Declared goods and turnover tax must stay within section 15 limits; the State circular ignoring that restriction was quashed.

Declared goods taxed under a State turnover tax must remain within the constitutional and statutory limits imposed by article 286(3) and section 15 of the Central Sales Tax Act, 1956. The Rajasthan High Court read section 13-A of the Rajasthan Sales Tax Act, 1994 down so that turnover tax could not increase the aggregate burden on declared goods beyond the prescribed ceiling or operate inconsistently with the restriction against tax at more than one stage. A State circular directing officers to ignore section 15 for turnover tax was held unsustainable and was quashed. The assessments were set aside and fresh assessments were directed in accordance with law.

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Issues: Whether section 13-A of the Rajasthan Sales Tax Act, 1994, insofar as it imposed turnover tax on declared goods included in the dealer's total turnover, was invalid for transgressing the ceiling and restrictions contained in section 15 of the Central Sales Tax Act, 1956 read with article 286(3) of the Constitution of India, and whether the State circular stating that section 15 was inapplicable to turnover tax could stand.

Analysis: The State's power to levy sales tax is subject to constitutional limitations under article 286(3), and Parliament has, through sections 14 and 15 of the Central Sales Tax Act, 1956, imposed restrictions on declared goods, including a ceiling on the rate of tax and the requirement that such tax not be levied at more than one stage. Section 13-A, as framed, brought declared goods within the gross taxable turnover for turnover tax without excluding them or ensuring that the aggregate burden would remain within the statutory ceiling. In practical operation, this could result in declared goods suffering a combined burden of principal tax and turnover tax beyond the maximum permissible rate. The circular directing assessing authorities to ignore section 15 in relation to turnover tax was contrary to the statutory restriction and could not be sustained.

Conclusion: Section 13-A was not wholly struck down, but it had to operate subject to section 15 of the Central Sales Tax Act, 1956 and article 286(3) of the Constitution of India; the incidence of tax on declared goods was read down and limited to the statutory ceiling. The assessments of turnover tax were set aside and fresh assessments were directed in accordance with law. The circular dated 12 September 2000 was quashed.

Final Conclusion: The petitions succeeded to the extent that turnover tax could not be collected on declared goods in excess of the parliamentary ceiling, and the impugned administrative direction was invalidated.

Ratio Decidendi: A State levy on declared goods, including an additional or turnover tax forming part of the aggregate tax burden, must conform to the restrictions imposed by section 15 of the Central Sales Tax Act, 1956 and article 286(3) of the Constitution of India, and any excess over the prescribed ceiling is impermissible.

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