2017 (3) TMI 213 - HC - VAT and Sales Tax

Petition challenging tax law provision dismissed, burden of proof on dealers upheld

The court dismissed the petition challenging the constitutional validity of Section 6A(1) of the Central Sales Tax Act, 1956. It held that the provision ... Constitutional validity of Section 6A of the Act - when the petitioners did not press the challenge to the Constitutional validity of Section 6A of the Act, whether the petitioners may be permitted to again raise the question of validity of Section 6A of the Act in the subsequent proceedings? - Held that: - it cannot be said that Section 6(A)(1) of the Act can be said to be ultra vires to Article 269(3) of the Constitution of India and / or Section 6A(1) of the Act treats the transaction which is not “sale” shall be treated as “sale”(deemed sale). Section 6 is a charging Section and Section 6 A is a procedural Section and therefore, by Section 6A(1) of the CST Act, it cannot be said that by the said provision, the transaction which otherwise is not a sale is treated as sale (deemed sale), it cannot be said that Section 6A (1) of the CST Act is unconstitutional and / or ultra vires to Article 269(3) of the Constitution of India and / or Entry no. 92 A of List I of the Schedule 7 of the Constitution. Section 6A is a procedural provision, the submission that amendment in Section 6A of the CST Act creates an irrebutable presumption of “sale” in absence of declaration in Form F and therefore, unconstitutional has no substance. Petition dismissed - decided against petitioner. Issues Involved:1. Constitutional validity of Section 6A(1) of the Central Sales Tax Act, 1956.2. Reassessment orders and subsequent appeals.3. Res judicata and constructive res judicata in taxation matters.4. Procedural aspects and burden of proof under Section 6A(1).Detailed Analysis:1. Constitutional Validity of Section 6A(1) of the Central Sales Tax Act, 1956:The petitioners challenged Section 6A(1) of the Central Sales Tax Act, 1956, arguing it was unconstitutional and ultra vires to the Constitution of India. They contended that the provision created an irrebuttable presumption by deeming every movement of goods to be a 'sale' in the absence of a declaration in Form F, which they argued was beyond the Parliament's power to tax transactions that were not sales. The petitioners relied on the Supreme Court's decision in *The State of Madras vs. M/s. Gannon Dunkerley and Co (Madras) Ltd* and *Bharat Sanchar Nigam Ltd and Another vs. Union of India and others* to support their stance.2. Reassessment Orders and Subsequent Appeals:The petitioners, manufacturers and dealers of edible oil, contested the reassessment orders which levied tax on transactions deemed to be sales due to the submission of fake Form F declarations. The reassessment orders were upheld by the Joint Commissioner of Commercial Tax, the Gujarat Value Added Tax Tribunal, and the Central Sales Tax Appellate Authority, leading to the current petition.3. Res Judicata and Constructive Res Judicata in Taxation Matters:The court examined whether the principle of res judicata or constructive res judicata applied, given that the petitioners had previously challenged the constitutional validity of Section 6A(1) but had withdrawn the challenge. The court noted that while each assessment year constitutes a separate cause of action, the petitioners' earlier withdrawal of the challenge to Section 6A(1) without pressing it could preclude them from raising the same issue again.4. Procedural Aspects and Burden of Proof under Section 6A(1):The court analyzed Section 6A(1) as a procedural provision that places the burden of proof on the dealer to show that the movement of goods was not by way of sale but a transfer to another place of business or agent. The provision allows the dealer to furnish Form F to substantiate this claim. If the dealer fails to furnish the declaration, the movement of goods is deemed to be a sale.Judgment:The court dismissed the petition on both maintainability and merits. It held that Section 6A(1) of the Central Sales Tax Act is a procedural section that does not levy tax on transactions that are not sales but provides a mechanism for dealers to prove that a transfer is not a sale. The court found no merit in the petitioners' argument that the provision created an irrebuttable presumption of sale. It also noted that the petitioners had previously challenged the provision and withdrew the challenge, which precluded them from raising the issue again. The court emphasized the importance of finality in litigation and discouraged forum shopping.