2006 (7) TMI 622 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the show cause notice dated March 3, 2006.
2. Vires and validity of section 8(3)(iv)(a) of the Assam General Sales Tax Act, 1993.
3. Authority of the Assistant Commissioner of Taxes to issue the notice.
4. Compliance with constitutional provisions and the Central Sales Tax Act, 1956.

Detailed Analysis:

1. Legality of the Show Cause Notice Dated March 3, 2006:
The petitioner challenged the legality of the show cause notice issued by the Assistant Commissioner of Taxes, Tinsukia, which alleged an irregularity in allowing the deduction of turnover amounting to Rs. 57,96,189 used in works contracts for the assessment years 2002-03 and 2003-04. The court found that the notice was issued for rectification of mistakes apparent from the records and was within the jurisdiction of the authority. Therefore, the notice was deemed legal and not suffering from any infirmity.

2. Vires and Validity of Section 8(3)(iv)(a) of the Assam General Sales Tax Act, 1993:
The petitioner argued that section 8(3)(iv)(a) was beyond the legislative power and competence of the State, as it allowed deductions only for declared goods purchased locally in Assam on payment of tax. The court examined the historical context of the levy of tax on works contracts, referencing the 46th Amendment to the Constitution, which allowed states to impose sales tax on the transfer of property in goods involved in works contracts. The court concluded that section 8(3)(iv)(a) was in conformity with section 15 of the Central Sales Tax Act, 1956, which restricts the tax on declared goods to not exceed 4%. Therefore, the provision was neither ultra vires the Constitution nor the Central Sales Tax Act, 1956.

3. Authority of the Assistant Commissioner of Taxes to Issue the Notice:
The petitioner contended that the Assistant Commissioner of Taxes had no power to revise the assessment as the Assam General Sales Tax Act, 1993, and the Rules made thereunder did not provide for such an appointment. The court noted that by an amendment to the Assam General Sales Tax Rules, 1993, the Senior Superintendent of Taxes had been designated as the Assistant Commissioner of Taxes. Additionally, under the Assam VAT Act, 2003, both the Assistant Commissioner of Taxes and the Superintendent of Taxes, Tinsukia, were delegated the power of assessment. Thus, the notice was issued by a competent authority.

4. Compliance with Constitutional Provisions and the Central Sales Tax Act, 1956:
The court emphasized that the legislative power of the State under entry 54 of the State List is subject to the limitations imposed by the Constitution, specifically article 286 and entry 92A of List I. The court reiterated that the provisions of sections 3, 4, and 5 of the Central Sales Tax Act, 1956, apply to transactions deemed as sales under article 366(29A). The court found that section 8(3)(iv)(a) of the Assam General Sales Tax Act, 1993, complied with these constitutional provisions and the Central Sales Tax Act, 1956, as it allowed deductions for declared goods purchased locally on payment of tax, ensuring no double taxation.

Conclusion:
The writ petition was dismissed, with the court holding that section 8(3)(iv)(a) of the Assam General Sales Tax Act, 1993, was valid and within the legislative competence of the State. The show cause notice issued by the Assistant Commissioner of Taxes was also deemed legal and within jurisdiction. The petitioner was granted the liberty to present any grounds in their reply to the show cause notice. No order as to costs was made.