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2015 (7) TMI 896 - RAJASTHAN HIGH COURT

2015 (7) TMI 896 - RAJASTHAN HIGH COURT - [2015] 82 VST 525 (Raj) - Partial exemption scheme - to increase inter-State sales and decrease the quantum of branch transfers - constitutional validity of Sections 26 and 82(3) of the Rajasthan Value Added Tax Act, 2003 - method of calculations - Held that:- under the notification dated 6.5.1986 incentive is given with a view to enhance inter State sales with a view to enhance State revenue in the form of sales tax and that object can be served with th .....

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e notification dated 6.5.1986 though uses the term “partial exemption” but in fact is a“partial disbursement of State revenue” earned due to the efforts made by the dealers for its enhancement.

In view of whatever stated above, these petitions for writ deserve acceptance, accordingly, the same are allowed. The initiation of impugned proceedings against the petitioner as per Section 26 of the VAT Act is declared illegal and the notices issued thereunder and orders made thereon are also .....

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s of the order dated 21.3.2014, passed by Commercial Taxes Officer, Anti Evasion Circle, Bhilwara, has also challenged constitutional validity of Sections 26 and 82(3) of the Value Added Tax Act, 2003 (hereinafter referred to as 'the VAT Act'). The factual matrix deserve notice is that the Government of Rajasthan, exercising authority under subsection (5) of Section 8 of the Central Sales Tax Act, 1956 (hereinafter referred to as 'the CST Act'), with a view to increase inter-Stat .....

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r, having his place of business and manufacturing goods in the State of Rajasthan, may claim partial exemption from the tax payable in respect of the sales by him of such goods in the course of inter-State trade or commerce by way of reduction at the rate of 50% of the tax so payable on increased sales upto 50% and at the rate of 75% of the tax so payable on increased sales made over and above the aforesaid 50%, in the manner and subject to the conditions as follows:- (1) Such reduction of tax s .....

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se of a dealer who commenced the manufacture of goods in the State of Rajasthan on or after 1.1.1985, the average of the aforesaid percentages in respect of the other manufacturers in the State in the relevant industry during theaccounting year 1984-85, calculated and determined by the assessing authority with the approval of the Commissioner, shall be deemed to be the percentage in respect of such dealer for the accounting year 1984-85; (3) This increase effected in the percentage, as referred .....

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laim, for partial exemption under this notfn. Dated 6.5.1986 (S.No.625) shall not be made and allowed in respect of the inter-State sales of levy cement, and of other cement made in accordance with S.No.928 dated 7.1.1994, and also of the following goods when the sales are made and CST paid thereon in accordance with the notfns mentioned against each :- (a) All edible oils (excluding hydrogenated oils, palm oil whether refined or not and refined coconut oil) S.No.649 dated 26.12.1986, S.No.793 d .....

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uding polyester filament, nylon filament and polypropylene filament yarn : S.N.781 dated 12.10.1989; (g) (1)Stainless steel blooms, rounds, wire rods, squares strip sheets, and (2) Hot rolled and cold rolled coils (mis-rolls), slabs, plates, and end cuttings thereof : S.No.867 dated 19.12.1991. Departmental Circular : See S.No.653A dated 17.1.1987. From reading of the notification, it is apparent that - (1) it grants partial exemption from CST payable in respect of inter State sales i.e. sale of .....

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sfers. To achieve the object emphasis is given to increase the inter-State sales and at the same time reduction of branch/stock transfers. To compute partial exemption allowed under the notification dated 6.5.1986, it is necessary to determine percentage of increase in the inter State sales and corresponding decrease in the percentage of stock/branch transfers. The reduction of tax payable by 50% is allowed by way of incentive, if, the increase in percentage of inter- State sales of the year for .....

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e same was claimed and was provisionally allowed by the Commercial Taxes Officer, Special Circle, Udaipur by an order dated 16.5.1988. For the period aforesaid the CST assessment was completed by the Commercial Taxes Officer, Special Circle, Udaipur by a rectified assessment order dated 17.12.1990. The petitioner was allowed to have remission of tax on sales amounting to ₹ 4,50,13,857.21. The partial exemption on increase in inter-State sales as per the notification dated 6.5.1986 was also .....

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essing Officer for the years 1999-00, 2001-01, 2001-02, 2002-03 and 2003-04. For the period 2007-08 the Assessing Authority i.e. the Commercial Taxes Officer, Circle, Rajsamand, by assessment order dated 9.3.2010 allowed partial exemption in terms of the notification dated 6.5.1986. It shall also be appropriate to mention that the Commercial Taxes Officer, Anti Evasion, Bhilwara conducted survey at the business premises of the assessee on 24.11.2004 and by the three notices, all dated 10.12.2004 .....

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gned. In relation to notices for subsequent assessment years on the same subject, the petitioner preferred another writ petition i.e. DBCivil Writ Petition No.4055/2010. For the assessment year 2007-08, relating to the same subject the respondents issued a notice for demand dated 21.3.2014 and that is underchallenge in DBCivil Writ Petition No.3340/2014. This petition for writ was admitted for hearing on May 29, 2014 with interim direction as under:- Having regard to the fact that these are impe .....

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also in CWP No.3340/2014, they shall serve a clear 7 days notice on the petitioner. Upon service of any such notice, it shall be permissible for the petitioner to take recourse to the appropriate remedies in accordance with law including making of a request for taking up of these matters for consideration during summer vacations. As already stated, constitutional validity of Sections 26 and 82(3) of the VAT Act is also questioned in these petitions, however, looking to the fact that writ petitio .....

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efore approaching writ Court is having no application where a party comes to the Court with an allegation that his right has been or being threatened to be infringed by law that itself is ultra vires. So far as Section 26 of the VAT Act is concerned, that relates to 'escaped assessment' and reads as follows:- 26. Escaped assessment :- (1) An assessment - (a) of a person who is liable to get registration but has not got himself registered ; or b) in which, for any reason, the levy of tax .....

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.- The assessment under this section shall not include that part of the business which has already been assessed or deemed to have been assessed under the provisions of this Act. (2) Where the Commissioner or the Deputy Commissioner (Administration) has reason to believe that a dealer has escaped assessment totax in any manner provided in sub-section (1), he may any time, subject to the limit specified in sub-section (3), either direct the assessing authority or the officer authorized by the Com .....

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r direction contained in any order passed by an appellate authority or the Tax Board or a competent court. (4) The assessment, if any already made shall be subject to the assessment made under this section. As per the petitioner Section 26 of the VAT Act confers uncontrolled, unguided and blanket powers to the assessing authority to re-issue assessment notice. It is asserted that no safeguards and checks are given to control the powers of assessing authority, who while invoking the powers under .....

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arbitrary exercise of powers by the assessing officer as he is not supposed to give reasons to reopen a concluded assessment. According to learned counsel for the petitioner Section 26 of the VAT Act is not in consonance with Articles 14, 19, 265 and 300-A of the Constitution of India, thus, deserves to be declared unconstitutional. In addition to the argument aforesaid learned counsel for the petitioner submits that as a matter of fact in the case in hand there is no escape of tax liability, th .....

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t is asserted that the petitioner neither escaped levy of tax nor any fee or sum payable under the VAT Act and there is also no case of unassessed tax under earlier assessment. The entire taxable turn over of inter State sales has already been assessed and taxed earlier. It is also urged that for the assessment year 2007-08, the assessing authority determined the inter State sales after due application of mind and taking into consideration the disclosure of facts made by the petitioner. The re-a .....

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r the notification dated 6.5.1986 allow reduction of tax to a dealer on basis of the achievements made by it in that year only. No dealer in any case can apprehend or presume exact quantum of sale in different categories at inception of the assessment year. This fact itself, as per learned counsel for the petitioner, is sufficient to indicate that benefit of partial exemption in terms of the notification is to be retained by the dealer being the partial exemption given under the notification dat .....

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nt to enhance its revenue by promoting inter State sales. In reply, while defending the action taken by the Commercial Taxes Officer, Anti Evasion, Commercial Taxes Department, Bhilwara, it is urged by learned Additional Advocate General that the notification dated 6.5.1986 doesnot incorporate any concession to a dealer. The benefit of partial exemption under the notification aforesaid is supposed to be extended to the customers. The petitioner retained the tax collected by consumer, thus, is li .....

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d in (1992) 2 SCC 411, and Kanthi Enterprises & Ors. v. State of Karnataka & Ors., reported in (2002)7 SCC 283, it is asserted that the registered dealer is not entitled to acquire any amount by way of tax at a rate or rates prescribed. If any person or a company or a dealer collects any amount of tax in violation of the provisions of the Act or the Rules or in excess to the rates prescribed, then such person, company or dealer is required to face criminal proceedings and to pay penalty .....

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neither arbitrary nor in excess to the competence available as that is to be exercised objectively and by providing an opportunity of hearing to the assessee, hence, the challenge to that is misconceived. Heard learned counsels. To adjudicate the issue involve, it shall be necessary to determine nature and objects of notification dated 6.5.1986 and further its applicability by keeping in mind the law laid down by Hon'ble the Supreme Court in Amrit Banaspati Co. Ltd. & Anr. v. State of Pu .....

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on and breach of faith of the people. Taxes like sales tax are paid by the people irrespective of their savings with participation in growth of national economy and development, hence its refund to a private person and manufacturer would be breach of trust of the people amounting to deception under law. Hon'ble the Apex Court also made a distinction in 'refund of tax' and 'exemption from tax'. The Court observed that 'exemption from tax' to encourage industrialisation .....

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l be contrary to public policy, contrary to the constitutional provisions and shall also be void under Section 23 of the Indian Contract Act. The constitutional requirement for levy ot tax is welfare of the society and not for a specific individual, hence any scheme for refund of sales tax shall be incapable of being enforced in court of law. The notification dated 6.5.1986 is a statutory notification being notified by the State of Rajasthan exercising powers conferred by Section 8(5) of the Cen .....

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subject to certain conditions referred in paras 1 to 4 of the notification. A threadbare reading of the notification makes it clear that to have benefit of partial exemption the dealer must have accurate determination of quantum of goods sold during whole accounting year and that can be settled by taking intoconsideration the quantum of goods sold within the State during accounting year; inter State sales i.e. goods sold in the course of inter State trade or commerce during the accounting year; .....

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e. 1984-85 and that is to be compared with simultaneous decrease in branch transfers. The benefit of partial exemption under the notification dated 6.5.1986 can be availed only if there is decrease in the percentage of branch transfers with simultaneous increase in inter State sales. A analytical consideration of the notification makes it clear that partial exemption is allowed to the dealers concerned to enhance State revenue by promotion of inter State sales with simultaneous decrease in branc .....

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on of inter State sales by proportionate decrease in branch transfers with the object to have higher State revenue. It is also apparent that the inter State sale of the goods and the branch transfers of goods is absolutely within the domain of dealers and looking to this aspect partial exemption was allowed to get the dealers shifted towards inter State sales from the branch transfers and for this purpose they are supposed to change their mode of transaction of goods. The dealers by shifting to .....

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n which is to be given cannot be known at the beginning of the assessment year being based on several factors, a dealer, therefore, cannot proceed for sale with less rate of tax with assumption to have partial exemption at the end of the year. If the actual quantum of concession is not known to the dealer then in no case that can be applied with reduced tax liability. The stand taken by the respondents that the dealer should charge tax with reduced rates virtually amount to insist for doing some .....

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