1995 (11) TMI 389 - HC - VAT and Sales Tax

Court upholds amended tax definition, clarifies surcharge liability

The Court dismissed the writ petition challenging the amended definition of section 2(r) of the Andhra Pradesh General Sales Tax Act, ruling that the ... - Issues:Challenge to amended definition of section 2(r) of Andhra Pradesh General Sales Tax Act as ultra vires of Constitution, Legislative competence of State Legislature, Assessment orders legality.Analysis:The writ petition challenges the amended definition of section 2(r) of the Andhra Pradesh General Sales Tax Act, alleging it is ultra vires of articles 14 and 19(1)(g) of the Constitution due to lack of legislative competence by the State Legislature. The petitioner, a limited company, contests the imposition of additional tax by the assessing authority based on the amended definition. The amended definition includes total turnover in all goods of a trader in all places of business in the State, irrespective of tax liability. The petitioner argues that this inclusion, especially of turnover from inter-State sales, is unjust, arbitrary, and illegal.In response, the second respondent clarifies that the amendment was made to remove ambiguity, defining total turnover as the aggregate turnover in all goods of a dealer. The counter-affidavit asserts that tax liability is determined based on the total quantum of business within the State, not specifically on inter-State transactions. The respondents maintain that the amended definition is not unconstitutional and does not enhance a dealer's tax liability concerning inter-State sales.The petitioner's counsel argues that the State lacks legislative competence to tax inter-State sales and cannot indirectly impose such taxes by broadening the definition of total turnover. Referring to section 38 of the Act and article 286 of the Constitution, the counsel contends that inter-State sales should not be considered for tax purposes. The petitioner asserts that including inter-State sales turnover in total turnover for calculating additional tax is illegal and unconstitutional.The Court refers to a Supreme Court case where it was held that State Legislatures, under specific entries in the Constitution, can consider total turnover for certain purposes without taxing inter-State sales directly. The Court concludes that the liability for surcharge is only on sales within the State, not on inter-State transactions. Following this precedent, the Court dismisses the writ petition, allowing the petitioner to challenge assessment orders if inter-State sales turnover was subjected to additional tax.In conclusion, the Court dismisses the writ petition, emphasizing that the State Legislature can consider total turnover for specific purposes without taxing inter-State sales directly. The petitioner is granted the option to challenge assessment orders concerning the treatment of inter-State sales turnover for additional tax.