1973 (8) TMI 146 - HC - VAT and Sales Tax

Court Upholds Central Sales Tax on Inter-State Rice Sales

Govinda Raja Rice Mill Versus The Union of India

The court affirmed the imposition of Central Sales Tax on the inter-State sale of rice milled from paddy previously taxed under State law. The appellant's ... - Issues Involved:1. Liability of rice sales in inter-State trade to Central Sales Tax.2. Applicability of section 8(2A) of the Central Sales Tax Act.3. Interpretation of section 6(1A) of the Central Sales Tax Act.4. Calculation of tax rates under section 8 of the Central Sales Tax Act.5. Maintainability of the suit.Issue-wise Detailed Analysis:1. Liability of Rice Sales in Inter-State Trade to Central Sales Tax:The core issue in this appeal was whether rice, milled from paddy that had already been subjected to purchase tax under the Andhra Pradesh General Sales Tax Act, is liable to Central Sales Tax when sold in the course of inter-State trade. The court concluded that the sale of such rice is indeed liable to Central Sales Tax under section 6(1A) of the Central Sales Tax Act, which applies to all inter-State sales regardless of whether the State law imposes a tax on such sales.2. Applicability of Section 8(2A) of the Central Sales Tax Act:The appellant initially argued that no tax was payable under section 8(2A) of the Central Act, contending that the rice was exempt from tax under the State Act. However, this argument was abandoned as section 8(2A) was effective only from 1st October 1958, while the transactions in question occurred between 1st April 1957 and 31st March 1958. Thus, section 8(2A) was not applicable to this case.3. Interpretation of Section 6(1A) of the Central Sales Tax Act:The court emphasized that section 6(1A) was introduced to ensure that all inter-State sales are liable to Central Sales Tax, irrespective of the taxability of such sales under State law. The section was intended to override any State law provisions that might exempt such sales from tax. The court rejected the appellant's contention that section 6(1A) should not apply because the rice was not taxable under the State law, stating that the non obstante clause in section 6(1A) makes it clear that Central tax liability exists regardless of State law exemptions.4. Calculation of Tax Rates Under Section 8 of the Central Sales Tax Act:The appellant argued that under section 8(2) of the Central Act, the tax rate should be calculated as if the sale had taken place within the State, which would mean no tax on rice milled from already taxed paddy. However, the court clarified that section 8(2) must be read in its entirety, which includes a provision deeming the dealer liable to State tax for the purpose of calculating the Central tax. Therefore, the rate prescribed under the State law should be adopted for Central tax calculation, but the liability to pay the tax is determined by section 6(1A).5. Maintainability of the Suit:While the trial court had dismissed the suit on the grounds of maintainability, the High Court did not find it necessary to decide on this issue due to their conclusion on the merits of the plaintiff's claim. The court did not express any opinion on the maintainability of the suit.Conclusion:The appeal was dismissed, affirming the orders of the Assistant Commissioner of Commercial Taxes and the Commercial Tax Officer, which imposed Central Sales Tax on the inter-State sale of rice milled from paddy that had already been taxed under the State law. The court directed the parties to bear their own costs of the appeal.