TMI Blog2014 (9) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... atute and cannot be implied. Tax collected under the Central Sales Tax Act is ultimately assigned to the State in view of article 269 as explained in N.K. Nataraja Mudaliar's case [1968 (4) TMI 61 - SUPREME COURT OF INDIA] and the Central sales tax though levied for and collected in the name of the Central Government is a part of the sales tax levied and imposed for the benefit of the State. But from this it does not follow nor does it follow from section 9 of the Central Sales Tax Act that every provision of the VAT Act including provisions relating to "advance ruling" would apply to proceedings for assessment, reassessment, collection and enforcement of payment of tax in relation to inter-State sale transactions under the Central Sales Tax Act. First respondent is entitled to initiate and complete the assessment under the Central Sales Tax Act in respect of the petitioner when its application for "advance ruling" was pending before the authority for advance ruling and pendency of its appeal against the said ruling before the S.T.A.T would also not impede or operate to disentitle the first respondent in any way in initiating or completing the assessment under the Central Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, the ARA by a majority of2:1 held that all the products fall under entry 19 of the Fourth Schedule (six of the 17 products having microbes under the sub-category bio fertilizers and the remaining 11 products under the sub-category nutrient elements such as iron, zinc, copper) and that they are liable to tax at the rate applicable to the Fourth Schedule to the VAT Act. The petitioner was asked to collect the orders of the second respondent on May 1, 2012. The petitioner sent its representatives with authorization dated May 2, 2012. On May 3, 2012, the second respondent served the copies of the majority ruling of ARA dated November 16, 2011 and that of the dissenting member of the ARA dated November 17, 2011. Aggrieved thereby, the petitioner filed T.A. No. 235 of 2012 to the Sales Tax Appellate Tribunal, Hyderabad (for short, STAT ) under section 67(4) of the VAT Act, on June 1, 2012. The appeal is pending before the STAT. The first respondent had made assessments for the years 2005-06 and 2006-07 under the VAT Act and the Central Sales Tax Act. The petitioner filed appeals before the Appellate Deputy Commissioner (CT), Hyderabad Rural Division. By order dated Januar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09 is challenged by the petitioner in M.P. No. 35359 of 2012. The principal contention of the petitioner is that the respective assessment orders impugned in these writ petitions are void as the first respondent has no jurisdiction to pass them in view of section 67 of the VAT Act being applicable to assessments and collection of tax under the Central Sales Tax Act in view of section 9 thereof. It contends that it had made an application for advance ruling on February 6, 2009; that the second respondent gave its ruling by order dated November 16, 2011; that the said ruling was served on the petitioner on May 3, 2012 (after lapse of six months); that the petitioner filed T. A. No. 235 of 2012, against it before the STAT which is pending and under sub-sections (3) and (4) of section 67 of the VAT Act, the assessing authorities are barred from deciding any issue with regard to which an advance ruling is sought and is pending adjudication by the STAT; therefore the first respondent could not have made any assessment during the pendency of the application for advance ruling before the second respondent and consequently the impugned orders passed are without jurisdiction and such o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 997] 106 STC 460 (SC); AIR 1997 SC 3054, New Central Jute Mills Co. Ltd. v. Assistant Collector of Central Excise, Allahabad AIR 1970 SC 454, Bhatinda Improvement Trust v. Balwant Singh AIR 1992 SC 2214, Commissioner of Income-tax v. Messrs Mahaliram Ramjidas [1940] 8 ITR 442 (PC); AIR 1940 PC 124. The Special Government Pleader for Commercial Taxes, however contended that there is no provision under the Central Sales Tax Act for advance rulings, as in the VAT Act; that merely because section 9(2) of the Central Sales Tax Act states that provisions of the general sales tax law of the appropriate State shall apply in respect of the assessment and collection of Central sales tax, it would not mean that section 67 of the VAT Act dealing with clarification and advance are automatically applicable in respect of assessments under the Central Sales Tax Act; that provisions relating to advance rulings are substantive in nature and have to be specifically provided for in the Central Sales Tax Act; that they cannot be applied by implication/interpretation; therefore there was no bar for the assessing officers to make assessments under the Central Sales Tax Act merely because an appeal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods,- (a) to the Government, or (b) to a registered dealer other than the Government, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act: Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,- (a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and (b) if the subsequent sale is made- (i) to a registered dealer, a declaration referred to in clause (a) of sub-section (4) of section 8, or (ii) to the Government, not being a registered dealer, a certificate referred to in clause (b) of sub-section (4) of section 8: Provided further that it shall not be necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of clause (a) of sub-section (4) of section 8 in connection with the purchase of such goods; and (b) where such subsequent sale has been effected by an unregistered dealer, in the State from which such subsequent sale has been effected. (2) Subject to the other provisions of this Act and the Rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State, shall, on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax, including any interest or penalty, payable by a dealer under this Act as if the tax or interest or penalty payable by such a dealer under this Act is a tax or interest or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State, and the provisions of such law including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceeds attributable to Union Territories shall form part of the Consolidated Fund of India. In Nataraja Mudaliar's case [1968] 22 STC 376 (SC); AIR 1969 SC 147, the circumstances leading to the enactment of the Central Sales Tax Act, 1956 have been set out. The Supreme Court noticed that prior to the framing of the Constitution, entry 48 of List II of the Seventh Schedule to the Government of India Act, 1935 empowered the provinces to legislate on the subject of tax on the sale of goods and on advertisement ; that in exercise of the said power, provincial Legislatures enacted sales tax laws for their respective provinces acting on the principle of territorial nexus , and picked out one or more ingredients constituting a sale and made it or them the basis of imposing liability for tax; that such exercise of taxing power by the provinces led to multiple taxation of the same transaction by many provinces and the burden of tax fell ultimately on the consuming public; that the taxation enquiry commission examined the matter of tax on interState sales and its recommendation led to enactment of the Constitution (Sixth Amendment) Act, 1956; by that amendment entry 92A was add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e laws imposing taxes on the sale or purchase of such goods of special importance shall be subject; that the Central Sales Tax Act and the constitutional provisions were intended to restrict the imposition of multiple taxation on a single inter-State transaction by different States, each State relying upon some territorial nexus between the State and the sale; that the tax though collected by the State under the Central Sales Tax Act was as an agent of the Central Government, it was, by sub-section (4) of section 9 enacted in the implementation of the principle of assignment of tax set out in clause (2) of article 269, assigned to the State which collected it; and that the Central Sales Tax Act is enacted under the authority of the Union Parliament, but the tax is collected through the agency of the State and is levied ultimately for the benefit of the State and is statutorily assigned to the States. In Mysore Electrical Industries Ltd.'s case [1971] 27 STC 559 (Mys), the High Court of Karnataka held that section 9(2) of the Central Sales Tax Act had adopted the procedure prescribed by the general sales tax law of the appropriate State in the matter of assessment, reassessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a power under the Madras General Sales Tax Act, 1959. In R.C. Hiremath's case [1981] 47 STC 38 (Karn), the High Court of Karnataka held that the provisions for making assessment is a substantive provision and not merely procedural. In the said case a firm which included the petitioner as a partner had become liable to pay tax but it was dissolved on July 1, 1963; that on the said day, there was no provision in the State Act or the Central Act prescribing a procedure for making an assessment against a dissolved firm; that subsequently by Act 9 of 1964, sub-section (2) was introduced in the Karnataka Sales Tax Act, 1957, by amendment Act No. 9 of 1964 providing for making of assessment against a dissolved firm and section 34 of the said Act validated all the proceedings including assessments made against the dissolved firms; by Act 9 of 1970, the amended section 15(2) was given retrospective effect and section 24 of the amending Act provided that all assessment orders made against dissolved firms earlier shall also be valid as having been made under the principal State Act as amended by Act 9 of 1970; by the Central Sales Tax (Amendment) Act No. 28 of 1969, section 9(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er its imposition; in any case, it is an imposition of a pecuniary liability which is comparable to a punishment for the commission of an offence; that it is a well-settled canon of construction of statute that neither could a pecuniary liability be imposed nor an offence created by mere implication; that the imposition of a pecuniary liability, which takes the form of a penalty or fine for the breach of a legal obligation cannot be relegated to the region of mere procedure and machinery for the realization of tax. In India Carbon Ltd.'scase [1997] 106 STC 460 (SC); AIR 1997 SC 3054, the Supreme Court held that when there is no substantive provision in the Central Sales Tax Act, 1956 which obliges an assessee to pay interest on delayed payments of sales tax, by invoking section 9(2) of the Central Act the assessee cannot be made liable to pay interest for delayed payments of sales tax by relying upon the provisions of the Assam Sales Tax Act, 1947; that the provision relating to interest in the latter part of section 9(2) of the Central Act can be employed by the State's sales tax authorities only if the Central Act makes a substantive provision for the levy and charge o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellate authority or the STAT. Likewise the ARA is prohibited from giving a clarification when the quasi-judicial/judicial authorities under the Act have already initiated appropriate proceedings for, in such an event, the clarification given by the ARA would no longer be an advance ruling, and would fetter exercise of quasi-judicial functions under the Act. The statutory bar under section 67(3) would require the officers/authorities to defer assessment/appellate/revisional proceedings under the Act, and await the rulings of the ARA. The binding effect of the ruling on all officers of the Commercial Taxes Department (other than the Commissioner), would ensure uniformity in the quasi-judicial orders passed by such officers as all of them are statutorily bound to follow the ruling of the ARA. A similar bar is found in the proviso to section 32(2) of the Act and, thereunder, the power of revision, under section 32(1) and (2), cannot be exercised by the revisional authority in respect of any issue or question which is the subject-matter of appeal before the Tribunal. The bar under sub-section (3) of section 67, would not apply either to the proceedings pending before the STAT under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism can only be introduced by way of a substantive provision in a statute and cannot be implied. Our view is also supported by the language of section 9 of the Central Sales Tax Act. Sub-section (2) thereof only makes applicable provisions of the State sales tax law relating to assessment, reassessment, collection and enforcement of tax, including any interest or penalty. A provision relating to advance ruling would not fall into any of the above categories. An advance ruling may be an aid to an assessment, reassessment, collection or enforcement of payment of tax but it is not in itself a mechanism for assessment, reassessment, collection and enforcement of tax which are normally done under the provisions of the Central Sales Tax Act by the competent authorities under the VAT Act. The above activities, it cannot be denied, can be done by such authorities without benefit of an advance ruling also (subject to appeal, revision, etc., in the hierarchy of authorities provided under the VAT Act). It may be that the tax collected under the Central Sales Tax Act is ultimately assigned to the State in view of article 269 as explained in N.K. Nataraja Mudaliar's case [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x law of the State as provided in section 9(3) of the Central Sales Tax Act (as it then stood) included within itself, all concessions given under the Orissa Act for payment within the prescribed time. The said judgment would also not apply as the provision of rebate was held to be part of the process of collection of tax covered by section 9 and is different from a provision such as one for advance ruling . In our opinion a provision relating to advance ruling would fall in the same category as one relating to penalty or interest , both of which were held to be substantive provisions in Khemka Co. (Agencies) Pvt. Ltd. [1975] 35 STC 571 (SC); [1975] 2 SCC 22 and India Carbon Ltd. [1997] 106 STC 460 (SC); AIR 1997 SC 3054. In this view of the matter we are of the opinion that the first respondent is entitled to initiate and complete the assessment under the Central Sales Tax Act in respect of the petitioner when its application for advance ruling was pending before the authority for advance ruling and pendency of its appeal against the said ruling before the S.T.A.T would also not impede or operate to disentitle the first respondent in any way in initiating or comp ..... 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