In Taxation Laws, the basic principle of tax in respect of a gatherer of tax is to recover the same in accordance with law i.e. not a paisa more not a paisa less, and in respect of a taxpayer the same principle applies with equal force. In other words, the tax gatherer and the taxpayer are the two sides of the same coin. While dealing with the scheme of the BST Act, 1959, the Supreme Court in Tel Utpadak Kendra vs. Dy. Commr. of ST (1981) 48 STC 248 (SC), has clarified the law to the effect that when an appellate authority is considering a second appeal against a first appellate order, it is examining an order which can be broadly described as an order of an assessment. It is a final order disposing of an appeal which, in a sense, is a continuation of the assessment. Thus, it is clear that the authorities under the scheme of the said Act, although designated differently according to their powers, are ultimately completing the process of assessment of tax only. But this whole process some times does not exactly proceed within the framework of the law and the taxpayer suffers to a great extent.

2. With the above background, we now revert to the topic under focus for your consideration. In order to claim charging concessional rate of tax on sales in the course of inter-State trade or commerce, u/s. 8(4) of the CST Act, 1956 r/w. Rule 12 of the CST Rules 1957, it is necessary to obtain Original ‘C’ Form declaration from a purchasing registered dealer. So is the case of production of Form ‘F’ declaration u/s. 6A in order to claim branch transfer not amounting to sales and therefore not liable to CST. Since the above declarations are required to be obtained from the ST Dept., the dealers are put to number of hardships and inconvenience in timely obtaining of these forms. This position continues year after year on a national scale, despite number of representations in this behalf from the trading community as well as from the Bar Associations. The assessing authorities as well as first appellate authorities do have little consideration in this behalf and they straightaway, without granting reasonable opportunity to produce such forms before them, reject the claims of hapless dealers and impose heavy tax, interest and penalties on dealers. Sadly, the superior authorities on their own intervene in such reckless and high handed passing of assessment or appeal orders by the lower authorities. Noticing such type of difficulties and other problems, as back as 1986 Justice Jha, in Fedders Llyod Corpn. Pvt. Ltd. vs. CST, (1986) 62 STC 216 at Page 218 observed : "The Sales Tax Department has been created to realize revenue and not to cause harassment to the people in general". However, regrettably, such guidelines by the Courts are ignored with impunity. Yet, the Tribunal and Courts do their duty in such circumstances.

3. In a recent good judgment of the Maharashtra Sales Tax Tribunal, Hon’ble Shri G. D. Parekh, President, in Fiat India Pvt. Ltd. vs. The State of Maharashtra, in S. A. No. 100 of 2008 deplored the practices followed in the Department in the following language :

". . . . the legislation has understood the difficulty in securing the declarations in ‘C’ Form, ‘F’ Form, etc. and thought it fit that the dealer should not be harassed unnecessarily because of difficulty in securing these declarations. Bearing this position in mind, it was incumbent on the part of the appellate authority to consider first whether declarations were placed on record before him before insisting for any amount of part-payment. It is very strange that the appellate authority has even not made any whisper in his order as regards the production of these declarations and straight away arbitrarily went on fixing huge amount of part-payment and unnecessarily dragging the dealer into litigation and wasting the time of all concerned. Instead of fixing of part-payment, the appellate authority could have fixed the matter for hearing immediately and could have passed the necessary order after verifying the declarations placed on record. Such approach and attitude of the qusai-judicial authority is highly objectionable."

4. Also, in a recent judgment of the Allahabad High Court in Hindon River Mills Ltd. vs. Commissioner of Trade Tax, U.P. (2008) 14 VST 63 (All.) in the matter of production of additional evidence in the form of ‘C’ Form declarations held as under :

"Held, allowing the revision, that law does not permit unnecessary taxation and permits only in accordance with law. In the case of the assessee, the application filed by the assessee under section 12(B) of the Act ought to have been accepted as sufficient opportunity had not been given to it to substantiate its claim. Therefore, the order of the first appellate authority as well as the Tribunal are liable to be set-aside and matter remanded to the Tribunal to verify ‘C’ forms and passed orders accordingly."

5. So friends, the above type of scenario, hopefully, is going to end in the near future when CST Act, 1956 is going to be repealed on 1-4-2010 as promised by the Central Govt. Therefore, let us hope and trust that the promise so given is implemented on dotted line and date.

By and large, under the sales tax legislation of any State, majority of the disputes arise as to whether a ‘person’ is a ‘dealer’ and the classification of ‘schedule entries’. Recently, the Kerala High Court was called upon to decide in writ appeal filed by State Bank of Travancore vs. CTO and Indian Bank vs. State of Kerala (2008) 13 VST 562 (Ker.) as to whether when a bank effecting sale in exercise of rights as pledgee of articles pledged by borrowers is liable to tax and whether the amendment so effected in clause (g) of section 2(viii) of the KGST Act, 1963 is valid. By the impugned amendment clause (g) was added. It reads as follows :

"(g) a bank or a financing institution which, whether in the course of his business or not, sells any gold or other valuable articles pledged with it to secure any loan, for the realization of such loan amount",

for the purpose of this clause, Explanation I includes a Nationalised Bank or a Scheduled Bank or a Co-operative Bank.

2. Before the Court, it was the case of the above petitioners that it was beyond the legislative competence of the State of Kerala to encompass a bank, which dispose of gold or valuable articles pledged as security to secure the loan amount, for realization of the loan amount. The Court rejected the above plea of the petitioners on the ground that

1. a sale of goods by a bank is not excluded from the purview of the legislative powers of the State in Entry 54 of List-II of the Seventh Schedule attached to the Constitution,

2. The sale of pledged articles is not a composite transaction. ‘Sale’ is defined in Section 2(xxi) of the KGST Act, 1963. After the Forty-sixth Amendment to the Constitution and after the insertion of the definition of the word ‘sale’ in the Act even an involuntary sale, that is a sale which is not in pursuance of a contract, would also qualify as sale,

3. When banks sell pledged articles it is in the course of banking business. Sale of pledged goods is not prohibited u/s. 8 of the Banking Regulation Act, 1949. While the disposal of pledged articles by the pledgee on default being committed by the borrower/pledger, amounts to realization of the security, it is nontheless a sale of goods,

4. a pledge is essentially a bailment of goods. By the pledge itself what is transferred by the pledger to the pledgee is only a special right in the property to cause the goods to be sold in the event of there being a default. Although a pledge does not involve a transfer of general property by the pledger to the pledgee and the definition of ‘sale’ under the KGST Act, excludes a pledge from the scope of the expression ‘sale’, when the pledgee-bank sells the goods upon conditions arising giving it the legal right to sell the goods, there cannot be any doubt that there is a transfer of general property in the goods by the bank to the buyer. A contract can be express or implied. When pledged articles are sold in public auction by the bank, it cannot be said that there is no contract between the bank and the buyer. When the bank as pledgee sells the property, the bank would be a seller within the meaning of the Sale of Goods Act, 1930 as it is the bank which sells the goods. Moreover, having regard to the pledge, the pledger must also be treated as having agreed to the transfer of general property of the goods to the prospective buyer on the happening of default and sale by the bank of pledged articles cannot be treated as ‘sale’ by the banks as agents of the pledger. It cannot therefore be said that there is no sale of goods within the meaning of the Sale of Goods Act for the reason that what is transferred is only a special right and no general property of goods is transferred or for the reason that there is no contract between the parties or that in the case of sale by the pledgee there is no volition on the part of the seller of the pledged articles,

5. there is absolutely no prohibition against a banking company to buy, sell or barter in bullion. Thus, when a bank buys, sells or trades in bullion, it is only engaging in a form of business which is perfectly permissible u/s 6 of the Banking Regulation Act, 1949.

3. With the above reasoning and after noticing large number of case law, the Court rejected the contention of the petitioners that they are not ‘dealers’ qua the sale of pledged property.

4. We therefore think that this judgment is of importance and one must read and re-read to understand the issues involved, and in particular the provisions of the Banking Regulation Act, 1949. In other words, it is not enough for a sales tax practitioner to read only allied laws but other laws applicable to a particular dealer i.e. in this case of banks to which the Banking Regulation Act, applies.

As reported in Times of India dated 14-05-2008, undeterred by the CJI’s assertion that he does not come under the RTI Act, the CIC has decided to take up the issue in a full Bench hearing soon.

"We have received complaints from two people regarding CJI’s statement. We will take up the matter in a full Bench hearing and till such time, I would like to refrain from making any observation on the issue", Chief Information Commissioner Mr. Wajahat Habibullah said.

2. The issue comes at a time when the CJI has mellowed down from his earlier stance and said that his office is that of a public servant. The CJI had recently remarked that as a constitutional authority, he did not come under the purview of the Act. "The CJI is a constitutional authority. RTI does not cover constitutional authorities," the CJI said.

3. In a statement later, the CJI clarified that he was a public servant and the issue of being governed under the Act was debatable. Following the earlier remark, Subhash C. Agarwal and C. Ramesh filed complaints based on newspaper clippings.

4. So, let us await development on this important matter affecting the common man.