does not fall under the exclusion. The court emphasized that SIL, like REP licences and DEPB, has intrinsic value and is freely traded, thus falling within the definition of "goods."

5. Constitutional Validity of Section 13AA of the Bombay Sales Tax Act, 1959
The petitioners challenged the constitutional validity of Section 13AA, arguing it was void and unconstitutional. The court rejected this challenge, referencing the Supreme Court's decision in Devi Dass Gopal Krishan Pvt. Ltd. v. State of Punjab, which upheld the validity of Section 13AA. The court noted that the amended section, which came into effect retrospectively from July 1982, was also valid.

6. Classification of SIL as "Goods" under Section 2(13) of the Act
The court examined whether SIL falls under the definition of "goods" as per Section 2(13) of the Act. It referred to the Supreme Court judgments in Vikas Sales Corporation v. Commissioner of Commercial Taxes [1996] 102 STC 106 and Yasha Overseas v. Commissioner of Sales Tax [2008] 17 VST 182, which held that REP licences and DEPB qualify as "goods." The court concluded that SIL, having intrinsic value and being freely traded, also qualifies as "goods."

7. Applicability of Purchase Tax under Section 13AA to SIL
The court held that since SIL is classified as "goods," it is subject to purchase tax under Section 13AA. The court noted that the petitioners had used SIL for importing goods and had not resold the licences, thus making them liable for purchase tax. The court also referenced the Explanation added to entry 26 of Schedule C, Part I, which clarified that "import licence" includes "special import licence."

Conclusion
The court dismissed the petitions, upholding the assessment orders and notices of demand for the periods 1994-95 and 1995-96. The court affirmed the applicability of purchase tax under Section 13AA to SIL, rejected the challenge to the constitutional validity of Section 13AA, and upheld the imposition of penalties and interest. The court also denied the petitioners' request for a refund of moneys collected unauthorizedly with interest. The rule was discharged in both petitions, with no order as to costs.

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