2000 (12) TMI 790 - SC - VAT and Sales Tax

Whether the levy of sales tax at the rate of 8 per cent was within the competence of the State or not? Held that - Appeal dismissed. It is not a case for interference with the orders passed by the High Court of Jammu and Kashmir and to issue any such direction to the respondents not to realise the balance amount of the sales tax for the reason that it had not been realised by the appellants nor due to the fact that exemption granted to the local manufacturers was quashed but with effect from a prospective date viz. April 1 1997. Conceding to the request made by the appellants in this case would also amount to granting relief in the teeth of order quoted above. The appellants had been throughout under a statutory liability to realise the sales tax at the rate of 8 per cent.

Summary

Issues:
1. Discrimination in sales tax exemption between local and outside manufacturers.
2. Validity of exemption notification under Jammu and Kashmir General Sales Tax Act, 1962.
3. Application of Article 142 of the Constitution in molding relief.
4. Liability of outside manufacturers to pay the balance amount of sales tax.

Analysis:
1. The appeal concerned the discrimination in sales tax exemption between local manufacturers in Jammu and Kashmir and manufacturers from outside the state. The appellants argued that they should not be required to deposit the remaining 4% of the sales tax, as local manufacturers were exempted from payment. However, the Court noted that the sales tax was levied by the State under its powers vested in the Jammu and Kashmir General Sales Tax Act, and the rate of tax had been raised to 8%. The Court emphasized that the appellants had been paying tax at 4% without objection until the rate was increased, and their voluntary decision not to collect the full tax from customers did not exempt them from their liability to pay the remaining amount.

2. The validity of the exemption notification under the Jammu and Kashmir General Sales Tax Act, 1962 was challenged by the outside manufacturers. The Court highlighted that the exemption granted to local manufacturers was found to be invalid, leading to the outside manufacturers being required to pay the increased rate of 8% sales tax. The Court clarified that the local manufacturers had no legal basis to collect sales tax from customers due to the exemption, whereas the outside manufacturers were obligated to pay the full tax rate as per the law.

3. The appellants invoked Article 142 of the Constitution in seeking relief from paying the balance amount of sales tax. They argued that the relief granted to local manufacturers should also apply to them. However, the Court reasoned that the relief granted to local manufacturers was specific to the circumstances of their exemption and did not extend to the outside manufacturers. The Court held that the appellants had a statutory liability to pay the full 8% sales tax rate and could not claim exemption based on the relief granted to local manufacturers.

4. The Court rejected the appellants' argument that they should not be required to deposit the remaining 4% of the sales tax, emphasizing that the liability to pay the full tax rate had never been in question. The Court noted that the relief granted to local manufacturers did not apply to the outside manufacturers, and the appellants were bound by their statutory obligation to pay the complete sales tax amount. Consequently, the appeal was dismissed, and the Court upheld the requirement for the outside manufacturers to pay the balance amount of sales tax without exemption.