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Union of India - Section
Section 349 in The Central Sales Tax Act, 1956
349.
Act 74 of 1956.- In the interest of the national economy of India certain amendments were undertaken in the Constitution by the Constitution (Sixth Amendment) Act, 1956. whereby(a) taxes on sales or purchases of goods in the course of inter-State trade or commerce were brought expressly within the purview of the legislative jurisdiction of Parliament;(b) restrictions could he imposed on the powers of State legislatures with respect to the levy of taxes on the sale or purchase of goods within the State where the goods are of special importance in inter-State trade or commerce.The amendments at the same time authorised Parliament to formulate principles for determining when a sale or purchase takes place in the course of inter-State trade or commerce or in the course of export or import or out-side a State in order that the legislative spheres of Parliament and the State legislatures become clearly demarcated. In the case of goods of special importance in inter-State trade or commerce, a law of Parliament is to lay down the restrictions and conditions subject to which any State law may regulate the tax on sales or purchases of such goods in the State.2. This Bill seeks to provide for the legislation authorised by the Constitution as amended above with a view to enabling the State Governments to raise additional revenues by levying tax on inter-State transactions which are at present immune from tax under their respective sales tax laws. After taking into account the recommendations of the Taxation Enquiry Commission and in consultation with the States the Government of India were of the view that the following principles should govern the scheme of the detailed legislation on the three inter-related subjects:(i) The Central Government should authorise the State Governments to impose on behalf of the Central Government tax on the sale or purchase of goods in the course of inter-State trade or commerce. The Central legislation should also delegate to the States the Central Government's power to levy and collect the tax and for this purpose prescribe the same system of registration, assessment, etc., as prevails in the States concerned under their own sales tax system.(ii)An important aspect of the Central legislation will be concerned with the definition of the locale of sales for the purpose of defining in detail the relative jurisdiction, firstly of the Union and the States, and secondly, of the States inter se. It is therefore, necessary that the law should define clearly, with specific reference to sales tax the circumstances in which a sale or purchase becomes taxable by a particular State and no other. It should also define for the purpose of the constitutional restrictions on the State's power to impose a tax under Item 54 of the State list, when a sale or purchase of goods may he said to take place :(a) in the course of export out of India.(b) in the course of import into India. and(c) in the course of inter-State trade or commerce.(iii) The Central legislation should provide for the declaration of certain commodities which are in the nature of raw materials and of special importance in inter-State trade or commerce and lay down the restrictions and conditions as to the rate, system of levy and other incidents of tax subject to which the States may impose tax on the sale or purchase-thereof.3. Necessary provisions have, therefore, been made in the different Chapters of this Bill incorporating the principles stated above". - Gazette of India. Extra, 21-11-1956. Pt. II - Section 1, p. 857.Act 61 of 1972.- "The levy of tax on inter-State sales under the Central Sales Tax Act. 1956. commenced from the 1st of July, 1957 Experience of the working of the Act has shown that it requires to he amended in certain respects for dealing with the problems of evasion of tax, realisation of tax in the event of liquidation of a company and for spelling out the intention underlying certain provisions more clearly so as to overcome or avoid interpretation to the contrary.2. The Bill seeks to make the following important amendments in the Act :(i) Exemption from Central sales tax on inter-State sales of electrical energy is now dependent on the exemption of tax by a State Government on local sales of electrical energy. It is now proposed to provide specifically that inter-State sail of electrical energy would not be liable to Central sales tax.(ii) Central sales tax is not leviable in respect of a transactions of transfer of goods from a head office or a principal to a branch or an agent or vice versa as these do not amount to sale. This aids evasion in that dealers try to show even genuine sales to third parties as transactions of this type. Accordingly, it is proposed to provide that the burden of proving that the transfer of goods in such cases is otherwise than by way of sale shall lie on the dealer who claims exemption from tax on the ground that there was in fact no sale.(iii) In order to deal with tax evaders, provision is sought to be made for demand, in appropriate cases, of security or additional security not exceeding Rs. 50,000 for initial registration or for continuance of registration. It is also proposed to make the penalty provisions more stringent.(iv) Provision is being made for rounding off to the nearest rupee of any tax, interest, penalty or fine payable by; declare under the Act.(v) Section 14 of the Act which declares certain goods as of special importance in inter-State trade or commerce is sought to be amended as under:-(a) The Supreme Court has ruled that the existing definition of "coal" includes."charcoal". Coal was included as one of the goods of special importance with a view to covering only that 'coal' which is mainly used as an industrial fuel and no "charcoal". The definition is. there-fore, sought to be amended retrospectively to exclude "charcoal".(b) The definitions of "iron and steel" and "oil-seeds", given in the section, have led to various interpretations by assessing authorities and Courts. The existing definitions are therefore sought to he replaced by specific lists of iron and steel items and oil seeds in order to avoid any ambiguity in this respect. The definition of "jute" is also being substituted by a more precise definition.(vi) Clause (b) of Section 15 which provides for refund to such person as may be prescribed by rules of local sales tax on goods declared to be of special importance in the inter-State trade or commerce, is being amended retrospectively to make it that the local sales tax can he reimbursed only when tax on the inter-State sale has been paid and not otherwiseBy another amendment (which will have prospective effect) to the same clause it is being provided that the local sale, tax on such goods will be reimbursable to the person making a sale of such goods in the course of inter-State trade or commerce.(vii) A new chapter is sought to be added to provide for collection of tax in the event of liquidation of a company(viii) The bill also makes necessary provision for validation of past levies.3. Opportunity is being taken to extend the principal Act to Kohima and Mokokchung districts of Nagaland.4. The Bill seeks to achieve these objects. - Gaz. of Ind., 5-8-1971. Pt. II, Section 2, Ext., p. 522.Act 103 of 1976.- The Central Sales Tax Act, 1956, formulates the principals for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into, or export from India. The Act also provides for the levy, assessment and collection of tax on sales of goods in the course of inter-State trade or commerce. Further, the Act declares certain goods to be of special importance in inter-State trade or commerce and specifies the restrictions and conditions to which State laws relating to sales tax shall be subject in regard to the levy of tax on the sale or purchase of such goods.2. According to Section 5(1) of the Central Sales Tax Act, a sale or purchase of goods can qualify as it sale in the course of export of the goods out of the territory of India only if the sale or purchase has either occasioned such export or is by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. The Supreme Court has held (vide Mohd. Serajuddin v. State of Orissa, 36 STC 136) that the sale by an Indian exporter from India to the foreign importer alone qualifies as a sale which has occasioned the export of the goods. According to the Export Control Orders, exports of certain goods can he made only by specified agencies such as the State Trading Corporation. In other cases also manufacturers of goods, particularly in the small scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade. A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods. Further, if such sales do not qualify as sales in the course of export they would be liable to State sales tax and there would he a corresponding increase in the price of the goods. This would make our exports uncompetitive in the fiercely competitive international markets. It is, therefore, proposed to amend, with effect from the beginning of the current financial year. Section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods preceding the sale or purchase of any goods occasioning export of those goods out of the territory of India shall also be deemed to be in the course of such export if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to such export.3. Sub-section (2) of Section 9 of the Central Sales Tax Act empowers the State sales tax authorities to assess, re-assess, collect and enforce payment of Central sales tax. The sub-section also authorises the authorities under the State sales tax laws to exercise all the powers which they have under those laws (including, inter alia, the power to impose penalties) for the purposes of the Central Sales Tax Act also. In Khemka & Co. (Agencies) Private Ltd. v. State of Maharashtra (35 STC 571). the Supreme Court, by a majority of 3:2, held that the provisions of the State sales tax laws as to penalties do not apply for purposes of the Central sales tax. In view of this judgment, the State Governments are faced with the problem of having to refund the amounts collected in the past by way of penalties. The judgment has also resulted in a vacuum being created in regard to levy 6f penalties. It is, therefore, necessary to amend Section 9 of the Central Sales Tax Act to provide expressly that the provisions relating to offences and penalties tinder the general sales tax law of each State shall, with necessary modifications, apply in relation to the assessment, re-assessment, collection and the enforcement of tax under the Central Sales Tax Act. It is also necessary to validate the penalties which have been levied in the past, for the purposes of the Central Sales Tax Act, on the basis of the provisions of the State sales tax laws.4. It is proposed to avail of the present opportunity to declare crude oil and certain cereals and pulses as goods of special importance in the course of inter-State trade or commerce and to make certain other amendments to remove difficulties which have been experienced in the administration of this Act.5. The bill seeks to achieve the above objects. The notes on clauses explain the provisions of the Bill. - Gazette of India, 26-8-1976, Pt. II, Section 2, Ext., p. 1334.Act 41 of 2001.- Central Sales Tax (CST) is levelled under the Central Sales Tax Act, 1956 (74 of 1956) (hereinafter referred to as the CST Act), wherever sale of goods takes place in the course of inter-State trade or commerce. CST is not payable when the movement of goods from one State to another is occasioned not by way of sale but by reason of transfer of such goods to any other place where the dealer carries on his business or to his agent or principal. Since CST is levied by the State from which the movement of goods commences, disputes have arisen many times between two States, as to whether or not the movement of goods in a particular case amounts to sale in the course of inter-State trade or commerce.2. Presently, there is no mechanism within the Central Sales Tax Act, 1956 to resolve such disputes. Consequently, parties have to approach Courts for a decision. In Ashok Layland Ltd. v. Union of India and others, (1997) 9 Supreme Court Cases 10, the Supreme Court has observed that in the interest of inter-State trade and commerce, the suggestion for creation of a Central mechanism to decide such disputes - which are really in the nature of inter-State disputes - may he well worth considering as every dealer affected may not he in a position to approach this Court for appropriate directions. The Court further observed that it is for the Government of India to consider this aspect and take necessary decision in that behalf. Subsequently, in view of the several petitions filed in the Supreme Court, the Supreme Court has directed that a Central mechanism indicated by it in Ashok Leyland case may he established by the Central Government to resolve this "conundrum" created by the conflicting interpretations given by the State Sales Tax authorities.3. In view of the aforesaid background, it is proposed to amend the CST Act by the proposed legislation so as to create a new authority on the lines of the Authority for Advance Rulings set up under Chapter XIX-B of the Income-tax Act, 1961 (43 of 1961), and assign the work of CST related cases to a Central Sales Tax Appellate Authority. Until such time as such Authority is constituted, it is considered expedient to assign the work relating to settling inter-State disputes under the CST Act to the Authority for Advance Rulings, which is in a position to take up additional work.4. The Bill seeks to achieve the above objects. - Gazette of India, 10-8-2001, Pt. II-Section 2, Ext. p. 4.[21st December, 1956]An Act to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of imports into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject.Be it enacted by Parliament in the Seventh Year of the Republic of India as follows:-| The Act has been extended to(1) Goa, Daman and Diu by Regulation 12 of 1962. Goa is now a State, see Act 18 of 1987, Section 3 (w.e.f. 30.5.1987).(2) Dadra and Nagar Haveli by Regulation 2 of 1978, Section 45 and to Kohima and Mokakchung district of Nagaland by Act 61 of 1972, Section 14 (w.e.f. 30.12.1972). Whole of the State of Nagaland on 1.3.1973 and to the State of Sikkim by S.O. 738(E), dated 27.12.1978. Enforced in Sikkim on 1.10.1982, see Sikkim Gazette, dated 18.10.1982.Brought into force on 5.1.1957, all sections except Section 15 vide S.R.O. 78, dated 4.1.1957. Section 15 came into force on 1.10.1958 vide G.S.R. 897, dated 23.9.1958. |