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

Next thought of mind…

Just I have crossed 76 years. Still I maintain sound health and work with full energy. Shortly, I shall publish a book titled as “A GLIMPSE ON THE TAXATION HISTORY OF ASSAM “.
I am looking forward for kind co-operation from all sections of people.

Thank you.

My Vision

I crossed my 75 years of age on the 10th day of December, 2012. My son, daughter, son-in-law, daughter-in-law, grand son, grand daughter, nephews, niece and a number of friends, relatives and well-wishers gathered on the occasion and greeted me.
 I am till now active, though ailments disturb me physically oft and on.  I hope to go ahead with zeal and enthusiasm to finish my unfinished aim of life.
Presently, I am on the heels to bring out a book to be titles as “ A Chronological Analyctic Vision On The Taxation History of Assam”.
I shall inform the visitors, when the project is materialized. 
Mrinal Kanti Chakrabartty
Guwahati

TAX LAWS ON SALES OR PURCHASES OF GOODS (On local sales and inter-State sales)

             “No Government can exist without taxation. The money must necessary be levied on the people; and the grand art consists of levying so as not to oppress the people”- Frederik the Great of Russia. The famous diplomat and economist in the Mauryya empire, “ Chanakya” or ‘Kautilya”, on the other hand, observed- “The king shall  first reform the administration, by punishing appropriately those officers, who deal in wealth; they duly being corrected, shall use the right punishment to ensure good conduct of the people of the town and the countryside.” These two folds of observation are indeed the guide-lines in proper conduct of tax administration in the State as well the country as a whole.

            Law is a weapon to carry on the administration in a proper and smooth way, so as to ensure proper collection of tax revenue as well to augment the position of the State Exchequer, by way of undertaking and implementing the plans and programmes for the welfare of the people as well as the development of the State. Our instant topic of discussion is on “tax on sales or purchases of goods within Assam or in the course of inter-State trade or commerce under the banner of the taxation laws, operative within the State of Assam.”

Taxation laws on sales or purchases of goods locally in Assam

           The State tax machineries are equipped with two folds of taxation laws for the purpose of administration in the matter of levy and collection of taxes with other allied matters, connected therewith. Those are : “The Assam Value Added Tax Act, 2003 (VAT Act), operative from 01.05.2005” and “The Central Sales Tax Act, 1956 (Central Act), operative from 05.01.1957.” .The former is an State Act, enacted at the behest of the Legislatures of Assam, while the second one is a Central Act, enacted by Parliament long 55 years aback. The former taxation law was adopted by the State Legislatures of the State under clause (3) of Article 246 read with entry 54 of List-II (State List) in the Seventh Schedule of the Constitution of India (Constitution), while the latter was enacted by Parliament by virtue of the powers conferred by clause (1) of Article 246 read with entry 92A of List-I (Union List).

        The ‘Sales tax law in Assam’ had a long background. Under the authority conferred by the Government of India Act, 1935 in sub-section (3) of Section 100 read with entry 48 of List II (State List), the Provincial Legislative of Assam first enacted “ The Assam Sales of Motor Spirit and Lubricants Taxation Act, 1939”, which was repealed and substituted by the “ The Assam (Sales of Petroleum and Petroleum Products, including Motor Spirit and Lubricants) Taxation Act, 1955” with effect from 01.05.1956. Thereafter, under the said authority conferred by the Government of India Act, 1935, a tax law on sales or purchases of goods within the State of Assam came into force from 24.12.1947 in the post- independence period. After adoption of the Constitution on 26.01.1950, the Legislature of Assam enacted “The Assam Finance (Sales Tax) Act, 1956” with effect from 01.07.1956 with a view to levy tax on the goods, imported from the places out side the State of Assam and also on the goods manufactured and processed in Assam under the authority of entry 54 of the State List, as discussed in the first para above read  with clause (a) of Article 304 of the Constitution  Likewise, a tax on the last purchase of goods in Assam was enacted under the title “ The Assam Purchase Tax Act, 1967”on the same footing of the Constitution and it came into effect from 03.07.1971.” All these Acts were amalgamated, consolidated and amended and a new Act, namely; “The Assam General Sales Tax Act, 1993” was brought into existence with the date of operation from 01.07.1993. The VAT Act is a new measure of tax in supersession of the AGST Act.

               The liability to pay tax under the VAT Act arises at every stage of sale affected in Assam, subject to credit of input tax paid at the time of previous purchase of goods with the way of functioning, designed in this respect. The measure of tax on such goods were adopted in respect of some specified goods with the rates of tax, presently @ 5 paise in the rupee @ 1 and 2 paise in the rupee, some unclassified goods, transfer of property in goods, involved in works contract and transfer of right to use any goods for a specified period under lease @ 13.5 paise in the rupee.

              In addition to the above, a series of goods with different rates of taxes were incorporated in the Schedules of the VAT Act, which were designed as taxable at the point of first sales in Assam, contrary to the principle laid down in the theme of the VAT Act for levy of tax at every stage of sales of goods made within the State of Assam. This tax measure seems to be irrelevant in the VAT scenario, which is nothing but a measure of value added tax in the series of multiple points of tax right from the manufacturer or importer upto the level of the sales made to the consumers. However, the administration of the VAT Act is being carried on with yield of increased quantum of collection, which reached to Rs. 5136.36 crores in the year 2011-12 against Rs. 3952.20 crores in the year 2010-11. The collection of tax and proper administration of tax laws can not be at par and both have separate entity.

Taxation law on the sales or purchases of goods in the course of inter-State trade or commerce

              The taxation law on the sales or purchases of goods in the course of inter-State trade or commerce, namely; the Central Act has been made operative since 05.01.1957, as stated above, and the administration in the matter of levy of tax under the said Act with other allied matters, is being carried on till now. The enactment of this Act was a product of authority conferred by amendment of Article 269 of Constitution vis-à-vis insertion of a new entry 92A in the Seven Schedule of the Union List, when it was felt incumbent that the levy of tax was imperative on the continuous growing trend of the sales or purchases of goods in the course of inter-State trade or commerce.

Powers and functions of the Central Act to be governed by the general sales tax law of the State (viz VAT Act)

             Sub-section (2) of Section 9 of the Central Act provided :- “The authorities, empowered to assess, re-assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall on behalf of the Government of India assess, re-assess, collect or enforce payment of tax including any interest or penalty, payable by a dealer under this Act, as if the tax or interest or penalty payable under the general sales law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State. The said sub-section also laid down that all the provisions relating to return, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of tax liability of a person carrying on business on transferee of or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of any dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, review, revisions, references, refunds, rebates, penalties charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly.”

           Sub-section (2A) of the said Section 9 of the Central Act, on the other hand, laid down, as follows:

          “All provisions relating to offences, interest and penalties (including provisions relating to penalties, in lieu of prosecution for an offence in addition to the penalties or punishment for an offence,( but excluding the provisions relating to matters provided in Section 10 and 10A) of the general sales tax law of such State, shall with necessary modification shall apply in relation to the assessment, re-assessment, collection and enforcement payment of payment of any tax required to be collected under this Act in such State or in relation to any process connected with such assessment, re-assessment, collection or enforcement of payment, as if, the tax payable under this Act were a tax under such sales tax law.”

         The implication of the above provisions of the Central Act is very clear. It provided a broad guide line to carry on the administration in certain matters in respect of the provision of the said Act under the provisions of the VAT Act.

         The Central Act contained some independent provisions of law , which are to be administered independently without taking resort to the provisions of Sub-section (2) and (2A) of Section 9 of the said Act. Those are,  inter-alia, “(i) Provisions relating to Import and Export (Section 5); (ii) Liabilities to pay tax on inter-State sales, exemption in course of sales of goods by transfer of the title of the goods during the course of movement from one State to another (Section 6);  (iii) Transfer of stock of goods out side the State ( Section 6A));(iv) Registration of the dealers (Section 7); (v) Rate of tax on the sale in course of inter-State trade or commerce(Section 8); (vi) Penalties (institution of case in the court of law) (Section 10); (vii) Imposition of penalty in lieu of prosecution (Section 10A), (viii) Cognizance of offences- sanction and trial (Section 11)………..”

       It will be seen that the above provisions of the Central Act were not incorporated in Sub-sections (2) and (2A) of Section 9 of the Central Act and as such the same are to be administered independently under the statutory provisions of the said Act itself, implying thereby that, the aforesaid provisions will have no scope for governance towards carrying on the administration under the provisions of the VAT Act. For the present, we take up for discussion on a particular topic ‘Registration’, as occurred in Section 7 of the Central Act.

     The Government of India by a Notification No. SRO 643 dated 22.02. 1957, issued under Sub-section (1) of Section 7 of the Central Act, specified the competent authorities to whom the application of registration under the Central Act is to be filed vis-à-vis the onward action to be taken in the matter. Such competent authority, specified in the aforesaid notification, is inter-alia, the authority, competent to register a dealer under the general sales tax law of the State (that, is the VAT Act), if any such dealer is liable for registration. There is no question of delegation of power under the VAT Act or any power of governance in the matter of administration of the registration proceedings under the provisions of the VAT Act.

      The fragments of Section 7 of the Central Act relation to registration are :-“ (i)  Sub-section (1) -A dealer liable to pay  tax is to apply for registration; (ii) Sub-section (2) : A dealer, purchasing goods from other State in the course of inter- State trade or commerce, is to apply for registration; (iii) Sub-section (3) - Registration of a dealer for liabilities under Sub-section (1) & (2); (iv) Sub-section (2A) Security required to be furnished by a dealer for reasons to be recorded by the competent authority thereof; (v) Sub-section (3A) – Additional security to be furnished by the dealer for proper payment of tax and proper custody and use of the Forms to be furnished by dealer for reasons to be recorded by the competent authority thereof; (vi) Sub-section (3-B) Security or additional security are required to be furnished by the competent authority after giving an opportunity of being heard; (vii) Sub-Section (3BB)- The quantum of payment of the amount of security or additional security made  in the form of surety bond and such surety, if  becomes insolvent or dies, the dealer is to inform the competent authority in this respect and to furnish fresh surety for the amount of the bond; (viii) Sub-section (3D) forfeiture of the amount of security in full or part thereof for realization of amount of tax and penalty to recover the loss for misuse of the Forms, subject to providing of an opportunity provided to the dealer of being heard; (ix) Sub-section (3E)- To demand fresh security, in case the amount of security is found to be insufficient; (x) Sub-section 3(F)- Refusal to issue fresh Form for non-compliance with requirements to furnish security; (xi) Sub-section 3(G) -To refund the amount of security or part thereof by the competent authority on application to be filed in this behalf by the dealer, when it is not required for the purpose of the Central Act; (xii)  Sub-section 3(H), 3(I) and 3(G) – filing of appeal before the appellate authority, when a dealer is aggrieved by the order of the competent authority in relation to order for furnishing security or additional security, hearing and order passed thereon; (Sub-section (4) & (5) Amendment or cancellation of the Certificate of Registration on application by the dealer or on motion by the competent authority, granting the same.

          Apparently, therefore, the competent authority, notified under sub-section is the actual authority to exercise the powers under Section 7 of the Central Act, except the power of the appellate authority against the order of security and additional security is to be exercised by a separate forum on application filed in Form 5A, specified in the Assam Rules of the Central Act. The ‘appellate authority’ has been defined in clause (aaa) of rule 2 of the Assam Rules of the Central Act, but the rule is not very much clear in regard to such appellate authority.

          It has been found that confusions have been cropped up in the spheres of administration of the provisions of Section 7 of the Central Act and the matters connected therewith, like; demand of security, additional security, forfeiture and refund of security and additional security amongst the taxing authority, competent to make administration of the Central Act. In the matter of requiring to furnish the additional security, the mandatory provisions of the sub-section (3A) and (3B) of Section 7 of the Central Act are neither observed nor given proper cognizance to the same. Some matters, as it seem, are sought to be governed by the provisions of the VAT Act, which ,in fact, seems to be  unwarranted and irrelevant with a wrong coverage given to cause acute hardship and inconveniences to the dealers by way of misinterpretation of the provisions of the Central Act. A farce is in sight in the name of refund of security instead of forfeiture of security at the intermediary stage in the normal way of functioning.

     In order to make a halt in respect of such a shortfall, it is hoped that the implications of the relevant provisions of the Central Act, where the power of administration of the Central Act has been vested to function independently, without resorting to the provisions of the VAT Act, may be studied properly and a review is made by the highest authority of the tax administration of the State so as to make a solution of the prevailing controversy. For that purpose, a free and constructive dialogue is considered necessary to come to a consensus.

AVERT DRAINAGE OF OIL TAX REVENUE IN ASSAM

The mineral oil of Assam is contributing substantial amount of tax revenue to the State Exchequer. This is derived from crude oil, extracted from the oil fields of Assam. The crude oil- potentiality was there since centuries back, but no efforts or endeavour were there to unearth the said potential resources. After fall of the Ahom regime, the British Raj started its reign in this territory, consequent upon execution of Yandabu Treaty with the Mans in 1826 A.D. The British Raj had full conviction in mind that the soil of Assam bears acute potentiality in the field of agriculture, forest and mineral resources and there was ample scope for acceleration of economy.

The tea plants were discovered in abundance in the forest areas of Upper Assam. There was strong hunt to unveil such potential resources in other nearby areas. They started wide range of expedition giving priority to undivided Sivasagar and Lakshimpur districts. When achieved, this was extended to the western and southern part of the State. Gradually, they installed factories, adjacent to the tea garden areas and started commercial production keeping in mind to make growth of economy. The quality of Assam tea was excellent. Consequently, the Assam tea occupied a prominent place in the global market. The flow of income was by leap and bounds. There was no measure of tax on the sale or purchase of tea at the early stage. The same was introduced from the 24^th December, 1947, when the Sales Tax Law came into operation in the State. Of course, a tax law on income of agriculture was introduced from the 1^st April, 1939, which till now remains operative.

The British Raj equally felt that there was potentiality of mineral oil in the soil of Assam. The casual flame of fire was visible in soils, from time to time. A drilling operation was started in the year 1867. Ultimately, it yielded a positive result and for the first time in the history of Asian continent, crude oil field was discovered in Digboi area of the present Tinsukia district in the year 1889 A.D. Steps were taken to establish a mini oil refinery at Digboi and it was commissioned in 1901. Gradually, some more oil fields were discovered in and around Digboi including the Makum area. It is worthy to mention that this refinery used to feed fuel to the military convoy on its way to the war field in Burma area (now Myanmar), when Word War II was in full swing.

In the middle part of twentieth century, a good numbers of oil fields were discovered in a number of places in Sivasagar and Dibrugarh districts. The Government of India (Central Government) instead of installing a big-sized refinery in Assam, planned to pump out such crude oil to the Barauni Oil Refinery of Bihar. Naturally, a great irritation cropped up in the minds of the people Assam and they started agitation protesting against such odds depriving the people of Assam to get the legitimate benefit on the State resources. The decision of the Central Government was to give cognizance to the accrued anger of the people and pacify them by installing another medium sized refinery in Noonmati area in the heart of Guwahati city was an act of betrayal in as much as the Central Government simultaneously took decision to pump out a major quantity of such extracted crude oil to Barauni Refinery of Bihar. The Barauni refinery at earlier stage did not pay tax on such inter-State sales of crude oil to the State of Assam and challenged any act of levy. Fortunately, the Supreme Court of India (Apex court) delivered a historical judgment affirming the claim of the Government of Assam in getting its lawful revenue on such sales. Thereafter, during the regime of Mrs. Indira Gandhi, piloting the Indian Government, a refinery was installed at Dhaligaon of Bongaigaon to be fed by the crude oils, extracted from the soil of Assam. A big-sized oil refinery was as well installed at Numaligarh of Golaghat district, which is a product of six years’ long Assam movement on the foreigners’ issue at the behest of the All Assam Students Union (AASU), associated by many other like mined political and non-political organizations..

The Legislatures of Assam incorporated the item ‘crude oil’ in the tax schedule of the Assam Entry Tax Act, 2001(Entry Act) from the 4^th October, 2004 making way to levy tax vis-à-vis to augment the State revenue of the State in respect of import of such goods from places out side the State of Assam to a local area in Assam as well as in respect of such import from one local area to another local area within the State of Assam. As a consequence, barring the Digboi refinery, all other refineries were roped in the tax net of the Entry Act. The Entry Act of 2001 met with a serious challenge and the Gauhati High Court declared the said Act as unconstitutional and held to be void. However, the said Act was reintroduced from 1^st June, 2008 with a retrospective effect and validated the tax levy and realization including the tax to be realized in the interim period of non-existence and non-operation of any EntryAct. The matter is reported to be under sub-judice of the Apex Court.

Parliament introduced a provision in the Central Act in 1972, whereby any dispatch of taxable goods to places out side the State not by reasons of sales, but by way of stock transfer has been made admissible for exemption of tax under the said Act. Previously, such exemption of tax was conventional, but now it was legalized. As a matter of fact, such exemption of tax has a constitutional sanction in as much as sub-clause (a) of clause (1) of Article 286 of the Constitution restricted the State any levy of tax on the goods, so moved and sold out of the State. The provisions of Central Act, however, strictly laid down conditions that- (i) for such exemption, the burden of proof rested with the dealer, claiming such stock transfer vis-à-vis exemption of tax; (ii) the documents and evidences of dispatch and sales are to be produced; (iii) a declaration in Form ‘F,’ containing, the dispatch particulars, transfer invoices, value of the goods, so moved; (iv) the exemption of tax is not automatic and it is subject to enquiry by the competent taxing authority, allowing such exemption. As a part of inquiry, the said authority may insist on the compliance of the requirements, as laid down in sub-rule (4) of Rule 4 of the Central (Assam) Rules, 1957. Another, note worthy point, which is to be taken into consideration is that an ‘agreement’ in regard to such stock transfer and ‘sale’ out of the State and the ‘sale notes’ confirming, inter-alia, payment of tax in the respective State, as ought to have received by the transferor of the goods, is to be produced.

Form ‘F’ clearly specified that such movement of goods on stock transfer should be made by road transport, railway, steamer, air or post office and not other wise and furnishing the dispatch particulars in the said form viz consignment notes & dates etc. has been made imperative.

It has, of late, come to the light that some Oil refineries of Assam have been making the transfer of stock of ‘petrol’ and ‘diesel’ through pipe lines installed by them. This is a unilateral arrangement and the ball of such stock transfer remained at the court of such refinery. No organization for movement of such oil products was involved in the scenario. The taxing authorities might have entertained such claims of exemption. Whether such episode of stock transfer through pipe lines, has really any legal base? In such self-designed exercise, it is apprehended that the drainage of crore of State revenue has become obvious. A coparative study of the Central tax revenue collection for last three or four years may unveil the actual position.

We hope, this discussion will receive attention of the Government of India to find out a suitable remedy.

TAX ON INCOME

‘Tax’ means ‘the money that is to 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 by any person or organization for works or investment, while; ‘Tax on agricultural income’ is ‘the money that is 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 the Seventh Schedule- List I (Union List). ‘Tax on income other than agricultural income’, as occurred in entry 82 of the said Schedule is thus a tax to be levied by the Central Government for the purpose of augmentation of the Central revenue. 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 due to cropping up acute public murmuring. The Income Tax Act, 1886 was brought out to build- up licence tax. The Income Tax Act, adopted in 1922 ( IT Act)continued to be operative in post independent period too. After the Constitution took birth on January, 26^th, 1950, the said law continued to be operative with the safe guard provided in Article 277 (Savings clause) 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 in continuation of the previous one. 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 due some obvious difficulties. The Government of India Act, 1935 as well incorporated an entry No. 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, which had the consequential effect that “The Assam Agricultural Income Tax Act, 1939” (Agricultural Act) was enacted by the then provincial Legislatures of Assam and the said Act became operative from the 1^st April, 1939. After India attained the dignity of a Democratic, Republic Nation on the 26^th January, 1950, the entry No. 46 incorporated 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’. As a matter of fact, the 1939 Act was already operative and it continued to be operative by virtue of the said provision read with 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 in consideration of the administrative needs in the interest of public service..

‘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 (1) 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 so as to provide independent and categorical definition on the term ‘agricultural income’, implying thereby that, it is dependent on the Income Tax Act. The definition in the Income Tax Act, inter-alia, laid down that ‘the income that is derived from the land of agriculture’. The tax on income and the tax on agricultural income are levied on 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 purpose of the agricultural Act is that, it is a tax on agricultural income, but a unique deviation has been made in the matter of determination of the quantum of the agricultural income of tea. The Income derived from tea is to be bifurcated into two. That is on income of agricultural activities and that of on trade activities. The ratio thereof was specified as 60 : 40- that is, 60 percent on agricultural income and 40 percent on trade income. This principle is exclusively maintained in case of the income of the agricultural product ‘tea’ only and not on other products like paddy, pulses, wheat, sugar- cane etc. where also simultaneously the question of both agricultural and trading activities are involved. There are good numbers of tea gardens in Assam exceeding 45, 000 in numbers with 700 to 800 numbers of industrial establishments. The former produces green tea laves, while the latter finished products, the black tea. In fact, the green tea tea leaves are sold to the industrial establishments, while the black tea in the State or out of the State in the course of inter-State trade or commerce.

The sales of green tea leaves are exempted from tax under the Assam Value Added Tax Act, 2003 (VAT Act) vide entry No. 41 in the First Schedule. The quantitative production of green tea, on the other hand, is taken into account for the purpose of levy of tax on tea garden lands, with the measuring scale of production of green tea leaves in smaller tea gardens, It is note worthy to state in the connection that the Legislatures of Assam incorporated the following provisions in the Assam Taxation On Specified Lands Act, 1990 (SPL Act)with effect from the 12^th day of February, 2009

“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 any part payment of sale price or consideration of 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 of 20 paise per kilogram and deposit the same in the State Exchequer in the same manner, as may be prescribed.” [The rate of tax was enhanced at 25 paise per Kilogram with effect from the 29^th April, 2010”]

This apparently reflect that a tax is to be payable in a direct or indirect way on the sale or purchase of green tea leaves not on advelorem basis, but on weight basis, though, in fact, the VAT Act clearly restricted it.

The measure of tax, adopted in this behalf seems to be out side the scope of the VAT law in as much as the sales and purchase of green tea leaves are exempted from sales tax in Assam. The restriction to levy of 100% tax on the income of tea, therefore, obviously created an acute set-back in the revenue generation exercise of the State in as much as 40% of tax on such income is poured to the Central Coffer in the name of income on trade activities. In fact, tea industry is one of the few limited industries of Assam. Hence, a rethinking is necessary to maintain disparity in respect of other agricultural products to restore the fiscal equilibrium. The State Government may initiate dialogue with the Central Government on this issue, if considered necessary.

The Agricultural Act continued to be operative for long 72 years provided ample power to the said tax authorities to administer the Act including the levy of tax and other allied matters. Over the head of such vested quasi-judicial power, the exclusive power of determination of the quantum of total income and bifurcation thereof for agricultural income by the income tax authorities, is obviously a double standard vision in the power exercise scenario of the Agricultural Act. It is, no doubt, an irrational and a pre-judicious projection in the matter of levy of tax on agricultural income. Rule 5 framed under the said Act provided some discretionary power to the State taxing authority for scrutiny and examination on such determination and bifurcation in such cases, when circumstances warranted so. The Supreme Court of India, however, quashed the validity of the said State rule. The State tax authorities are thus 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 has been nullified thereby.

The Head Offices of limited numbers of industries, like tea industries, oil industries, coal industries, jute merchants etc.of Assam are mostly located at places out side the State of Assam. The taxes on income are generally deposited by such industrial entrepreneurs in the income tax territorial jurisdiction of such Head Offices. The concerned States in which such tax income tax revenue deposits 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 fall within the territorial jurisdiction of Assam.

The sensitive sons of the soil of Assam, therefore, urge upon the Government of Assam to consider all this vital aspects and play a pivotal role for its suitable solution at this stage keeping in mind that a spark neglected may burn the house.

AVERT RAMPANT CORRUPTION IN ASSAM CHECK POSTS

When a section of renowned and august personalities of the Indian sub-continent are on the heels to uproot corruption and are conspicuously vociferous against the social evils and impropriety, the continuance of the marathon flow of rampant corruption in the border check posts of Assam has posed to be an acute threat to the sound and healthy economy in the field of revenue generation of Assam. The trend of corruption in encouraging and accelerating the revenue drainage of the State is, undoubtedly, the social and economic crime and obviously attracts coercive measures. The border check posts of Assam were established since 1971-72 with a view to arrest the tax evasion and thereby to augment the State revenue. The check posts of the other departments, like transport, forest, excise and P.W.D. are also simultaneously functioning in a composite manner or with independent entity, having the aim and object to ensure proper revenue generation of the State. There seems to be, of late, a dearth of sincerity and lack of good will in such noble mission. The revenue generation is always incremental and certain factors are involved in such high revenue rise year after year., When, on the contrary, any acute lapse in such ardent exercise is visible for any negligence of duty or connivance of the tax machinery or collusion with the traders, it tantamount to be a deep cause of agony and a shadow of darkness surrounds the prospective dazzling revenue scenario.
Contrary to the original aims and objects, an unhealthy happening has been coming in sight through the screen of the publicity and the flushing of the news media. A sensitive citizen has the reasons to be ashamed, when a truck driver makes the innocent open expression that while coming across the other Border States, like Bihar and West Bengal etc. without any element of black money, they are victimized with illegal and unreasonable demands for such black money, while entering into the State of Assam. The earning of black money at the cost of the State Government revenue is, no doubt, very unfortunate and it is offensive and quite detrimental to the public interest.
It is appreciated that adequate measures have been taken by the taxing authorities to ensure revenue collection by way of mobilization of inner records through hi-tech exercises, but ,in fact, this is a theoretical approach and an effort to unveil the position of hide out revenue and to make recovery thereof from deep slumber under the cover of the records. The ardent necessity, what is felt, is to check and arrest the unaccounted inflow of goods and to discourage the consequential tax dodging activities on the sales. Such an endeavour seems to be legging far behind at these instant hours.
The check posts are the watch dogs to curb and arrest the evasion of tax revenue at the source, but there is no ‘Weigh bridge’ installed at the check posts primarily to ascertain the actual weight of the goods carried, which aptly differs with the covering Challan manifests in many cases. There is no broad platform in the check posts with proper and suitable man-power to unload the goods and to get proper account on the qualitative weight and value thereof. In many cases, such illegal carriage of goods uses to move scot free. The affairs of the check posts presently continues with the go as it is practice with broad-based British Ex-Premier Walford’s vision “Let the sleeping dog lie.” In last part of the 20th century and first part of this century, continuous raids to inspect, examine and to detect the tax dodging activities at the places of businesses of traders, godowns and warehouses gained the momentum and a substantial yield of revenue achieved as well. The transporters being the co-partners of such of such mal-activities, playing the pivotal role in such tax dodging episode, were, as well, not spared. There was, no doubt, high handedness in such raid exercises indulging personal gain under the shadow of some so called big banyan tree like personalities. The law of the land was very much there to apprehend such odds. Hence, the Government ought to have accepted it as a challenge and discourage the same in firm hands instead of bidding a good bye to such a fruitful and unhygienic revenue- generated programme.
The issue and utilization of the ‘Delivery Notes’, to make proper accounting of the imported goods, in fact, sometimes prove to be the farce and in practical sense, a parallel unaccounted flow of business runs without any tax liability in many cases. The Transit Passes issued to move the\goods from one State to other through the corridor of Assam amounts, on many occasions, to be a breach of trust in as much as some quantity of such goods hardly moves across the check post and are sold within the State of Assam.
The taxing authorities have been well equipped for administration of the tax laws by virtue of delegation powers, but a break of the continued system for last six decades becomes obvious, as the incumbents responsible for power exercise solely are dependable on the direction and dictation of high ups, exercising the so-called unitary power. The character and quality of quasi-judicial exercise is thus practically getting a crack.
Our concern is that the good name of the taxation department is to be restored and it should not be the subjected to criticism at any level, more particularly, the news or in the publicity media. There needs a profound review on the shortfalls of the functionaries with a designed renovation. The primary duty of the State Government is, therefore, to take note of the deficiency and to initiate action for aversion of rampant corruption at this stage, which has already polluted the healthy atmosphere.