Tuesday, May 26, 2009


Tax on oils, namely; crude oil, petrol, diesel and other petroleum products; plays a pivotal role in the revenue generation scenario of Assam. Taxes on sales and other allied matters are governed by the Finance Taxation Administration of Assam by way of enforcement of the enacts introduced in this behalf. The collection of tax revenue during the last three years were, as below:-2006-07 – Rs.3046 crore2007-08 - Rs.2864 ”2008-09 - Rs. 3526 ” The shortfall of collection in 2007-08 was, inter-alia, due to inadequate supply of crude oil vis-à-vis the consequential production outturn and sales threto. However, this has been recouped and took an accelerative turn in 2008-09. If things goes on rightly, the tax revenue collection may undoubtedly achieve Rs. 5000 crore within a couple of years. The trend of extracted crude oil sometimes poses to be discouraging and equally, therefore, import of such crude oil from othe States becomes essential. Contrary to the spirit and intention of the Value Added Tax (VAT) ideology, which maintains the steadfast theme of levy of tax on the every stage of sales of taxable goods, subject to the credit of input tax paid at the point of previous purchase of such goods, the State Legislatures accommodated levy of first point tax in the VAT Law of Assam with exemption of such tax at the subsequent stage on discharge of the onus of payment of tax at source without, however, any relaxation or modification, whatsoever on the basic theme, incorporated in the Law.. Simultaneously, therefore, a two-tier system of levy of tax, that is, one at the multi-point sales of goods and other at the first point, has been operating side by side without any fundamental change of ideology and structure in the VAT Law. Obviously, a clash and conflict between the two in the VAT Law has been apparently visible. In the system of levy of tax on the first point sales of oil products, some relaxation has as well been provided in the case of inter-se-sale deals between one oil company and other, implying thereby that, such inter-se-sales between one oil company and other shall not be held as the first point sales in Assam, but the subsequent sales made to the others or to the consumers shall be treated as the first point sales in Assam for the purpose of levy of tax under the VAT Law of Assam. When a particular Law has been framed for a particular purpose for levy of tax, such a deviation without relaxing of the basic theme or vision of the Law seems to be a unique and an unprecedented exercise of power. Clumsiness, complication and controversy on the system are, therefore, well existent. The ideology formulated and maintained in relation to the non- levy on the first sales in the course of inter-se sales between the oil companies obviously defeated the purpose of levy of tax at the point of first sales in Assam and it is doubtful if such a provision did necessarily warrant. The terms set-forth in the VAT Law to provide the tax relief by the first point seller oil company are : (a) that, the purchaser oil company will pay tax on the sales within the State or in the course of inter states sales under the VAT or the Central Sales Law, as the case may be (b) that, in case the purchaser desptaches such purchased oil products to other States not by way of sales, liability to pay tax on the purchase value of such goods, as provided in the VAT Law shall be cropped up. Despatch of goods to other States not by way of sale is apparently a transfer of stock of goods to other State for sale. Article 286(1)(a) of the Constitution of India restricted any levy of tax for sale out side the State. Section 6A of the Central Sales Tax Law, on the other hand, provided the granting of exemption of tax on such stock transfer of goods subject to discharge of onus in this respect. The propriety of levy of tax on the same goods meant for stock transfer on the purchase value is thus a controversial matter. The rate of tax on the purchase value of oil products meant for stock transfer has been specified at 4 paise in the rupee against the normal rates of tax (@ Petrol Rs. 25.75 paise in the rupee and Diesel Rs. 15.50 paise in the rupee) while in the case of other commodies despatched for identical purpose has been specified as per the prevelant rate of tax, specified in the Schedules of the Act.. So, a disparity and discrimination has obviouly been maintained leaving scope for dispute. There has been mysteriously large scale transfer of stock of oil products by the producing oil companies to other States. The entertainment of such claim of stock transfer is subject to enquiry and achieving satisfaction by the Assessing Officers. The Central Sales Tax Rules formulated some guidelines for the same as well. Whether such transfer of stock is consquent upon any pre-contract of sale is a vital point to be examined and ascertaied as any despatch on the basis of such a contract the character and quality of stock transfer is likely to be defeated. The VAT Law also provided benefit of tax at the concessional rate to the inter-se-purchaser oil companies to make stock transfer and thus to indulge the tax dodging activities by adopting frauduleny way of stock transfer. It stands a routine way of life for a section of traders/cosumers to purchase oil products at lower rates of tax at Khanapara Meghalaya), Bandardowa Arunachal Pradesh) and Dimapur (Nagaland) etc. taking advatange of the geographical location and an acute diversion of trade activities is in sight.It is high time that all these aspects may be considered by the State tax administration and to ensure that no drainage of Assam State revenue is there, but proper safe guard is guaranteed at any cost of augmentation of revenue of the State.
(Mrinal Kanti Chakrabarty)10, Lakhimi Path, R.G. Barua RaodGuwahati – 781024, India98642-01694 (M)

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