2020 (1) TMI 889 - HC - VAT and Sales Tax

Writ petitions dismissed as premature due to Section 4-A interpretation.

A. Ponnusamy Pillay & Sons Versus The Commercial Tax Officer Karaikkal., Union Territory of Pondicherry represented by its Secretary, Finance Department Pondicherry.

The court found the writ petitions premature and not maintainable at this stage. The key issue was the applicability and interpretation of Section 4-A of ... Renewal of IMFL license - issuance of Tax Clearance Certificate - validity of Section 4-A of the Pondicherry General Sales Tax Act, 1967 - HELD THAT:- The present Writ Petitions were not only premature even when the same was filed, but also, barring the ground of validity of the provisions of Section 4-A of the Act, the same were not even maintainable. The ground of validity of the said provision appears to have been raised as a tangent attack just to maintain the writ petitions. The question, really if any arises, is only of the applicability and interpretation of the provisions of Section 4-A of the Act. The said provision providing for the levy of the Turnover Tax would naturally involve determination of facts and extent of turnover for applying the said provisions. The present case arises on the application filed by the Assessee for seeking a Tax Clearance Certificate even when the assessment of the year concerned were not finalised by the Assessing Authority. Therefore, taking the figures of turnovers tentatively, a prima facie satisfaction was arrived by the Assessing Authority that since the turnover of some of the products dealt with by the Assessee exceeded the prescribed limit, Section 4-A stood attracted in the case and without that tax liability being cleared by the Assessee to that effect, the Tax Clearance Certificate could not be issued to the Assessee. The said order does not call for any interference of this court in the extraordinary jurisdiction at this stage. Whether the Assessee was entitled to issuance of the Tax Clearance Certificate or not would naturally depend upon the assessment of the turnover of the Assessee finally by the Assessing Authority in accordance with the provisions of the Act, including the application of Section 4-A of the Act. Petition disposed off. Issues Involved:1. Validity of Section 4-A of the Pondicherry General Sales Tax Act, 1967.2. Applicability of turnover tax on the Assessee's products.3. Requirement and issuance of a Tax Clearance Certificate.4. Interpretation of constitutional restrictions under Article 286 read with Sections 14 and 15 of the Central Sales Tax Act, 1956.Detailed Analysis:1. Validity of Section 4-A of the Pondicherry General Sales Tax Act, 1967:The petitioner challenged the validity of Section 4-A, which mandates an additional turnover tax at the rate of 3%. The provision states that every dealer shall pay turnover tax on the total turnover, with specific exclusions listed. The petitioner argued that the provision was ultra vires since it did not account for the restrictions under Section 15 of the Central Sales Tax Act, 1956, which limits the tax rate on declared goods like cigarettes. The court referenced the Constitution Bench decision in 'Godfrey Philips India Ltd. vs. State of U.P.' which clarified that any state levy under Entry 54 of the State List must comply with restrictions under Section 15 of the Central Sales Tax Act.2. Applicability of Turnover Tax on the Assessee's Products:The Commercial Tax Officer rejected the Assessee's request for a Tax Clearance Certificate, stating that the Assessee dealt in alcoholic beverages and cigarettes, making them liable for turnover tax under Section 4-A. The officer noted that the Act does not require a dealer to exclusively deal in alcoholic beverages or cigarettes to be liable for the tax. The court upheld this interpretation, stating that the determination of tax liability involves assessing the turnover of the Assessee's products, which exceeded the prescribed limits.3. Requirement and Issuance of a Tax Clearance Certificate:The Assessee needed a Tax Clearance Certificate to renew their IMFL license. The request was denied because the Assessee had not cleared the turnover tax liability. The court found that the issuance of the certificate depended on the final assessment of the Assessee's turnover by the Assessing Authority. The preliminary figures indicated that the Assessee's turnover exceeded the limits, attracting Section 4-A. Therefore, without settling the tax liability, the certificate could not be issued.4. Interpretation of Constitutional Restrictions:The court examined the applicability of Article 286 of the Constitution, which, along with Sections 14 and 15 of the Central Sales Tax Act, imposes restrictions on state levies. The Supreme Court in 'Godfrey Philips India Ltd.' held that state taxes on declared goods must comply with these constitutional restrictions. The court concluded that this interpretation was settled law and did not require further examination in this case. The Assessee could raise these issues during the assessment proceedings.Conclusion:The court concluded that the writ petitions were premature and not maintainable at this stage. The primary issue was the applicability and interpretation of Section 4-A, which required factual determination of the Assessee's turnover. The court left these questions open for determination during the assessment proceedings and disposed of the writ petitions without costs.