1996 (5) TMI 389 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of the Constitution (Forty-sixth Amendment) Act, 1982, particularly clause (d) in article 366(29A).
2. Validity of sub-clause (vi) of clause (t) of section 2 and section 9-A of the M.P. Vanijyik Kar Adhiniyam, 1994.
3. Double taxation on leased goods.

Issue-wise Detailed Analysis:

1. Constitutionality of the Constitution (Forty-sixth Amendment) Act, 1982:
The petitioners challenged the Constitution (Forty-sixth Amendment) Act, 1982, specifically clause (d) in article 366(29A), arguing that deeming leasing without involving transfer of property in goods as sale is void, invalid, and ultra vires, conflicting with entry 54, List II of Schedule VII. The court referred to the Supreme Court's decision in the Builders Association of India v. Union of India [1989] 73 STC 370 (SC); AIR 1989 SC 1371, which extensively examined and upheld the validity of the amendment. The court reaffirmed that the extended definition of "sale" in clause (d) of article 366(29A) includes a tax on the transfer of the right to use any goods for any purpose, whether or not for a specified period, for cash, deferred payment, or other valuable consideration. Therefore, the challenge to the constitutionality of the amendment failed.

2. Validity of sub-clause (vi) of clause (t) of section 2 and section 9-A of the M.P. Vanijyik Kar Adhiniyam, 1994:
The petitioners argued that sub-clause (vi) of clause (t) of section 2 and section 9-A of the M.P. Vanijyik Kar Adhiniyam, 1994, were ultra vires the powers of the State Legislature, being beyond the scope of entry 54 of List II of the Seventh Schedule. The court noted that section 2(t) of the Act defines "sale" to include the transfer of the right to use any goods for any purpose for cash, deferred payment, or other valuable consideration. Section 9-A imposes a tax on such transfers. The court held that these provisions align with the extended definition of "sale" under article 366(29A) and are valid. The court also referenced the Supreme Court's reaffirmation of the Builders Association decision in Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204 (SC), which upheld the extended definition of "sale."

3. Double taxation on leased goods:
The petitioners contended that the goods had already suffered tax under the Central Sales Tax Act or the State Act and should not be taxed again under the leasing agreements. The court dismissed this argument, stating that the extended definition of "sale" under article 366(29A) and section 2(t) of the Act includes leasing agreements, making them exigible to tax. The court emphasized that the Supreme Court had already upheld the validity of such taxation in the Builders Association and Gannon Dunkerley cases. The court also noted that the State Government had issued a notification specifying goods subject to tax under section 9-A, including plant and machinery, motor vehicles, air-conditioning equipment, and other items, confirming the applicability of the tax.

Conclusion:
The court dismissed the writ petitions, holding that the Constitution (Forty-sixth Amendment) Act, 1982, and the relevant provisions of the M.P. Vanijyik Kar Adhiniyam, 1994, are valid. The court found no merit in the arguments challenging the constitutionality of the amendment or the validity of the state legislation. The court also rejected the claim of double taxation on leased goods, affirming that leasing agreements fall within the extended definition of "sale" and are subject to tax. The petitions were dismissed without any orders as to costs.