2021 (4) TMI 1217 - HC - VAT and Sales Tax

Classification of goods - rate of tax - plywood when it is sold locally to Railways within the State and if sold to Railways under CST on interstate sales - eligibility for concessional rate of sales tax - HELD THAT - The facts regarding supply of plywoods to the Indian Railways are not disputed by the respondents. The petitioner produced evidence and established that they are the supplier of plywoods to the Indian Railways. Therefore, they are entitled for the concessional rate of Sales Tax as contemplated under Entry 112 of Part-B of the First Schedule, which reads as Railway wagons, engines, coaches and parts thereof . The Explanation to Section 8 of the Act, contemplates that for the purpose of this sub-section, a dealer shall be deemed to be a dealer liable to pay tax under the Sales Tax Law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law - the provisions of the Act is clear that the rate of tax on sales in the course of interstate trade or commerce is enumerated under Section 8(1) of the Act. Under sub section (2) of Section 8 of the Act, once the concession for rate of tax is extended to the dealer, who supplied the materials to the Indian Railways, then the said benefit extended under Entry 112 of Part-B of the First Schedule is to be extended to another State supply also. In other words, there cannot be two sales tax, one for the supply inside the State and the other for another State supply. Once the concession is extended as far as the supply within the State is concerned, then the same benefit is to be extended in respect of interstate supply. Admittedly, supply of plywoods in WP 10623 of 2008 is supplied to the Indian Railways, more specifically, for construction of Railway coaches. This Court is of an opinion that the concessional tax granted to the petitioner with reference to supply of plywoods, within the State is to be extended in respect of supply of plywoods to interstate to the Indian Railway - Petition allowed.

Summary

Issues:
Challenge to clarification letter on tax rates for plywood supplied to Railways within and outside the State.
Interpretation of Section 8(2) of the Central Sales Tax Act, 1956.
Applicability of concessional tax rate under Entry 112 of Part-B of the First Schedule.
Validity of subsequent clarification on tax rates for gaskets supplied to Railways.
Consistency in tax treatment for interstate and intrastate supplies to Railways.

Analysis:
The judgment concerns the challenge to a clarification letter issued by the Commissioner of Commercial Taxes regarding the tax rates applicable to plywood supplied to Railways within and outside the State. The petitioner contended that the imposition of different tax rates for intrastate and interstate sales violates Section 8(2) of the Central Sales Tax Act, 1956. The petitioner, a supplier of plywoods to Railways, argued that they are entitled to the concessional tax rate under Entry 112 of Part-B of the First Schedule for supplying materials to Indian Railways for construction purposes.

The court noted that the clarification letter issued was in direct violation of Section 8(2) of the Act, which specifies that the tax rate for interstate sales should be the same as that for intrastate sales. The judgment referenced previous cases from the High Court of Karnataka to support the interpretation of tax rates for goods supplied to Railways. It was emphasized that if goods are supplied for the construction of coaches for Indian Railways, the tax levied within the State should apply to interstate supplies as well.

The court further highlighted a subsequent clarification on tax rates for gaskets supplied to Railways, which affirmed the consistent application of tax rates for interstate and intrastate supplies to Railways. As a result, the court quashed the initial clarification letter dated 04.07.2007 and directed the reassessment of taxes to be paid by the petitioner, ensuring uniformity in tax treatment for supplies to Indian Railways within and outside the State.

In conclusion, the judgment allowed the writ petitions challenging the clarification letter and subsequent assessment orders, emphasizing the need for consistent tax treatment for supplies to Indian Railways. The court directed the reassessment of taxes with the opportunity for the petitioners to present their case, ensuring compliance with the provisions of the Central Sales Tax Act and the applicable schedules.