2012 (8) TMI 887 - HC - VAT and Sales Tax

Restriction upon registered dealers to trade with unregistered dealers by other State - Held that - The incidence of tax has been given under section 8 of the Act of 2005 and the State Government s power to legislate on subject of levy of tax in Chapter III of the Act of 2005 is also not under challenge. What is under challenge is the withdrawal of credit given on the basis of input tax. Therefore from the facts itself it is clear that the State has not imposed the tax but has granted some concessions in the matters of the tax levied under the Act of 2005. The State has decided to encourage the trade with the registered dealers under the CST Act by giving some credit known as input-tax credit and has not levied any tax or penalty upon the petitioners on their entry to trade with the unregistered dealers. Therefore from the impugned substitution of sub-clause (ii) of sub-section (4) of section 18 neither the State Government has levied some additional tax on the subject-matters covered under the article 246(1) nor has put any restrictions against the trade by the petitioners with unregistered dealers. Therefore the petitioners challenge to substituted provisions of sub-clause (ii) of sub-section (4) of section 18 of the Jharkhand Value Added Tax Act 2005 by the impugned Ordinance Act is misconceived. W.P. dismissed.

Summary

Issues:
Challenge to the imposition of tax on inter-State sales under Jharkhand Value Added Tax Act, 2005.

Analysis:
The writ petition involved a challenge to the imposition of tax on inter-State sales under the Jharkhand Value Added Tax Act, 2005. The petitioners, registered traders of coke and coal, contended that the State of Jharkhand had exceeded its jurisdiction by imposing restrictions on inter-State sales, which they argued fell under the exclusive legislative domain of the Parliament. The petitioners claimed that the insertion of specific clauses in the Act restricted their ability to claim input-tax credit on sales to unregistered dealers, thus hindering trade. They relied on legal provisions and precedents to support their argument.

The State, on the other hand, defended the amendments made to the Jharkhand Value Added Tax Act, 2005, stating that the changes did not impose restrictions on trade with unregistered dealers from other states. The State argued that the amendments aimed to promote transparency in trade and enhance revenue collection by limiting input-tax credit to sales made to registered dealers under the Central Sales Tax Act. The State highlighted the legislative process through which the amendments were enacted, emphasizing that they were in line with the objectives of the Act.

The High Court analyzed the constitutional provisions and relevant legal principles to determine the validity of the amendments. It clarified that the State had the power to legislate on the levy of value-added tax within its territory, and the amendments did not amount to imposing additional taxes but rather modified the input-tax credit provisions. The Court emphasized that the State had not imposed any new taxes but had provided concessions to traders dealing with registered dealers under the Central Sales Tax Act. The judgment distinguished the present case from the precedent cited by the petitioners, as the legal issues and contexts were different.

Ultimately, the High Court dismissed the writ petition, finding that the petitioners' challenge to the amended provisions of the Jharkhand Value Added Tax Act, 2005, was misconceived. The Court concluded that the amendments did not violate constitutional provisions or infringe on the exclusive legislative domain of the Parliament. The judgment upheld the validity of the amendments and affirmed the State's authority to regulate input-tax credit in inter-State sales under the Act.