2020 (9) TMI 118 - HC - VAT and Sales Tax

Power to increase the rate of tax (VAT) on Petrol and Diesel by way of Notification - grievance of the petitioner is that the amendment made under G.O.Ms.No.24 dated 27.05.2020 constitutes an excess of power insofar as the provision invoked, Section 31, only provides for the reduction of the tax rate by notification and not an increase , which is what has been done in the present case. HELD THAT - The rates of tax on petrol and diesel have been altered across the board and ostensibly, in public interest . The notification does not refer to or address a specific class of assesses/transactions and no conditions are imposed upon satisfaction of which the amended rate would apply. A general and omnibus alteration to the rate of tax of this nature would have to be effected only by way of amendment to the Schedule itself under Section 75 and not by issuance of a Notification under Section 31 of the PVAT Act - Though the 2017 amendment to the rate of petrol and diesel from 21.5% and 17.15% to 22.15% and 18.15% respectively was also only by way of Notification under Section 31 and was in force till the present impugned amendment, this does not per se invalidate a subsequent illegitimate and unauthorised levy. Except for some differences in detail, the amendment of schedules in the VAT enactments extracted above, uniformly require that the notification for amendment once made, be placed before the House within the timeframes stipulated therein for deliberation and ratification. It was thus incumbent upon the respondents to have followed the proper procedure for amendment of schedules set out under Section 75 of the PVAT Act and the invocation of Section 31 in the above circumstances is contrary to law. Impugned Notification quashed - Petition allowed.

Issues Involved:

1. Validity of the invocation of Section 31 of the Puducherry Value Added Tax Act, 2007 (PVAT Act) for increasing tax rates.
2. Proper interpretation and application of Sections 31 and 75 of the PVAT Act.
3. Examination of the precedent and statutory provisions from other states and union territories.

Detailed Analysis:

1. Validity of the Invocation of Section 31 of the PVAT Act for Increasing Tax Rates:

The petitioner challenges the Government Order (G.O.) dated 27.05.2020, which increased the tax rates on petrol and diesel to 28% and 21.8%, respectively. The petitioner contends that Section 31 of the PVAT Act only allows for the reduction of tax rates by notification, not for an increase. The petitioner argues that any increase in tax rates should be done through an amendment to the schedule under Section 75, which involves a more cumbersome legislative process.

2. Proper Interpretation and Application of Sections 31 and 75 of the PVAT Act:

The court examines the purpose and scope of Sections 31 and 75 of the PVAT Act. Section 31, similar to provisions in the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) and the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act), allows the government to reduce the tax rate by notification for specific classes of goods or transactions. Section 75, on the other hand, provides the government with the power to alter, add to, or cancel any of the schedules to the Act, which would apply universally to all assessees and transactions involving the specified commodity.

The court notes that Section 31 is intended to offer the benefit of exemption or reduction in the tax rate to a specified class of transactions or assessees upon satisfying certain conditions. In contrast, Section 75 allows for a wholesale change in the tax rate by amending the schedule, which impacts all assessees and transactions involving the specified commodity.

3. Examination of the Precedent and Statutory Provisions from Other States and Union Territories:

The court references a Division Bench decision in State of Tamil Nadu v. Kannapiran Steel Re-rolling Mills, which reiterates that exemptions or reductions in tax rates under sections similar to Section 31 are meant for specific classes of assessees or transactions. The court also examines similar statutory provisions from other states and union territories, such as New Delhi, Gujarat, Assam, Rajasthan, Maharashtra, and Punjab, which require amendments to schedules to be presented before the legislative assembly for ratification.

The court concludes that the impugned notification, which altered the tax rates on petrol and diesel across the board without addressing a specific class of assessees or transactions and without imposing any conditions, should have been issued under Section 75 and not Section 31. The procedure under Section 75 involves legislative scrutiny and ratification, which was not followed in this case.

Conclusion:

The court allows the writ petition and quashes the impugned notification, stating that the invocation of Section 31 in this context is contrary to law. The proper procedure for amending the tax rates should have been followed under Section 75 of the PVAT Act. The connected miscellaneous petition is closed, and no costs are awarded.

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