INDIRECT TAXES

Sales Tax Decisions

P. C. Joshi

1. Contempt of Court

In the case before the Supreme Court, Shri R.K. Jain the Editor of Excise Law Times had written an editorial on the state of affairs that prevailed with Central Excise Customs & Service tax Appellate Tribunal (CECSTAT). In the impugned editorial, while commending the administration and judicial reform initiated by the new President of the Tribunal Mr. Jain highlighted specific cases of irregularities, malfunctioning and corruption. The Supreme Court found that the article projected a true state of the functioning of the Tribunal on administrative and to some extent on the judicial side. By doing so Mr. Jain had merely discharged the constitutional duty of a citizen, enshrined in Article 51(A) (h). Such an article cannot be held to be an attempt to scandalize the Tribunal as a body or that can interfere with the administration of justice. The Indirect Tax Practitioners’ Association which had moved the Apex Court against Mr. Jain, did not succeed in their petition. On the other hand, the Apex Court saddled them with the cost of Rs.2 lakhs for filing frivolous petition. Out of such amount, Rs.1 lakh was directed to be deposited with the Supreme Court legal service committee and other Rs.1 lakh to be paid to Mr. R. K. Jain.

Indirect Tax Practitioners’ Association vs. R.K. Jain (2010) NTN (Vol. 44) Pg. 116

2. Deemed Sale – Catering Service

The Punjab and Haryana High Court held that the assessee carrying on the business of catering, was liable to be taxed under the Sales Tax law. However, the transaction being of composite nature, involving sale of food as well as services, sales tax can be levied only on the element of sale of goods and the service portion was liable to service tax. On such portion of services, sales tax cannot be levied.

Cap n Chops Caterers vs. State of Haryana. (2010) 37 PHT 266 (P&H)

3. Exemption

The Allahabad High Court while considering the impact of the amendment to Central Sales Tax Act by Finance Act, 2002 held that the exemption to the new units; granted in accordance with the eligibility certificate and covered by the Notification issued prior to 11th May, 2002, though withdrawn by another Notification with effect from 15th October, 2002 would continue to be available till the end of the period specified in the eligibility certificate. In such a case the exemption however so available was restricted to the sales to registered dealers, specially when the exemption to pay CST for a stipulated period under earlier notification was made on graded basis. The sales to unregistered dealers would not be eligible to exemption in view of the amendment referred to above, unless the declaration in Form C or D was produced.

M/s. Yamaha Motor Escorts Ltd. vs. State of U.P. & Ors. (2010) NTN Vol.44 -33

4. Jurisdiction

The Gujarat High Court held that the Tribunal was not justified in holding that the Sale Tax Officer who cancelled the registration certificate under sub-section 2(A) of 30(AA) of the Gujarat Sales Tax Act 1969 had valid jurisdiction. In the absence of any order of delegation of power of the Commissioner of Sales Tax, the presumption drawn by the Tribunal that the official acts were deemed to have been done properly was held to be misconceived.

In the present case, even before the High Court, the State could not place on record, any order in support of the action of the Sales Tax Officer. The State could refer to an order of delegation of power dated 8th July, 1994 by which such a power was delegated only to Assistant Commissioner of Sales Tax and not to the Sales Tax Officer.

The Court also observed that nothing can be presumed in regard to the existence of the order conferring the jurisdiction upon the Sales Tax Officer. The impugned order of canceling the registration certificate by the Sales Tax Officer was quashed.

Shyamlal Pharma vs. State of Gujarat STJ Vol.49 Part 7 Pg.592

5. Liability – Consignment Agent

The Delhi High Court while considering the provisions of the Delhi VAT Act, 2004 held that the sale of goods through a consignment agent, who paid the tax due to the Government, cannot be taxed again in the hands of the principal who transferred the goods in question to the consignment agent concerned.

Havell’s India Ltd. vs. The Commissioner of VAT Act (2010) (1) Goods and Service Tax Journal Page 83

6. Moveable or immoveable property – Works Contract

Before the Uttarakhand High Court, the assessee had undertaken the installation of airconditioning plant which in its turn can be removed from one place to another. The Court rejected the submission of the assessee that the airconditioning plant so installed was immovable property.

Jaiprakash Industries Ltd. vs. Commissioner of Commercial taxes. (2010) NTN (Vol.4) Pg. 96

7. Reassessment

The Allahabad High Court quashed the approval granted by the Additional Commissioner in an mechanical manner for initiation of reassessment proceedings without due application of mind to the facts and material on record.

Seema Enterprises vs. State of U.P. & Ors. 2010 NTN (Vol.44) Pg.81

8. Sale in the course of export under Sec.5 (3) of CST Act

1) The Constitution Bench of the Supreme Court after reviewing the case law on the point, held that the sale of bus body made by the local manufacturer to an exporter of complete bus, was eligible as sale in the course of export u/s 5(3) of the CST Act. It was also held that it was not necessary that the goods purchased and goods exported should be in the same form when such transactions were inextricably linked with the export of the goods. The Hon’ble Supreme Court however clarified that it is not possible to hold that every penultimate sale in furtherance to the export irrespective of the nature of the goods also was covered by Sec.5(3). Such a question may have to be decided by ascertaining the inextricable connection with the export of goods and not a remote connection. In other words the connection should not be casual, accidental or fortuitous but real intimate and interlinked.

State of Karnataka vs. Azad Coach Builders Pvt. Ltd. & Anr. (2010) NTN (Vol.44) pg.40

2) Sale in the course of export

The Assessee before the Punjab and Haryana High Court had sold rice to an export house duly supported by ‘H’ form issued by the export house. The High Court confirmed the view taken by the Tribunal that the nature of the transaction was covered by Sec.5 (3) of the CST Act read with Sec.15(c) thereof.

State of Punjab vs. Rattna Rice & General Mills Fazilka (2010) 37 PHT 323

9. Valid order – reasons Must

The complainant before the National Consumer Disputes Redressal Commission challenged its order, before the Supreme Court, by which the petition was dismissed without being supported by any reason. The Commission just affirmed the order of the State Commission. The Supreme Court after considering the Scheme of the Consumer Protection Act, 1986 held that Commission did have the trapping of a Civil Court and was a high powered quasi-judicial forum for deciding the disputes between a consumer and the seller. However, the order passed by such an authority or even an administrative authority that adversely affected the right of parties must be a speaking order. In that connection, the Apex Court referred to several cases the sum and substance of which was that the reason was the soul of the law which in its absence ceased to exist. The Supreme Court therefore set aside the order of the National Consumer Disputes Redressal Commission and remanded the matter to it for deciding the complaint afresh.

Kranti Associates Pvt. Ltd. vs. Masood Ahmed Khan & Ors – STJ Vol.49 Part 7 Pg.619