1993 Supreme(P&H) 91

PUNJAB & HARYANA HIGH COURT
A.P.Chowdhri, J.L.Gupta and N.K.Sodhi JJ.
East India Cotton Manufacturing Company Limited
Versus
State Of Haryana, Through Secretary To The Government Department Of
Civil Writ Petition No. 10277 of 1989,
Decided On : JANUARY 22, 1993

The definition of "sale" in the Amending Act of 1989 was confined to intra-State sales and did not include inter-State sales. The wide definition of "works contract" in the Amending Act of 1989 was not rendered ultra vires merely because it was broadly defined. The exemption from sales tax granted to certain goods under Schedule B of the HGST Act applied to those goods as such and did not extend to transactions falling within the purview of the definition of "sale" under the Amending Act of 1989. The retrospective effect given to certain provisions of the Amending Act of 1989 was permissible and did not violate any constitutional principles. The Taxing authorities were empowered to determine, in the facts and circumstances of each case, whether a particular transaction amounted to an inter-State sale or an intra-State sale.

Headnote:

HARYANA GENERAL SALES TAX ACT, 1973 - AMENDMENTS - CONSTITUTIONAL VALIDITY - SALE OR PURCHASE OF GOODS - WORKS CONTRACT - INTER-STATE SALE - TAXATION.

Fact of the Case:

Several writ petitions were filed challenging the constitutional validity of certain amendments made in Section 2 of the Haryana General Sales Tax Act, 1973 (HGST Act) by the Haryana General Sales Tax (Amendment) Act (Haryana Act No. 1 of 1989) (Amending Act of 1989). The main challenge was to the provisions relating to the taxation of works contracts and the definition of "sale" under the amended provisions.

Finding of the Court:

The Court upheld the constitutional validity of the impugned amendments, holding that: * The definition of "sale" in the Amending Act of 1989 was not ultra vires the powers of the State Legislature and did not include inter-State sales within its ambit. * The wide definition of "works contract" in the Amending Act of 1989 was not rendered ultra vires merely because it was broadly defined, as the taxable event was the transfer of property in goods involved in the execution of a works contract. * The exemption from sales tax granted to certain goods under Schedule B of the HGST Act applied to those goods as such and did not extend to transactions falling within the purview of the definition of "sale" under the Amending Act of 1989. * The retrospective effect given to certain provisions of the Amending Act of 1989 was permissible and did not violate any constitutional principles. * The Taxing authorities were empowered to determine, in the facts and circumstances of each case, whether a particular transaction amounted to an inter-State sale or an intra-State sale.

Issues: 1. Whether the definition of "sale" in the Amending Act of 1989 was ultra vires the powers of the State Legislature and included inter-State sales within its ambit? 2. Whether the wide definition of "works contract" in the Amending Act of 1989 was rendered ultra vires merely because it was broadly defined? 3. Whether the exemption from sales tax granted to certain goods under Schedule B of the HGST Act applied to transactions falling within the purview of the definition of "sale" under the Amending Act of 1989? 4. Whether the retrospective effect given to certain provisions of the Amending Act of 1989 was permissible and did not violate any constitutional principles? 5. Whether the Taxing authorities were empowered to determine, in the facts and circumstances of each case, whether a particular transaction amounted to an inter-State sale or an intra-State sale?

Ratio Decidendi: 1. The definition of "sale" in the Amending Act of 1989 was confined to intra-State sales and did not include inter-State sales. This interpretation was supported by the fact that Section 12 of the HGST Act expressly excluded inter-State sales from the purview of the Act. 2. The wide definition of "works contract" in the Amending Act of 1989 was not rendered ultra vires merely because it was broadly defined. The taxable event was the transfer of property in goods involved in the execution of a works contract, and the definition of "works contract" was not relevant for determining the taxable event. 3. The exemption from sales tax granted to certain goods under Schedule B of the HGST Act applied to those goods as such and did not extend to transactions falling within the purview of the definition of "sale" under the Amending Act of 1989. This was evident from the fact that the exemption was granted in the context of the sale or purchase of such goods as such goods. 4. The retrospective effect given to certain provisions of the Amending Act of 1989 was permissible and did not violate any constitutional principles. The Legislature had ample powers to give retrospective effect to legislation, and in this case, the retrospective effect was given to rectify a situation where some dealers had charged sales tax on transactions covered by the Amending Act prior to its enactment. 5. The Taxing authorities were empowered to determine, in the facts and circumstances of each case, whether a particular transaction amounted to an inter-State sale or an intra-State sale. This was necessary because the determination of the nature of a sale depended on various factors, such as the movement of goods, the place of passing of property in goods, and the intention of the parties involved.

Final Decision: The Court upheld the constitutional validity of the impugned amendments to the HGST Act and dismissed the writ petitions.