“No Government can exist without
taxation. The money must necessary be levied on the people; and the grand art
consists of levying so as not to oppress the people”- Frederik the Great of
Russia. The famous diplomat and economist in the Mauryya empire, “ Chanakya” or
‘Kautilya”, on the other hand, observed- “The king shall first reform the administration, by punishing
appropriately those officers, who deal in wealth; they duly being corrected,
shall use the right punishment to ensure good conduct of the people of the town
and the countryside.” These two folds of observation are indeed the guide-lines
in proper conduct of tax administration in the State as well the country as a
whole.
Law is a weapon to carry on the
administration in a proper and smooth way, so as to ensure proper collection of
tax revenue as well to augment the position of the State Exchequer, by way of undertaking
and implementing the plans and programmes for the welfare of the people as well
as the development of the State. Our instant topic of discussion is on “tax on
sales or purchases of goods within Assam or in the course of
inter-State trade or commerce under the banner of the taxation laws, operative
within the State of Assam.”
Taxation laws on sales or purchases of goods
locally in Assam
The State tax machineries are
equipped with two folds of taxation laws for the purpose of administration in
the matter of levy and collection of taxes with other allied matters, connected
therewith. Those are : “The Assam Value Added Tax Act, 2003 (VAT Act),
operative from 01.05.2005” and “The Central Sales Tax Act, 1956 (Central Act),
operative from 05.01.1957.” .The former is an State Act, enacted at the behest
of the Legislatures of Assam, while the second one is a Central Act, enacted by
Parliament long 55 years aback. The former taxation law was adopted by the
State Legislatures of the State under clause (3) of Article 246 read with entry
54 of List-II (State List) in the Seventh Schedule of the Constitution of India
(Constitution), while the latter was enacted by Parliament by virtue of the
powers conferred by clause (1) of Article 246 read with entry 92A of List-I
(Union List).
The ‘Sales tax law in Assam’ had a
long background. Under the authority conferred by the Government of India Act,
1935 in sub-section (3) of Section 100 read with entry 48 of List II (State
List), the Provincial Legislative of Assam first enacted “ The Assam Sales of
Motor Spirit and Lubricants Taxation Act, 1939”, which was repealed and
substituted by the “ The Assam (Sales of Petroleum and Petroleum Products,
including Motor Spirit and Lubricants) Taxation Act, 1955” with effect from
01.05.1956. Thereafter, under the said authority conferred by the Government of
India Act, 1935, a tax law on sales or purchases of goods within the State of
Assam came into force from 24.12.1947 in the post- independence period. After
adoption of the Constitution on 26.01.1950, the Legislature of Assam enacted
“The Assam Finance (Sales Tax) Act, 1956” with effect from 01.07.1956 with a
view to levy tax on the goods, imported from the places out side the State of Assam
and also on the goods manufactured and processed in Assam under the authority
of entry 54 of the State List, as discussed in the first para above read with clause (a) of Article 304 of the
Constitution Likewise, a tax on the last
purchase of goods in Assam was enacted under the title “ The Assam Purchase Tax
Act, 1967”on the same footing of the Constitution and it came into effect from
03.07.1971.” All these Acts were amalgamated, consolidated and amended and a
new Act, namely; “The Assam General Sales Tax Act, 1993” was brought into
existence with the date of operation from 01.07.1993. The VAT Act is a new
measure of tax in supersession of the AGST Act.
The liability to pay tax under
the VAT Act arises at every stage of sale affected in Assam, subject
to credit of input tax paid at the time of previous purchase of goods with the way
of functioning, designed in this respect. The measure of tax on such goods were
adopted in respect of some specified goods with the rates of tax, presently @ 5
paise in the rupee @ 1 and 2 paise in the rupee, some unclassified goods,
transfer of property in goods, involved in works contract and transfer of right
to use any goods for a specified period under lease @ 13.5 paise in the rupee.
In addition to the above, a
series of goods with different rates of taxes were incorporated in the
Schedules of the VAT Act, which were designed as taxable at the point of first
sales in Assam, contrary to the principle laid down in the theme of the VAT Act
for levy of tax at every stage of sales of goods made within the State of Assam.
This tax measure seems to be irrelevant in the VAT scenario, which is nothing
but a measure of value added tax in the series of multiple points of tax right
from the manufacturer or importer upto the level of the sales made to the
consumers. However, the administration of the VAT Act is being carried on with
yield of increased quantum of collection, which reached to Rs. 5136.36 crores in
the year 2011-12 against Rs. 3952.20 crores in the year 2010-11. The collection
of tax and proper administration of tax laws can not be at par and both have
separate entity.
Taxation law on the sales or purchases of goods
in the course of inter-State trade or commerce
The taxation law on the sales or
purchases of goods in the course of inter-State trade or commerce, namely; the
Central Act has been made operative since 05.01.1957, as stated above, and the
administration in the matter of levy of tax under the said Act with other
allied matters, is being carried on till now. The enactment of this Act was a
product of authority conferred by amendment of Article 269 of Constitution
vis-à-vis insertion of a new entry 92A in the Seven Schedule of the Union List,
when it was felt incumbent that the levy of tax was imperative on the
continuous growing trend of the sales or purchases of goods in the course of
inter-State trade or commerce.
Powers and functions of the Central Act to be
governed by the general sales tax law of the State (viz VAT Act)
Sub-section (2) of Section 9 of
the Central Act provided :- “The authorities, empowered to assess,
re-assess, collect and enforce payment of any tax under the general sales tax
law of the appropriate State shall on behalf of the Government of India assess,
re-assess, collect or enforce payment of tax including any interest or penalty,
payable by a dealer under this Act, as if the tax or interest or penalty
payable under the general sales law of the State; and for this purpose they may
exercise all or any of the powers they have under the general sales tax law of
the State. The said sub-section also laid down that all the provisions relating
to return, provisional assessment, advance payment of tax, registration of the
transferee of any business, imposition of tax liability of a person carrying on
business on transferee of or successor to, such business, transfer of liability
of any firm or Hindu undivided family to pay tax in the event of any
dissolution of such firm or partition of such family, recovery of tax from
third parties, appeals, review, revisions, references, refunds, rebates,
penalties charging or payment of interest, compounding of offences and
treatment of documents furnished by a dealer as confidential, shall apply
accordingly.”
Sub-section (2A) of the said Section
9 of the Central Act, on the other hand, laid down, as follows:
“All provisions relating to
offences, interest and penalties (including provisions relating to penalties,
in lieu of prosecution for an offence in addition to the penalties or
punishment for an offence,( but excluding the provisions relating to matters
provided in Section 10 and 10A) of the general sales tax law of such State,
shall with necessary modification shall apply in relation to the assessment,
re-assessment, collection and enforcement payment of payment of any tax
required to be collected under this Act in such State or in relation to any
process connected with such assessment, re-assessment, collection or
enforcement of payment, as if, the tax payable under this Act were a tax under
such sales tax law.”
The implication of the above provisions of the
Central Act is very clear. It provided a broad guide line to carry on the
administration in certain matters in respect of the provision of the said Act
under the provisions of the VAT Act.
The Central Act contained some
independent provisions of law , which are to be administered independently
without taking resort to the provisions of Sub-section (2) and (2A) of Section
9 of the said Act. Those are, inter-alia, “(i) Provisions relating to Import
and Export (Section 5); (ii) Liabilities to pay tax on inter-State sales,
exemption in course of sales of goods by transfer of the title of the goods
during the course of movement from one State to another (Section 6); (iii) Transfer of stock of goods out side the
State ( Section 6A));(iv) Registration of the dealers (Section 7); (v) Rate of
tax on the sale in course of inter-State trade or commerce(Section 8); (vi)
Penalties (institution of case in the court of law) (Section 10); (vii)
Imposition of penalty in lieu of prosecution (Section 10A), (viii) Cognizance
of offences- sanction and trial (Section 11)………..”
It will be seen that the above
provisions of the Central Act were not incorporated in Sub-sections (2) and
(2A) of Section 9 of the Central Act and as such the same are to be
administered independently under the statutory provisions of the said Act
itself, implying thereby that, the aforesaid provisions will have no scope for
governance towards carrying on the administration under the provisions of the
VAT Act. For the present, we take up for discussion on a particular topic ‘Registration’,
as occurred in Section 7 of the Central Act.
The Government of India by a
Notification No. SRO 643 dated 22.02. 1957, issued under Sub-section (1) of
Section 7 of the Central Act, specified the competent authorities to whom the
application of registration under the Central Act is to be filed vis-à-vis the
onward action to be taken in the matter. Such competent authority, specified in
the aforesaid notification, is inter-alia, the authority, competent to
register a dealer under the general sales tax law of the State (that, is the
VAT Act), if any such dealer is liable for registration. There is no question
of delegation of power under the VAT Act or any power of governance in the matter
of administration of the registration proceedings under the provisions of the
VAT Act.
The fragments of Section 7 of the Central
Act relation to registration are :-“ (i)
Sub-section (1) -A dealer liable to pay tax is to apply for registration; (ii)
Sub-section (2) : A dealer, purchasing goods from other State in the course of
inter- State trade or commerce, is to apply for registration; (iii) Sub-section
(3) - Registration of a dealer for liabilities under Sub-section (1) & (2);
(iv) Sub-section (2A) Security required to be furnished by a dealer for reasons
to be recorded by the competent authority thereof; (v) Sub-section (3A) –
Additional security to be furnished by the dealer for proper payment of tax and
proper custody and use of the Forms to be furnished by dealer for reasons to be
recorded by the competent authority thereof; (vi) Sub-section (3-B) Security or
additional security are required to be furnished by the competent authority
after giving an opportunity of being heard; (vii) Sub-Section (3BB)- The
quantum of payment of the amount of security or additional security made in the form of surety bond and such surety,
if becomes insolvent or dies, the dealer
is to inform the competent authority in this respect and to furnish fresh
surety for the amount of the bond; (viii) Sub-section (3D) forfeiture of the
amount of security in full or part thereof for realization of amount of tax and
penalty to recover the loss for misuse of the Forms, subject to providing of an
opportunity provided to the dealer of being heard; (ix) Sub-section (3E)- To
demand fresh security, in case the amount of security is found to be
insufficient; (x) Sub-section 3(F)- Refusal to issue fresh Form for
non-compliance with requirements to furnish security; (xi) Sub-section 3(G) -To
refund the amount of security or part thereof by the competent authority on
application to be filed in this behalf by the dealer, when it is not required
for the purpose of the Central Act; (xii)
Sub-section 3(H), 3(I) and 3(G) – filing of appeal before the appellate
authority, when a dealer is aggrieved by the order of the competent authority
in relation to order for furnishing security or additional security, hearing
and order passed thereon; (Sub-section (4) & (5) Amendment or cancellation
of the Certificate of Registration on application by the dealer or on motion by
the competent authority, granting the same.
Apparently, therefore, the competent
authority, notified under sub-section is the actual authority to exercise the
powers under Section 7 of the Central Act, except the power of the appellate
authority against the order of security and additional security is to be
exercised by a separate forum on application filed in Form 5A, specified in the
Assam Rules of the Central Act. The ‘appellate authority’ has been defined in
clause (aaa) of rule 2 of the Assam Rules of the Central Act, but the rule is
not very much clear in regard to such appellate authority.
It has been found that confusions have
been cropped up in the spheres of administration of the provisions of Section 7
of the Central Act and the matters connected therewith, like; demand of
security, additional security, forfeiture and refund of security and additional
security amongst the taxing authority, competent to make administration of the
Central Act. In the matter of requiring to furnish the additional security, the
mandatory provisions of the sub-section (3A) and (3B) of Section 7 of the
Central Act are neither observed nor given proper cognizance to the same. Some
matters, as it seem, are sought to be governed by the provisions of the VAT
Act, which ,in fact, seems to be unwarranted and irrelevant with a wrong coverage
given to cause acute hardship and inconveniences to the dealers by way of misinterpretation
of the provisions of the Central Act. A farce is in sight in the name of refund
of security instead of forfeiture of security at the intermediary stage in the
normal way of functioning.
In order to make a halt in respect of such
a shortfall, it is hoped that the implications of the relevant provisions of
the Central Act, where the power of administration of the Central Act has been
vested to function independently, without resorting to the provisions of the
VAT Act, may be studied properly and a review is made by the highest authority
of the tax administration of the State so as to make a solution of the
prevailing controversy. For that purpose, a free and constructive dialogue is
considered necessary to come to a consensus.
