Some important judgments

The issue in this case was about disallowance of claim of
interstate sale, as dispatch proof was not available. Before the Maharashtra
Sales Tax Tribunal the appellant produced copy of orders, delivery challans,
sales bills, etc. and ‘C’ forms received from purchasers. It was then contended
that it is not the requirement of law that the goods must be dispatched by
public transport. They can even be transported in own vehicle, etc. The
appellant in this respect relied upon judgments in the case of Nivea Times, (108
STC 6) and Pure Beverages Ltd., (142 STC 522). The Revenue Department submitted
that since no dispatch proof was produced, it is to be held as local sale.

The Tribunal held that the averment made by the Revenue
Department that there is no interstate movement is to be proved by the
Department. Except lack of dispatch proof, the Department has not proved
anything contrary to say that it is not an interstate sale. The Tribunal held
that the burden is on the Department to prove the same. The Tribunal also
considered the evidence produced by the appellant including ‘C’ forms. The
Tribunal also held that passing of property in any particular State is not
decisive. The Tribunal allowed claim of interstate sale.

The facts of the case, relating to year 1994-95 and others,
are that the appellant received an order for supply of certain manufactured
parts. The buyer gave certain parts as free issue to be incorporated in the
manufactured goods. In purchase order, there was no term about and particular
price to be considered for the said free issues. In his sale bill the appellant
added the cost of such free issues in his price to calculate excise duty. The
cost so added was then given deduction. On the above facts, the lower
authorities considered the cost of such supplies as part of sale price and
levied tax on the same. Before the Tribunal, appellant explained the facts. The
Tribunal observed that in this case the supplies are not made with any
particular consideration. There was no intention on the part of buyer or seller
to sale/purchase above goods nor agreed for any consideration. Therefore there
cannot be sale from the appellant to the buyer. The addition in price was with
sole purpose of calculating duty, as it was attracted even on free supply cost,
as per Excise laws. The Tribunal distinguished the judgment in the case of N. M.
Goyal (72 STC 368) on the above facts. The Tribunal made reference to judgment
in the cases of Gannon Dunkerley & Co. (9 STC 353), Indian Coffee & Tea
Distributors Co. (6 STC 47), Indian Alluminium Cables (115 STC 161), Hindustan
Aeronautics Ltd. (55 STC 314) and Auto Comp Corpn. (S.A. 1083 of 99, dated
26-9-2003). The Tribunal directed to delete the addition.

Vide S.A. 359 and 360 of 2000, dated 5-4-2006, the
Maharashtra Sales Tax Tribunal directed that the turnover in respect of forgings
is to be taxed @ 4% under Entry B-6. The First Appellate Authority did not pass
consequential order on the ground that the Commissioner of Sales Tax has
preferred reference application. Therefore, this miscellaneous application was
filed before the Tribunal by the appellant. The Tribunal held that action of the
said authority in not passing order for long time in direct judgment of the
Tribunal is unjustified and showed its displeasure. The Tribunal observed as
under :

The assessing officer is directed to give effect, of the judgment of the Tribunal in Second Appeal Nos. 359 and 360 of 2000 immediately without fail.”

It is felt that the above observations of the Tribunal will be seriously followed by the lower authorities in other cases also.

Profession Tax – Extent of liability

Kamataka Bank Ltd. v. State of A.P. and Others CR. Yegnaiah & Sons. v. Profession Tax Officer and Another (12 VST 459) (SC):

The issue in this case was about levy of Profession-Tax. The AP. Profession Tax Act sought to levy Profession Tax on each branch of the same person (entity). This was resisted on the ground that as per the Constitution, there is limit of Rs.2,500 per person for levy of Profession Tax by the States. It was argued that this limit is per person in the State and hence induding all branches, the Profession Tax on one person cannot exceed more than Rs.2,500. The argument was that levy of Profession Tax @ 2,500 on its each branch is far in excess of statewise limit of Rs.2500 per person. In short, the argument was that tax is leviable on it at maximum Rs.2,500. Therefore, the specific provision under AP. Profession Tax Act viz. definition of ‘person’ which sought to define each branch as person was challenged as un-constitutional. The short gist of the Supreme Court judgment is as under:

The Supreme Court observed that the definition of the word ‘person’ in the Explanation to S. 2(j) of the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987, and also Explanation No. 1 of the First Schedule to the Act is not intended to tax a person at a rate higher than Rs.2,SOOper annum, per person, but to treat even a branch of a firm, company, corporation or other corporate body, any society, club or association as a separate person, and therefore, a separate assessee within the meaning of S. 2(b) of the Act and the Andhra Pradesh State Legislature has undoubtedly the competency to adopt such a devise of taxation. The Andhra Pradesh State Legislature did not violate the mandate of Article 276(2) of the Constitution of India in so defining the word ‘person’. It is further observed that the definition of ‘person’ in General Clauses Act, would not restrict the power of the State Legislature to define a ‘person’ and adopt a meaning different from or in excess of the ordinary acceptance of the word as is defined in the General Clauses Act.

On the aspect of constitutional validity, the Supreme Court observed that there is always a presumption  in favour of constitutionality,  and a law will not be declared  unconstitutional  unless the case is so clear as to be free from doubt;  lito doubt the constitutionality  of a law, is to resolve it in favour of its validity. II   Where the validity of a statute  is questioned,  and there are two interpretations,  one of which  would  make  the law valid  and  the  other  void,  the  former  must  be preferred  and  the validity  of law  upheld,  observed the Supreme Court. It is further observed that in pronouncing on the constitutional validity of a statute, the Court is not concerned with the wisdom or un-wisdom, the justice or injustice of the law. If that which is passed into law is within the scope of the power conferred on a Legislature and violates no restrictions on that power, the law must be upheld whatever a Court may think of it, held the Supreme Court.

In respect of argument on unconstitutionality in the light of Article 14, the Supreme Court held that no legislation can be declared to be illegal, much less unconstitutional on the ground of being unreasonable or harsh on the anvil of Article 14 of the Constitution, except, of course, when it fails to clear the test of arbitrariness and discrimination which would render it violative of Article 14 of the Constitution.

In respect of tax levy provisions, the Supreme Court held that the State Legislature undoubtedly is competent to make a law relating to taxes for the benefit of the State or other local authorities therein in respect of professions, trades, callings or employments. It is traceable to Entry 60 of List of the Seventh Schedule, but that power of the Legislature to make such a law to levy and collect the profession tax is made subject to the restrictions as provided for under Article 276(2) of the Constitution. The purpose of Article 276 is not to amend the State’s power to tax profession founded on Entry 60 but is to provide that such tax is not invalid on the ground that it relates to a tax on income.

It is well settled that a tax on profession is not necessarily connected with income. A tax on income can be imposed if a person carries on a profession, trade, calling, etc. Such a tax on profession is irrespective of the question of income. There is no other restriction imposed upon a State Legislature in making law relating to tax on profession, trade, calling and employment. There can be no doubt whatsoever that a State Legislature cannot make any law to levy and collect profession tax at the rate of more than Rs.2,500 per person, per annum, in view of the restriction in Article 276(2) of the Constitution.

The Legislature is competent in its wisdom to define ‘person’ separately for the purposes of each of the enactments and different from the one in the General Clauses Act and create an artificial unit. The definition of ‘person’ in the General Clauses Act would not operate as any fetter or restriction upon the powers of the State Legislature to define ‘person’ and adopt a meaning different from that defined in the General Clauses Act.

The Supreme Court thus upheld the levy on different branches of same person at Rs.2,500 each.