2024 (3) TMI 1033 - SC - VAT and Sales Tax

Rate of the State sales tax on silk fabrics - taxable at 4% or 12%? - demand made for the period between 15th January 2000 and 31st March 2000 - HELD THAT - During the said period, silk fabric was a part of Schedule I of the DST Act, on which sales tax was leviable at the rate of 12%. Sections 14 and 15 of the Central Sales Tax Act were deleted by Act No. 18 of 2017. Section 14, before its deletion, declared certain goods specified therein as of special importance in inter-state trade or commerce. Until 11th May 1968, item (xi) was incorporated in Section 14, which covered the item of silk sarees . However, with effect from 11th May 1968, the said item was deleted by Act No. 19 of 1968. Section 15(1) of the CST Act, as existed during the period for which the impugned assessment was made, provided that the local sales tax rate on declared goods should not exceed 4% of the sale or purchase price of such goods. So long as the silk fabric was a part of the list of declared goods under Section 14 of the CST Act, the sales tax levy under the DST Act could not have exceeded 4% in view of Section 15(1) of the CST Act. However, silk fabric was deleted from the list contained in Section 14 of the CST Act, effective 11 May 1968. Therefore, during the relevant period for which the impugned assessment order was issued, as silk fabric was not a part of the list under Section 14, there was no embargo on levying sales tax on silk fabric at a rate exceeding 4%. Therefore, the argument based on Section 15(1) of the CST Act will not help the appellant. The second Schedule of the ADE Act provides that during each financial year, each State shall be paid a certain percentage of net proceeds of the additional duties levied and collected during the financial year in respect of the goods described in column (3) of Schedule I. However, no additional duty was made payable on silk fabric under the ADE Act. The proviso makes it clear that notwithstanding the ADE Act, there is no bar on the States levying sales tax - the argument that as silk fabric formed a part of Schedule I of the ADE Act, it disentitled the State Government from levying sales tax is fallacious and cannot be accepted. The High Court has noted that its Co-ordinate Bench in the case of MR. TOBACCO PVT. LTD. VERSUS UNION OF INDIA AND OTHERS 2006 (1) TMI 567 - DELHI HIGH COURT upheld the validity of notification dated 31st March 2000 issued under the DST Act. There are no error in the view taken by the Delhi High Court in the impugned judgment - Accordingly, the appeal is dismissed.

Summary

Issues Involved:
The judgment deals with the challenge to an assessment order issued under the Delhi Sales Tax Act, 1975 regarding the levy of State sales tax on silk fabric at different rates, and the interpretation of relevant provisions of the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

Factual Aspects:
The appellant contested a judgment by the Delhi High Court regarding the imposition of State sales tax on silk fabric at varying rates between 1999 and 2001, leading to an assessment order demanding Rs.4,22,095.

Submissions:
The appellant argued that under the Additional Duties of Excise Act, the Delhi Government lacked the authority to levy State sales tax on silk sarees, citing constitutional provisions and relevant court decisions to support the contention. The respondent countered that the deletion of silk fabric from a specific list allowed for sales tax rates exceeding 4%.

Our View:
The Court examined the relevant provisions of the Central Sales Tax Act and the Additional Duties of Excise Act to determine the validity of the sales tax levy on silk fabric. The Court noted that while the appellant relied on the ADE Act to challenge the tax imposition, the Act did not prohibit States from levying sales tax. The judgment highlighted the interconnected nature of the CST Act, ADE Act, and State Sales Tax Act, emphasizing that the absence of additional duty payable on silk fabric did not bar the State from imposing sales tax.

The Court upheld the Delhi High Court's decision, affirming the validity of the notification issued under the DST Act. The judgment clarified that the case law cited by the appellant did not directly address the issues raised in the present case, leading to the dismissal of the appeal without costs.