Allahabad High Court
Rakesh Dal Mill vs The Commissioner Of Sales Tax on 24 April, 2007
Bench: Sushil Harkauli, Ajai Kumar Singh
JUDGMENT
Sushil Harkauli and Ajai Kumar Singh, JJ.
1. Under Section 14 of the Central Sales Tax Act 1956, goods can be declared as goods of special importance in inter-State trade or commerce. Section 15 of that Act imposes certain restrictions upon the taxation of sales of such goods under State Sales Tax Laws. The restrictions consist of (1) a lower rate of tax (4% at present); and (2) restraint of double taxation.
2. In the present case we are concerned with the second restraint mentioned above. The precise issue is about the applicability of the said restriction in cases - where the goods were not declared goods under Section 14 at the time of the first taxable transaction, but have come under Section 14 before the second transaction taxable under the State Legislation.
3. Relying upon the decision of a Division Bench decision of this Court in the case of Commissioner of Sales Tax v. Chokhani Company (1982) 51 STC, 195, a Single Judge Bench of this Court in the case of Sunil Kumar Benchey Lal v. Commissioner of Sales-Tax, U.P. Lucknow (1987) 1 U.P.T.C. 775 held that the restriction of Section 15 of the Central Sales Tax Act 1956 would apply even where the goods in question were not declared as goods of special importance in inter-State trade or commerce under Section 14 of the Central Act at the time of the first sale inviting tax liability, but have been so declared before the second sale where the disputed State sales tax is sought to be imposed. In this sales tax revision, another Single Judge Bench of this Court disagreed with the aforesaid view taken in the case of Sunil Kumar Benchey Lal (supra) and referred the question whether that decision does not lay out the correct law and requires re-consideration.
4. Primarily, the correctness of the decision of Sunil Kumar Benchey Lal (supra) was doubted on the ground that the decision in the case of Chokhani Company (supra) was a case where the goods in question (oil seeds) had been "declared goods" under Section 14 of the Central Sales Tax through out the assessment year in question, which in Chokhani's case was 1975-76; and therefore it was doubted that the decision in the case of Sunil Kumar Benchey Lal (supra) was not right in holding that the Chokhani's case would apply even where goods which were not "declared goods" under Section 14 at the time of the first taxable transaction of sale, and had been 'declared' under that Section just prior to the second sale.
5. We have heard Sri Bharat Ji Agrawal senior advocate, assisted by Sri Nikhil Agrawal for the applicant M./S Rakesh Dal Mill, and the learned Standing Counsel for the Commissioner of Sales Tax, at great length.
6. The Central Sales Tax Act 1956 has been enacted by Parliament. Reading Sections 14 & 15 of the Act together suggests that if it is felt that it is necessary or desirable to promote inter-state trade or commerce of certain goods, such goods are declared to be of special importance under Section 14. Upon such declaration, the Sales Tax Laws enacted by a State Legislature would be under the restrictions specified above.
7. Logically, the reduction in State tax liability and the single point taxation under Section 15 of the Central Act are basically steps in the direction of enhancing or increasing inter-State trade or commerce in respect of the goods considered of special importance in such trade.
8. In view of the above objective, that interpretation should be adopted which will assist and not impede inter-State trade of such goods.
9. There are three conceiveable situations:
(1) declared goods purchased by the dealer in one State (say State A), then carried to another State (say State B) and sold inside State B. This would mean first taxation under sales tax law of State A and second taxation under sales tax law of State B. (2) declared goods purchased by the dealer sitting in State B from State A by way of inter-State sale and then sold inside State B. This would mean first taxation under Central Sales Tax Act and second taxation under sales tax law of State B. (3) declared goods purchased by the dealer inside State B and sold inside State B.
10. In all such cases the sales tax would be imposable either under the law of State A, or under the Central law, or under the law of State B and there would be no sales tax on subsequent sale transactions. Also the sales tax under the law of State A or State B cannot exceed 4%, which is the present rate under the Central Act. Thus, irrespective of the nature of transactions, taxation on goods declared of special importance in inter-State trade of commerce has been made uniform and independent of State legislations.
11. Therefore, where under the Central Act goods have been declared of special importance in inter-State trade tax or commerce with a view to promote inter-State trade or commerce in respect of such goods, any sale made within a State after such declaration, should abide the restrictions under Section 15, inasmuch as the restriction will further the cause of achieving the legislative intent of promoting inter-State trade or commerce in respect of those goods.
12. On the other hand if we apply the other interpretation suggested by the department that if on the date of incidence of first tax i.e. the first sale, the goods were not "declared goods" under Section 14, then although on the date of sale within the State, that is to say the second sale inviting State tax, goods have been declared of special importance, yet the State legislation can subject them to higher tax, that would obviously impede inter-State trade in respect of such goods. Acceptance of such an interpretation, which prima facie militates against the legislative intent, would require exceptionally strong reasons. Such reasons may arise either by the compelling words of either of the statutes i.e. the Central Act or the State Act; or may arise from strong cogent logic or authoritative judicial precedent. No such thing has been pointed out by the learned Standing Counsel.
13. For the reasons given above, we are of the view that the decision of this Court in the case of Sunil Kumar Benchey Lal (supra) does not require reconsideration and lays down the correct law about the applicability of Section 15 of the Central Act, although Chokhani's case by itself did not lay out the proposition which was laid down in the case of Sunil Kumar Benchey Lal (supra). The referred question is answered as above. Let paper of this case be placed before the appropriate Single Judge Bench hearing sales tax revisions, for further consideration of the matter on merits.