2006 (9) TMI 497 - HC - VAT and Sales Tax

Summary

Issues:
Declaration of provisions of section 14 of the Punjab Value Added Tax Act, 2005 as ultra vires to section 15(c) of the Central Sales Tax Act, 1956.

Analysis:
The writ petition sought a declaration that the provisions of section 14 of the Punjab Value Added Tax Act, 2005 were ultra vires to the provisions of section 15(c) of the Central Sales Tax Act, 1956. The petitioner contended that credit of tax paid on paddy should be allowed as input tax credit (ITC) when calculating the tax payable on rice procured from it. The petitioner had purchased rice extracted from paddy on which purchase tax had already been paid. The Department initially clarified that ITC would be available on the sale of rice if the paddy had suffered tax, but later withdrew this clarification, disallowing the petitioner's claim for ITC on the sale of rice.

The petitioner argued that the provisions of section 15(c) of the Central Act should override the State law based on the provisions of article 286 of the Constitution of India and the language of section 15 of the Central Act itself. The court noted that the State of Punjab agreed to allow set-off of tax paid on paddy when rice is sold, provided certain conditions were met, in accordance with section 15(c) of the Central Sales Tax Act, 1956. The court held that section 15(c) of the Central Act must be given effect to from the date of enforcement of the PVAT Act on April 1, 2005. The petitioner was granted liberty to seek the benefit of this provision before the appropriate authority. Any orders inconsistent with the court's decision were deemed non est, and fresh orders were to be passed in line with the court's order.

In conclusion, the court disposed of the writ petition by upholding the petitioner's contention regarding the applicability of section 15(c) of the Central Act over the State law, allowing the petitioner to seek the benefit of set-off of tax paid on paddy when selling rice, subject to specified conditions.