2016 (1) TMI 6 - HC - VAT and Sales Tax

Constitutional validity of some of the provisions of the Maharashtra Purchase Tax on Sugarcane Act, 1962 - Interpretation - determination of purchase price - valuation - inclusion of expenses - the amendments were carried out from 1st October, 1995 to change the structure of taxation - Held that - On a reading of the provisions together and harmoniously, we are not in agreement with Mr. Joshi that the tax is on expenses or expenditure and not on purchase of sugarcane. The above provisions have been minutely referred by us together with those enabling recovery of tax. There is a inherent fallacy in the submission of the Petitioners that components which are not germane or relevant to the purchase of sugarcane and the price paid therefor are taken into consideration by the legislature. It is apparent that the term purchase price is defined in such a way as to include amounts mentioned in sub-clauses (i) to (iii) of section 2(f-b) of the Act of 1962. Once it is apparent that the components or elements stated therein go into fixation of purchase price and that is the measure for computation of the tax, then, depending upon facts and circumstances in each case, the occupier can point out that not all components or elements are included in the purchase price in his case. That it is only the actual costs which have been taken into account or that they have not included all the heads simply because not all of them form part of the purchase price. Then, it would be open for the Assessing Officer/Commissioner to consider such pleas and material in support thereof. He would, then, compute the tax liability after duly considering them. However, it is the turnover of purchases meaning the aggregate of the amounts of purchase price paid and payable by an occupier, on which tax is levied and collected. The turnover is computed on the basis of the purchase transactions and the price paid for the same. Thus, it would be open for the Petitioners to point out that the turnover of purchases in their case involves payment of purchase price without the elements that are set out in the definition of the term purchase price referred above. The computation of the purchase price is indicated so that the tax to be levied and collected is correctly computed. If sum total of the purchases would constitute the turnover and the measure of that would be the amount of purchase price paid and payable by an occupier during the given period, then, it is only to enable the assessment and collection of tax in accordance with law that these provisions have been inserted. Thus, we are in complete agreement with Mr. Sonpal on the legality and validity of the tax. It is not unconstitutional and ultra vires as alleged. Decided against the appellants/ assessee.

Summary

Issues Involved:

1. Constitutional validity of certain provisions of the Maharashtra Purchase Tax on Sugarcane Act, 1962.
2. Legality of the amendments made by the Maharashtra Tax Laws (Levy and Amendment) Act, 1995.
3. Interpretation of the term "purchase price" and its components.
4. Legality of demand notices issued by the tax authorities.

Detailed Analysis:

1. Constitutional Validity of Provisions:
The Petitioners challenged the constitutional validity of sections 2, 3, and 6 of the Maharashtra Purchase Tax on Sugarcane Act, 1962, as amended. They argued that the amendments adversely affected sugar units by changing the tax levy from a quantity-based system to one based on the purchase price, which includes additional expenses like transportation and harvesting costs. The court examined the provisions and concluded that the tax is levied on the turnover of purchases of sugarcane used in manufacturing or production of sugar, and the inclusion of additional expenses in the purchase price is within the legislative competence of the State under Entry 54 of List II of the Seventh Schedule to the Constitution of India.

2. Legality of Amendments by the Maharashtra Tax Laws (Levy and Amendment) Act, 1995:
The Petitioners contended that the amendments made by the Maharashtra Tax Laws (Levy and Amendment) Act, 1995, which introduced definitions of "purchase price" and "turnover of purchases," were unconstitutional. The court noted that the legislature has the power to amend tax laws to address economic realities and ensure social justice. The amendments aimed to remove disparities in tax burdens among different sugar factories and were found to be a valid exercise of legislative power.

3. Interpretation of "Purchase Price":
The term "purchase price" was defined to include the amount of valuable consideration paid for the purchase of sugarcane, transportation expenses, and any other sum spent for anything done in respect of the sugarcane at the time of or before delivery. The Petitioners argued that this interpretation was erroneous and that expenses incurred by the factory should not form part of the purchase price. The court held that the definition of "purchase price" is clear and includes all relevant expenses incurred before the delivery of sugarcane. The tax is levied on the aggregate amount of purchase price, which is a valid measure for computing the tax.

4. Legality of Demand Notices:
The Petitioners challenged the legality of demand notices issued by the tax authorities, arguing that no demand should be made before the assessment is finalized. The court agreed that no coercive recovery measures should be taken unless the tax amount is crystallized and ascertained through proper assessment. The court emphasized that the Petitioners have the right to contest the computation of tax and produce relevant material during the assessment process.

Conclusion:
The court upheld the constitutional validity of the challenged provisions and amendments, stating that the tax on the turnover of purchases of sugarcane is within the legislative competence of the State. The court dismissed the Petitions, affirming that the inclusion of additional expenses in the purchase price is a valid measure for computing the tax. The court also clarified that demand notices should not be issued before the assessment is finalized, and the Petitioners have the right to contest the computation of tax during the assessment process.