ENGINE VALVES LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THE above batch of writ petitions involve the interpretation of the scope of section 8 (2-A) and section 8 (2) (b) of the central Sales Tax Act, 1956, hereinafter referred to as "the Central act" and more particularly as to whether the additional sales tax and surcharge levied under the Tamil Nadu Additional Sales Tax Act, 1970 (Act 14 of 1970) and the Tamil Nadu Sales Tax (Surcharge) Act, 1971 (Act 24 of 1971) hereinafter referred to as "the Additional Sales Tax Act" and "the Surcharge act" respectively are attracted and become leviable in respect of turnover not covered by "c" and "d" forms and assessable to tax under the Central Act. THE majority of the petitioners have come up before this court challenging the show cause notice issued by the concerned assessing officers to bring to assessment, either afresh or by way of reassessment the turnover relating to inter-State sales not covered by the "c" or "d" forms at the rates inclusive of additional sales tax and surcharge in addition to the rates of such taxation that was and has to be levied in the light of the Central Act read with the Tamil Nadu General Sales tax Act, 1959, hereinafter referred to as the "local sales tax law". Some of the writ petitions have been filed challenging the final orders of assessment on the above basis, contending that the normal statutory remedies provided are neither effective nor appropriate.

(2.) THE petitioners are all assessees under the Central sales Tax Act, 1956 and dealers in different commodities in the course of inter-State trade and commerce. In the majority of cases filed, the petitioners were earlier assessed finally to tax under the Central Act. THEy had different categories of turnover and in these cases, their concern mainly is with reference to the turnover not covered by proper or valid "c" or "d" forms and is, therefore, subject to the general rate to be determined applying section 8 (2) (b) of the Central Act. THE grievance of the petitioners is that the Special Commissioner and Commissioner of Commercial Taxes, madras, has clarified as late as November, 1989, that there is no liability of surcharge and additional tax in respect of inter-State sales, but yet on account of a clarification said to have been issued by the Government of India that wherever there is provision for levy of additional sales tax and surcharge, they also have to be determined and included in arriving at the rate of tax to be calculated in terms of section 8 (2) (b) of the Central Act, the office of the Commissioner of Commercial Taxes, Madras, issued revised instructions to include both the additional tax and surcharge leviable on the sale or purchase of goods under the State Act for determining the rate of Central sales tax and proceeded with reassessment/revision of assessment even by reopening past assessments. In the light of the said revised instructions, the respective assessing authorities have either issued notices or passed final orders after due notice and opportunity by revising the rate of taxation in respect of turnover not covered by valid "c" and "d" forms by adding to the rate of tax, the additional tax as well as the surcharge leviable.

(3.) THE learned counsel appearing for the petitioners and the Revenue referred to some of the decided cases both of the Supreme Court of india and some of the High Courts, and it would be appropriate to refer to them before adverting to the actual consideration of the issues raised for our determination. THE decision [deputy Commissioner of Sales Tax v. Aysha Hosiery factory (P) Ltd. ] directly dealt with an identical issue of the nature before us, except that it was with respect to the Central Act and the Kerala General sales Tax Act, 1963. In that case also, the assessees questioned the inclusion of the additional sales tax levied in respect of their inter-State sales on the ground that the levy under the Kerala Additional Sales Tax Act is not and could not be considered as a levy "under the sales tax law of the appropriate state" within the meaning of section 8 (2-A) of the Central Act and for the purpose of levying tax in view of the said section 8 (2-A) only the rate of tax as per the Kerala General Sales Tax Act, shall be taken into account. While repelling the said challenge, the apex Court held as hereunder : "in all these appeals the inter-State sales in question which are sought to be taxed admittedly do not fall under sub-section (1) or clause (a) of sub-section (2) of section 8 of the Central Sales Tax Act. THE sales were of goods other than the declared goods, therefore, under clause (b) of sub-section (2) of section 8 the tax payable by the dealer on his turnover shall be calculated at the rate of 10 per cent or at the rate applicable to the sale or purchase of such goods inside the State whichever is higher. However, sub-section (2-A) of this section states that notwithstanding anything contained in clause (b) of sub-section (2) the tax payable under the central Sales Tax Act by the dealer where the intra-State sale of the same under the'sales tax law'of the State is'exempt from tax generally or subject to tax generally at a rate which is lower than four per cent shall be nil or, as the case may be, shall be calculated at the lower rate'. Thus if an intra-State sale by the dealer is exempt then his inter-State sale also will be exempt. If the intra-State sale is taxed at a rate which is lower than four per cent, then his inter-State sale of the same commodity shall also have to be taxed at the lower rate applicable in the State. But where the rate of tax applicable to intra-State sale was more than four per cent then the rate applicable for inter-State sale will be 10 per cent or the rate applicable for the local sale whichever is higher. THE question for consideration is as to whether the additional tax levied under the Kerala Additional Sales Tax Act is also to be considered as sales tax under the'sales tax law'of the State. THE question could not have arisen but for the fact that this additional levy came to be imposed under a separate Act. Had the additional sales tax been imposed by simply amending the rates in the original Act the question would not have arisen. But we are of the view that this makes no difference and it is merely a matter of style of legislation. THE additional sales tax levied under the additional Sales Tax Act is also sales tax of the same category as in the original Act. THE Kerala Additional Sales Tax Act provides that'the tax payable under the Kerala General Sales Tax Act, 1963 (15 of 1963) (hereinafter referred to as "the State Act") for every financial year commencing from the financial year 1978-79 shall be increased by 10 per cent of such tax'. Instead of increasing the rate of tax for each of the commodities which are covered by the Kerala General Sales Tax Act by one comprehensive provision, the tax is increased by 10 per cent over the rate provided under the original Act in respect of all the commodities the sale or purchase of which are taxable. Both take the form of sales tax and in the case of assessment of local sales it makes no difference whether it is called tax and additional tax or one higher percentage of tax. In truth and effect it is a levy of tax on the sales or purchases of the dealers. However, it was contended on behalf of the assessees that the words'under the sales tax law of the appropriate State' in section 8 (2-A) of the Central Sales Tax Act refers to only the General Sales Tax Act provisions and not the Additional Sales Tax Act provisions. Section 2 (i) of the central Sales Tax Act defines'sales tax law'as meaning'any law for the time being in force in any State or part thereof which provides for the levy of taxes on the sale or purchase of goods generally or on any specified goods expressly mentioned in that behalf, and'general sales tax law'means the law for the time being in force in any State or part thereof which provides for the levy of tax on the sale or purchase of goods generally'. THE definition does not say that the sales tax law or the general sales tax law which levies taxes on sale or purchase of goods shall be under a single a enactment. What is relevant is whether the tax partakes the character of sales tax or purchase tax. Any other construction would restrict the applicability of section 8 (2-A)of the Central Sales Tax Act to the sales tax law that was in force in 1956 when the Central Sales Tax Act came into force and any amendment to the local law would not have any effect on the applicability of that provision. We do not see any logic or reason for such a construction. What is relevant is if a particular intra-State sale transaction in a particular assessment year is subjected to a particular rate of tax that automatically gets reflected in and had to be taken into consideration for finding the rate and the applicability of section 8 (2-A) or section 8 (2) (b) of the Central Sales Tax Act. As already stated if instead of an Additional Sales Tax Act the Legislature has simply amended the Kerala General Sales Tax Act by varying the rate automatically that will come in for consideration and application of the provisions of section 8 (2) (b) and 8 (2-A) of the Central Sales Tax Act. For this purpose amendment of the State Act is not considered as an amendment of the Central Sales Tax Act. But since the rate applicable to the intra-State sales at a particular point of time is a relevant consideration for finding out the rate of tax on inter-State sale the amendment of the State Act automatically has the effect of changing the rate provided under section8 of the Central Sales Tax Act. That is not to say that the Central Act is amended by the State Legislature. THE rates of tax in certain cases under the Central Act are linked to the rates fixed under the local Acts and that is how the amendment of the local Acts affects the rates under the Central Act. It is still the Central Act that is applied but only for purposes of fixing the rate of tax leviable under the Central Sales Tax Act the provisions of the local Act are looked into. So construed we have no doubt that in all cases where the rate of tax under the local law is less than four per cent that will be the rate applicable to the inter-State sale of the same commodity if the provisions of section 8 (2-A) of the Central Sales Tax Act are applicable. THE dealer undoubtedly would be paying at the rate as enhanced by the Additional Sales Tax Act and therefore that will be the rate, that is including the additional tax, that is to be taken into consideration for finding out the applicability of section 8 (2-A) of the Central Sales Tax Act and the rate of tax in respect of his inter-State sales turnover. THEre could be, therefore, no doubt that the assessees-respondents in all these cases are liable to pay sales tax at the rate including the additional sales tax in respect of their inter-State sale under the Central sales tax assessment orders. "*