The tea garden lands of Assam have been playing a prominent role in the agricultural, industrial and commercial aspects in the State scenario. The State is blessed with the flow of incoming revenue derived out of tax on sales, tax on agricultural income, tax on specified land, apart from the land revenue, revenue on electricity duty, revenue on professions, trades, employments etc. tax. Though the Assam tea has been facing an acute competition in the global commercial market, the good name of the Assam tea is still being maintained, as a whole.
Some pertinent question in relation to the measures of tax, adopted in Assam has apparently been visible and it is necessary to make an analysis on the same.
Exemption of tax on Green tea leaves
The First Schedule of the VAT Act has specified series of goods, exempted from tax under Section 9 of the VAT Act and hence no tax is leviable on the sales of such goods made within the State of Assam. The sales of such goods made in the course of inter-State trade or commerce are as well to be treated as tax free. Entry 41 of the said Schedule laid -down that ‘Unprocessed green leaves of tea’ is exempted from tax. The ‘Tentative Commodity List of Vatable Goods’, finalized by the Empowered Committee, contained also that ‘Unprocessed green leaves of tea’ is exempted from tax under the VAT Act.
.Concept of Specified Land Act
Clause (3) of Article 246 read with entry 49 of List-II (State List) in the Constitution vested powers to the State Legislature to make law in respect of ‘Tax on Land and Building’. In exercise of the said powers, the Legislatures of Assam enacted the “Assam Taxation (On Specified Lands) Act, 1990” (Lands Act), which came into effect from the 1st January, 1990.
The preamble of the Lands Act laid down that it is a tax imposed on certain categories of land. The levy of such tax is to be made on the annual productivity of such specified lands. The specified lands includes, inter-alia, the tea garden lands and the annual productivity of the green tea leaves on weight (in Kilogram) basis is the measuring scale for the purpose of levy of tax on such tea garden lands.
In the original Act effective from the 1st January, 1990, the rate of tax was fixed at 50 paise per Kilogram. The validity of the Lands Act was challenged by a number of tea gardens and tea organizations before the Gauhati High Court and the Supreme Court of India. During the pendency of the cases, however, a Memorandum of Understanding (MOU) was signed between the Government of Assam and the various tea organizations and the rate of tax was reduced from 50 paise to 18 paise with a retrospective effect from the 1st January, 1990. The Lands Act was amended from time to time and with effect from 31st March, 1997, the tea garden lands, the aggregate area of which did not exceed four hectares, were exempted from payment of such land tax.
The numbers of tea estate in Assam and the production of green tea leaves in such tea estates, as were projected in the Statistical Hand Book of Assam, 2007 are, as below:
Year Nos. Quantity produced (in weight)
2002- 43272 43,33,27,000 Kg.
2003- 43293 43,47,59,000 Kg.
2004- 43296 43,56,49,000 Kg.
2005 - 47,41,37,000 Kg.
The numbers of tea gardens and the productivity of tea thereof must have gone to a much higher side during these long five or six years, which particular is, however, not available readily. The collection of tax under the Lands Act was ascertained from the tax department sources, which is as below :
2002-2003 – Rs. 52.93 crore
2003-2004 - Rs. 56.17 “
2004-2005- Rs. 45.29 “
2005-2006 - Rs. 52.18 “
2006-2007- Rs. 53.68 “
The revenue yield from the green tea leaves under the Lands Act seems to be not upto the mark and due taxes were not likely to have been paid by a number of tea gardens.
Some of the tea estates, the numbers of which are exhibited above, do not have any tea manufacturing units (industrial units). Those tea garden units use to make sale of the green tea leaves to the tea industrial units for manufacture and sales of black tea. The numbers of tea manufacturing units in Assam are roughly in between 750 and 800. Some tea gardens, as it could be learnt, made bifurcation or trifurcation of the original units and made the same smaller ones so as to enjoy the benefit of exemption of taxes, as provided in the amended Lands Act of 1997 effective from 31st March, 1997. A huge loss of revenue is thus being incurred annually since 1997-98.
Proposal to levy Cess on the bought- tea leaves in Assam
While presenting the Budget for the 2008-2009 in the House of Legislature of Assam on the 10th March, 2008, the Chief Minister of Assam submitted as proposal before the House for levy of Cess on the green tea leaves. The portion of the speech is reproduced hereunder:
“A large number of bought-leaf factories have come up in Assam. These bought –leaf factories purchase green leaf and manufacture tea. However, unlike established tea companies, these bought-leaf factories do not contribute any revenue to the State Exchequer. They are unable to maintain quality of tea. At present, these bought-tea factories and some established companies who manufacture tea from bought-leaf do not pay any Cess on green tea leaf purchased by them. I propose to levy Cess at therate of 20 paise per kilogram of green tea leaf purchased by them. This rate is much lower than the rate at which the established tea companies pay Cess. The established tea companies pay Cess at the rate of 32 paise per kilogram of green tea leaf in Brahmaputra Valley and 29 paise per kilogram of green tea in Barak Valley. I propose to raise a Development Fund from the revenue collected for development of small and marginal tea growers, welfare of the tea labourers in organized sector and improvement of quality of Assam tea.”
‘Cess’ means a tax or duty. A cess or duty is not generally levied on the sale or purchase of goods for which separate enactment, namely; the VAT Act is there. It is generally levied other than on the sale or purchase of goods. The Budget proposal of the Chief Minister of Assam contained that a Cess would be levied on the sale of green tea leaves at the rate of 20 paise in the rupee. The proposal did not indicate specifically the Act under which such Cess was proposed to be levied.
Tax measures under Lands Act
The Legislatures of Assam by an amendment of the Lands Act ( Assam Act IV of 2009) incorporated some provisions in the Lands Act and the same was given effect from the 12th day of February, 2009. The amendment reads as:
Section 6A-“ Every person engaged in manufacture of tea and responsible for making any payment or discharging any liability on account of any amount purported to be the full or part payment of sale price or consideration for purchase of green tea leaf, shall, at the time of credit to the account of or payment to the seller of such amount in cash, by cheque, by adjustment or in any manner, whatsoever, deduct tax calculated at the rate 20 paise per kilogram and deposit the same in the State Exchequer in such manner as may be prescribed.”
(The rate of such tax was enhanced to 25 paise per kilogram with effect from 29.04.2010.)
The said amendment provided also : (i) the ways and means for deduction of tax at source and deposit thereof and to issue a tax deduction certificate to the sellers of the green tea leaves by the purchasers; (ii) submission of return and statement of deduction of tax by the purchasers; (iii) interest for non-deduction and non deposit of the deducted tax at the rate of 1.5 paise per month; (iv) imposition of penalty for any violation of the provisions of the Lands Act and (v) institution of case in the court of law for any offence.
Levy of tax on the sales of green tea leaves- controversial
In the amendment of Lands Act, the authority of law under which such amendment was made has not been quoted. It also maintained silence as to the authority under which the tax was levied on the sale or purchase of such green tea leaves in the said Lands Act, contrary to the basic principle of levy of tax on the tea gardens lands on the productivity of green tea leaves as the measuring scale.
The question of law as has been cropped up in such exercise are discussed below :
(1) The item green tea leaf is exempted from tax, as exhibited in the First Schedule of the VAT Act. Hence, no tax is leviable on the sale or purchase of such green tea leaves under the VAT Act, which was enacted under the authority of clause (3) of Article 246 read with entry 54 of List II (State List) in the Seventh Schedule of the Constitution;
(2) No other Constitutional authority was provided to levy tax on the sale of such green tea leaves, sold by the producing tea garden to the manufacturing tea gardens;
(3) The main theme and ideology of the Lands Act is that, a tax is leviable under the Act, on the annual productivity of the green tea leaves, produced. The said Act provided no scope to levy of tax on the sale or purchase of green tea leaves, which ,in fact, are exempted from the sales tax under the VAT Act, governing the principle of levy of tax on the sale or purchase of goods in Assam ;
(4) When the aggregate area of the tea garden lands held by a person does not exceed four hectares, no tax is leviable on such lands, implying thereby that the annual productivity of green tea leaves in respect such tea garden lands, are not to be reckoned for the purpose of taxability under the said Lands Act;
(5) The new measure of tax on the sales of green tea leaves incorporated in the Lands Act from 12.02.2009 obviously created a clash and conflict with the provisions VAT Act as well as a portion of the Lands Act;
(6) The tax deduction on the weight of the green tea leaves (on the basis of kilogram) has a direct clash with the principle of levy of tax on the sale or purchase of goods, where value consideration gains the momentum;
(7) The new measure of levy of tax seems to be something unforeseen and extra-ordinary, as the newly inserted Section 6A was a measure to deduct tax at source, while liability to pay tax on such sales of green tea leaves was not given berth in the amended Lands Act;
(8) The term ‘sale’ has not been defined in the Lands Act and the basic principle of levy of tax on the sales of green tea leaves also not accommodated in the Lands Act and it seems to some extent as extra-ordinary exercise of territorial jurisdiction;
(9) The basic ingredients required for the levy of tax on the sales of green tea leaves has not been incorporated in the Lands Act;
(10) The amended Act incorporated the levy of ‘tax’ on green tea leaves is contrary to proposal of levy of ‘Cess’, as reflected in the Budget speech of the Chief Minister of Assam.
The entire matter relating to levy of tax on green tea leaves seems to be controversial and review is necessary by the Government.
Solution suggested
This zig-zag process of levy of tax may have a far-reaching ill consequence to the revenue generation of the State. Since the intention of the Legislature of the State to safe guard the revenue of the State by way of levy of tax on the green tea leaves sold to the bought-leaf factories for manufacture black tea and to make sale, therefore, the Government may consider the following suggestions for the greater interest of the revenue of the State:
(i) That, the exemption tax in respect of the aggregate area of the specified lands held by a person a person not exceeding four hectares of land, as occurred in clause (a) of Section 5 of the Lands Act, may be revoked or withdrawn;
(ii) The lands, held by a person not exceeding four hectares of land, are also to be brought under the purview of tax- net of the lands Act and the provision of the said Act has to be applied in all cases;
(iii) The liability to make payment of tax, submission of returns will rest with such tea garden land owners, as envisaged in the Lands Act and the rules, framed thereunder.
However, in order to ensure that proper payment of tax has been made by such land owners, it may made as a condition that the green tea leaves handed over to the tea manufacturing factories, such land owners are to adduce proof that the tax due to State Exchequer has been paid. In alternative, such manufacturing factories may be authorized to deduct the requisite tax, while making payment green tea leaves for manufacturing or other allied purposes. The appropriate wordings will be’ the green tea leaves placed with the tea factories for manufacture or other allied purposes instead of the words ‘sale or purchase of green tea leaves’.
(Mrinal Kanti Chakrabartty)
“ Rudra Bhawan”
R.G. Barua Road, 10- Lakhimipath, Guwahati-781024
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Friday, July 9, 2010
Tuesday, June 1, 2010
TAX ADMINISTRATION IN ASSAM
Tax is a contribution, extracted by the Government in the form of revenue to the State Coffer. No Government can exist without taxation. This money, in fact, is to be levied to the people and the grand art consists of levying so as not to oppress.
AIM AND OBJECT
The aim and object of the tax administration is to make generation as well to cause mobiliza¬tion of revenue resources for the purpose of augmentation to the State Coffer within the frame work of law, enacted by the Legislatures of the State in a systematical and methodical way.
TAXING AUTHORITIES
The Commissioner of Taxes (Commissioner) is the supreme authority in the field of administration for carrying out the purposes of the taxation laws of the State. He is to be assisted by a set of officers, namely; the Additional Commissioners of Taxes, Joint Commissioners of Taxes, Deputy Commis¬sioners of Taxes, Assistant Commissioners of Taxes, Superintendents of Taxes and the Inspectors of Taxes, appointed by the Government, specifying its territorial jurisdiction. The Agricultural Income Tax Officer is assigned to carry out the administration of the Assam Agricultural Income Tax Act, 1939. The post is manned by the cadre of the Superintendents.
COMMISSIONER OF TAXES
The Commissioner is an Ex-cadre post and the member of the lndian Administrative Service cadre ornaments this post He is entrusted to govern the tax administration with the help of the seasoned and veteran officers of the cadre posts. Primarily, he is not supposed to know the inner visions and techni¬calities and the taxing authorities, appointed to assist him, are to guide him in a right and proper way with unbiased briefs, clean and crystal projection of the facts. The notes are to be law, fact and docu¬ment based and are to be processed chronologically from the grass root level and onwards so as to adopt a constructive and judicious decision, implying thereby that, such a process is knowledge and experience oriented. Unless there is righteous advice and guidance, there may derailment or disrup¬tion in the walk on the main orbit smoothly and efficiently.
BIRTH OF THE TAXATION DEPARTMENT
Taxation department is a post child after the independence of India. In pre-independence period, the taxation laws, namely, the Assam Agricultural Income Tax Act, 1939, the Assam Sales of Motor Spirit and Lubricants Taxation Act, 1939 and the Assam Amusement and Betting Tax Act, 1939 (operative since 1.4.1939,1.4.1939and 1.8.193 9 respectively), enacted under the Government of India Act, 1935, were administered by the Excise Department of the Government of Assam. After the enactment of the Sales Tax Law (the Assam Sales Tax Act, 1947) from 24.12.1947 under the Government of India Act, the taxation department took its birth. All the above taxation Laws including the Assam Professions Trades, Callings and Employments Taxation Act, 1947 (operative from 1.4.1947), enacted also under the Government of India Act, 1935, received proper safe guards under saving provisions, as envisaged in Article 277 of the Constitution of India (Constitution) adopted and effected from 26.1.1950. There are as many as nine taxation laws operative in Assam.
Two taxation laws, namely; the Assam Taxation) on Goods carried by Roads and Waterways) Act, 1954 and the Assam Tax on Luxuries Act, 1997 were nullified by the Hon'ble Supreme Court of India. A portion of the taxation law, namely; the Assam Entry Tax Act, 2001 was also declared to be null and void by the Hon'ble Gauhati High Court, but the State Legislature repealed the earlier Act and made re-enactment of the same in 2008, which became effective from 1.6.2008. The new Act is to give safe guard of the erstwhile incomplete proceeding and tax recovery of the old Act and the tax already collected, but all proceedings under the 2008 Act are to be taken up denovo for the purpose of admin¬istration of the new Act. Two other Acts, namely; the Assam Passengers and Goods Taxation Act, 1962 and the Assam Urban and Immoveable Properties Act, 1963 administered by the taxation department, were transferred to the Transport and Municipal Department in 1989 and 1971 respectively.
POWERS AND FUCTIONS OF THE TAXING AUTHORITIES
The power and functions of the taxing authorities are of three folds : (i) Executive, (iii) Quasi-judicial and (iii) Administrative. The former two are in relation to the administration of the taxation laws and the last one is for general administration.
The bifurcation of executive and quasi-judicial powers in the process of administration of the taxa¬tion Laws was essential, keeping in view, the mandatory provision of Article 50 of the Constitution, that is, the doctrine of Separation of Powers. The encroachment of powers by the executive exercising the quasi-judicial power at the same time may be counted to be pre-judicious, as will be evident from the verdicts of the Hon' ble Courts of law. An investing officer or any team of officers is not to exercise the quasi-judicial powers for the same issue.
APPOINTMENT AND DELEGATION POWERS
The taxing authorities of the State are appointed by the State Government by notification in the Official Gazette with specification of the territorial jurisdiction. Only the Government can modify, extend or curtail such jurisdiction and none else. The Commissioner is to delegate his powers to the category-wise of officers subject to the conditions and restrictions imposed in the Act and the rules keeping in view the territorial jurisdiction, specified by the State Government. There should not be any overlapping or encroachments in the power delegation and power exercise scenario.
SHORTFALLS IN DELEGATION OF POWERS
The Assam Value Added Tax Act, 2003 (VAT Act) came into operation from 1.5.2005. In the power delegation scenario, some shortfalls became obvious and reconciliation seems to be incumbent for proper and smooth administration of the VAT Act. For instance, the scope of power delegation has been restricted in rule 6 of the rules, framed under the VAT Act. This seems to have not been rightly observed. In the said rule, there is no scope for delegation of powers to the Assistant Commissioners of Taxes, but the Commissioner by Notifications dated 28.4.2005 delegated his powers to the said set of officers without any base. Unless rule 6 is amended and the words Assistant Commissioner is accom¬modated, some complications might be there in near future. The, Commissioner has not delegated his powers to the appropriate category of the officers to exercise the powers of registration, provisional assessment, best- judgment, assessment to the unregistered dealers, escapement of assessment, power of forfeiture, calling of returns, levy of interest and in many other aspects. Moreover, delegation of powers to compound offences to all categories of officers seems to be in contravention of the provi¬sions of rule 6. The definition of Assistant Commissioner and Superintendent has special significance in the matter of administration of the VAT Law, as such authorities are one and same in respect of a dealer in a particular area and there can not be any overlapping of territorial jurisdiction.
The department will have no measure of defence, if the exercise of powers without delegation or the powers delegated beyond the scope of rule is challenged.
TAX MACHINERIES
The services of each category of official as well the taxing authorities are counted as indispensable for proper administration of the taxation laws of the State. None is inseparable from others and none is less important.
GRASS ROOT LEVEL
The grass root level officials are the members of the ministerial cadre. Unless the files are designed properly and systematically and moved with action, there may be dislocation in the system. In taxation department, the system of maintenance of records is very unique and very much methodical. The case records are to be maintained in double cover. The outer cover in side is meant for preservation of return at the first inside and preservation of the order of assessment in the last side. In between the first cover the correspondences and Miscellaneous or sheets are to be maintained period wise, year-wise, as the case may be. It is felt incumbent that a summery of the position of the files is maintained in side each case record. The Index Register and the Assessment, Demand and Collection Registers are like the mirror of a dealer and maintains the complete dossier. These records must have the parity with one another so that cross checking may yield a positive result.
The dealing assistants should make it a habit to make scrutiny of the case records from bottom to the top and to put up with action, wherever necessary. Where there is no action the portion is to be closed and tagged. Such scrutiny may ensure proper realization of tax,' if necessary by taking coercive measures. The records are to be maintained in such a way that no sort of entry is lost under any circumstances. }
The maintenance’ of case diary and put up diary are two basic requirements of the concerned deal¬ing assistants. The other records, like maintenance of Bakijai Registers, Register in relation to institu¬tion of court cases, composition of offences, imposition of penalty Register has a dire necessity. The summery at the end of each month is to be drawn up in the index Register, Assessment Demand and collection Register. The Assistant Commissioner or the Superintendents are to check the registers and records and ensure follow up action.
FIELD STAFF
The field staff mainly connotes the Inspectors of Taxes. There main duty is to make survey of the area at least three times in a year. The survey should be made in respect of all the business of the dealers/assesses of the area. None is to be left out. Even a Pan shop or a Saloon should not be omitted. The detailed particulars are to be recorded in the survey register. Such survey register will present the complete picture of business position in the area. The survey should not be confined to the urban areas only, but it should be extended to the rural or semi urban areas, where there is flow of business. Survey Register should be maintained for each Act separately, so that complete picture of the assessees re¬mains visible. Such survey is subject to inspection by the superior authority at least twice in a year.
Enquiry in respect of any assessee and inspection of the business premises, godowns, loaded/un¬loaded trucks form the other parts of duties of the field officers. Such exercise is to be made with a sober approach but with firm stand.
The collection of particulars from different sources with verification of such collected particulars is another vital part of duty of the field officer.
The work of inspection, if necessary under the authority of search warrant and the preparation of the seizure list requires due prudence and proper application of mind. Likewise, the seizure of goods should follow the same footstep. It is to be made imperative that all inspection be recorded in the Register with the outturn thereof.
QUASI-JUDICIAL PROCEEDINGS
The powers and function of the Assistant Commissioners and the Superintendents of Taxes are quasi-judicial,. Registration, requirement to furnish security, administration of assessment proceed¬ings and penal proceedings, all are quasi-judicial ones. The power of the Civil Court has been vested upon the said authorities, who can enforce attendance of any person, administer oath or affirmation in connection with any proceedings, require production of documents and evidences for such purpose, as may be warranted.
The orders in each case must be law, facts and materials based with a self-speaking exposure There should not be any biasness in the contents of the orders, but with a judicious approach and out look. While administering the quasi-judicial proceedings, all facts are to be recorded properly. Though the Act has provided that the orders, instructions and direction of the Commissioner is binding to the officers subordinate to him, but a reservation is maintained, whether such imposition will ensure fair and judicious delivery of judgment. There is possibility of being influenced by any order, direction or instruction in the lawful administration of any quasi-judicial proceedings under the Act.
APPELLATE PROCEEDINGS
The Appellate Authority is a quasi-judicial authority, but it maintains its independent entity. The Commissioner is neither to delegate his powers nor to issue any instruction in administering the quasi-judicial appellate functions under the Act. The Appellate Authority is to dispose of the appeal petition after providing opportunity to the person appealed and the authority against whose order appeal peti¬tion has been filed. The order of the Appellate Authority is not be interfered, by the Commissioner but the Board of Revenue, Assam can entertain an appeal, if filed by the aggrieved party or the Commis¬sioner. The scope for filing writ petition before the High Court on the question of law and justice, however, remains open.
REVISIONAL AUTHORITY
The power of revision of the orders of the Assessing Officer rests with the Commissioner or by the officers not below the rank of the Deputy Commissioner to whom such power is delegated by the Commissioner
SUO MOTO REVISION
The power of suo moto rests with the Commissioner or the persons appointed to assist the Commis¬sioner upto the level of the Deputy Commissioners. Three ingredients are necessary to invoke the powers of suo moto revision, (i) There must be an order (ii) the order must be erroneous and (iii) The order must be prejudicial to the interest of the revenue. Unless, these three ingredients exist, the invo¬cation of power of suo moto revisions is likely to be questioned. The order of suo-moto revision must reflect this vital requirement. When such ingredients are absent in the order, the order is likely to suffer from deficiency.
INVESTIGATING WING
There had been an investigating wing in the taxation department, which was withdrawn in 1983 December without being re-designed or revived so far. Though the Sales Tax Laws of the State em¬powered the State Government to constitute such a wing for investigation and detection of taxes, the same has not been materialized. This has a dire necessity to check, detect and prevent evasion of taxes. An Audit Team has been constituted, which does not have any legal base and such functioning of the Audit team may invite controversy in the long run. That can be regularized by creating an investing wing with assignment of powers, inter-alia, for investigation, audit etc. Audit is a part of investigation and its limitation need not be confined to the case records only.
POWER OF ASSESSMENT TO THE INVESTIGATING TEAM
A discussion has already made that following the doctrine of Separation of Powers, the quasi-judicial powers of assessment and other allied matters are not to be exercised by the investing wing and the said power rests with the assessing wing in the units. This aspect requires a fresh consideration with proper review.
OPERATION OF CHECK POSTS
The operational aspects of the check post suffer from various shortfalls and lacunae. First, there is no Weigh Bridge; second, there is no proper platform to unload the goods with adequate man- power; third, there is no godown to store the goods, when seized. The misuse of Delivery Notes has become a regular phenomenon. It is believed that the check posts maintains the complete dossier of each dealer with registration numbers, commodities dealt in and other allied requisite information. How they can make it possible to evade payment of tax by furnishing false information in respecct of the goods carried by misrepresentation of facts? The particulars transmitted through inter-net may help to adopt follow up action and to apprehend such unscrupulous traders. It is however imperative that for the purpose of administration of the quasi-judicial proceedings or to bring criminal liabilities, the Deliv¬ery Notes must be physically available to the concerned Assessing Officers. Actually, the Check Posts are the competent authorities to arrest such foul play at source and to do away with the odds by initiating coercive measures like detention of vehicle, seizing of goods and forfeiture or disposal thereof.
FIELD INSPECTION
There has been a good deal of deficiency in the matter of field inspectio, namely; at the business premises of the dealers, godowns, ware houses and carriers. The carriers place the pivotal role in indulging the evasion of taxes in collusion with the buyers and the sellers of the goods. Each officer is responsible for proper levy and collection of tax, checking, preventing and arresting evasion of taxes including collection of evaded and realization of outstanding dues in his area. In the past era, the good performances of the officer was a measuring scale to wards counting his efficiency and consideration for posting in suitable commercil areas. The inspection of cinema halls irrespective of any show was a regular phenomenon and it was made compulsory to maintain Register, to submit monthly statements in addition to submission of fornightly diaries.
OFFICE INSPECTION BY THE HIGHER AUTHORITIES
In sixties and earlier, office inspection by the Commissioner at least three times in a year was regular phenomenon. Such inspections were marathon and very tough, but constructive. The inspec¬tion reports were to be typed half margin and preliminary following action reports were to be submit ted within a specified time. With the increase of volumnous works and strengthening the man power, such task was carried out by his juniors in an identical manner. This improved the work culture and accelerated the work efficiency.
AUDIT
The aim and object of audit are to detect the irregularities and to regularise thereof. When there is major lapses, the officers were answeable to that. The existing provisions of law were rectified to cure the defects. Now, the said culture has been changed. The audit encroaches its jurisdiction and makes excess.
ADMINISTRATION OF THE ASSAM VALUE ADDED TAX ACT, 2003
Though the Assam Value Added Tax is a tax on the sales and purchase of the goods, but its aim and object is not identical to the previous ones. It is somewhat unique and technical and designed with a self-wheel-steering drive. The Act has, however, been designed identical to the previous sales tax law, whereby ample ambiguity and misconception prevail. For example, the spirit and intention of the Act was to levy tax on every stage of sales subject to credit of input tax. In the Act, contrary to the aim and object and the preamble, a tax measure for levy at the point of first point sales in respect of 23 items has been incorporated, though the Act has not specifically recorded anything about such departure from the main theme.
The VAT Law is for levy of tax on the sales or purchase of goods, but in the Act some measures of taxes were adopted to levy tax on exempted goods, production, total value of works contract, import of goods, which is beyond the spirit and intention of the Act. This type of payment of composition of tax obviously disrupted the levy of taxes at subsequent sales or inter-State sales making the whole process in the VAT system is anomalous and the process is likely to be foiled and frustrated.
The issue of Tax Invoice andivRetail Invoice are compulsory in the VAT regime to ensure proper accounting for and proper payment of tax thereof, but this has neither been complied with or not enforced for which trie leakage of revenue has become obvious.
The acceleration of activities in the field may discourage any such odds.
ENTRY TAX LAW AND THE LUXURY TAX LAW
The administration of these two Laws are to be carried on under the VAT Law of Assam, but the aim and object of levy of tax under these Act are not identical tq VAT Law. It will be in the fitness of things to make provisions in the Act for independent process of administration to avoid any complications.
TAX LAW ON SPECIFIED LANDS
With a view to ensure correct and accurate levy of tax, the following important aspects requires to be looked into:
(i) There should be a survey in all tea gardens irrespective of big and smalls.
(ii) The accuracy of production of green tea leaves is to be verified with the volume of production of black tea, keeping in view the ratio 4.5 :1.
(iii) There should be cross verification of green tea production statement, furnished in the sales tax department with the statement furnished in the Central Excise Department.
ELECTRICITY DUTY
The Central Sales Tax Act, 1956 has restricted the levy of tax in respect of the energy supplied outside the State, but contrary to this, the provisions for levy of tax on such supply, has been incorpo¬rated in the Assam Electricity Duty Act, 1963 in October, 1984.
AMUSEMENT AND BETTING TAX ACT
The Assam Amusement and Betting Tax Act, 1939 is to be renovated and re-designed to make way for assessment, specification of violation of the provisions of the Act including evasion of taxes and penal measures thereof.
TAX ON PRODESSIONS,TRADES. CALLINGS AND EMPLOYMENTS
Actually, the above measure of tax is hot a tax on income, but it is a tax on Professions, trades, callings and employments. The income derived out of the same is counted as a measuring scale for the purpose of levy of tax. But with the amendment of the Act, 1992, there was a crack in the system and this required to be restored.
AIM AND OBJECT
The aim and object of the tax administration is to make generation as well to cause mobiliza¬tion of revenue resources for the purpose of augmentation to the State Coffer within the frame work of law, enacted by the Legislatures of the State in a systematical and methodical way.
TAXING AUTHORITIES
The Commissioner of Taxes (Commissioner) is the supreme authority in the field of administration for carrying out the purposes of the taxation laws of the State. He is to be assisted by a set of officers, namely; the Additional Commissioners of Taxes, Joint Commissioners of Taxes, Deputy Commis¬sioners of Taxes, Assistant Commissioners of Taxes, Superintendents of Taxes and the Inspectors of Taxes, appointed by the Government, specifying its territorial jurisdiction. The Agricultural Income Tax Officer is assigned to carry out the administration of the Assam Agricultural Income Tax Act, 1939. The post is manned by the cadre of the Superintendents.
COMMISSIONER OF TAXES
The Commissioner is an Ex-cadre post and the member of the lndian Administrative Service cadre ornaments this post He is entrusted to govern the tax administration with the help of the seasoned and veteran officers of the cadre posts. Primarily, he is not supposed to know the inner visions and techni¬calities and the taxing authorities, appointed to assist him, are to guide him in a right and proper way with unbiased briefs, clean and crystal projection of the facts. The notes are to be law, fact and docu¬ment based and are to be processed chronologically from the grass root level and onwards so as to adopt a constructive and judicious decision, implying thereby that, such a process is knowledge and experience oriented. Unless there is righteous advice and guidance, there may derailment or disrup¬tion in the walk on the main orbit smoothly and efficiently.
BIRTH OF THE TAXATION DEPARTMENT
Taxation department is a post child after the independence of India. In pre-independence period, the taxation laws, namely, the Assam Agricultural Income Tax Act, 1939, the Assam Sales of Motor Spirit and Lubricants Taxation Act, 1939 and the Assam Amusement and Betting Tax Act, 1939 (operative since 1.4.1939,1.4.1939and 1.8.193 9 respectively), enacted under the Government of India Act, 1935, were administered by the Excise Department of the Government of Assam. After the enactment of the Sales Tax Law (the Assam Sales Tax Act, 1947) from 24.12.1947 under the Government of India Act, the taxation department took its birth. All the above taxation Laws including the Assam Professions Trades, Callings and Employments Taxation Act, 1947 (operative from 1.4.1947), enacted also under the Government of India Act, 1935, received proper safe guards under saving provisions, as envisaged in Article 277 of the Constitution of India (Constitution) adopted and effected from 26.1.1950. There are as many as nine taxation laws operative in Assam.
Two taxation laws, namely; the Assam Taxation) on Goods carried by Roads and Waterways) Act, 1954 and the Assam Tax on Luxuries Act, 1997 were nullified by the Hon'ble Supreme Court of India. A portion of the taxation law, namely; the Assam Entry Tax Act, 2001 was also declared to be null and void by the Hon'ble Gauhati High Court, but the State Legislature repealed the earlier Act and made re-enactment of the same in 2008, which became effective from 1.6.2008. The new Act is to give safe guard of the erstwhile incomplete proceeding and tax recovery of the old Act and the tax already collected, but all proceedings under the 2008 Act are to be taken up denovo for the purpose of admin¬istration of the new Act. Two other Acts, namely; the Assam Passengers and Goods Taxation Act, 1962 and the Assam Urban and Immoveable Properties Act, 1963 administered by the taxation department, were transferred to the Transport and Municipal Department in 1989 and 1971 respectively.
POWERS AND FUCTIONS OF THE TAXING AUTHORITIES
The power and functions of the taxing authorities are of three folds : (i) Executive, (iii) Quasi-judicial and (iii) Administrative. The former two are in relation to the administration of the taxation laws and the last one is for general administration.
The bifurcation of executive and quasi-judicial powers in the process of administration of the taxa¬tion Laws was essential, keeping in view, the mandatory provision of Article 50 of the Constitution, that is, the doctrine of Separation of Powers. The encroachment of powers by the executive exercising the quasi-judicial power at the same time may be counted to be pre-judicious, as will be evident from the verdicts of the Hon' ble Courts of law. An investing officer or any team of officers is not to exercise the quasi-judicial powers for the same issue.
APPOINTMENT AND DELEGATION POWERS
The taxing authorities of the State are appointed by the State Government by notification in the Official Gazette with specification of the territorial jurisdiction. Only the Government can modify, extend or curtail such jurisdiction and none else. The Commissioner is to delegate his powers to the category-wise of officers subject to the conditions and restrictions imposed in the Act and the rules keeping in view the territorial jurisdiction, specified by the State Government. There should not be any overlapping or encroachments in the power delegation and power exercise scenario.
SHORTFALLS IN DELEGATION OF POWERS
The Assam Value Added Tax Act, 2003 (VAT Act) came into operation from 1.5.2005. In the power delegation scenario, some shortfalls became obvious and reconciliation seems to be incumbent for proper and smooth administration of the VAT Act. For instance, the scope of power delegation has been restricted in rule 6 of the rules, framed under the VAT Act. This seems to have not been rightly observed. In the said rule, there is no scope for delegation of powers to the Assistant Commissioners of Taxes, but the Commissioner by Notifications dated 28.4.2005 delegated his powers to the said set of officers without any base. Unless rule 6 is amended and the words Assistant Commissioner is accom¬modated, some complications might be there in near future. The, Commissioner has not delegated his powers to the appropriate category of the officers to exercise the powers of registration, provisional assessment, best- judgment, assessment to the unregistered dealers, escapement of assessment, power of forfeiture, calling of returns, levy of interest and in many other aspects. Moreover, delegation of powers to compound offences to all categories of officers seems to be in contravention of the provi¬sions of rule 6. The definition of Assistant Commissioner and Superintendent has special significance in the matter of administration of the VAT Law, as such authorities are one and same in respect of a dealer in a particular area and there can not be any overlapping of territorial jurisdiction.
The department will have no measure of defence, if the exercise of powers without delegation or the powers delegated beyond the scope of rule is challenged.
TAX MACHINERIES
The services of each category of official as well the taxing authorities are counted as indispensable for proper administration of the taxation laws of the State. None is inseparable from others and none is less important.
GRASS ROOT LEVEL
The grass root level officials are the members of the ministerial cadre. Unless the files are designed properly and systematically and moved with action, there may be dislocation in the system. In taxation department, the system of maintenance of records is very unique and very much methodical. The case records are to be maintained in double cover. The outer cover in side is meant for preservation of return at the first inside and preservation of the order of assessment in the last side. In between the first cover the correspondences and Miscellaneous or sheets are to be maintained period wise, year-wise, as the case may be. It is felt incumbent that a summery of the position of the files is maintained in side each case record. The Index Register and the Assessment, Demand and Collection Registers are like the mirror of a dealer and maintains the complete dossier. These records must have the parity with one another so that cross checking may yield a positive result.
The dealing assistants should make it a habit to make scrutiny of the case records from bottom to the top and to put up with action, wherever necessary. Where there is no action the portion is to be closed and tagged. Such scrutiny may ensure proper realization of tax,' if necessary by taking coercive measures. The records are to be maintained in such a way that no sort of entry is lost under any circumstances. }
The maintenance’ of case diary and put up diary are two basic requirements of the concerned deal¬ing assistants. The other records, like maintenance of Bakijai Registers, Register in relation to institu¬tion of court cases, composition of offences, imposition of penalty Register has a dire necessity. The summery at the end of each month is to be drawn up in the index Register, Assessment Demand and collection Register. The Assistant Commissioner or the Superintendents are to check the registers and records and ensure follow up action.
FIELD STAFF
The field staff mainly connotes the Inspectors of Taxes. There main duty is to make survey of the area at least three times in a year. The survey should be made in respect of all the business of the dealers/assesses of the area. None is to be left out. Even a Pan shop or a Saloon should not be omitted. The detailed particulars are to be recorded in the survey register. Such survey register will present the complete picture of business position in the area. The survey should not be confined to the urban areas only, but it should be extended to the rural or semi urban areas, where there is flow of business. Survey Register should be maintained for each Act separately, so that complete picture of the assessees re¬mains visible. Such survey is subject to inspection by the superior authority at least twice in a year.
Enquiry in respect of any assessee and inspection of the business premises, godowns, loaded/un¬loaded trucks form the other parts of duties of the field officers. Such exercise is to be made with a sober approach but with firm stand.
The collection of particulars from different sources with verification of such collected particulars is another vital part of duty of the field officer.
The work of inspection, if necessary under the authority of search warrant and the preparation of the seizure list requires due prudence and proper application of mind. Likewise, the seizure of goods should follow the same footstep. It is to be made imperative that all inspection be recorded in the Register with the outturn thereof.
QUASI-JUDICIAL PROCEEDINGS
The powers and function of the Assistant Commissioners and the Superintendents of Taxes are quasi-judicial,. Registration, requirement to furnish security, administration of assessment proceed¬ings and penal proceedings, all are quasi-judicial ones. The power of the Civil Court has been vested upon the said authorities, who can enforce attendance of any person, administer oath or affirmation in connection with any proceedings, require production of documents and evidences for such purpose, as may be warranted.
The orders in each case must be law, facts and materials based with a self-speaking exposure There should not be any biasness in the contents of the orders, but with a judicious approach and out look. While administering the quasi-judicial proceedings, all facts are to be recorded properly. Though the Act has provided that the orders, instructions and direction of the Commissioner is binding to the officers subordinate to him, but a reservation is maintained, whether such imposition will ensure fair and judicious delivery of judgment. There is possibility of being influenced by any order, direction or instruction in the lawful administration of any quasi-judicial proceedings under the Act.
APPELLATE PROCEEDINGS
The Appellate Authority is a quasi-judicial authority, but it maintains its independent entity. The Commissioner is neither to delegate his powers nor to issue any instruction in administering the quasi-judicial appellate functions under the Act. The Appellate Authority is to dispose of the appeal petition after providing opportunity to the person appealed and the authority against whose order appeal peti¬tion has been filed. The order of the Appellate Authority is not be interfered, by the Commissioner but the Board of Revenue, Assam can entertain an appeal, if filed by the aggrieved party or the Commis¬sioner. The scope for filing writ petition before the High Court on the question of law and justice, however, remains open.
REVISIONAL AUTHORITY
The power of revision of the orders of the Assessing Officer rests with the Commissioner or by the officers not below the rank of the Deputy Commissioner to whom such power is delegated by the Commissioner
SUO MOTO REVISION
The power of suo moto rests with the Commissioner or the persons appointed to assist the Commis¬sioner upto the level of the Deputy Commissioners. Three ingredients are necessary to invoke the powers of suo moto revision, (i) There must be an order (ii) the order must be erroneous and (iii) The order must be prejudicial to the interest of the revenue. Unless, these three ingredients exist, the invo¬cation of power of suo moto revisions is likely to be questioned. The order of suo-moto revision must reflect this vital requirement. When such ingredients are absent in the order, the order is likely to suffer from deficiency.
INVESTIGATING WING
There had been an investigating wing in the taxation department, which was withdrawn in 1983 December without being re-designed or revived so far. Though the Sales Tax Laws of the State em¬powered the State Government to constitute such a wing for investigation and detection of taxes, the same has not been materialized. This has a dire necessity to check, detect and prevent evasion of taxes. An Audit Team has been constituted, which does not have any legal base and such functioning of the Audit team may invite controversy in the long run. That can be regularized by creating an investing wing with assignment of powers, inter-alia, for investigation, audit etc. Audit is a part of investigation and its limitation need not be confined to the case records only.
POWER OF ASSESSMENT TO THE INVESTIGATING TEAM
A discussion has already made that following the doctrine of Separation of Powers, the quasi-judicial powers of assessment and other allied matters are not to be exercised by the investing wing and the said power rests with the assessing wing in the units. This aspect requires a fresh consideration with proper review.
OPERATION OF CHECK POSTS
The operational aspects of the check post suffer from various shortfalls and lacunae. First, there is no Weigh Bridge; second, there is no proper platform to unload the goods with adequate man- power; third, there is no godown to store the goods, when seized. The misuse of Delivery Notes has become a regular phenomenon. It is believed that the check posts maintains the complete dossier of each dealer with registration numbers, commodities dealt in and other allied requisite information. How they can make it possible to evade payment of tax by furnishing false information in respecct of the goods carried by misrepresentation of facts? The particulars transmitted through inter-net may help to adopt follow up action and to apprehend such unscrupulous traders. It is however imperative that for the purpose of administration of the quasi-judicial proceedings or to bring criminal liabilities, the Deliv¬ery Notes must be physically available to the concerned Assessing Officers. Actually, the Check Posts are the competent authorities to arrest such foul play at source and to do away with the odds by initiating coercive measures like detention of vehicle, seizing of goods and forfeiture or disposal thereof.
FIELD INSPECTION
There has been a good deal of deficiency in the matter of field inspectio, namely; at the business premises of the dealers, godowns, ware houses and carriers. The carriers place the pivotal role in indulging the evasion of taxes in collusion with the buyers and the sellers of the goods. Each officer is responsible for proper levy and collection of tax, checking, preventing and arresting evasion of taxes including collection of evaded and realization of outstanding dues in his area. In the past era, the good performances of the officer was a measuring scale to wards counting his efficiency and consideration for posting in suitable commercil areas. The inspection of cinema halls irrespective of any show was a regular phenomenon and it was made compulsory to maintain Register, to submit monthly statements in addition to submission of fornightly diaries.
OFFICE INSPECTION BY THE HIGHER AUTHORITIES
In sixties and earlier, office inspection by the Commissioner at least three times in a year was regular phenomenon. Such inspections were marathon and very tough, but constructive. The inspec¬tion reports were to be typed half margin and preliminary following action reports were to be submit ted within a specified time. With the increase of volumnous works and strengthening the man power, such task was carried out by his juniors in an identical manner. This improved the work culture and accelerated the work efficiency.
AUDIT
The aim and object of audit are to detect the irregularities and to regularise thereof. When there is major lapses, the officers were answeable to that. The existing provisions of law were rectified to cure the defects. Now, the said culture has been changed. The audit encroaches its jurisdiction and makes excess.
ADMINISTRATION OF THE ASSAM VALUE ADDED TAX ACT, 2003
Though the Assam Value Added Tax is a tax on the sales and purchase of the goods, but its aim and object is not identical to the previous ones. It is somewhat unique and technical and designed with a self-wheel-steering drive. The Act has, however, been designed identical to the previous sales tax law, whereby ample ambiguity and misconception prevail. For example, the spirit and intention of the Act was to levy tax on every stage of sales subject to credit of input tax. In the Act, contrary to the aim and object and the preamble, a tax measure for levy at the point of first point sales in respect of 23 items has been incorporated, though the Act has not specifically recorded anything about such departure from the main theme.
The VAT Law is for levy of tax on the sales or purchase of goods, but in the Act some measures of taxes were adopted to levy tax on exempted goods, production, total value of works contract, import of goods, which is beyond the spirit and intention of the Act. This type of payment of composition of tax obviously disrupted the levy of taxes at subsequent sales or inter-State sales making the whole process in the VAT system is anomalous and the process is likely to be foiled and frustrated.
The issue of Tax Invoice andivRetail Invoice are compulsory in the VAT regime to ensure proper accounting for and proper payment of tax thereof, but this has neither been complied with or not enforced for which trie leakage of revenue has become obvious.
The acceleration of activities in the field may discourage any such odds.
ENTRY TAX LAW AND THE LUXURY TAX LAW
The administration of these two Laws are to be carried on under the VAT Law of Assam, but the aim and object of levy of tax under these Act are not identical tq VAT Law. It will be in the fitness of things to make provisions in the Act for independent process of administration to avoid any complications.
TAX LAW ON SPECIFIED LANDS
With a view to ensure correct and accurate levy of tax, the following important aspects requires to be looked into:
(i) There should be a survey in all tea gardens irrespective of big and smalls.
(ii) The accuracy of production of green tea leaves is to be verified with the volume of production of black tea, keeping in view the ratio 4.5 :1.
(iii) There should be cross verification of green tea production statement, furnished in the sales tax department with the statement furnished in the Central Excise Department.
ELECTRICITY DUTY
The Central Sales Tax Act, 1956 has restricted the levy of tax in respect of the energy supplied outside the State, but contrary to this, the provisions for levy of tax on such supply, has been incorpo¬rated in the Assam Electricity Duty Act, 1963 in October, 1984.
AMUSEMENT AND BETTING TAX ACT
The Assam Amusement and Betting Tax Act, 1939 is to be renovated and re-designed to make way for assessment, specification of violation of the provisions of the Act including evasion of taxes and penal measures thereof.
TAX ON PRODESSIONS,TRADES. CALLINGS AND EMPLOYMENTS
Actually, the above measure of tax is hot a tax on income, but it is a tax on Professions, trades, callings and employments. The income derived out of the same is counted as a measuring scale for the purpose of levy of tax. But with the amendment of the Act, 1992, there was a crack in the system and this required to be restored.
WORKS CONTRACT AND LEASE:: WHETHER VAT COMMODITIES ?
VAT is a multiple system of tax leviable at every stage of sales of goods made by a dealer, subject to credit of input tax paid at the time of previous purchase of the goods. 'Input tax' and 'Output tax' are one and the same thing. The tax paid by the purchaser to the seller is input tax, while the tax realised by the seller from the purchaser and paid to the Govt. is output tax. A controversy is prevalent as to whether 'Works Contract and Lease' are VAT Commodities and the taxability on such item come under the purview of VAT tax-net.
Following a number of litigations and the Apex Court decisions against levy
of the tax on Works Contract and Lease, the Constitution of India was amended in 1982 and 'the transfer of property in goods involved in 'Works Contract' and 'the transfer of right to use any good without transfer of ownership' have been brought under the purview of the definition of 'Sales of goods'. The problem thus got a halt and tax on such transfer of property in goods and transfer of right of goods was well being levied under the Assam General Sales Tax Act, 1993. With the introduction of the Assam Value Added Tax Act, 2003, the basic principle of levy of tax, which has been discussed above, the levy of tax 'Works Contract' and 'Lease' has become irrelevant in as much as the 'Works Contract and Lease' maintain their independent entity and separate bearing. The multiple system of sales clockwise or stage wise in such deal become irrelevant. The VAT Act mainly dwelt in the basic principle of levy of tax on every goods at every stage of sale. It has not accommodated the principle of levy of tax on 'the transfer of property in goods' involved in 'Works Contract' and the 'transfer of right to use any goods involved in Lease. There ought to have a provision dispensing with the main theme of VAT so as to accommodate this extra-ingredients in the tax-net of Assam. The scope for levy of tax under the VAT Act has been specified in the Schedule attached to the Act along with the category of taxable goods not specified in other Schedules of the Act with the broad term 'Works Contract' and 'Lease'. The basic principle of levy of tax has not been accommodated. 'Works Contract' and 'Lease' are not the goods and the concept of levy of tax on 'Works Contract' and 'Lease' seem to be a deviation from the main spirit and intention of levy of tax on the sales of goods in the VAT ideology.
Assuming, but not admitting that the legislatures, while incorporating such measure of tax on 'Works Contract' and 'Lease', intending to levy tax on the transfer of property in goods involved in Works Contract and on the transfer of right to use such goods involved in lease, the rates of tax specified in Schedule at 12.5 paise in the rupee, is not at par with the rate of commodity-wise tax, specified in the other Schedules of the Act. For instance, the rate of tax on the sales of declared goods is always 4 paise in the rupee and it can not exceed the rate declared by the Govt. of India by enactment of the Central Sales Act, 1996 under the authority of the Constitution of India. Pipes of all varieties, pumps, tractors, ships vessels and many other allied articles, pertaining to 'Works Contracts' and 'Lease' do not have the rate of tax beyond 4 paise in the rupee. Naturally, there has been strong clash between the rate of the tax specified at 12.5 paise involved in 'Works Contract' and 'Lease' and the rate of tax of goods specified in the Schedules of the same VAT Act. There can not be double rate of tax on the same commodity for the purpose of 'Plain Sale' or 'Sale in the course of Works Contract' as well as the alleged sales on 'Lease'. Obviously, discrimination has been well maintained in tax-net scenario under the VAT Act of Assam.
The VAT law in Assam provided the measure of Composition of tax on works contract to be exercised by the works contractors at their own option in dispensing with the requirements of making payment of tax on the sales element under the VAT Act. The rate of tax payable as Composition of tax under such Scheme has been specified at 4 paise in the rupee on the gross value of 'Works Contract'. Apparently, this is abusive of the principle of levy of tax, as enumerated in the Constitution read with the definition of VAT Act.
A transfer of property in goods involved hi 'Works Contract' is liable to be taxed. A tax is leviable on the taxable commodities and not on the exempted ones. Moreover, labour charges, transport charges and other allied charges involved on the works contract can not be brought under the purview of taxability.
Transfer of right to use any goods in connection with lease is not a permanent sale of good. It is casual deal without maintaining any continuity. A lease deal on the same commodity may be frequent on the expiry of the specified period of time, but it may not be on chain system. This has provided scope for levy of tax on the same item leased without any scope for any credit of input tax. The legislatures have not specified the items to be taxed on lease and the levy of tax on lease has been made wide and open. It may naturally have an adverse effect to the lessesors and lessee when to be taxed on small deals of lease. No 'taxable quantum' has also been specified on lease deals. A confusion always prevail over the question of 'Hire' and 'Lease', as it has not been well analysed in the system. In absence of that creation of confusion to the dealer and exercise of powers by the taxing authority arbitrarily can not be ruled out in the matter.
Our above projection explaining the propriety of taxability in 'Works Contract' and 'Lease' ought not to have incorporated in the VAT Act of Assam, which maintain a separate aim and object with separate way of functioning. On the other hand, the levy of tax on transfer of property in goods involved Works Contract and transfer of right to use good on lease can not be given a good bye, as a substantial amount of tax revenue pours into the state coffer annually.
A separate enactment of law is considered to be imperative for the sake of better tax administration vis-a-vis proper augmentation of revenue of the State without any scope of disputes or controversy.
Following a number of litigations and the Apex Court decisions against levy
of the tax on Works Contract and Lease, the Constitution of India was amended in 1982 and 'the transfer of property in goods involved in 'Works Contract' and 'the transfer of right to use any good without transfer of ownership' have been brought under the purview of the definition of 'Sales of goods'. The problem thus got a halt and tax on such transfer of property in goods and transfer of right of goods was well being levied under the Assam General Sales Tax Act, 1993. With the introduction of the Assam Value Added Tax Act, 2003, the basic principle of levy of tax, which has been discussed above, the levy of tax 'Works Contract' and 'Lease' has become irrelevant in as much as the 'Works Contract and Lease' maintain their independent entity and separate bearing. The multiple system of sales clockwise or stage wise in such deal become irrelevant. The VAT Act mainly dwelt in the basic principle of levy of tax on every goods at every stage of sale. It has not accommodated the principle of levy of tax on 'the transfer of property in goods' involved in 'Works Contract' and the 'transfer of right to use any goods involved in Lease. There ought to have a provision dispensing with the main theme of VAT so as to accommodate this extra-ingredients in the tax-net of Assam. The scope for levy of tax under the VAT Act has been specified in the Schedule attached to the Act along with the category of taxable goods not specified in other Schedules of the Act with the broad term 'Works Contract' and 'Lease'. The basic principle of levy of tax has not been accommodated. 'Works Contract' and 'Lease' are not the goods and the concept of levy of tax on 'Works Contract' and 'Lease' seem to be a deviation from the main spirit and intention of levy of tax on the sales of goods in the VAT ideology.
Assuming, but not admitting that the legislatures, while incorporating such measure of tax on 'Works Contract' and 'Lease', intending to levy tax on the transfer of property in goods involved in Works Contract and on the transfer of right to use such goods involved in lease, the rates of tax specified in Schedule at 12.5 paise in the rupee, is not at par with the rate of commodity-wise tax, specified in the other Schedules of the Act. For instance, the rate of tax on the sales of declared goods is always 4 paise in the rupee and it can not exceed the rate declared by the Govt. of India by enactment of the Central Sales Act, 1996 under the authority of the Constitution of India. Pipes of all varieties, pumps, tractors, ships vessels and many other allied articles, pertaining to 'Works Contracts' and 'Lease' do not have the rate of tax beyond 4 paise in the rupee. Naturally, there has been strong clash between the rate of the tax specified at 12.5 paise involved in 'Works Contract' and 'Lease' and the rate of tax of goods specified in the Schedules of the same VAT Act. There can not be double rate of tax on the same commodity for the purpose of 'Plain Sale' or 'Sale in the course of Works Contract' as well as the alleged sales on 'Lease'. Obviously, discrimination has been well maintained in tax-net scenario under the VAT Act of Assam.
The VAT law in Assam provided the measure of Composition of tax on works contract to be exercised by the works contractors at their own option in dispensing with the requirements of making payment of tax on the sales element under the VAT Act. The rate of tax payable as Composition of tax under such Scheme has been specified at 4 paise in the rupee on the gross value of 'Works Contract'. Apparently, this is abusive of the principle of levy of tax, as enumerated in the Constitution read with the definition of VAT Act.
A transfer of property in goods involved hi 'Works Contract' is liable to be taxed. A tax is leviable on the taxable commodities and not on the exempted ones. Moreover, labour charges, transport charges and other allied charges involved on the works contract can not be brought under the purview of taxability.
Transfer of right to use any goods in connection with lease is not a permanent sale of good. It is casual deal without maintaining any continuity. A lease deal on the same commodity may be frequent on the expiry of the specified period of time, but it may not be on chain system. This has provided scope for levy of tax on the same item leased without any scope for any credit of input tax. The legislatures have not specified the items to be taxed on lease and the levy of tax on lease has been made wide and open. It may naturally have an adverse effect to the lessesors and lessee when to be taxed on small deals of lease. No 'taxable quantum' has also been specified on lease deals. A confusion always prevail over the question of 'Hire' and 'Lease', as it has not been well analysed in the system. In absence of that creation of confusion to the dealer and exercise of powers by the taxing authority arbitrarily can not be ruled out in the matter.
Our above projection explaining the propriety of taxability in 'Works Contract' and 'Lease' ought not to have incorporated in the VAT Act of Assam, which maintain a separate aim and object with separate way of functioning. On the other hand, the levy of tax on transfer of property in goods involved Works Contract and transfer of right to use good on lease can not be given a good bye, as a substantial amount of tax revenue pours into the state coffer annually.
A separate enactment of law is considered to be imperative for the sake of better tax administration vis-a-vis proper augmentation of revenue of the State without any scope of disputes or controversy.
Wednesday, January 27, 2010
TAX ON INCOME AND AGRICULTURAL INCOME
‘Tax’ means ‘the money that must be paid to the State; charged as a proportion of personal income and business profits or added to cost of some goods and services’ ‘ Income’ means ‘a money received during a certain period for work or from investment.’ “Agriculture’, on the other hand, means ‘a science or practice of farming.’ ‘Tax on income’ is thus money to be paid on the profits earned for works or investment, while; ‘Tax on agricultural income’ is ‘the money to be paid on profit earned on the practice of farming.’ ‘Tax on income’ is a subject, administered by the Government of India (Central Govt.) through the machineries at its disposal. Article 246(1) of the Constitution of India (Constitution) empowered Parliament to make enactment of laws on the subjects, specified in Seventh Schedule- List I (Union List). ‘Tax on income other than agricultural income’, as occurred in entry 82 of the said Schedule is thus the subject of levy of tax by the Central Govt. In fact, the measure of tax on income in India was introduced in British Parliament long back in 1860 to bear the economic burden on account of armed revolution of the First War of Independence against the British regime. The reasonableness of such measure of income tax adopted, were assigned as, it is a (i) canon of ability for paying such tax; (ii) canon of certainty; (iii) canon of convenience and (iv)canon of economy. There was, however, no such tax from 1865-67 on account of public murmuring. The Income Tax Act, 1886 was brought out to build- up licence tax. The Income Tax Act, 1922 continued to be operative in post independent period too. After the Constitution took birth on January, 26th, 1950, the said Act continued remained in force with the safe guard provided under the banner of Article 277 (Savings) of the Constitution. The Income Tax Act was remodeled and it was passed in the House of Parliament in September, 1961 and the Indian Income Tax Act, 1961 (Income Act) thus came into effect. It is, in fact, a tax only on income, profits or gains and not on the capital, whether original, substituted or increased. The salient features are, therefore, - (i) income tax is only a charge on income and not the capital; (ii) the method of charging tax on income and capital gains is different; (iii) in computing the taxable income of a business, profession or vocation, only the revenue expenditure and not the capital expenditure is deducted from the trading profits. ‘Tax on agricultural income, is a subject, administered by the State Governments through the tax machineries of the State. In 1925 the Indian Taxation Enquiry Commission opined the justification of creating a measure of tax on agricultural income, but the same was not readily materialized. The Government of India Act, 1935 as well incorporated entry 41 in the Seventh Schedule of Provincial Legislative List to facilitate introduction of tax measure on agricultural income. The measure of tax on agricultural income was thus introduced and the Assam Agricultural Income Tax Act, 1939 (Agricultural Act) was enacted by the then provincial Legislatures of Assam operative from 1.4.1939. After India achieved Republican character in 1950, entry 46 in the Seventh Schedule of the Constitution provided power to the Legislatures of the State to enact law on the ‘Taxes on agricultural income tax’. The 1939 Act, however, continued to be operative by virtue of savings provisions in Article 277 of the Constitution. It is worthy to mention that within this long spell of 70 years, a number of amendments of the Act took place following administrative needs and in consideration of public interest. ‘Tax on income’, as defined in clause (29) of Article 366 of the Constitution ‘includes a tax on the nature of an excess profits tax’, ‘ Agricultural income’ as defined in clause (i) of the said Article means ‘agricultural income, as defined for the purpose of the enactments relating to Indian income tax.’ The Constitution thus maintained silence to provide independent and categorical definition on the term ‘agricultural income’ and it is kept dependent on the Income Act. The definition in the Income Act incorporated that ‘the income that is derived from the land of agriculture’. The tax on income and the tax on agricultural income are levied taking into consideration the income derived in the previous year subject to deduction of the amount, admissible under the relevant Acts out of the total quantum of income derived. Though the main theme of the agricultural Act is that, it is a tax on agricultural income, but some deviation has been made in the matter of determination of the quantum of the agricultural income of tea. Income derived from tea is to be bifurcated as income on agricultural activities and on trade activities. The ratio maintained thereof is 60 : 40- that is, 60 percent on agricultural income and 40 percent on trade income. This principle is exclusively maintained in case of tea only and not on other production like paddy, pulses, wheat, sugar cane etc. where also simultaneously question of agriculture and trade are involved. There are good numbers of tea gardens, which produce green tea leaves and effect sales to the black tea manufacturing industries. It is not exactly known how they are roped in the tax net for purpose of levy of tax on income and agricultural income in accordance with the designed ratio. The tax on land, with the measuring scale of production of green tea leaves in smaller tea gardens, are not levied directly, but on the sales made to the manufacturing tea gardens, which purchase for production of black tea. The measures, adopted seem to be fallacious. The imposed restriction on the levy of 100% tax of tea obviously created an acute set-back in the revenue generation exercise of the State. In fact, tea industry is one of the few limited industries of Assam. This aspect of law requires a rethinking for rationalizing the fiscal disequilibrium at par with the income of the other agricultural commodities. The measure of tax, as introduced by the erstwhile provincial legislature of Assam and continued for long 70 years provided ample power to the Agricultural income tax authorities to administer the Act, that is, levy of tax and other allied matters. Over the head of such ardent vested quasi-judicial power, the exclusive power of determination of the quantum of total income and bifurcation thereof has been vested upon the income tax authority, causing a double standard in the power exercise scenario. It, no doubt, amounted to be a centralization of power the identical State law under the statute of law by way of encroachment and seems to be irrational and pre-judicious. The Agricultural Income Tax Rules laid down some discretionary power to agricultural authority for scrutiny and examination on such determination and bifurcation in such cases, when circumstances warranted so. The Supreme Court of India, of late, quashed the validity of the said State rule. This has the consequential effect that the State tax authorities are to remain cipher and to act like rubber stamps on the unitary decision of the central authorities. The quasi-judicial aspect in the agricultural Act thus practically intended to seek a good bye. The Head Offices of limited numbers of industries, installed in Assam, like tea industries, oil industries, coal industries etc. are mostly located at places out side the State of Assam. The taxes on income are generally deposited by such industrial entrepreneurs out side Assam. The concerned States in which such tax revenue deposits are made use to get share of income tax, as envisaged in Article 270(2) of the Constitution. Assam is thus deprived of such benefit even though the base of production, manufacturing and trade activities is totally within the parameter of Assam. The sensitive sons of the soil of Assam, urge upon the Government of Assam to consider this revenue generation issue and raise this vital pertinent question before the central Govt. so that an amendment of the Constitution is made to ensure augmentation of revenue to this economically backward State.
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