2002 (3) TMI 940 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legislative competence of Section 27 of the Assam General Sales Tax Act, 1993.
2. Violation of Articles 265, 286, and 300A of the Constitution of India.
3. Confiscatory nature of Section 27.
4. Validity of Sections 8(i)(c) and 8(3)(iv) of the Act.

Issue-wise Detailed Analysis:

1. Legislative Competence of Section 27:
The petitioners challenged Section 27 of the Assam General Sales Tax Act, 1993, arguing that it is beyond the legislative competence of the State Legislature. They contended that Section 27 includes turnover outside the purview of Entry 54 of List II and amounts not exigible to Sales Tax under the Act or the Central Act. The court referred to precedents, including the State of Madras v. Gannon Dunkerly & Co., and the Builders' Association of India v. Union of India, which clarified the State's power to levy sales tax on the value of goods involved in a works contract. The court concluded that Section 27 is a machinery provision for tax collection and not a substantive provision for imposing tax, thus within the legislative competence of the State.

2. Violation of Articles 265, 286, and 300A:
The petitioners argued that the deduction of tax at source under Section 27 violates Articles 265, 286, and 300A of the Constitution of India. They cited the Supreme Court's decisions in Bhawani Cotton Mills Ltd. v. State of Punjab and Steel Authority of India Ltd. v. State of Orissa, which held that arbitrary deduction of tax at source without provision for exemption is unconstitutional. The court distinguished these cases by noting that Section 27 of the Assam Act provides for deduction of tax at source only in respect of goods liable to tax under the Act, thereby not violating the constitutional provisions.

3. Confiscatory Nature of Section 27:
The petitioners claimed that Section 27 is confiscatory in nature as it purports to realize tax on turnover not taxable under the Act. The court rejected this argument, stating that Section 27 is a machinery provision for advance tax collection and not confiscatory. The court emphasized that the liability to pay tax is determined under Sections 7 and 8 of the Act, and Section 27 merely facilitates tax collection.

4. Validity of Sections 8(i)(c) and 8(3)(iv):
Some petitioners also challenged Sections 8(i)(c) and 8(3)(iv) as ultra vires and violative of Article 286 of the Constitution, arguing that these sections do not provide for deduction of the value of goods used in inter-State trade or commerce. The court held that these provisions are not ultra vires or illegal when read in conjunction with the charging sections and the permissible deductions under the Act. The court clarified that Section 27 should be read together with Sections 7 and 8, and deductions and exemptions provided under these sections apply to tax deduction at source under Section 27.

Conclusion:
The court upheld the validity of Section 27 and related provisions of the Assam General Sales Tax Act, 1993, by reading them down to ensure compliance with constitutional provisions and judicial precedents. The court emphasized that deduction of tax at source is permissible under the law, and dealers/assessees can claim permissible deductions during final assessment. All writ petitions were disposed of in light of these observations, with no costs awarded.