2009 (1) TMI 829 - HC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, where the State Government prescribes lower rate of tax under section 8(5) of the Central Sales Tax Act, 1956, can additional tax be levied under section 5A of the Punjab General Sales Tax Act, 1948? Whether, under the facts and circumstances of the case, the honourable Tribunal was justified in upholding the levy of interest under section 11D of the Punjab General Sales Tax Act, 1948 read with section 9(2) of the Central Sales Tax Act, 1956 on account of additional demand created by the revisional authority, even though the petitioner had paid the full amount of tax due as per returns filed and accepted by the assessing authority while framing assessment? Held that - Additional sales tax would not be leviable on inter-State sales or purchases of goods in regard to which notification has been issued by the concerned State under section 8(5) of the Act fixing a specific lower rate by keeping in view the larger public interest. The question of law is answered in favour of the dealer and against the Revenue. It follows that the decision o the Tribunal is liable to be set aside. Accordingly, the decision of the Tribunal concerning additional tax and interest thereon is set aside.

Summary

The judgment of the Punjab and Haryana High Court in 2009 involved a case where the dealer, engaged in manufacturing and supplying cycles and cycle parts, was assessed for the year 1986-87. The revisional authority found the assessment to be improper due to non-charging of additional tax on inter-State sales. The Tribunal upheld this decision, leading the dealer to approach the High Court. The main questions of law referred were whether additional tax could be levied under the Punjab General Sales Tax Act, 1948, when the State Government prescribes a lower rate of tax under the Central Sales Tax Act, and whether interest could be charged on additional demand created by the revisional authority.

The High Court analyzed Section 8(5) of the Central Sales Tax Act, which allows the State Government to direct that no tax under the Act is payable by a dealer for inter-State sales, upon issuing a notification. Referring to the Supreme Court case of Aysha Hosiery Factory (P.) Ltd. [1992] 85 STC 106, the court concluded that additional sales tax would not be levied on inter-State sales when a specific lower rate is fixed under Section 8(5) for public interest. The court also cited the case of Shree Digvijay Cement Co. Ltd. v. State of Rajasthan [2000] 117 STC 395 to support this view.

Ultimately, the High Court ruled in favor of the dealer, holding that no additional tax could be levied under the Punjab General Sales Tax Act, 1948, when a lower rate was prescribed under the Central Sales Tax Act. The decision of the Tribunal to charge additional tax and interest was set aside. The matter was disposed of accordingly.