Taxation- A concerted phenomenon for upgradation of economic platform

Taxation means the system of imposition and collection of tax. Tax, on the other hand, means, the money demanded by the Government from the income of the citizen or on the value of the goods, bought or sold, or by other ways and means, adopted to collect revenue to the Government coffer within the frame-work of the Constitution or under the statute of the law, operative in this behalf.

Taxation in pre-imperial rule
 Taxation is not a new phenomanon in the history of India. It had the age- long tradition since Ramayan and Mahabhat era. The measure of tax in  the past, in fact, used to continue as a matter of convention, the mode and manner of extraction being harsh, beset with untold ingredients of torture and cruelty.The Land Revenue was the primary source of royal earnings with other ancillaries, adopted, from time to time. Such measures were, however, not systematic, rather haphazard, clumsy and cumbersome.  In the  Mauryya era, the great deplomate and economist Kautilya or Chanakya played a pivotal role towards the acceleration of administration commensurated with the ways and means towards upgradation of economy. In his famous  precious book  “Kautilya’s Artha Sastra”, this great man of giant personality formulated the unique technic of administration with various guide-lines, wherein the spheres of fiscal discipline in the field of administration gained the momentum.To speak the truth, Kanishka or Chanakya was the father of modern administration and economy, who designed a broad  platform centuries aback.

Imperial Rule in India
At  the out-set, say, from 2000 - 3000 B.C.till the early part of the 12th century, India was  ruled by the Hindu Kings with utmost glory and grandeur; but since 1206 A.D., the Muslim dynestic rule was set-up by Kututubuddin Aibek of Das Dynesty following the invasion  of the country by his master Mohammed Ghori of Ghazni dynasty  of Turky. The traditional marathan Muslim regime continued till 1712 A.D.,that is, upto the demise of the Emperor Bhadur Shah, the last Mughal dynestical ruler, which kingdom being set up by  Emperor Babar in 1526 A.D., The East India Company of England, a business organization, which came to India for trade and commerce purposes instantaneously changed their  modus-operandi on being tempted by the unparallel visible and potential wealth and property resources widely spread in the nooks and corns of the country ( east and west and north and south). They took up the helm of administration of India in a piece meal way by applying might and by hook or crook taking advantage of  utter weakness and unbecoming and  uncompromising  feuds and fall -outs  amongst the rulers  besides other internal chaos and  conflicts, those parallely being cropped up.  Ultimately, the entire Indian territorial administration came to their grip one after one under a single banner. The Ahom Kingdom of Assam, which had the unbreaking period of administrative regime for long 598 years (from 1228 to 1826 A.D.) in greater Assam ,also came under the grip of the East India Company following  the Yandabu Treaty, signed by the said company and the earlier invaders of  Assam, the Mans of erstwhile Burma, (now Myanma). During  the tenure of great Queen Victoria of England the British Government took over the administration from the East India Company on the 1st November, 1858 A.D. and started to rule the country through her representative, the Viceroy of India.  Since then, Assam  became a part of great Britain as a province of intregated and consolidated India. The province of Assam was primarily divided into ten districts on 6th February, 1874. The British Rule in India continued upto 1947 and on the 15th August , 1947, India  got its independance following  marathan  struggles and movements both violent and non-violent. But the most tragic part of the happenings was that India was bifurcated and Pakisthan took birth as a muslim dominated country in the global map. India is now a Sovereign, Secular, Socialistic, Democratic Republic since 26th January, 1950. Assam being  the part of India (a province since 1874) and now it is a State of the territory of India.
                     During the Muslim regime, the measures of taxation were there, but in many occasions, it posed to be detrimental to the interest of the Hindu inhabitants. Even, the Emporer Aurangeb used to levy  Jijia tax on the Hindus obviously playing a distinctive communal game to oppress and suppress the non-Muslim community. This was not the single instance, but there were  many. In a nut shell, the measures of taxes were there, but the levy and colletion lacked proper discipline and the requisite sense  of  justice and equity were lacking.

Tax administration in Assam under the British Rules
Our instant topic of discussion, in fact, is taxation in Assam though we designed it in a broad title ultimately to cover the State of Assam, one of the North Eastern States. During the hours of British reign since 1826 A.D., various measures of taxation were adopted. The prominent amongst them were Land Revenue, Excise Duty, Stamp Duty etc. There was Zamindari system in the erstwhile undivided Goalpara  district. The Zaminders or Kings became loyal to the British Goverment in lieu of payment money and other precious gifts. The said Zaminders were the agents of the Government in power in the matter of collection of such revenue resources and other gifts. In other areas  of Assam, the Mouzadars played the pivotal role in this matter.  The mode and manner  of collection and extraction of such revenue were not healthy, but was full of cruelty and brutality to the poor class of people.

State taxation laws
Tax under the Govt. of India Act,1935
Pre-independance  period
The British Government  enacted the Government of India Act in 1935, whereby, the people of India were, inter-alia, provided with a part of autonomy on certain matters to execute such power through their elected representatives, but, those too, were under the royal authority. Taxation was one of the subject of matter of such power of the allegedly designed autonomy. The system of levy and collection of Municipal tax in urban areas and house tax in rural areas also did prevail. A number of States adopted the measures of sales tax in 1936-37, but the Goverment of Assam introduced the following tax measures after enactment of law in 1939 only.
 The measures of tax were the following :-

 1. The Assam Sales of Motor Spirit and Lubricants Taxation Act, 1939- from 1st May, 1939 . A tax on sales or purchase of Petroleum and Lubricants This was, however, replaced by The Assam (sales of Petroleum, Petroleum  Products including Motor Spirit and Lubricants Taxation Act, 1955 from 1.5.1956 with gradual additions of numbers of refinery products and petro-chemicals products besides crude oil. This law was merged with the Assam General Sales Tax Act,  an amalgamated, consolidated and amendment of four operating Acts, namely;   the Assam Sales Tax Act, 1947, the Assam Finance (Sales Tax) Act, 1956, the Assam Sales of Petroleum, Petroleum Products including Motor Spirit and Lubricants Taxation Act, 1955 and the Assam Purchase Tax Act, 1967 from 1.7.1993. The Constitutional Safe-guard, in fact, was existent there in the new Act (The Assam General Sales Tax Act, 1993) by entry 54 List II (State List) in the Seventh Schedule of the Constitution. With the introduction of Assam Value Added Taxation Act, 2003 from 1.5.2005, the items of goods, as were there, were incorporated in the said Act. Contrary to the spirit and intention of the Assam Value Added Tax Act, crude oil, petroleum products and petro-chemical products, the items of first point tax in the State, continued to be administered by this Act without any separate base or footing, exceptions, whatsoever.  The items crude oil, petroleum,petroleum producuts with other ancillaries as well do not have any impact under the Goods and Services Act, 2017 and it has its independant way   of administration probably being carried on by the Assam Value Added Tax Act, 2003.

2. The Assam Agricultural Income Tax, 1939-from 1.4.1939. This is a tax levied   on the agricultural income of the agriculturists. This is seperated from the Indian Income Tax Act, 1961, which is a Central Act with measure of tax on income other than agricultural income. But  40% of the  income derived out of tea, an agricultural product,  is bifurcated and counted for levy of tax under the Indian Income Tax Act, as being the  alleged income derived out of trade. The State can levy tax on the remaining 60% of the income derived out of such production of tea, that too, subject to determination by the Income Tax authorities, a Central Government revenue wing. However, a disparity and discrimination besides over-riding the power of the State taxing authorities are being obviously continuing there. Not only that, the Income Tax Act made it mandatory that the income determined by the income tax authorities has to remain binding on the aggricultural income tax authorities without any power to call in question obviously thereby superseding the manadatory powers laid down in the Assam Agricultural Income Tax Act,1939. A funny aspect is, no doubt, transparent in the administration of this Act.
             This Act has now the base of entry 41 of List II (State List) in the Seventh Schedule of the  Indian Constitution.
         
3.The Assam Amusement and Betting Tax,1939- from 1.8.1939. A tax on Amusement , betting and on use of Cable Television  (being added subsequently). It continued to be operative even after the Constitution of India was adopted. The Constitutional safe-guard was obvious, as envisaged in entry 62 List II (State List) of the Seventh Schedule of the Constitution of India,.
        This measure of tax has been brought under the purview of the Goods and Services Tax Act, 2017 with effect from 1.7.2017.
Post independence period
         After the independence of India, but before the the Constitution of India came into force from 26.1.1950, the Government of Assam enacted the following taxation laws, as mentioned below :-
       1. The Assam Professions, Trades, Callings and Employments Taxation Act, 1947-  from 1st May, 1947. This tax measure was introduced on professions, trades, callings and employments. The  measure of income tax, adopted by the Government of India is a tax  on the net income derived out of income, while the taxes under this Act are levied on the professions, trades, callings and employments. The gross income has been designed as the measuring scale on such items  for levy of tax. Apparently, this is not a double tax on income. This Act is being administered independently by the State taxing authorities and it is well guarded by Article 276 read with  entry 60 of List II (State  List) in Seventh Schedule  of the Constitution of India.
  2.    The Assam Sales Tax Act, 1947 – from 24.12.1947. The measure of tax on the sales and purchases of goods,  was introduced in Assam with  exemption of tax on certain commodities. The tax  on transfer of property in  goods effected in course of execution of works contract and the goods handed over on lease for temporary use by the lessee  without any change of ownership, were  also brought under the  purview of this Act. This Act  was well safe-guarded by entry 54 List II (State List)of the Seventh Schedule of the Constitution.
        This Act was amalgamted with the Assam General Sales Tax Act,1993 with effect from 1.7.1993. There after, it was incorporated with Assam General Sales Tax Act, 1993 from 1.5. 1993 and then again with the Assam Value Added Tax Act, 2003 from 1.5.2005. Now with introduction of the Goods and Services Tax Act, 2017 with effect from 1.7.2017 this  is being governed by the said Act.

Post- Constitutional period
          After the Constitution of India, which came into force from 26.1.1950, the following taxation laws were enacted.
                1.The Assam Taxation on goods carried by Roads and Inland Waterways Act, 1954--  from 24.4.1954. This taxation law was introduced  on the carriage of tea and jute (on weight basis) by road or waterways.  This Act was declared ultra-vires by the Supreme Court of India, as the requisite assent was not obtained from the President of India  under Article 304(b) or 255 of the Constitution of India before  or after the enactment of the said law. The said Act was reintroduced to safe-guard the earlier collection of tax, but the Act finally ceased to be operative after 31.3.1962. This Act was enacted under the authority of entry 56, List II (State List) –Seventh Schedule of the Constitution of India.
           The loss incurred for inoperation of this Act, was compesated by enactment of the Assam Passengers and Goods Taxation Act, 1962, which came into force from 16.8.1962 (as is being discussed latter), based on the said consttutional footings.
          2.The Assam Finance (Sales Tax) Act, 1956- from 1.7.1956. This enactment of law was introduced for the purpose of levy of tax on the sales of some specific goods, which were (i)  imported from out side the State of Assam or (ii) manufactured or processed in Assam for the purpose of sales. This was done under the authority of Article 304(a) read with entry 54 of List II (State List) in the Seventh Schedule of the Constitution of India to avoid discrimination between imported and manufactured or processed goods. This reached to the same fate as in the case of the Assam Sales Tax Act, 1947, as discussed above.
             3.The Assam Passengers and Goods Taxation Act, 1962- from 16.8.1962- The requirement for enactment of this taxation Act  was partly discussed against the item  1 above (Viz the Assam Taxation of Goods carried by Road and Inland Waterways Act, 1954). This has the same Constitutional base as was in the said Act. This tax was leviable on the fare and freight of the passengers and goods, carried by roads and waterways on hire.
           The power of administration of this Act was transferred to the transport administration of the State in the year 1989.
           4. The Assam Urban and Immovable Property Tax Act, 1963- from 1.4.1963. Entry 49  List II (State List) of the Seventh Schedule of the Constitution of  India empowered the State Legisture  vide item ‘Tax on Lands and Buildings’ to enact such a law. The administration of this Act was solely extended for the Urban areas, which were under the Municipal or the Town Committees and it is leviable to the the owners of the lands and buildings on the rental value of such lands and buildings, determined by the Municipality or the Town Committee authorities.
       The power of administration of this Act was transferred to the Municipal and Town Committee authorities in the year1971-72, as it was more relevant to the said authorities.
           5.The Assam Electricity Duty Act, 1964-  from 1.4.1965-  Entry 53 Lst II (State List) of the Seventh Schedule of the Constitution of India empowered the State Legislature to levy tax on consumption or sale of electricity.With such power conferred, the Legislature of Assam enacted the Assam Electricity Duty Act, 1964 to levy tax on the generation, consumption and distribution of electrict energy. This tax is leviable in units.
        The Act is till now operative within the State of Assam.The users, consumers, in fact, are to bear the burden of this measure of tax.
       A section of persons in the electricity board is enjoying the benefit of free payment of rent for consumption of electricity. Likewise, in some temporary supply  of electricity for different purposes, the rents are being paid on lump sum basis. A pertinent question arises  whether duty, as due for consumption, use or supply are being paid to the State Coffer properly or not ?
           6. The Assam Purchase Tax Act, 1967- from 3.7.1971- The Constitutional back ground of this Act is the same, as is in the case of the Assam Sales Tax Act and other two laws on sales and purchases of goods within the State of Assam.  This measure of tax  was on the last point  purchase of  jute, raw hides and skins and paddy.  The  Act was originally given effect from 29.5.1968, but following the cases of litigation in the Court of law and disposal  thereof against the State further amendment of the Act was necessary .It was thus given effect from 3.7.1971 causing loss of revenue for three years.
    This Act as well  reached the same fate as in the case of other three Acts, namely; the Assam Sales Tax Act, the  Assam Finance (Sales Tax)Act and  the Assam (Sales of Petroleum, Petroleum Products including Motor Spirit and Lubricants )Taxation Act, 1955. 
          7. The Assam Tax on Luxuries  (Hotels, Lodging Houses And Hospitals Act, 1989- from 1.4.189 original Act and from 29.8.2009, the Hospital Act. The tax on luxuries has the same base like that of the amusement and betting tax, as envisaged in entry 62 List II (State List) in the Seventh Schedule  of the Constitution of India. Taxes are leviable under this Act on the accommodations, services and amenities provided in the Hotels, Lodging Houses and Hospitals (other than the Government Hospitals).
     This Act was merged with Goods and Services Tax Act,2017 with effect from 1.7.2017.
            8.The Assam Taxation (On Specified Lands) Act,- from 1.1.1990. This Act was introduced by virtue of power conferred to the State Legislature vide entry 49- List II  State List) in the Seventh Schedule of the Constitution of India.  Originally, this measure of tax was introduced on the lands taking into consideration the quantum of production of green tea leaves and extraction of coal.The weight pertaining to the production or extraction was a measuring Scale for determining the tax on land. The item coal was withdrawn from the tax scenario for a short time, but it was reintroduced. Other items, added in this respect ,were crude oil, natural gas, lime stones etc.
            The Act was challenged before the Hon’ble High Court and the Supreme court of India on the plea that it is not a tax on production of tea or extraction of coal, but it is a tax on the land. However, after a Memorandum  of Understanding signed by  the appellants and the State Government of Assam, the cases were withdrawn and the rates of tax were reduced from 50 paise to 18 paise per kilogram of tea produced. That, it was a levy of tax on land and not on the green tea leaves was confirmed by Hon’ble Calcutta High Court, in some identical case in West Bengal, but the  Government. Had nothing to do following the Memorandum of Understanding signed hurriedly.This Act is operating till now yielding a substantial amount of revenue to the State coffer, though there has been a shortfall, as no power of inspection and seizure of goods were incorporated in this Act.
            9. The Assam General Sales Tax Act, 1993-  from 1.7.1993. This has the same constitutional base, as has been discussed in the cases of the four taxation  laws in relation to the sales and purchases of goods in Assam. Following the dire necessity felt to mininimize the work load of administration, which involved time factor as well, these four  taxation laws  in relation to  the sales and purchases of goods operative in Assam, were amalgamated, consolidated and amended in Assam and the Assam General Tax Act, 1993 to give birth to this new Act for operation in the State of Assam. This has the same constitutional base as in othe sales and purchase tax Act.
       This Act was an ideal one and continued to be operative till the Assam Value Added Tax Act,2003 on 1.5.2005, which was subsquently replaced by the Goods and Services Tax Act, 2017  from 1.7.2017.
             10. The Assam Taxation  (On Luxuries) Act, 1997 –from 1.8.1997- The constitutional base of this taxation Act is identical to the Tax on Luxuries (Hotels, Lodging Houses and Hospitals) Act,1989, but the subject matter, mode and manner of the measure of tax is different. The tax was leviable on the  stock value of luxuries, namely, of Cherrots, Cigerettes, Cigar, Scented  Tobacco including Zarda, Smoking Mixture for Pipes and Cigerettes, Mill made Textiles and Fabrics. The operation of this Act got yield of a substial amount of revenue to the State.
          The Hon’ble Supreme Court of India by a judgment and order passed on 21.1.2005 declared the incorporation of the items tobacco and Gudka as ultra-vires and the Act thereafter ceased to be effective.
           11.The Assam Entry Tax Act, 2001- from 1.10.2001. The  Assam Entry Tax Act, 2001 was introduced under the authority of  Entry 52-List II (State List) in the Seventh Schedule of the Constitution of India. Originally, the aim and object of this Act was was to levy of tax on some specified goods entered into any local areas of Assam from the places outside the State of Assam for use or sale. The intention of this Act was to prevent a section of traders  or consumers to purchase goods in places outside the State of Assam  and to bring such goods into Assam for onward sale or  use depriving the State of its revenue.   After 18 days of coming into force of the said Act, the Act was, however, amended abruptly and apart from entry  of goods  into Assam, the entry of goods from  one local area in Assam to any other local area in Assam  were  made  liable to be taxed. Thus apart from the character of tax  on entry of goods, it was simultaneously designed with  the character of Octroi tax.
            A  portion of this Act was declared ultra-vires by the Hon’ble Gauhati High Court on  17.11.2006 for the constutional lapses, which decision was upheld on appeal by the larger Bench of the said Court. The Act was thus repealed and a fresh law on  Assam Entry Tax was enacted and given effect from 13.4.2008 with the power of the  State to realise the earlier taxes.
     With the introduction of the Goods and Services Tax Act, 2017 from 1.7.2017, this Act ceased to be operative.
       12. The Assam Value Added Tax Act, 2003-  from 1.5.2005- This is a new measure of levy of tax on the sales and purchases of goods. It is a tax leviable at every stage of sale made by a registered dealer to another registered dealer with the provision of credit of input tax paid at the points of purchase of such goods made, It is leviable at different stages like (i) sale of raw materials (ii) manufactured or finished products and (iii) the goods imported from the places outside the State of Assam and sales thereof. The issue of Tax Invoices in case of whole sale and Retail Invoices were made imperative in relation to the transaction. With the addition of value added tax, the prices of the commodities naturally went up. The dealers were benefitted, the State Government used to get the legitimate amount of tax,  but the consumers had to suffer multiplicity of tax following the merger of tax in each stage of sales (i.e value added tax). Though the aim and object of this Act was to provide transparency, but in the field of activities it was not as good,as it was assured to be. Though the items pertaining to Petroleum and petroleum Products were excluded from the purview of this Act,  the administration in relation to the said measure of tax were being carried  on under the said Assam Value Added Tax Act with the identical system of administration.  This was indeed contrary to the main ideology of the operative law .The Act was repealed following the introduction of the Goods and Services Tax Act, 2017, while petroleum, diesel etc. maintained their own base. 

The Central taxation laws
            1. The Central Sales Tax Act, 1956-  Prior to 5.1.1957, there was no measure of tax on the sales and purchases of the goods made in the course of inter-State trade or commerce. Article 269 (3)(g) read with entry 92A of List I (Union List) in the Seventh Schedule of the Constituion of India empowered Parliament to make laws for  levy of tax on thes sales or purchases of goods made in the course of inter-State trade or commerce.  Parliament enacted the Central Sales Tax Act, 1956, which  came into force from 5.1.1957. The items of goods, which were taxable under State taxation Laws were as well to be levied tax under  the  this Act, when sold in the course of inter-State trade or commerce. Two categories of the rates were persistant, namely; for sales to the registered dealers under the Act and sales  to other than the registered dealers. The transfer of stock of goods were not be taxed under this Act subject to the conditions and restrictions , as imposed. The State Governments were empowered to grant exemption of tax on certain commodities or to certain areas under the provisions of this Act.
      This taxation law ceased to be existent following introduction of the Goods and Sevices Tax Act, 2017 from 1.7.2017.
         2. The Goods and Services Tax Act, 1917- from 1.7.2017- The Government  of India gave a new thought to make restructure of a series of the Central and State taxation Acts not only in respect of sales  or purchases the goods and other ancillaries,connected therewith, into one Act under a single tax net as a measure of simplification of administration as well as growth of economy for the entire the country as a whole. The central taxes intended to be merged were the Central Excise Duty; Additional Excise Duty; Exice Duty levied under the Medicinal and Toiletories Preparation; Service Tax; Additional Customs Duty commonly known as Countervailing Duty; Special AdditionalDuties of Customs ; Surchage and Cess; Central Sales tax, while of the States, the Sales tax, Entertainment tax, Luxury tax, Lottery, Betting and Gambling tax , Cess and Surcharges, Entry tax.
        A series of items of services was incorporated in this new Act for the purpose of levy of tax.
      There had been wide dispute and dissention over the question of introduction of this consolidated tax measure, but after wide deliberation, ultimately,  a consensus was arrived at and it was  introduced unanimously.
      The Constitution of India was amended  with the requisite Articles and the entries of the Schedules thereof before the enactment of the Goods and Services Act.
       The Goods and services Act has been designed into three aspects, as below
          (1)State Goods and Services Act (SGST)-  enacted to be administered by the State authorities in the line of the Central Goods and Services Act;
           (2) Central Goods and Services Act (CGST)- enacted to be administered by the Central  authorities;
            (3) Inter State Goods and Services Tax Act (IGST)- enacted to  be administered by the Central authorities in the matter of inter-State deals.
           Though  two years have  been over after implementation of the Goods and Services Tax Act, it is yet to attain maturity and the common people are yet to be made aware of the pros and cons of this measures of tax. This tax measures did not yield a very positive result and according to media report, the collection of revenue is now in a lower side.
         The State taxation laws, as exhibited above, which were not incorporated in the Goods and Services Tax  are continuing their operation and administration independently, as before.

Conclusion
         The ‘Goods and Services Tax’ is a self-designed omnibus with multifarious Central and State apparatus and components, propelled by designed engine with self-moving arrangements, having its full control over the methodical journey, which is rarely be astrayed or cracked in reaching the destination. Such designed omnibus may not, however, always ensure safe and proper  journey and to yeild a positive result due to unhealthy apparatus and irregular ingredients and components. The outside vicious atmosphere may also influence adversely in the loading components. Our suspicious vision is that there may be  foul play in the process. ‘Good will and bad will’; ‘honesty and dishonesty’ may in either way influence the race. ‘Evasion and avoidance are ‘brothers twine’. Our intention is to say that full  sphere of honesty and trustworthy must prevail upon the operating traders in the course of their journey of trades and services activities.
        The law making authorities have given due stresses on the on the honesty, integrity and trustworthyness of the traders and discouraged the functions of the ‘Inspector Raj’, the field officers  on the plea of the alleged high handedness and corruption. Even if any raid is to be undertaken, that is also to be done only with the prior orders or approval of the Joint Commissioner of Taxes, normally remaining far away from the spot in such process, there will be a time gap and the whole exercise may be foiled and frustrated . The law, on the other hand, maintained utter silence on the question of erection and operation of the check posts, which played a pivotal role in preventing, detecting and arresting evasion of taxes in the erstwhile law regimes. Accordingly, all check posts have been made effective making way for free movement of the goods.’The earth would have been a heavenly abode had there been no evasion or avoidance of taxes’. But whether it can be rightly presumed or assumed?
          Some raw materials, like jute, superi, tea leaves as well as timbers, bamboo, cane and furniture thereof besides coal, dhania, jeera, haldhi, ginger, hides and skins and bone of animals, raptiles  etc. which are the  non-excisable commodities use make clandestine movements from one place to another and from one State to another on sales or sock transfer, whatsoever, we believe, hardly pay tax righteously and legitimately. One can- not assure that the finished products derived thereof are being accounted for properly to be incorporated in the tax net. The  reports of unaccounted movement of coal and detention thereof are frequently published in the news media. Functioning of unauthorised syndicates and collection of unathorized  and illegal tax are also gaining the momentum. ‘Necessity is the other of invention’. So, tax evader or avoider will try to make new ways and means to evade payment of taxes. This vital point requires a proper review by the law making and law enforcing authorities.  
           At the conclusion, we add two famous sayings-
           Frederick the Great of Russia- “No Government can exist without taxation. This money must necessarily be levied on the people, and grand art consists of levying so as not to oppress.”
        Kautilya or Chanakya- “ Thus the king shall first reform the administration, by punishing appropriately  those officers, who deal in wealth, they duly corrected shall use the right punishments to ensure the good conduct of the people of the town and countries.”


Mrinal Kanti Chakrabartty
R.G. Barua  Road, 10- Lakhimipath’
Guwahati-781-024 (Assam)

Proposed Goods And Services Tax Regime States’ Economic Sovereignity Is Likely To Be Curtailed

Since the introduction of the Government of India Act, 1935, the power to levy tax on the sales or purchases of the goods along with some other allied functions within the respective territorial areas of the erstwhile provinces of India was vested upon the Provincial Legislative Assemblies of the States. After India became a Democratic Republic Nation, the Constitution of India (Constitution) was adopted and it became effective from the 26^th January, 1950 with the Federal structure of Governments. The existent four taxation laws on the sales and purchases of goods in Assam, namely; the Assam Sales Tax Act, 1947, the Assam Finance (Sales Tax) Act, 1956, the Assam Sales of Petroleum and Petroleum Products including Motor Spirit and Lubricants Taxation Act, 1955 and the Assam Purchase Tax Act, 1967 were amalgamated and consolidated to give birth to a new tax law, the Assam General Sales Tax Act, 1993 (AGST Act) from 01.07.1993. The said law Act was dismantled to design the Assam Value Added Tax Act, 2003 (VAT Act) effective from 01.05. 2005. The levy of tax at every stage in the series of the sales of goods made with the provision of credit of input tax paid at the point of the previous purchases by a registered dealer to the other was the main phenomenon of the Act. The goods like- crude oil, petrol, diesel with other petroleum products, tea, bitumen, liquor etc., however, were kept out side the VAT scenario, designing those items as the first point taxable goods in Assam in the new Act. Contrary to restriction on input tax credit on the sales of such goods, a clash was maintained by incorporating the provisions for set-off the tax, paid on the auction purchased tea and warehouse purchased branded liquor, creating thereby an utter confusion. The State’s legitimate tax has been secured, the traders use to get the input tax credit to avoid double/multiple taxation, but the consumers are to bear the burden of heavy price rise owing to such multiple levy of tax, beset with, other allied elements. The VAT system is methodical, chronological and self-designed, but some inner set-backs are well existent there. The mounting chronic evasion of taxes without proper vigilance machinery is counted as a serious blow to the legitimate revenue earnings. The mode of input tax credit, the ways and style of assessment including audit assessment seem to be unsystematic and irrational. Of course these asre the administrative matters and responsibility lies with the competent authority to look upon the same.

      A project was drawn up by the Government of India (Centre) a couple of years back for unification of some Central and State tax laws to be baptized as ’Goods and Services Tax’  (GST) in a designed manner. The project, however, could not be materialized as yet, though it was announced to make effective from 01.04.2010, being followed by other dates. The ground-yard of the project could not be prepared, by way of amending the Constitution, as some States are not in favour of the project, which they apprehend that the prolonged fiscal autonomy and austerity of the States would be hijacked by the centre. Such unification is, no doubt, aimed at simplification of the multiple tax system at various angles, but it is likely to create a vacuum in the State’s economy making them solely to be dependant on the Centre.  The process of amendment of the Constitution was started long back, but it is still in the doldrums. The Lok Sabha recently adopted the bill, but it is under scrutiny by the Rajya Sabha. Even after Rajya Sabha’s clearance, the concurrence from at least 50% States will be incumbent. Of course, Assam was the pioneer to accept the project without proper study and examination on the ultimate fate. It is still doubtful, if the proposed project can be materialized from 01.04.2016, as announced by the Union Finance Minister Arun Jately, while the project is still hanging in the balance.

      The GST literature indicates that a series of Central and State laws will be unified and designed in a unique way to simplify the existing multiple levy of tax at the Central and the States’ level. It is intended to consolidate and to design a single law at the behest of the Centre. The unified Central cum State laws will cover the following:

     Central taxes :  Central Excise Duty, Additional Excise Duties, Excise Duty levied under Medicinal & Toiletries Preparation Act, Service Tax, Additional Customs Duty commonly known as countervailing Duty (CVD), Special Additional Duty, Surcharge and Cess.

    State taxes : Value Added Tax, Sales tax, Entertainment tax, Luxury tax, Taxes on lottery, betting and gambling; State Cess and Surcharges, Entry tax not in lieu of Octroi.

 The item of goods, proposed to be excluded from the GST net are - petroleum and petroleum products, namely; petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption besides tobacco.

 A dilemma is prevailing on the fate of the existing Purchase tax, Stamp Duty, Vehicles tax, Electricity duty and other Entry tax and Octroi measures. In Assam, the measure of purchase tax is not presently effective; though a vital necessity is felt that the last point purchase of goods like raw jute, superi, hides and skins, bones of animals, birds etc. should have an independent base of tax entity, as previously existent for the growth of economy.                                                                 

Contrary to the proposed tax measure, the GST law is intended to discourage the value added tax charged and collected on each sale, but to charge the differences only to avoid heavy price rise, as prevalent. The Tax Credit Accounts are to be guided, as under:

(A)    Out put tax: (i) CGST, (ii) SGST. (Central GST and State GST)

(B)       Input tax: (i) CGST and IGST against CGST out put tax, (ii) SGST and IGST against SGST out put tax (Central GST, State GST and Inter-State GST).

 Recently, the Union Finance Minister declared that one percent tax will be levied temporarily on the inter-State sales.

    A full-fledged scheme of the GST is yet to be made public. It will be available after the Constitution is amended and the draft law is processed.

      The GST will be a Central law. In respect of industrial production, the element of tax on GST will be levied at source in a comprehensive manner. The subsequent levy of such tax is to be followed according to the formulated principles. It may be that the States will simply be the mechanical device of the centre and is to remain cipher. The States, as we guess, will not be in a position to safe guard the local interest, when so warranted, as at present and to remain dependent on the Centre for fund allocation and other allied matters. The federal character of the States in the matter of fiscal autonomy is likely to take a good bye and unitary imposition at the behest of the Centre may take berth. A final picture will be visible after the project is materialized.

Taxation Department- Power Exercise Scenario (Upliftment of economy in a righteous way)

Appointment and Delegation of powers

 The tax administration of Assam was being carried on in a disciplined way within the ambit and competence of the taxation laws, operative in the State. There are as many as nine taxation laws eight of which were enacted by the State Legislature, while one being by Parliament. Each law plays the pivotal role towards the augmentation of revenue to the State Exchequer. The Commissioner of Taxes, Assam is the supreme authority for the purpose of administration of the taxation laws and is appointed by the Government of Assam for the purpose of carrying out the purposes of the Act along with the officials of different cadres right from the rank of the Additional Commissioners of Taxes to the grass root level, the Inspectors of Taxes, specifying the area of functioning in respect of each of the officers. The Commissioner is equipped with the supreme powers to carry on the administration of the Acts, while for the smooth conduct of the administration; he has been empowered to delegate his powers to the officers, appointed to assist him befitting to their status, subject to the conditions and restrictions, as envisaged in the Acts and the rules framed thereunder. It is the prerogative of the Commissioner to assign the powers, to detail the functions of the taxing authority to the best of his judgment in consideration of the knowledge of law, working ability and other allied factors. In the past, the posting of the officers in the important revenue areas were made in consideration of seniority and capability to run the revenue administration, beset with, the neck of proper collection of revenue including the arrear taxes as well as to prevent, detect and arrest the evasion of taxes by the tax dodgers. A dossier of the officers was maintained thereon. As the days are going on, such mode of consideration has been taken a good bye. In the past, the opinion and recommendation of the Commissioner in the matter of posting and transfer, used to gain priority, but now in reverse to that the political views and recommendation are gaining the momentum in many cases. The posting of officers in the check posts and other important areas depends on the choice of the officers and not in the interest of public service. Naturally, erosion has been taken place in the proper and zealous functioning and there has been gradual deterioration of the administration. The Commissioner sometimes fails to exert power and a set-back becomes obvious.

Duties and resposibilities

The duties and responsibilities of the taxation officers have been widely tabled. In a brief (i) an Inspector of Taxes is meant for survey, inspection, checking, preventing and arresting  the evasion of taxes, collection of particulars from different sources for the purpose of verification of the same in the field as well as to take note at the time of assessments of taxes, besides other allied works; (ii) an Assistant Commissioner of Taxes or a Superintendent of Taxes of the unit is responsible for registration of a dealer, for realizing security money to ensure proper payment of tax and proper custody of statutory declaration forms; to make assessment and realization of tax including the arrears taxes, inspection, checking  and detection of evasion of taxes; general supervision of administration in the area and other allied works; (iii) a Deputy Commissioner of Taxes of the zone is to supervise the works of the officers of the units in all spheres including inspection of offices, looking into the position and progress of  collection of revenue with arrears, chalking out special drive for collection of revenue including the arrear taxes and maintenance of liaison with the Commissioner of Taxes,(iv) Deputy Commissioner of Taxes (Appeals) is to function as the appellate authority against the order of assessment imposition of penalty, passed by the Assistant Commissioners of Taxes and the Superintendents of Taxes, when aggrieved by a dealer,. The powers and functions of the Deputy Commissioner (Appeals) are independent and he is not act  by virtue of the powers by the Commissioner, but under the statute of law; (v) Joint Commissioner of Taxes is to discharge the powers and functions, assigned by the Commissioner on different subjects, to make inspection of the subordinate offices, hear revision petition and other allied matters; (v) Additional Commissioner of Taxes is to render assistance to the Commissioner in different matters including inspection, general and law administration,  hearing of revision petition and other allied matters. Each of the officers except the Deputy Commissioner(Appeals), as stated above, is equipped with the powers, delegated by the Commissioner befitting to their status as well as in consideration of the administrative needs.

Enforcement wing

(Repeal Act)

An Enforcement wing was created in the taxation department in the year 1964 for the purpose of checking, preventing and arresting evasion of taxes. In fact, there was no specific provision in the sales tax laws operative in the State to create such wing at the relevant times and the same used to run as a matter of convention. The wing was centrally operated, being manned by one Assistant Commissioner of Taxes with numbers of the Superintendent of Taxes and the Inspectors of Taxes, subject to the supervision and control of the Commissioner of Taxes. An Inspector of Taxes was posted in each unit for the purpose of collection of information and to provide assistance in different aspects to the central wing. In 1967-68, the said wing was decentralized and each zonal Assistant Commissioner was entrusted to head the zonal wing in their respective zones with the Superintendent of Taxes and Inspectors of Taxes placed at his disposal. In the year 1981, in addition to the existing set-up, another Enforcement wing was created centrally under a Deputy Commissioner of Taxes with the numbers of the Superintendent of Taxes. There had been complaints at different corners about the mal-functioning of the officers of the central wing as well harassment to the traders. A section of traders and professional personnel were on the heels to abolish the Enforcement wing. They could manage the bureaucratic and the political set-up of the relevant time and succeeded to dismantle this important wing including the zonal level wings late in December, 1983. Instead of bringing the officers, alleged to have been involved in mal-functioning, to book, the abolition or withdrawal of the wing was unfortunate and was detrimental to the interest of the State revenue. The officers might be bad, but the aim and object of the wing was revenue oriented. The funniest part of thing is that, the Government did not revive the said organization during these long 31 year and encouraged a section of unscrupulous traders to move freely towards evasion of taxes.

(AGST Act)

Previously, four taxation laws in relation to the sale and purchases of the goods were operative, but the same were amalgamated, consolidated to give birth to a single Act, namely; the Assam General Sales Tax Act, 1993 (AGST) with effect from the 1st July, 1993. This Act empowered the State Government (Government of Assam) to constitute a Bureau of Investigation or Vigilance or Enforcement wing consisting of the Officers, appointed by the Government for the purpose of collection of intelligence, enquiry and investigation in connection with the evasion of taxes. A vigilance group was constituted by the Commissioner of Taxes and the officers comprising of such group, were delegated with the powers, but the same was not constituted by the State Government, as laid down. The officers entrusted in the group as well created some displeasure in the name of checking of evasion of taxes, which created out rage amongst the different section of tax payers.

(VAT Act)

The AGST Act was repealed and in its place the Assam Value Added Tax Act, 2003 (VAT Act) came into operation from the 1st May, 2005. In the said Act, a provision to create a vigilance wing was incorporated as well. Unlike the AGST Act, the power to constitute a vigilance wing was vested to the Commissioner, but such group is to be constituted out of the officers, appointed by the State Government to assist the Commissioner. The vital part of such appointment is that the territorial jurisdiction of the officers is to be specified in such appointment made by the Government. The constitution of the vigilance wing by the Commissioner, therefore, has a pre-condition that the appointment of the tax officers for carrying out then purposes of the Act must contain the territorial jurisdiction, as notified by the Government. While constituting such vigilance wing the Commissioner can not specify the area out of his own, but it is relevant to the appointment. Within five days of coming of the VAT Act into force, the Commissioner by a notification delegated his powers to a set of officers to exercise powers under the said Act. The salient feature of such delegation of power was that, it was not preceded by any notification pertaining to the appointment made by the Government with the territorial jurisdiction. The said notification seemed to be not proper in the eye of law. However, with the transfer of the entire group of the officer, this wing ceased to function.

The delegation of power, as stated in the pre-para included,  inter-alia,  the power to make provisional assessment, re-assessment on the escaped or evaded taxes, to undertake the special mode of recovery, to levy interest, to purchase goods in case of under valuation, to compound offence, to impose penalty etc. Actually, the doctrine of separation of power, as envisaged in the Constitution and the definition of the term ‘Superintendent’ left no scope for such delegation of powers of assessment, re-assessment, imposition of penalty etc. Apparently the said delegation of power suffered from shortfall and impropriety.

Functioning of taxing authorities without legal authority

Presently, there is no such vigilance wing, constituted by the Commissioner in the manner, discussed above. It has been, however, learnt that a set of officers are being detailed to roam and function in the matter of inspection of the traders’ business premises, godown, transporters’ godown premises, to make interception of the goods vehicles and inspection thereof throughout the State of Assam. No appointment of such officers under the Act with the territorial jurisdiction was made by issue of notification by the Government and no delegation of power was conferred by the Commissioner in this respect. This seems to be a unique way of functioning currently, where the legal provisions have been given a good bye and some unwritten jungle laws have been introduced.

We have full moral support to undertake checking activities with drastic measures against the tax dodgers, but as a retired officer of the taxation department having prolonged profound experience in the taxation department, we do not deem it proper to keep our eyes closed on such ways of functioning, having no legal base or entity. We have no other ways, but to express our views in writing no matter if it reaches to the deaf ears. The proceedings undertaken for registration, requiring furnishing of security, orders pertaining to assessment, re-assessment, rectification of assessment, penalty, compounding of offences etc. by the officers, suffer from immense lacunae and are found to be fallacious. There is no effort or endevour to make the new comers adequately trained up for want of requisite infrastructure, such as providing training, holding workshops etc.

Conclusion

The prosperity of a State largely and fully depends on the utilization and mobilization of the resources available at its disposal and to make proper use thereof. The revenue collection is always incremental, but the trend of evasion leaps no bound. Unless the tax machinery is active and sincere and moves in a proper and righteous way, the drainage of revenue will continue by way of tax dodging activities.

(Mrinal Kanti Chakrabartty)

       Guwahati-24

TAX MECHANISM

Burning questions on the set-back of economy in Assam

Assam is rich of its visible and potential natural resources, but adequate measures have not been taken for the utilization of such resources and mobilization of the out turns. The growth of industry is quite negligible in Assam. The other infrastructures, connected therewith, could not as well be accelerated properly, as a consequence.  The fiscal out turn derived, are enjoyed by the people of the other States. The common people of Assam have practically to pass their days with hunger, beset with, acute darkness of poverty. The shyness of financial condition is utterly responsible for the same.  The indifferent attitude of the State political bosses as well the lack of dynamism of the administrative machineries, are mainly responsible for such set backs vis-à-vis the fallen economy of the State.

OIL SECTOR

(Original history)

       Assam is blessed by nature with adequate numbers of Oil fields in its soil, particularly in the Upper Assam areas.  There may be some more in other areas of the State, but least efforts were made to unearth or unveil such potential resources. There was only one Oil refinery at Digboi of the present Tinsukia district of Assam since the British era. Consequent upon discovery of a number of new Oil fields in the Upper Assam area, namely; in Sivsagar, Dibrugarh and Tinsukia districts, a conspiracy was started at the instance of the Government of India (Central Government) to pump out the crude oil by extracting the same from such Oil fields, discovered in Assam to the Barauni Refinery of Bihar.  The Government of Assam (State Government) maintained a cipher role in such conspiracy to deprive the people of Assam on the points of installation of new industry, avenue of employment and other allied benefits. The mass people of Assam, therefore, awoke up against such attitude of the Central Government and started an agitation demanding installation of another Oil refinery in Assam for utilization of the crude oil to be extracted from the newly discovered oil fields. When it reached to the climax, the Central Government agreed to start a refinery in Assam.

Second refinery established in Assam

 A second mini refinery was established at Noonmati in the heart of the Gauhati City and it was commissioned in 1960. The project was started to refine the crude oil and to sale its finished petroleum products under the management of the Indian  Oil Corporation Ltd. (IOC), a pioneer Oil Entrepreneur of the country to console the people of the State. 

      A huge quantity of such crude oil, however, was being pumped out to Barauni to feed the Barauni Refinery, as originally planned.

Attempt to evade liabilities to pay tax

     Crude Oil is a taxable item of goods under the Assam (Sales of Petroleum and Petroleum Products, including Motor Spirit and Lubricants) Taxation Act, 1955 (Petroleum Act). The movement of such crude oil on sales out side the State of Assam in the course of inter-State trade or commerce, attracted liabilities to pay tax under the Central Sales Tax Act, 1956 (Central Act). The Oil Entrepreneurs, extracting such crude oil from the soil of Assam and making movement of the same on sales to Barauni in the course of inter-State trade or commerce, originally did not pay any tax on the sales of such goods. When required by the Superintendent of Taxes (taxing authority) of the area, the Oil Extracting Entrepreneur filed the case of litigation in the highest forum of law. Ultimately, a historic judgment was delivered by the Supreme Court of India (Apex Court), affirming the liabilities of the Extracting Entrepreneur to pay tax under the Central Act. The said Oil Entrepreneurs now involved in extracting operations are (i) The Oil India Ltd. (OIL) and (ii) The Oil and Natural Gas Corporation (ONGC)]. After the Apex Court’s verdict, they started to pay tax.

Establishment of third refinery with its modus-operandi

       In the meantime, another Oil Refinery was set-up in Dhaligaon of Bongaigaon, namely; the Bongaigaon Refinery and Petro Chemicals Ltd (BRPL). The sales of petroleum and petro-chemical products used to make a considerable inflow of revenue to the State Exchequer. There was, however, a mystery.  The sales of the petroleum products of the BRPL were restricted to the IOC only. It could not make sale of its products to any other Oil organization as well as to the consumers direct. It is to be routed through the IOC. That means, the BRPL was a manufacturing agency, while marketing agency of the BRPL lied with the IOC, which could only make sales of such products in the market.

Fourth refinery established in Assam

    The movement started by the All Assam Students Union (AASU), associated by the Gana Sangram Samitee in 1979 ,  inter-alia, for driving out the influx of the illegal foreigners into Assam, making entry into the soil of Assam from Pakisthan (now Bangladesh) came to an end, following a Memorandum Of Understanding (MOU), signed by them with the Central and the State Government on the 15th August, 1985. Along with the other terms, incorporated in the MOU, one of the terms was that a big sized refinery is to be set up in the State. The Numaligarh Refinery is the product of the said MUO. The out flow of crude oil to Barauni was discontinued after the Numaligarh Refinery was commissioned.

Price mechanism of petroleum products

        The Oil Co-ordination Committee (OCC), constituted by the Central Government under the Ministry of Petroleum, used to control the price mechanism of crude oil and other petroleum products. Prior to 24.09.1982 the taxes on the petroleum products were levied in Assam on the volume of the petroleum products sold. The said system was discontinued and the taxes were being levied on advelorem basis, that is, on the value of such goods sold.  There were two-folds of price mechanism in respect of such goods sold; Ex-refinery price and the Retention price. The ex-refinery price included; the cost of production, excise duty, freight and tax, while the retention price was fixed after taking into consideration the imported price of crude oil, cost of the indigenous crude oil, refinery cost and refinery margins, crude throughput, product patterns etc. The retention price was, therefore, much higher than the ex-refinery price. The BRPL sold its products to the IOC at the ex-refinery price, while the IOC sold such BRPL products along with its own manufacturing products at the retention price. The tax on the sales of the petroleum products is payable at the point of first sale made in Assam. No tax was, however, payable at the point of second or subsequent sales made in Assam in respect of the same goods, subject to discharge of onus that such tax was paid at the first stage of sale by the BRPL. The BRPL paid tax on the sales made the ex-refinery price, while the IOC charged tax on the sale value in respect of its own products and also the products, purchased from the BRPL at the ex-refinery price. The IOC paid tax on the sales of their own products only, while no tax was paid on the sales of such goods made out of the purchases made from the BRPL, on the plea that such sales were the second stage of sales made in Assam. The charge and collection of tax was, therefore, irregular. The IOC maintained that this had to be done to maintain the price equilibrium in the course of business of selling the goods, but in the eye of law, this was an unauthorized and illegal collection of tax made by the IOC without depositing the same into the State Coffer. There was no provision in the Petroleum Act to make forfeiture of such amount and to credit the amount into the Government account and also to initiate any penal action for such illegal collection of tax on the second sales of the petroleum products made in Assam. Naturally, such amount of tax was added to the margin of profit in respect of the business of the IOC. The State was deprived of such tax revenue, which were collected from the common consumers.

System of maintenance of accounts

         The BRPL, on the other hand, used to receive the difference of the sale price between the Retention price and the Ex-refinery price from the pool account of the OCC and credited such receipt in their accounts, as ‘the sales of goods produced’, which was duly projected in the Balance Sheet, maintained for the respective years. An explanatory note in respect of such difference of amount, received from the OCC, was recorded in the Balance Sheets of the relevant years as - ‘Sale includes,  inter-alia, excise duty, tax and freight etc., wherever applicable and the OCC Pool account adjustment, as allowed by the Government from time to time, as per petroleum pricing policy.” Apparently, from the tone of the language, reflected in the Balance Sheet, it appeared that the said amount , received from the OCC, was a part of the sale price of the same goods, sold by the BRPL to the IOC, which was credited in the account ‘Sales of the goods produced’.

Levy of tax and its consequential effect

         The Superintendent of Taxes, Bongaigaon (taxing authority), therefore, took into consideration the entire amount of sales, projected in this behalf  (viz the amount received on account of the ex-refinery price and the amount received from the OCC) and  levied tax to the BRPL from period ending 30.09.1982 and onwards. 

        No tax could, however, be levied to the IOC on the tax charged and collected illegally on the second stage of sales of such goods made in Assam.  No action could as well be taken for forfeiture of the excess tax collected and no penal measure as well could be initiated for such unauthorized and illegal collection of taxes by IOC. In fact, the provisions for forfeiture existed in the analogous tax laws on the sales and purchases of goods, operating in Assam, but conspicuously, the same was absent in the Petroleum Act, though this Act came into force long before in 1939, while the other sales tax laws came into force in 1947 and 1956.

     The dispute in regard to the levy of tax to the BRPL adding back the part of the sale price, as aforesaid, was ultimately dragged to the Apex Court. The Apex court finally provided relief to the BRPL saying that the said amount was nothing but a subsidy. The action taken in this behalf thus took a final halt there.  There are, however, some reservations as to the measure of defence taken at the State level.

       The State of Assam thus lost more than 100 crore of rupees, as a consequence from the period from 24.09.1982 to 30.06.1993 on this pertinent issue, initiated and ultimately closed down.

 Leakage could be averted

       The Petroleum Act was repealed and its place, a new Act with the amalgamation, consolidation and amendment of four taxation laws in respect of the sales and purchases of goods in force in Assam, which was designed as the Assam General Sales Tax Act, 1993 (AGST Act) and came into force from the 1st July, 1993. In the said new Act, provision was incorporated for forfeiture of the illegal, unauthorized and excess tax collected. Steps could therefore be taken for forfeiture of such amount of tax collected by the IOC from 01.07.1993 and onwards. This, however, seems to have not been done.

Levy of tax, when sale price exceed forty percentum over the purchase price

      Another provision was incorporated in the AGST Act effective from 01.07.1993, which laid down, as below:

“Where a person sells a substantial part of the goods, manufactured by him or imported by him to another person for sale under the brand name of such other person or for sale as distribution or selling agent or for sale for repacking or subjecting the goods to another process not amounting to manufacture and the price charged on sale exceeds the sale price by more than such percentage as may be prescribed in respect of such goods or classes of such goods, the re-sale exceeds the sale price by more than such percentage, as may be prescribed in respect of such goods or class of goods, the resale by such other person shall subject to the rules, if any, framed in this behalf, be deemed to be at the first point of sale within the State.”

      It was provided in the rules, framed under the AGST Act, that when such sales exceed forty percentum of the purchase value, a tax on such sales proceeds is leviable.

     The sales proceeds of IOC at retention price in respect of the goods purchased from the IOC at ex-refinery price exceeded forty percent over the purchase value. The taxing authority, Guwahati Unit ‘A’ (taxing authority) took resort to the said provisions of law and levied tax on such sales proceeds of goods derived out of the purchases made on ex-factory basis from 01.07.1993 and realized the tax, which to some extent safe-guarded the interest of the revenue of the State. However, for the indifferent attitude and lack of proper action, taken by the Government, a huge amount of such tax revenue from 24.09.1982 to 30.06.1993, as discussed above had to be lost.

New price mechanism and its shortfalls

        The price mechanism, adopted by the OCC, as discussed above, continued upto 31stMarch, 1998. The Central Government probably realized that such types of dual sale price on the petroleum commodity might give rise to further complicacies and the said price mechanism was dismantled from the 1st April, 1998. This would have safe-guarded well the interest of the revenue of the State, but the State Government suddenly took another new measure of levy of tax to petroleum entrepreneurs.

        Crude oil, petrol, diesel and other petroleum products are taxable at the point of first sale in Assam and no tax is leviable on the second or subsequent sales made thereof. The Legislatures of Assam made an amendment in the AGST Act effective from the 5th June,1998, whereby, it was laid down that the inter-se-sales of such petrol and petroleum products made by one Oil Company to another Oil Company in Assam are not be treated as the first point sale in Assam for the purpose of levying of tax.  That means, the sales made by the last Oil Company in Assam to the consumers are to be treated as the first point sale in Assam for the purpose of levy of tax under the AGST Act. Such a thought was given in the year 1993 and 1994, when the episodes were first detected,  but the same was not materialized, as there was apprehension that it might drag to some more complicacy. In fact, after dismantling of the price mechanism of the oil products from 1st April, 1998, which safe guarded the interest of the State revenue, such an amendment given effect from the 5th June, 1998, in true sense, was unwarranted. There was, however, a time gap between this period from 01.04.1998 and 05.06.1998 for which perhaps this amendment was made. However, this could have been withdrawn after the dismantling of price mechanism came to the light. This pertained to the levy of tax on sales by the one Oil Company to another company within the State, but when such purchasing Company makes sales of goods to other Oil Company in the course of inter-State trade or commerce or makes transfer of stock of goods to the principal, branch or agent from one State to the other, the State was likely to make loss of the revenue. A safe given in this regard pertained to the liabilities of the purchasing companies, but it is not applicable in the manufacturing sphere.

      In fact, though such oil products are the goods, taxable at the point of first sale in Assam, the mode of the taxation measures, adopted, is a departure from the norms and procedure.

Recurrence in the VAT Act

      The AGST Act was repealed from the 30th April, 2005 and in its place, the Assam Value Added Tax Act, 2005 (VAT Act) came into operation with effect from the 1st May, 2005. The VAT Act maintains that, it is a tax on the sale of any goods at every point in the series of sales made by the registered dealer with the provisions of credit of input tax paid at the points of previous purchases thereof. Contrary to this spirit of law, the Petrol, Diesel and other petroleum products were designed as the first point taxable goods in Assam. Again, keeping conformity with the mode of levy of tax on such oil products with the repealed AGST Act, the inter-se-sales between the Oil Companies were designed not as the first point sales of Assam. The inter-se- sales made by one Oil Company to the other Oil Company were designed not as the first point sale in Assam, but the purchasing Oil Company to the other and the consumers are to be treated as the first point sale made in Assam. The entire process seems to be unique and lacks conformity and failed to maintain proper conformity and consonance with the spirit and intention of the VAT measure.

Discriminations in the rates of tax

     The rate of tax on the sale of petrol is 27.5 paise in the rupee, while rate of tax on diesel is 16.5 paise in the rupee. In the case of sales of such goods to the registered dealers in the course of inter-State trade or commerce, the rate of tax is two paise in the rupee, while in the case of sales to other than the registered dealers, the actual rate of tax applicable in the State.

      The VAT Act laid down that after the purchase of any petroleum or petroleum products for resale within the State, if the purchasing Oil Company despatches any portion of the goods to a place out side the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, then notwithstanding anything contained in the VAT Act, for that portion of the goods, the purchasing Oil Company shall be deemed to be the last purchaser within the State of Assam and it shall be liable to pay tax on such portion of goods at the rate of four paise in the rupee on the gross turnover of such purchase of goods.

     In fact, the purchasing Oil Company derived the benefit of tax @ 27.5 or 16.5 in the rupee, as the case may be, at the time of purchase of such goods. If it despatches such goods not by way of sale in the course of inter-State trade or commerce, but by way of transfer of stock of goods out side the State of Assam, it ought to have compensated the loss, by way of realization of tax actually due, but the VAT Act provided relaxation and specified the rate of levy of tax at four paise in the rupee instead of 27.5 or 16.5 paise in the rupee. This is obviously causing loss to the State.

Diversion of trade- Loss of revenue

 The rates of tax on the sales of petrol in Assam are 27.5 paise in the rupee, while the rate of tax of diesel is 16.5 paise in the rupee. This is much higher, compared to the rates of taxes prevalent in most other States of the North Eastern Region, where the rates of taxes are 20 paise and 12 paise in the rupee respectively. A consumer, therefore, prefers to purchase such goods on payment of lesser amount of taxes across the nearby boundary line; like Khanapara, Jorabat, Banrdowa and other areas to derive fiscal benefit. The boundaries of the North-State districts are not far away. So, apparently, there is a diversion of trade, causing loss of revenue to the State of Assam.

Transfer of stock of oil  products to other States

    The movements of goods to places out side the State in the course of inter-State trade or commerce, may take place in two ways- (i)  One by way of sales and the other by way of stock transfer for sale or other manufacturing activities in other State. The movements of goods on stock transfer are exempted from tax, but such claim of stock transfer is subject to enquiry by the taxing authority, allowing exemption of tax. Along with other documents and evidences to be produced under the statute of the Central Act  and the rules, framed under, it has been made imperative to obtain a declaration in Form ‘F’ by the transferor of the goods from the transferee, duly filled in verified and signed. Such declaration should contain, inter-alia, the particulars of despatch of the goods by railway, steamer or ferry, air port, post office, road transport. The number and date of invoice, challan and other documents under which in respect of the goods are to quoted in such declarations with the physical evidence of such documents.

Despatch of oil products through pipe lines- propriety thereof

         A section of the Oil Refineries of Assam are despatching the oil products, like, petrol and diesel to other States through the pipe lines, installed by them. Such despatches of the products through the pipe line partly included in respect of sales in the course of inter-State trade or commerce, while some related to the stock transfer of such goods out side the State. The provisions of the Central Act read with Form ‘F’ provided some restriction and limitation and the despatch of goods through pipe line did not get berth. The Form ‘F’ prescribed in the rules under the Central Act; did not specify that the movements of the goods through the Pipe lines are permissible. The despatch of the petroleum products through the pipe line is a unilateral process, adopted by such oil companies in making movement by way of stock transfer. Moreover, in such unilateral exercise, proper enquiry seems to be not possible. It is understood that the taxing authorities are allowing such stock transfer of petrol and petroleum products through pipe lines with out proper authority of law.

This pertinent aspect, therefore, requires a scrutiny and examination to safe guard the revenue of the State.

RAW PETROLEUM COKE AND CALCINED PETROLEUM COKE

(Tax on declared goods)

         Under the authority of sub-clause (a) of clause (2) of Article 286 of the Constitution, Parliament declared a series of goods to be of special importance in the course of inter-State trade or commerce. “Coal, including coke in all its forms, but excluding charcoal” has been declared to be of special importance in the course of inter-State trade or commerce. ‘Raw Petroleum Coke’ (RPC) and ‘Calcined Petroleum Coke’ (CPC) are two different items of goods, which have independent use and identity in the commercial market. The said two goods have not been identified separately in the list of the declared goods. The Apex Court delivered a historical judgment affirming that the RPC and the CPC are the one item for the purpose of levy of tax as the declared goods, covering the broad term ‘ Coal including Coke in all its form.’  The identity and the commercial use of such goods, therefore, did not gain the momentum.

           The Central Act laid down ‘ Where a tax has been levied in respect of sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or Commerce and tax has been paid under this (Central) Act in respect of sale of such goods in the course of inter-State trade or commerce, the tax levied under such law shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions, as may be provided in any law in force in that State.”

    In the tone of the identification of ‘Coke in all its forms’, the tax paid on the purchase of RPC is admissible for reimbursement, when CPC is sold in the course of inter-State trade or commerce and taxes has been paid.

       Parliament has already identified separately, the manufactured or processed items of goods out of iron and steel by making classification separately as rod, bars, rounds, hoops, strips, skelps, plates, tools, alloys etc. for the purpose of levy of tax separately on such iron and steel goods, but the same was not done in case of coal and coke in all their form. As a result, heavy drainage of tax revenue has been taking place from the State Coffer years after years for these technical reasons, the amendment or modification of which may avert such drainage of revenue.

    This is entirely a matter of the Central Government. The State Government took up the matter with the Central Government, but without any fruitful result.

TEA SECTOR

Collection of tax on tea

    Tea is precious Agricultural product of Assam. Tea plants were discovered in the forests of Assam in the initial stage of the British regime in 1926. It had a wide spread and gradually extended to the whole of Assam.  Though there are more than 50 thousands of tea gardens (big and small) in Assam, the tea industrial units are in between 700 and 800. The tax revenue in Assam in the year 2012-13 was Rs. 28.11 crores under VAT Act and Rs. 14.48  crores under the Central  Act,, the total being Rs. 42.59 crores.

 The Head Offices of most of the tea gardens in Assam, located out side the State of Assam, use to make control over the business activities of the tea gardens of Assam, like sales and purchases of the goods including the avenue of employment. The garden managements do not have any say on the same and they have to remain cipher and to act like rubber stamps. A part from the sales of the manufactured tea, a huge quantity of such goods uses to move to places out side the State of Assam by way stock transfer to the Head Offices, Branch Offices or to the Agents out side the State of Assam for the purpose of sale out side the State of Assam or as the case may be. Such goods, moved to the places out side the State of Assam are exempted from tax under the Central Act, subject to discharge of onus that there was no element of sale in such movement of goods. The experience showed that in many cases, there were manipulations of such deal in as much as the tea garden entrepreneurs use to make sales of tea under the secret contract of sale, but disclose that such goods moved by way of stock transfer by manipulation of documents.  The entire episodes are carried on under the secret directions of the Head Offices, located out side the State. Crores of rupees are being drained out from the State Exchequers years after years. No proper investigations are made, proper inspections and raids are applied to prevent; arrest or detect such drainage of revenue.

The State of Assam would have earned between 50% to 100% more revenue, if the tax machineries are on the heels in this regard. 

CONSIGNMENT TAX

To compensate loss for stock transfer of goods

 There had been acute murmuring from some producing States of the Union of India over the question of legalizing the process of the transfer of goods by incorporating such a provision in the Central Act from 01.04.1973. The affected States started hue and cry.  In order to safe guard the interest of the revenue of the State, the Constitution was amended and authority was provided to the Central Government to introduce law on Consignment Tax by incorporation such entry 92B in List-I (Union List) in the Seventh Schedule of the Constitution, which was effective from 02.02.1983.

     No law was enacted by Parliament during this long period of 31 years and the poor State like Assam has been suffering for not getting tax on its products like; petrol diesel, tea, coal, raw jute, superi, bamboo hides and skins etc.

 This deserves an effective consideration.

Tax on sale or purchases of green tea leaves

 The sales and purchases of “Green tea leaves” are exempted from tax under the VAT Act, which governs the levy of such tax. The production of such “Green tea leaves” is, however, taken into consideration as a measuring scale for the purpose of levy of tax under the Assam Taxation (On Specified Lands) Act, 1990 [Specified Lands] Act on the tea garden lands. Contrary to the provisions of the VAT Act, exempting the levy of tax on the sales and purchases of such green tea leaves, the Legislatures of the State introduced a measure of tax on the sales and purchases of such green tea leaves in the name of safe guarding the collection of tax under the said Specified Lands Act, tough the aim and object of the said Act to levy tax on some the specified lands only, herein refers to the tea garden lands of Assam. The necessity of levy of tax is there for the purpose of augmentation of revenue, but this is not to be done in a perverted way.

      This aspect of the measure of tax adopted is required to be reviewed.

TAX ON AGRICULTURAL INCOME

Levy of tax on the income of tea

  A measure of tax on tax on the income derived out of agriculture was adopted in Assam with effect from 01.04.1939 during the British regime. The Assam Agricultural Income Tax Act, 1939 (Agricultural Act), governing such levy of tax is still in operation with the time to time modification thereof. In case of other income out of agriculture, the tax is levied on the 100 percent of such income derived. In the case of levy of such on the income of tea, however, the quantum of income has to be bifurcated. That is, 60 percent of such income is to be reckoned as the income out of agriculture and 40 percent as out of trade. This process is governed by the Indian Income Tax Act, 1961 (Income Act).  Under the statute of the said Income Act, the quantum of income is to be determined by the Income Tax Authorities of the Central Government, which has to bifurcate it to make levy tax on trade on the 40 percent of such income leaving the balance 60 percent un-assessed for the purpose of levy of tax by the Agricultural Income Tax authorities of the State Government, as the agricultural income.  Though the Agricultural Act projected its wide and independent vision, the provisions of the Income Act have been prevailing over it. Not only that, the power of assessment of tax vis-à-vis determination of the quantum of total income with bifurcation thereof; has been vested upon the Income Tax Authorities. The State Agricultural Income Tax Authorities can not make any excess and has to remain cipher in such exercise and carry on it function as the assessing authority like a rubber stamp. The quasi-judicial approach in  the proceedings of the Agricultural Act, thereby, suffers from acute set back.

      In case of the other income on agriculture, like; paddy, pulses, wheat, sugarcane, jute etc. such restrictions are not there, but it is applied in the cases of tea only restricting thereby the  free flow of revenue to the State Coffer.

      The State o Assam is, therefore, incurring heavy loss for bifurcation of such income derived from the income of tea in two folds, namely; agriculture and trade.

       A remedial measure seems to be imperative for the greater interest of the State of Assam.

LEVY OF TAX ON PURCHASE OF GOODS

     With a view to safe guard the interest of revenue in Assam, a measure of tax was introduced for levy of tax on the last point purchase of some local products of Assam from 03.07.1971 by way of enactment of the Assam Purchase Tax Act, 1967( Purchase Act).  Such items of goods were Raw Jute, Bamboo, Hides and Skins of animal, Bones of animals, reptiles, Superi etc. The said measure of tax continued upto 30th April, 2005 even after repeal of the  said Purchase Act on the 30th June, 1993 by virtue of the provisions of the Assam General Sales Tax Act, 1993 (AGST Act). The said measure of tax was abolished after the VAT Act came into force from 1st May, 2005. A provision was, however, incorporated in the VAT Act to the effect, which was, in fact, not specific but circumstantial. The said measure of tax can not ensure proper levy and collection of tax. There may difficulty to levy of tax in respect of the goods moved other than by way of sales, but by way of transfer of stock, as occurred in the VAT Act.

      To ensure better collection of revenue in respect of the items of local products, as stated above, the Purchase Act could have played the pivotal role in the generation of revenue of the State.

TAX ON BRICKS

 “Brick” is an item of goods, taxable at the point of first point of sale in Assam and the rate of tax is five paise in the rupee.  The Government of Assam, however, allowed option to the producers of the bricks to pay tax under the Composition Scheme, that is; in a lump sum basis instead of paying tax at the Scheduled rate.

      In the Budget of 2013-14, the said rate of Composition of tax were enhanced as below :

   Category              Capacity of kiln             Previous annual rate                     Present annual rate                   

     A                     25 payas and above         Rs. 57, 500.00                                     Rs. 1,00,000.00

     B                     21 payas to 24 payas         Rs. 46,000.00                                      Rs.    80,000.00

     C                     Upto 20 payas                     Rs. 34,500.00                                     Rs.      60,000.00            

       Generally, three categories of bricks are manufactured in a brick field, the proportion of which are – 60%  -1st class : 20% -2nd class : 20% - 3rd glass (Jhama or broken). A brick field with capacity of 3 (three) lakhs produces bricks in each round, the following quantities of bricks:

                          1st class =        1,80,000 Nos.

                           2nd class =          60,000  “

                           3rd class              60,000  “

                                  Total         3.00, 000 Nos.

 Generally, three rounds of bricks are manufactured in a brick field and in that case, the production will be three times of the above.

 On a close analysis and in consideration of the prevalent price of such bricks, a brick field of having three lakhs capacity of bricks is to pay tax at Rs. 2,88,000.0 for three rounds of brick manufactured in a year. The same will be double, triple or even quadruple, when the capacities of such brick fields are bigger.

   The rate of tax under the Composition Scheme, as stated above, is, therefore, much lower, compared to the production of bricks and the price thereof..

   Moreover, the Scheme maintained silence as to what will be the fate of levy of tax on the subsequent sales made by the dealers within the State or in the course of inter-State trade or commerce.

      As the question of huge leakage of revenue is involved, this aspect of the measure of tax requires a review.

STATE IS DEPRIVED OF THE SHARE OF INCOME TAX

The Head offices of the Oil Companies, Coal Companies, Cement Companies and most of the Tea Companies are located in the places out side the State of Assam. They use to pay tax on the income derived in the State out side the State of Assam. The shares of such taxes are received by the States in which such income taxes are paid as envisaged in clause (2) f Article 270 of the Constitution. Consequently, Assam is deprived of such revenue derived out of income in the soil of Assam.  There of the Central taxes would have increased 50 percent, if not more, if such a episode would have not been there.

         Unless the Head Offices are shifted to Assam this set back, leading to irreparable loss of revenue will continue.

       Mrinal Kanti Chakrabartty