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2011 (5) TMI 869 - HC - VAT and Sales TaxWhether section 17 of the Assam Value Added Tax Act, 2003 or the notification dated April 5, 2007 are unconstitutional? Held that - In so far as we are concerned with the challenge to section 17 of the Act, there is legislative guidance in the preamble to the Act. The discretion of the State Government is also limited inasmuch as it has been clearly laid down in the proviso to section 17 of the Act that the Government shall not vary the rate of tax so as to enhance it, in any case, exceeding forty paise in a rupee. The upper limit of taxation, has therefore, been fixed. As far as the notification dated April 5, 2007 is concerned, on its deletion from the First Schedule to the Act, tobacco came within the purview of entry 1 in the Fifth Schedule to the Act and the tax leviable on tobacco came to be 12.5 paise in a rupee or 12.5 per cent, which is well below 40 paise in a rupee or 40 per cent. Under these circumstances, we are of the opinion that neither section 17 of the Act of 2003 nor the notification dated April 5, 2007 are unconstitutional or can be challenged on the ground of having been issued arbitrarily. Appeal dismissed.
Issues Involved:
1. Constitutional validity of Section 17 of the Assam Value Added Tax Act, 2003. 2. Validity of the notification dated April 5, 2007, which omitted "tobacco" from the First Schedule to the Act, thereby making its sales taxable. Issue-Wise Detailed Analysis: 1. Constitutional Validity of Section 17 of the Assam Value Added Tax Act, 2003: Section 17 of the Assam Value Added Tax Act, 2003 empowers the Government to amend any entry in any schedule to the Act, including the rate of tax, through a notification in the Official Gazette. The proviso to Section 17 restricts the Government from enhancing the rate of tax beyond forty paise in a rupee (or 40%). The petitioners challenged Section 17 on the grounds of excessive delegation of legislative power. They argued that there was no definite legislative policy or necessary guidelines for the exercise of power by the delegate, making Section 17 unconstitutional. The court referred to a similar provision in the Assam Entry Tax Act, 2001, which was upheld in the case of State of Assam v. Chhotabhai Jethabhai Patel Tobacco Products Co. Ltd. The Division Bench in that case had held that the preamble, objects, and reasons of the Assam Entry Tax Act provided sufficient guidance for issuing notifications under Section 3(4) of the Act. Applying the same reasoning, the court examined the Assam Value Added Tax Act, 2003. The preamble of the Act provided sufficient guidance as it aimed at the imposition and collection of tax on sales or purchases of goods in Assam. The court emphasized that it is well-settled that decisions regarding taxation are within the Legislature's discretion, and the court has no role in questioning the reasonability of such classifications unless there is clear and hostile discrimination. The court concluded that there was no excessive delegation of power under Section 17, as the legislative policy and guidelines were discernible from the preamble and the provisions of the Act. The discretion of the State Government was limited by the proviso to Section 17, which capped the maximum rate of tax enhancement. 2. Validity of the Notification Dated April 5, 2007: The notification dated April 5, 2007, omitted "tobacco" from the First Schedule to the Act, making its sales taxable under entry 1 in the Fifth Schedule at the rate of 12.5%. The petitioners challenged this notification, arguing that it was arbitrary and lacked legislative backing. The court referred to the legislative discretion in matters of taxation, as discussed in Gujarat Ambuja Cements Ltd. v. Union of India. It reiterated that the Legislature has wide latitude in deciding what should be taxed and the manner of its imposition. The court found that the notification was issued to generate revenue by taxing "tobacco," which was initially exempted. The rate of tax levied on tobacco (12.5%) was well within the maximum limit specified in the proviso to Section 17 (40%). The court held that the notification was not issued arbitrarily and was in line with the legislative policy and guidelines provided in the Act. The challenge to the notification dated April 5, 2007, was thus negated. Conclusion: The court dismissed the writ petition, upholding the constitutional validity of Section 17 of the Assam Value Added Tax Act, 2003, and the notification dated April 5, 2007. It found no merit in the petitioners' arguments and imposed costs of Rs. 5,000 on the petitioners.
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