- (1.) The petitioner, a public limited company incorporated under the Companies Act, while questioning correctness of the order dated 21.3.2014, passed by Commercial Taxes Officer, Anti Evasion Circle, Bhilwara, has also challenged constitutional validity of Sections 26 and 82(3) of the Value Added Tax Act, 2003 (hereinafter referred to as 'the VAT Act').
(2.) The factual matrix deserve notice is that the Government of Rajasthan, exercising authority under sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 (hereinafter referred to as 'the CST Act'), with a view to increase inter-State sales and decrease the quantum of branch transfers in order to augment the State's revenue from inter-State sales, issued a partial exemption notification dated 6.5.1986. The notification aforesaid reads as under:- "NOTIFICATION No. F.4(72)FDGr.IV/8I-18 Dated 6/5/1986- S.O.23. - In exercise of the powers conferred by S. 8(5), CST Act, 1956, the State Govt. in supersession of the FD notfn. No. F4(72) FDGr/IV/81-36 dated 3.12.1985 [S. No. 584], hereby directs that, with immediate effect, any dealer, having his place of business and manufacturing goods in the State of Rajasthan, may claim partial exemption from the tax payable in respect of the sales by him of such goods in the course of inter-State trade or commerce by way of reduction at the rate of 50% of the tax so payable on increased sales upto 50% and at the rate of 75% of the tax so payable on increased sales made over and above the aforesaid 50%, in the manner and subject to the conditions as follows:- (1) Such reduction of tax shall be allowed to a dealer only after and in respect of the increase which is effected in the percentage of the quantum of goods sold in the course of inter State trade or commerce out of the total quantum of goods sold within the State and in the course of inter-State trade or commerce and despatched to Head Office, Branch Office, Depot or agent outside the State for sale outside the State, during any accounting year as against such percentage during the accounting year 1984-85; (2) in the case of a dealer who commenced the manufacture of goods in the State of Rajasthan on or after 1.1.1985, the average of the aforesaid percentages in respect of the other manufacturers in the State in the relevant industry during the accounting year 1984-85, calculated and determined by the assessing authority with the approval of the Commissioner, shall be deemed to be the percentage in respect of such dealer for the accounting year 1984-85; (3) This increase effected in the percentage, as referred to in clause (1) above in respect of the sales in the course of inter-State trade or commerce, to be considered shall be limited to the extent of the decrease in the percentage in respect of the despatch of goods to Head Office, Branch Office, Depot or agent outside the State for sale outside the State, during the relevant accounting year as against such percentage during the accounting year 1984-85; and (4) No claim for such reduction of tax shall be allowed in respect of levy - cement. Note.--Claim, for partial exemption under this notfn. Dated 6.5.1986 (S. No. 625) shall not be made and allowed in respect of the inter-State sales of levy cement, and of other cement made in accordance with S. No. 928 dated 7.1.1994, and also of the following goods when the sales are made and CST paid thereon in accordance with the notfns mentioned against each:- (a) All edible oils (excluding hydrogenated oils, palm oil whether refined or not and refined coconut oil) S. No. 649 dated 26.12.1986, S. No. 793 dated 17.4.1990, pub.18.4.1990, S. No. 934 dated 31.3.1994; (b) Solvent extracted edible oil; S. Nos. 650 dated 26.12.1986 and 934 dated 31.3.1994; (c) Polyester filament yarn and nylon filament yarn : S. No. 741 dated 2.3.1989; (d) Polymer chips and polypropylene filament yarn : S. No. 741 dated 2.3.1989, w.e.f. 13.9.1989; (e) Polyester staple fibre and acrylic stable fibre : S. No. 742 dated 2.3.1989; (f) All kinds of yarn or waste thereof made from man-made fibre including spun and blended yarn but excluding polyester filament, nylon filament and polypropylene filament yarn : S.N.781 dated 12.10.1989; (g)(1) Stainless steel blooms, rounds, wire rods, squares strip sheets, and (2) Hot rolled and cold rolled coils (mis-rolls), slabs, plates, and end cuttings thereof : S. No. 867 dated 19.12.1991. Departmental Circular : See S. No. 653A dated 17.1.1987."
(3.) From reading of the notification, it is apparent that- (1) it grants partial exemption from CST payable in respect of inter State sales i.e. sale of goods in the course of inter-State trade or commerce; (2) it extends an incentive to increase inter-State sales by reducing branch or stock transfers i.e. dispatch of goods to branches, depots or agents outside the State for effecting sales outside the State on which no tax is leviable in the State either under the Rajasthan Sales Tax Act (hereinafter referred to as 'the RST Act') or CST Act; (3) the object of the notification is to reduce the loss of revenue to the State by branch transfers. To achieve the object emphasis is given to increase the inter-State sales and at the same time reduction of branch/stock transfers.;