1996 (12) TMI 349 - HC - VAT and Sales Tax

Supreme Court invalidates purchase tax under Haryana Act, affirms Assessing Authority's jurisdiction

The Supreme Court declared the taxes sought to be levied under Section 9(1)(b) of the Haryana Act as beyond the legislative competence of the State, ... - Issues Involved:1. Legality of the impugned orders/demand notices for purchase tax.2. Constitutional validity of the Amendment Ordinance No. 2 of 1984 and Amendment Act No. 11 of 1984.3. Validity of Section 9(1) of the Haryana General Sales Tax Act.4. Levy of purchase tax under Section 9 of the State Act.5. Challenge to the vires of Haryana Act No. 1 of 1990, Haryana Act No. 4 of 1991, and Haryana Act No. 9 of 1993.6. Constitutional validity of purchase tax under Article 301 of the Constitution.7. Jurisdiction of the Assessing Authority and the period of limitation for assessment/re-assessment.Issue-wise Detailed Analysis:1. Legality of the Impugned Orders/Demand Notices for Purchase Tax:The petitions challenged the orders passed by the Assessing Authority for the assessment years 1973-74 to 1977-78 and the demand notices issued for the recovery of purchase tax. The petitioners had previously succeeded in challenging the levy of purchase tax in the High Court, which was declared ultra vires to Section 9 of the State Act. However, the Full Bench later upheld the validity of Section 9(1) and the levy of purchase tax. The Supreme Court reversed the Full Bench's decision, declaring the taxes sought to be levied under Section 9(1)(b) of the Haryana Act as beyond the legislative competence of the State.2. Constitutional Validity of the Amendment Ordinance No. 2 of 1984 and Amendment Act No. 11 of 1984:The petitioners challenged the constitutional validity of the Amendment Ordinance No. 2 of 1984 and Amendment Act No. 11 of 1984. The Full Bench overruled the previous judgment and upheld the validity of Section 9(1) and the levy of purchase tax. The Supreme Court, however, reversed this decision, declaring the taxes sought to be levied as beyond the legislative competence of the State.3. Validity of Section 9(1) of the Haryana General Sales Tax Act:The Full Bench upheld the validity of Section 9(1) of the State Act and the levy of purchase tax. The Supreme Court, in the case of Good-year India Limited v. State of Haryana, declared that the taxes sought to be levied under Section 9(1)(b) were taxes on consignment and beyond the legislative competence of the State.4. Levy of Purchase Tax under Section 9 of the State Act:The Supreme Court in Good-year India Limited v. State of Haryana and other related cases quashed the levy of purchase tax under Section 9 of the State Act. The Court observed that the tax imposed by these sections was a tax levied on the price of raw material purchased by a manufacturer and not on the manufactured goods or consignment sale. The levy of purchase tax was held to be intra vires the powers of the State Legislature.5. Challenge to the Vires of Haryana Act No. 1 of 1990, Haryana Act No. 4 of 1991, and Haryana Act No. 9 of 1993:Although the petitioners challenged the vires of these Haryana Acts, no arguments were advanced on this point during the hearing. The Court did not find any merit in the challenge to the provisions of Section 9 on the ground of violation of Article 301 of the Constitution.6. Constitutional Validity of Purchase Tax under Article 301 of the Constitution:The petitioners argued that the levy of purchase tax interferes with free trade and commerce and is ultra vires to Article 301 of the Constitution. The Court referred to various Supreme Court decisions, including Atiabari Tea Company Limited v. State of Assam and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, and concluded that the tax imposed by the State would become ultra vires to Article 301 only if it directly impedes the free movement of goods. The Court held that the levy of purchase tax does not impede, hamper, or obstruct the free flow of trade or commerce and is not violative of Article 301.7. Jurisdiction of the Assessing Authority and the Period of Limitation for Assessment/Re-assessment:The petitioners argued that the impugned notices and orders are void as the Assessing Authority had no jurisdiction to pass these orders after the expiry period of limitation specified in Section 31 of the Haryana Act. The Court referred to Sections 31 and 32 of the Haryana Act and held that Section 32(1) removes the hurdle of limitation in making assessment or re-assessment in consequence of any order made by any Court. The Court concluded that the impugned assessments are not barred by limitation and the Assessing Authority was within its jurisdiction to pass fresh orders of assessment.Conclusion:The writ petitions were dismissed with costs of Rs. 10,000/- each. The interim orders passed by the Court were vacated, and the respondents were allowed to recover the amount of tax along with interest from the petitioners.