1979 (10) TMI 204 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of Section 4-B of the Punjab General Sales Tax Act, 1948, to declared goods.
2. Whether Section 5(3) of the Act excludes the applicability of Section 4-B or any other provision of the Act in the case of declared goods.
3. Whether Section 4-B is ultra vires Article 286 of the Constitution of India and contravenes Section 15 of the Central Sales Tax Act, 1956.

Issue-wise Detailed Analysis:

1. Applicability of Section 4-B to Declared Goods:

The court examined whether Section 4-B of the Punjab General Sales Tax Act, 1948, applies to declared goods such as cotton, oil-seeds, and pig-iron. The petitioners contended that Section 5(3) of the Act, which starts with a non obstante clause, should be the sole charging section for declared goods, thereby excluding Section 4-B. The court noted that Section 4-B was introduced to address situations where raw materials are consumed for manufacturing tax-free goods or sent out of the state without sale, thus ensuring that such transactions are taxed. The court concluded that Sections 4, 4-A, and 4-B of the Act continue to be the charging sections, with Section 5(3) fixing the stage of levy for declared goods. Therefore, Section 4-B is applicable to declared goods.

2. Exclusion of Section 4-B by Section 5(3):

The petitioners argued that under Section 5(3)(a), declared goods are exigible to sales tax only at the stage of sale by the last dealer liable to pay tax, and since they do not effect any sale, they should not be liable to pay tax. The court clarified that sales tax can be imposed on purchases of goods that are used contrary to the conditions in the registration certificate. The court cited precedents, including the Supreme Court's decision in Modi Spinning and Weaving Mills Co. Ltd. v. Commissioner of Sales Tax, Punjab, to support this view. The court held that Section 5(3) and Section 4-B can coexist harmoniously, with Section 4-B addressing specific scenarios where goods are used in a manner other than resale within the state or inter-state trade. Thus, Section 5(3) does not exclude the applicability of Section 4-B.

3. Ultra Vires and Contravention of Constitutional Provisions:

The petitioners contended that Section 4-B is ultra vires Article 286 of the Constitution and contravenes Section 15 of the Central Sales Tax Act, 1956. The court referred to the Supreme Court's judgment in State of Tamil Nadu v. M.K. Kandaswami, which upheld the validity of a similar provision in the Madras General Sales Tax Act, 1959. Additionally, the court noted that Section 4-B was enacted to align the Punjab General Sales Tax Act with the Supreme Court's observations in Punjab Khandsari Udyog v. State, ensuring compliance with Section 15 of the Central Sales Tax Act. The court concluded that Section 4-B is constitutionally valid and does not contravene any provisions of the Central Sales Tax Act.

Conclusion:

The court answered all three questions in favor of the revenue and against the petitioners. The General Sales Tax References Nos. 14 and 15 of 1977 were directed to be decided by the Tribunal in light of these answers. The Civil Writ Petitions were dismissed, with the petitioners given 15 days to comply with the orders passed by the authorities. The parties were left to bear their own costs.