2016 (8) TMI 1344 - HC - VAT and Sales Tax

Validity of State Development Tax (SDT) whether State legislature is competent to make provision for levy of SDT under Act, 1948? Held that - trade tax is one of the tax chargeable and leviable under Act, 1948 and within the ambit of Section 2 (n) but there may be other taxes also which can be imposed under Act, 1948 subject to the condition that incident of tax is sale or purchase of goods , within the ambit of definition under Article 366(29- A) of the Constitution - Even charging Section i.e. Section 3 provides that a dealer shall be liable to pay tax for each assessment year as are provided under various Sections mentioned therein. Therefore, to read Act, 1948 as if therein, legislature can impose only Trade Tax and not anything else is nothing but a complete lack of understanding in appreciation of above statute. The point of levy of Tax i.e. SDT falls on sale or purchase therefore, is leviable and permissible under Act, 1948. - Power to levy tax is an inherent attribute of sovereign function of State. It has power under charging provisions, to levy tax on the taxable turnover of dealer at the rates prescribed under provisions of Act, for raising revenue for public purposes. Ordinarily, it is used to express exercise of sovereign power to raise revenue for the expenses of government. In the present case, State has framed law for imposition of tax on sale or purchase of goods under Act, 1948. It had made provisions for imposition of Trade Tax in general and additional tax . The definition of tax is inclusive and can be extended to other taxes. To make this clear, legislature has also amended definition of tax by including therein SDT also. Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Validity of the "State Development Tax" (SDT).
2. Legislative competence of the State to levy SDT.
3. Inclusion of SDT in the assessment order.
4. Interpretation of relevant statutory provisions and constitutional entries.

Issue-Wise Detailed Analysis:

1. Validity of the "State Development Tax" (SDT):
The petitioner challenged the validity of the SDT, asserting that its imposition on Eligibility Certificate holders at the rate of 1% was ultravires. The petitioner sought a writ of mandamus to declare the levy of SDT invalid and a writ of certiorari to quash the assessment order dated 5.3.2009, which included the 1% SDT on the sale of television chassis, colored televisions, television parts, and accessories.

2. Legislative Competence of the State to Levy SDT:
The court examined whether the State Legislature was competent to impose the SDT under the U.P. Trade Tax Act, 1948. The court referred to Entry 54, Seventh Schedule, List II of the Constitution of India, which empowers the State to legislate on "Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of Entry 92-A of List I." The court concluded that the Provincial Legislature is competent to make laws imposing tax on the sale or purchase of goods, and the SDT falls within this ambit.

3. Inclusion of SDT in the Assessment Order:
The petitioner argued that the imposition of SDT by inserting Section 3-H and making it dominant over Section 4-A, thereby attracting the levy of SDT upon units availing tax exemption, was illegal and arbitrary. The court noted that the Amendment Act, 2005, introduced Section 3-H, which specifically provided for the levy of SDT at a rate not exceeding 1% on taxable turnover exceeding fifty lakh rupees. The court found that the SDT was an additional tax levied on the sale or purchase of goods and was within the legislative competence of the State.

4. Interpretation of Relevant Statutory Provisions and Constitutional Entries:
The court analyzed the definitions of 'tax' and 'trade tax' under the U.P. Trade Tax Act, 1948, and Article 366(29-A) of the Constitution. The court observed that the term 'tax' includes various forms of taxes, and the definition under Section 2(n) of the Act, 1948, is inclusive, encompassing additional taxes such as SDT. The court also referred to the Supreme Court's observations in State of U.P. and others vs. Systematic Conscom Limited, which upheld the levy and collection of SDT as a valid exercise of the State's taxing power.

Conclusion:
The court concluded that the State Legislature was competent to levy SDT under the U.P. Trade Tax Act, 1948, and the imposition of SDT was valid. The court dismissed the petition, finding no merit in the challenge to the legislative competence or the validity of the SDT. The assessment order including the 1% SDT was upheld, and the petition was dismissed with no costs.