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2014 (9) TMI 417 - HC - VAT and Sales TaxConstitutional Validity of section 15(2)(xi) of the KVAT Act - mandatory requirement to seek registration even if assessee not liable to sales tax - The case of the petitioner is that in a hallmarking unit, there is no sale or delivery of any goods and that therefore, it is not liable to get itself registered under the Act. - Held that - A reading of the principles laid down by the apex court in the last two judgments where provisions of the Tripura and Assam Acts were upheld by the apex court show that the apex court found that the maintenance of accounts in the prescribed manner and furnishing such information as the Commissioner requires, were for achieving the object of ceiling loopholes of escape from the levy of tax and that the incidental powers under entry 54 entitled the State Legislature to legislate upon these subjects as well. Section 40 of the Act provides that every person registered under the Act, every dealer liable to get himself registered under this Act, etc., shall keep and maintain a true and correct accounts and other such account as may be prescribed in the manner provided in the Act. Similarly section 44 also empowers the provisions of accounts and also confers power of entry, such as rule 58 have been framed under the Act for the effective implementation of these statutory provisions. These provisions are incorporated in the KVAT Act with identical objects and for achieving the very same purposes which are found by the apex court to sustain the provisions of the Tripura and Assam Acts. - Therefore, in view of the principles laid down by the apex court in the aforesaid judgments, the challenge against section 15(2)(xi) has to fail. - Decided against the assessee.
Issues Involved:
1. Constitutionality of Section 15(2)(xi) of the KVAT Act. 2. Validity of assessment orders (Exhibits P15 and P16) under the KVAT and CST Acts for the year 2005-06. Issue-wise Detailed Analysis: 1. Constitutionality of Section 15(2)(xi) of the KVAT Act: The petitioner challenged the constitutionality of Section 15(2)(xi) of the KVAT Act, which mandates hallmarking units to obtain registration under the Act. The petitioner argued that hallmarking does not involve the sale or delivery of goods, and thus, does not fall under the purview of entry 54, List II of the Seventh Schedule to the Constitution, which authorizes the State Legislature to levy tax on the sale or purchase of goods. The court examined the contention in light of the apex court's judgment in Bharat Sanchar Nigam Ltd. v. Union of India, where it was established that the transfer of goods or title is essential for a transaction to be classified as a sale. However, the court also considered the legislative competence under entry 54, List II, and the principles laid down in A.V. Fernandez v. State of Kerala and Hoechst Pharmaceuticals Ltd. v. State of Bihar, which upheld the State Legislature's power to require registration and submission of returns even if the transactions are not liable for sales tax. Further, the court referenced the judgments in Tripura Goods Transport Association v. Commissioner of Taxes and M/s. A.B.C. (India) Ltd. v. State of Assam, which validated similar provisions in the Tripura and Assam Sales Tax Acts. These judgments emphasized that ancillary provisions aimed at preventing tax evasion are within the legislative competence of the State Legislature. The court concluded that Section 15(2)(xi) of the KVAT Act, requiring hallmarking units to obtain registration, is a valid piece of legislation. The provision is intended to aid in the implementation of tax laws and prevent tax evasion, aligning with the principles upheld by the apex court in the aforementioned cases. 2. Validity of Assessment Orders (Exhibits P15 and P16): The petitioner sought to quash the assessment orders (Exhibits P15 and P16) issued under the KVAT and CST Acts for the year 2005-06, arguing that the orders were based on an incorrect finding that the petitioner had traded in ornaments. The court noted that the correctness of the tax levy as reflected in the assessment orders involves factual determinations that are best adjudicated by a fact-finding authority. Therefore, the court advised the petitioner to pursue the statutory appellate remedies available under the law. The court provided the petitioner with an opportunity to file appeals against the assessment orders within four weeks. The appellate authority was directed to entertain the appeals and deal with them on merits, ignoring any delay due to the pendency of the writ petition. Conclusion: The writ petition was dismissed, with the court upholding the constitutionality of Section 15(2)(xi) of the KVAT Act and directing the petitioner to pursue statutory appellate remedies regarding the assessment orders.
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