1. Dispute over the levy of State sales tax on silk fabric at a rate exceeding 4% under the Delhi Sales Tax Act. (Para 1 , 2 )
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2024 Supreme(SC) 264
SUPREME COURT OF INDIA
ABHAY S. OKA, SANJAY KAROL, JJ.
Saree Sansar – Appellant
Versus
Govt. of NCT of Delhi & Ors. – Respondents
Civil Appeal No. 3774 of 2011
Decided On : 21-03-2024
Advocates appeared:
For the Appellant(s) : Mr. M.L. Lahoty, Adv. Mr. Himanshu Shekhar, AOR Mr. Paban K. Sharma, Adv. Mr. Anchit Sripat, Adv. Mr. Pranab Kumar Nayak, Adv.
For the Respondent(s): Mr. Rana Mukherjee, Sr. Adv. Ms. Rekha Pandey, Adv. Mr. Rupinder Sinhmar, Adv. Mr. B.K. Satija, Adv. Mr. Mukesh Kumar Maroria, Aor, Mr. Shreekant Neelappa Terdal, AOR Mr. Gurmeet Singh Makker, AOR Mr. Sanjay Kumar Dubey, Adv.
For the Appellant(s) : Mr. M.L. Lahoty, Adv. Mr. Himanshu Shekhar, AOR Mr. Paban K. Sharma, Adv. Mr. Anchit Sripat, Adv. Mr. Pranab Kumar Nayak, Adv.
For the Respondent(s): Mr. Rana Mukherjee, Sr. Adv. Ms. Rekha Pandey, Adv. Mr. Rupinder Sinhmar, Adv. Mr. B.K. Satija, Adv. Mr. Mukesh Kumar Maroria, Aor, Mr. Shreekant Neelappa Terdal, AOR Mr. Gurmeet Singh Makker, AOR Mr. Sanjay Kumar Dubey, Adv.
IMPORTANT POINT
The main legal point established in the judgment is that the levy of sales tax at the rate of 12% on silk fabric was valid during the relevant period as there was no embargo on levying sales tax at a rate exceeding 4% after silk fabric was deleted from the list under Section 14 of the Central Sales Tax Act.
Headnote:
Sales Tax - Silk Fabric - Delhi Sales Tax Act, 1975 - Section 4(1), Central Sales Tax Act - Sections 14, 15, Additional Duties of Excise (Goods of Special Importance) Act, 1957 - Schedule I - Summary: The court discussed the applicability of sales tax on silk fabric under the Delhi Sales Tax Act, 1975 and the Central Sales Tax Act. It also considered the provisions of the Additional Duties of Excise Act and their interconnection with the State Sales Tax Act. The court found that the levy of sales tax at the rate of 12% on silk fabric was valid during the relevant period as there was no embargo on levying sales tax at a rate exceeding 4% after silk fabric was deleted from the list under Section 14 of the Central Sales Tax Act.
Fact of the Case:
The appellant challenged the order of assessment for the levy of State sales tax on silk fabric at the rate of 12% for the period from 15th January 2000 to 31st March 2000. The appellant argued that the Delhi Government was not empowered to levy State sales tax on silk sarees under the Additional Duties of Excise Act.
Finding of the Court:
The court found that the levy of sales tax at the rate of 12% on silk fabric was valid during the relevant period as there was no embargo on levying sales tax at a rate exceeding 4% after silk fabric was deleted from the list under Section 14 of the Central Sales Tax Act.
Issues: The main issue was the validity of the levy of State sales tax on silk fabric at the rate of 12% for the period from 15th January 2000 to 31st March 2000.
Ratio Decidendi: The court held that the levy of sales tax at the rate of 12% on silk fabric was valid during the relevant period as there was no embargo on levying sales tax at a rate exceeding 4% after silk fabric was deleted from the list under Section 14 of the Central Sales Tax Act.
Final Decision: The appeal was dismissed with no orders as to costs.
Legal Category Hierarchy
Table of Contents
2. Whether the ADE Act bars State sales tax on declared goods or whether Section 15(1) of the CST Act caps the tax at 4%. (Para 3 , 4 )
3. Silk fabric was removed from the CST Act's declared goods list, and the ADE Act allows State sales tax provided the State forfeits ADE proceeds. (Para 5 , 6 , 7 , 8 , 9 )
4. Inclusion of goods in the ADE Act does not prohibit State sales tax, but such levy disentitles the State from receiving a share of ADE proceeds. (Para 8 )
5. Appeal dismissed. (Para 10 )
6. Does inclusion of goods in the ADE Act bar a State from levying sales tax?
No. The Second Schedule of the ADE Act provides that States may levy sales tax on goods listed in the First Schedule, but doing so means no sums from the additional duties will be payable to that State for that financial year. (Para 8 )
7. When does the 4% sales tax limit under Section 15(1) of the CST Act apply?
The limit applies only to goods declared as being of special importance in inter-state trade or commerce under Section 14 of the CST Act. If an item is deleted from Section 14, the 4% cap no longer applies. (Para 6 )
8. Does a nil duty rate under the ADE Act prevent a State from levying sales tax on that item?
No. The court held that the ADE Act's framework allows States to levy sales tax regardless of the duty rate, provided the State accepts that it will not receive a share of the net proceeds of additional duties for that item. (Para 8 )
JUDGMENT :
(Abhay S. Oka, J.) :
FACTUAL ASPECTS
1. The appellant assessee has taken exception to the judgment dated 19th October 2006 passed by a Division Bench of Delhi High Court. In the exercise of powers under Section 4(1) of the Delhi Sales Tax Act, 1975 (the DST Act), the Government of Delhi issued a notification on 31st March 1999 stating that the rate of the State sales tax on silk fabrics was fixed at 3%. On 15th January 2000, another notification was issued by which silk fabric was included in Schedule I of the DST Act. Therefore, the State sales tax on silk fabric was increased to 12%. On 31st March 2000, silk fabric was shifted from Schedule I to Schedule II of the DST Act by amending the Schedules. Therefore, the sales tax became payable on silk fabric at 4%. An assessment order was issued to the appellant on 31st October 2001 for the levy of the State sales tax at the rate of 12% for the period from 15th January 2000 to 31st March 2000. The amount demanded was Rs.4,22,095/-.
2. The appellant filed a writ petition before the Delhi High Court to challenge the order of assessment. By the impugned judgment, the writ petition was dismissed.
SUBMISSIONS
3. The learned counsel appearing for the appellant invited our attention to the provisions of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (the ADE Act). He submitted that the item “Silk Sarees” falls under item no.50.05 of the First Schedule to the ADE Act. Since “Silk Sarees” fall in the category of “declared goods” under the ADE Act, the Delhi Government was not empowered to levy State sales tax on the said goods. He submitted that under the scheme of the ADE Act, the additional duties are levied on declared goods in lieu of the sales tax and after deducting 2.203% of the total proceeds for distribution to the Union Territories, the remaining proceeds are distributed among the States as per the prescribed percentage. He relied upon Articles 266 and 269 of the Constitution of India, containing the scheme of collection and distribution of net proceeds of taxes and duties received by the Government of India under the Consolidated Fund. He submitted that Article 269(2) makes it very clear that the proceeds attributable to the Union Territories are kept aside and would not form a part of the Consolidated Funds of India. He urged that Delhi was getting its share of ADE at the relevant time. Hence, the Delhi Government was debarred from levying sales tax on “Silk Sarees”. He submitted that the ADE Act has been brought on the statute book to bring uniformity in the duty/tax throughout the country on the “goods of special importance”. He relied upon a decision of this Court in the case of Godfrey Phillips India Ltd. v. State of U.P., (2005) 2 SCC 515 and submitted that no State is entitled to levy sales tax when it is entitled to share proceeds under the ADE Act. He relied upon paragraph 6 of a decision of this Court in the case of State of Kerala v. Attesee, (1989) Supp.1 SCC 733 to support his contention that the Delhi Government was not entitled to levy sales tax on silk sarees. He submitted that the fact that “silk fabric” was deleted from the list contained in Section 14 of the Central Sales Tax Act, 1956 (the CST Act) is entirely irrelevant. In the alternative, the learned counsel submitted that in view of sub-section (1) of Section 15 of the CST Act, the Government of Delhi cannot claim sales tax over 4%. Therefore, he would urge that the levy of the sales tax at the rate of 12% is certainly bad in law.
4. The learned counsel appearing for the respondents submitted that the Item of silk fabric was deleted from the list of items in Section 14 with effect from 11th May 1968. Therefore, there was no embargo on levying sales tax at the rate above 4%. The learned counsel submitted that though the item of silk sarees is covered by clause 50.05 of the First Schedule to the ADE Act, the additional duty payable on the item is shown as nil. Therefore, the
