DIRECT TAX AND INDIRECT TAX

DIRECT AND INDIRECT TAXES
A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government, a payment exacted by legislative authority. A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority". Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid labour). India has a well developed taxation structure. The tax system in India is mainly a three tier system which is based between the Central, State Governments and the local government organizations. In most cases, these local bodies include the local councils and the municipalities. According to the Constitution of India, the government has the right to levy taxes on individuals and organizations. However, the constitution states that no one has the right to levy or charge taxes except the authority of law. Whatever tax is being charged has to be backed by the law passed by the legislature or the parliament. Article 246 (SEVENTH SCHEDULE) of the Indian Constitution, distributes legislative powers including taxation, between the Parliament and the State Legislature. Schedule VII enumerates these subject matters with the use of three lists;
• List - I entailing the areas on which only the parliament is competent to makes laws,
• List - II entailing the areas on which only the state legislature can make laws, and
• List - III listing the areas on which both the Parliament and the State Legislature can make laws upon concurrently.
Separate heads of taxation are provided under lists I and II of Seventh Schedule of Indian Constitution. There is no head of taxation in the Concurrent List (Union and the States have no concurrent power of taxation). Any tax levied by the government which is not backed by law or is beyond the powers of the legislating authority may be struck down as unconstitutional. The thirteen heads List-I of Seventh Schedule of Constitution of India covered under Union taxation, on which Parliament enacts the taxation law, are as under:
• Taxes on income other than agricultural income;
• Duties of customs including export duties;
• Duties of excise on tobacco and other goods manufactured or produced in India except (i) alcoholic liquor for human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in (ii);
• Corporation Tax;
• Taxes on capital value of assets, exclusive of agricultural land, of individuals and companies, taxes on capital of companies;
• Estate duty in respect of property other than agricultural land;
• Duties in respect of succession to property other than agricultural land;
• Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freight;
• Taxes other than stamp duties on transactions in stock exchanges and futures markets;
• Taxes on the sale or purchase of newspapers and on advertisements published therein;
• Taxes on sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce;
• Taxes on the consignment of goods in the course of inter-State trade or commerce.
• All residuary types of taxes not listed in any of the three lists of Seventh Schedule of Indian Constitution.
71
The nineteen heads List-II of Seventh Schedule of the Indian Constitution covered under State taxation, on which State Legislative enacts the taxation law, are as under:
• Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues;
• Taxes on agricultural income;
• Duties in respect of succession to agricultural income;
• Estate Duty in respect of agricultural income;
• Taxes on lands and buildings;
• Taxes on mineral rights;
• Duties of excise for following goods manufactured or produced within the State (i) alcoholic liquors for human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics;
• Taxes on entry of goods into a local area for consumption, use or sale therein;
• Taxes on the consumption or sale of electricity;
• Taxes on the sale or purchase of goods other than newspapers;
• Taxes on advertisements other than advertisements published in newspapers and advertisements broadcast by radio or television;
• Taxes on goods and passengers carried by roads or on inland waterways;
• Taxes on vehicles suitable for use on roads;
• Taxes on animals and boats;
• Tolls;
• Taxes on profession, trades, callings and employments;
• Capitation taxes;
• Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling;
• Stamp duty.
Provisions have been made by 73rd Constitutional Amendment, enforced from 24th April, 1993, to levy taxes by the Panchayat. A State may by law authorise a Panchayat to levy, collect and appropriate taxes, duties, tolls etc. Similarly, the provisions have been made by 74th Constitutional Amendment, enforced from 1st June, 1993, to levy the taxes by the Municipalities. A State Legislature may by law authorise a Municipality to levy, collect and appropriate taxes, duties, tolls etc.
Direct Taxes:
A Direct tax is a kind of charge, which is imposed directly on the taxpayer and paid directly to the government by the persons (juristic or natural) on whom it is imposed. A direct tax is one that cannot be shifted by the taxpayer to someone else. The some important direct taxes imposed in India are as under:
Income Tax: Income Tax Act, 1961 imposes tax on the income of the individuals or Hindu undivided families or firms or co-operative societies (other tan companies) and trusts (identified as bodies of individuals associations of persons) or every artificial juridical person. The inclusion of a particular income in the total incomes of a person for income-tax in India is based on his residential status. There are three residential status, viz., (i) Resident & Ordinarily Residents (Residents) (ii) Resident but not Ordinarily Residents and (iii) Non
72
Residents. There are several steps involved in determining the residential status of a person. All residents are taxable for all their income, including income outside India. Non residents are taxable only for the income
received in India or Income accrued in India. Not ordinarily residents are taxable in relation to income received in India or income accrued in India and income from business or profession controlled from India.
Corporation Tax: The companies and business organizations in India are taxed on the income from their worldwide transactions under the provision of Income Tax Act, 1961. A corporation is deemed to be resident in India if it is incorporated in India or if it’s control and management is situated entirely in India. In case of non resident corporations, tax is levied on the income which is earned from their business transactions in India or any other Indian sources depending on bilateral agreement of that country.
Property Tax: Property tax or 'house tax' is a local tax on buildings, along with appurtenant land, and imposed on owners. The tax power is vested in the states and it is delegated by law to the local bodies, specifying the valuation method, rate band, and collection procedures. The tax base is the annual ratable value (ARV) or area-based rating. Owner-occupied and other properties not producing rent are assessed on cost and then converted into ARV by applying a percentage of cost, usually six percent. Vacant land is generally exempted from the assessment. The properties lying under control of Central are exempted from the taxation. Instead a 'service charge' is permissible under executive order. Properties of foreign missions also enjoy tax exemption without an insistence for reciprocity.
Inheritance (Estate) Tax: An inheritance tax (also known as an estate tax or death duty) is a tax which arises on the death of an individual. It is a tax on the estate, or total value of the money and property, of a person who has died. India enforced estate duty from 1953 to 1985. Estate Duty Act, 1953 came into existence w.e.f. 15th October, 1953. Estate Duty on agricultural land was discontinued under the Estate Duty (Amendment) Act, 1984. The levy of Estate Duty in respect of property (other than agricultural land) passing on death occurring on or after 16th March, 1985, has also been abolished under the Estate Duty (Amendment) Act, 1985.
Gift Tax: Gift tax in India is regulated by the Gift Tax Act which was constituted on 1st April, 1958. It came into effect in all parts of the country except Jammu and Kashmir. As per the Gift Act 1958, all gifts in excess of Rs. 25,000, in the form of cash, draft, check or others, received from one who doesn't have blood relations with the recipient, were taxable. However, with effect from 1st October, 1998, gift tax got demolished and all the gifts made on or after the date were free from tax. But in 2004, the act was again revived partially. A new provision was introduced in the Income Tax Act 1961 under section 56 (2). According to it, the gifts received by any individual or Hindu Undivided Family (HUF) in excess of Rs. 50,000 in a year would be taxable.
Indirect Tax:
An indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). An indirect tax is one that can be shifted by the taxpayer to someone else. An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products. The some important indirect taxes imposed in India are as under:
Customs Duty: The Customs Act was formulated in 1962 to prevent illegal imports and exports of goods. Besides, all imports are sought to be subject to a duty with a view to affording protection to indigenous industries as well as to keep the imports to the minimum in the interests of securing the exchange rate of Indian currency. Duties of customs are levied on goods imported or exported from India at the rate specified under the customs Tariff Act, 1975 as amended from time to time or any other law for the time being in force. Under the custom laws, the various types of duties are leviable. (1) Basic Duty: This duty is levied on imported goods under the Customs Act, 1962. (2) Additional Duty (Countervailing Duty) (CVD): This is levied under section 3 (1) of the Custom Tariff Act and is equal to excise duty levied on a like product manufactured or produced in India. If a like product is not manufactured or produced in India, the excise duty that would be leviable on that product had it been manufactured or produced in India is the duty payable. If the product is leviable at different rates, the highest rate among those rates is the rate applicable. Such duty is leviable on the value of goods plus basic custom duty payable. (3) Additional Duty to compensate duty on inputs used by Indian manufacturers: This is levied under section 3(3) of the Customs Act. (4) Anti-dumping Duty: Sometimes, foreign sellers abroad may export into India goods at prices below the amounts charged by them in their domestic markets in order to capture Indian markets to the detriment of Indian industry. This is known as dumping. In order to prevent dumping, the Central Government may levy additional duty equal to the margin of dumping on such articles. There are however certain restrictions on imposing dumping duties in case of countries which are signatories to the GATT or on countries given "Most Favoured Nation Status" under agreement. (5) Protective Duty: If the Tariff Commission set up by law recommends that in order to protect the interests of Indian industry, the Central Government may levy protective anti-dumping duties at the rate recommended on specified goods. (6) Duty on
73
Bounty Fed Articles: In case a foreign country subsidises its exporters for exporting goods to India, the Central Government may impose additional import duty equal to the amount of such subsidy or bounty. If the amount of subsidy or bounty cannot be clearly deter mined immediately, additional duty may be collected on a provisional basis and after final determination, difference may be collected or refunded, as the case may be. (7) Export Duty: Such duty is levied on export of goods. At present very few articles such as skins and leather are subject to export duty. The main purpose of this duty is to restrict exports of certain goods. (8) Cess on Export: Under sub-section (1) of section 3 of the Agricultural & Processed Food Products Export Cess Act, 1985 (3 of 1986), 0.5% ad valorem as the rate of duty of customs be levied and collected as cess on export of all scheduled products. (9) National Calamity Contingent Duty: This duty was imposed under Section 134 of the Finance Act, 2003 on imported petroleum crude oil. This tax was also leviable on motor cars, imported multi-utility vehicles, two wheelers and mobile phones. (10) Education Cess: Education Cess is leviable @ 2% on the aggregate of duties of Customs (except safeguard duty under Section 8B and 8C, CVD under Section 9 and anti-dumping duty under Section 9A of the Customs Tariff Act, 1985). Items attracting Customs Duty at bound rates under international commitments are exempted from this Cess. (11) Secondary and Higher Education Cess: Leviable @1% on the aggregate of duties of Customs. (12) Road Cess: Additional Duty of Customs on Motor Spirit is leviable and Additional Duty of Customs on High Speed Diesel Oil is leviable by the Finance Act (No.2), 1998. and the Finance Act, 1999 respectively. (13) Surcharge on Motor Spirit: Special Additional Duty of Customs (Surcharge) on Motor Spirit is leviable by the Finance Act, 2002.
Central Excise Duty: The Central Government levies excise duty under the Central Excise Act, 1944 and the Central Excise Tariff Act, 1985. Central excise duty is tax which is charged on such excisable goods that are manufactured in India and are meant for domestic consumption. The term "excisable goods" means the goods which are specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act 1985. It is mandatory to pay Central Excise duty payable on the goods manufactured, unless exempted eg; duty is not payable on the goods exported out of India. Further various other exemptions are also notified by the Government from the payment of duty by the manufacturers. Various Central Excise are: (1) Basis Excise Duty: Excise Duty, imposed under section 3 of the ‘Central Excises and Salt Act’ of 1944 on all excisable goods other than salt produced or manufactured in India, at the rates set forth in the schedule to the Central Excise tariff Act, 1985, falls under the category of Basic Excise Duty In India. (2) Special Excise Duty: According to Section 37 of the Finance Act, 1978, Special Excise Duty is levied on all excisable goods that come under taxation, in line with the Basic Excise Duty under the Central Excises and Salt Act of 1944. Therefore, each year the Finance Act spells out that whether the Special Excise Duty shall or shall not be charged, and eventually collected during the relevant financial year. (2) Additional Duty of Excise: Section 3 of the ‘Additional Duties of Excise Act’ of 1957 permits the charge and collection of excise duty in respect of the goods as listed in the Schedule of this Act. (4) Road Cess: (a) Additional Duty of Excise on Motor Spirit: This is leviable by the Finance Act (No.2), 1998. (b) Additional Duty of Excise on High Speed Diesel Oil: This is leviable by the Finance Act, 1999. (5) Surcharge: (a) Special Additional Duty of Excise on Motor Spirit: This is leviable by the Finance Act, 2002. (b) Surcharge on Pan Masala and Tobacco Products: This Additional Duty of Excise has been imposed on cigarettes, pan masala and certain specified tobacco products, at specified rates in the Budget 2005-06. Biris are not subjected to this levy. (6) National Calamity Contingent Duty (NCCD): NCCD was levied on pan masala and certain specified tobacco products vide the Finance Act, 2001. The Finance Act, 2003 extended this levy to polyester filament yarn, motor car, two wheeler and multi-utility vehicle and crude petroleum oil. (7) Education Cess: Education Cess is leviable @2% on the aggregate of duties of Excise and Secondary and Higher Education Cess is Leviable @1% on the aggregate of duties of Excise. (8) Cess - A cess has been imposed on certain products.
Service Tax: The service providers in India except those in the state of Jammu and Kashmir are required to pay a Service Tax under the provisions of the Finance Act of 1994. The provisions related to Service Tax came into effect on 1st July, 1994. Under Section 67 of this Act, the Service Tax is levied on the gross or aggregate amount charged by the service provider on the receiver. However, in terms of Rule 6 of Service Tax Rules, 1994, the tax is permitted to be paid on the value received. The interesting thing about Service Tax in India is that the Government depends heavily on the voluntary compliance of the service providers for collecting Service Tax in India.
Sales Tax: Sales Tax in India is a form of tax that is imposed by the Government on the sale or purchase of a particular commodity within the country. Sales Tax is imposed under both, Central Government (Central Sales Tax) and State Government (Sales Tax) Legislation. Generally, each State follows its own Sales Tax Act and levies tax at various rates. Apart from sales tax, certain States also imposes additional charges like works contracts tax, turnover tax and purchaser tax. Thus, Sales Tax Acts as a major revenue-generator for the various State Governments. From 10th April, 2005, most of the States in India have supplemented sales tax with a new Value Added Tax (VAT).
74
Value Added Tax (VAT): The practice of VAT executed by State Governments is applied on each stage of sale, with a particular apparatus of credit for the input VAT paid. VAT in India classified under the tax slabs are 0% for essential commodities, 1% on gold ingots and expensive stones, 4% on industrial inputs, capital merchandise and commodities of mass consumption, and 12.5% on other items. Variable rates (State-dependent) are applicable for petroleum products, tobacco, liquor, etc. VAT levy will be administered by the Value Added Tax Act and the rules made there-under and similar to a sales tax. It is a tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer. Under the current single-point system of tax levy, the manufacturer or importer of goods into a State is liable to sales tax. There is no sales tax on the further distribution channel. VAT, in simple terms, is a multi-point levy on each of the entities in the supply chain. The value addition in the hands of each of the entities is subject to tax. VAT can be computed by using any of the three methods: (a) Subtraction method: The tax rate is applied to the difference between the value of output and the cost of input. (b) The Addition method: The value added is computed by adding all the payments that is payable to the factors of production (viz., wages, salaries, interest payments etc). (c) Tax credit method: This entails set-off of the tax paid on inputs from tax collected on sales.
Securities Transaction Tax (STT): STT is a tax being levied on all transactions done on the stock exchanges. STT is applicable on purchase or sale of equity shares, derivatives, equity oriented funds and equity oriented Mutual Funds. Current STT on purchase or sell of an equity share is 0.075%. A person becomes investor after payment of STT at the time of selling securities (shares). Selling the shares after 12 months comes under long term capital gains and one need not have to pay any tax on that gain. In the case of selling the shares before 12 months, one has to pay short term capital gains @10% flat on the gain. However, for a trader, all his gains will be treated as trading (Business) and he has to pay tax as per tax sables. In this case the transaction tax paid by him can be claimed back/adjusted in tax to be paid.
The overall control for administration of Direct Taxes lies with the Union Finance Ministry which functions through Income Tax Department with the Central Board of Direct Taxes (CBDT) at its apex. The CBDT is a statutory authority functioning under the Central Board of Revenue Act, 1963. It also functions as a division of the Ministry dealing with matters relating to levy and collection of Direct Taxes. The Central Excise Department spread over the entire country administers and collects the central excise duty. The apex body that is responsible for the policy and formulation of rules is the Central Board of Excise and Customs which functions under the control of the Union Finance Ministry. The Central Excise officers are also entrusted with the administration and collection of Service tax and the Customs duty.
The information contained in this chapter is related to direct and indirect taxes imposed and collected by the Union Government. The tables giving data from 2000-01 onwards in respect direct taxes (corporation tax, income tax and other direct taxes) collected by Central Board of Direct Tax (CBDT) and indirect taxes (customs duties, union excise duties and service tax) collected by Central Board of Excise and Customs. Customs Collection Rate used in this chapter is defined as the ratio of revenue collection (basic customs duty + countervailing duty) to value of imports (in per cent) unadjusted for exemptions, expressed in percentage.
Highlights of the Direct and Indirect Taxes:
• The total revenue realization from Direct and Indirect Taxes increased from ` 1881.19 billion in 2000-01 to ` 6076.45 billion in 2008-09. The percentage share of revenue realization from direct taxes to the total revenue realization increased from 36.3% in 2000-01to 55.7% in 2008-09, whereas, the percentage share of revenue realization from indirect taxes declined from 63.7% in 2000-01 to 44.3% in 2008-09.
• Revenue collection from direct taxes increased from ` 683.05 billion in 2000-01 to ` 3382.12 billion in 2008-09. The percentage share of revenue realization from corporation tax to the total revenue realization from direct taxes increased from 52.3% in 2000-01to 63.2% in 2008-09, whereas, the percentage share of revenue realization from income tax decreased from 46.5% in 2000-01 to 36.7% in 2008-09.
• Revenue collection from indirect taxes increased from ` 1198.14 billion in 2000-01 to ` 2446.67 billion in 2009-10. The percentage share of revenue realization from customs duties to the total revenue realization from indirect taxes decreased from 39.7% in 2000-01 to 34.5% in 2009-10, whereas, the percentage share of revenue realization from excise duties declined from 57.2% in 2000-01 to 42.1% in 2009-10. , However, the percentage share of revenue realization from service tax to the total revenue realization from indirect taxes increased substantially from 2.2% in 2000-01 to 23.5% in 2009-10.
75
• The total number of effective assessees of income tax and corporation tax increased from 23.00 million in 2000-01 to 32.65 million in 2008-09. The companies’ assessees declined from 334261 in 2000-01 to 327674 in 2008-09, whereas, the number of individual assessees and assessees of Hindu un-divided Families of income tax increased 20.66 million and 0.55 million respectively in 2000-01 to 30.10 million and 0.77 million in 2008-09. The assesses of firms declined from 1.34 million to 1.31 million during same period, whereas, trusts’ assesses increased from 0.064 million in 2000-01 to 0.071 million in 2008-09. However, the other asssessees increased from 0.051 million to 0.071 million during same period.
• The customs collection rate gradually decreased from 20.2% in 2000-01 to 6.9% in 2008-09. Customs collection rate of petroleum products decreased from 10% in 2004-05 to 3% in 2008-09, whereas, customs collection rate of non-petroleum products decreased from 12% in 2004-05 to 9% in 2008-09.
• About 34% of total import duties were realized from machineries, whereas, 10.8%, 9.0%, 8.5% and 7.7% of the total import duties were realized from Gold & articles other than Gold, petroleum products, chemicals and iron & steel respectively during 2009-10.
• About 62.2% of total excise duties was realized from petroleum crude and petroleum products, whereas, 13.5% and 9.4% of the total excise duties were realized from tobacco products and Iron & steel and articles thereof respectively during 2009-10.
• 7% of total service tax was realized from telephone billing, whereas, 6.9%, 6.3% and 5.4% of the total service tax were realized from banking and other financial service, business auxiliary service and general insurance premium respectively during 2009-10.
This chapter contains the following tables:
Table 6.1: presents year-wise revenue realisation from direct taxes, percentage annual growth of corporation and income taxes and percentage share of corporation tax and income tax to the total direct taxes since 2000-01.
Table 6.2: presents year-wise revenue realisation from indirect taxes and percentage share of Custom Duties, Excise Duties & Service Tax to the total indirect taxes since 2000-01.
Table 6.3: presents year-wise revenue realisation from direct and indirect taxes, percentage annual growth of direct and indirect taxes and percentage share of direct taxes and indirect taxes to the total taxed revenues since 2000-01.
Table 6.4: presents year-wise revenue realisation from direct taxes categorized in pre assessment and post assessment revenue collections since 2000-01.
Table 6.5: presents year-wise revenue realisation and cost of collection of direct taxes since 2000-01.
Table 6.6: presents year-wise number of effective assesses of direct taxes since 2000-01.
Table 6.7: presents year-wise corporation tax collected under various heads since 2000-01.
Table 6.8: presents year-wise income tax (other than corporation tax) collected under various heads since 2000-01.
Table 6.9: presents zone-wise revenue collection from customs duties since 2006-07.
Table 6.10: presents customs revenue collection from major commodity-groups since 2006-07.
Table 6.11: presents value of imports, import duties collection and collection rates since 2000-01.
Table 6.12: presents collection rates for selected import groups since 2004-05.
Table 6.13: presents zone-wise revenue collection from central excise duties since 2006-07.
Table 6.14: presents excise revenue from petroleum products (POL) and non-petroleum products (non-POL) since 2000-01.
Table 6.15: presents revenue collection from central excise duties from major commodity groups since 2006-07.
Table 6.16: presents service-wise revenue collection from service tax from since 2006-07.
76

CENTRAL SALES TAX

CENTRAL SALES TAX ACT, 1956
(ACT NO. 74 OF 1956)
CHAPTER I
Preliminary
1 Short title, extent and Commencement
(1) This Act may be called the Central Sales Tax Act, 1956.
(2) It extends to the whole of India [***].
(3) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint, and different dates may be appointed for
different provisions of this Act.
2 Definitions
In this Act, unless the context otherwise requires,—
(a) “appropriate State” means-
(i) in relation to a dealer who has one or more places of business situated in
the same State, that State;
(ii) in relation to a dealer who has [***] places of business situated in
different States, every such State with respect to the place or places of business
situated within its territory;
[***]
(aa) “business” includes-
(i) any trade, commerce or manufacture, or any adventure or concern in the
nature of trade, commerce or manufacture, whether or not such trade, commerce,
manufacture, adventure or concern is carried on with a motive to make gain or profit
and whether or not any gain or profit accrues from such trade, commerce,
manufacture, adventure or concern; and
(ii) any transaction in connection with, or incidental or ancillary to, such trade,
commerce, manufacture, adventure or concern;
(ab) “crossing the customs frontiers of India” means crossing the limits of the
area of a customs station in which imported goods or export goods are ordinarily kept
before clearance by customs authorities.
Explanation- For the purposes of this clause, “customs station” and
“customs authorities” shall have the same meanings as in the Customs Act, 1962 (52
1
of 1962);
(b) “dealer” means any person who carries on (whether regularly or otherwise)
the business of buying, selling, supplying or distributing goods, directly or indirectly,
for cash, or for deferred payment, or for commission, remuneration or other valuable
consideration, and includes-
(i) a local authority, a body corporate, a company, any cooperative society or
other society, club, firm, Hindu undivided family or other association of persons
which carries on such business;
(ii) a factor, broker, commission agent, del credere agent, or any other mercantile
agent, by whatever name called, and whether of the same description as hereinbefore
mentioned or not, who carries on the business of buying, selling, supplying or
distributing, goods belonging to any principal whether disclosed or not; and
(iii) an auctioneer who carries on the business of selling or auctioning goods
belonging to any principal, whether disclosed or not and whether the offer of the
intending purchaser is accepted by him or by the principal or a nominee of the principal.
Explanation 1 - Every person who acts as an agent, in any State, of a
dealer residing outside that State and buys, sells, supplies, or distributes, goods in the
State or acts on behalf of such dealer as-
(i) a mercantile agent as defined in the Sale of Goods Act, 1930 (3 of
1930), or
(ii) an agent for handling of goods or documents of the title relating to
goods, or
(iii) an agent for the collection or the payment of the sale price of goods
or as a guarantor for such collection or payment,
and every local branch or office in a State of a firm registered outside that
State or a company or other body corporate, the principal office or headquarters whereof
is outside that State, shall be deemed to be a dealer for the purposes of this Act.
Explanation 2 - A Government which, whether or not in the course of
business, buys, sells, supplies or distributes, goods, directly or otherwise, for cash or
for deferred payment or for commission, remuneration or other valuable
consideration, shall except in relation to any sale, supply or distribution of surplus,
unserviceable or old stores or materials or waste products or obsolete or discarded
machinery or parts or accessories thereof, be deemed to be a dealer for the purposes
of this Act;
(c) “declared goods” means goods declared under section 14 to be of special
importance in inter-State trade or commerce.
(d) “goods” includes all materials, articles, commodities and all other kinds of
movable property, but does not include newspapers, actionable claims, stocks, shares
and securities;
(dd) “place of business” includes -
(i) in any case where a dealer carries on business through an agent (by
whatever name called), the place of business of such agent;
(ii) a warehouse, godown or other place where a dealer stores his goods; and
2
(iii) a place where a dealer keeps his books of account;
(e) “prescribed” means prescribed by rules made under this Act;
(f) “registered dealer” means a dealer who is registered under section 7;
(g) “sale”, with its grammatical variations and cognate expressions, means any
transfer of property in goods by one person to another for cash or deferred payment
or for any other valuable consideration, and includes,–
(i) a transfer, otherwise than in pursuance of a contract, of property in any
goods for cash, deferred payment or other valuable consideration;
(ii) a transfer of property in goods (whether as goods or in some other form)
involved in the execution of a works contract;
(iii) a delivery of goods on hire-purchase or any system of payment by
instalments;
(iv) a transfer of the right to use any goods for any purpose (whether or not for
a specified period) for cash, deferred payment or other valuable consideration;
(v) a supply of goods by any unincorporated association or body of persons to
a member thereof for cash, deferred payment or other valuable consideration;
(vi) a supply, by way of or as part of any service or in any other manner
whatsoever, of goods, being food or any other article for human consumption or any
drink (whether or not intoxicating), where such supply or service, is for cash,
deferred payment or other valuable consideration,
but does not include a mortgage or hypothecation of or a charge or pledge
on goods;
(h) “sale price” means the amount payable to a dealer as consideration for the
sale of any goods, less any sum allowed as cash discount according to the practice
normally prevailing in the trade, but inclusive of any sum charged for anything done
by the dealer in respect of the goods at the time of or before the delivery thereof
other than the cost of freight or delivery or the cost of installation in cases where
such cost is separately charged;
PROVIDED that in the case of a transfer of property in goods (whether as
goods or in some other form) involved in the execution of a works contract, the sale
price of such goods shall be determined in the prescribed manner by making such
deduction from the total consideration for the works contract as may be prescribed
and such price shall be deemed to be the sale price for the purposes of this clause.;
(i) “sales tax law” means any law for the time being in force in any State or
part thereof which provides for the levy of taxes on the sale or purchase of goods
generally or on any specified goods expressly mentioned in that behalf and includes
value added tax law, and “general sales tax law” means any law for the time being in
force in any State or part thereof which provides for the levy of tax on the sale or
purchase of goods generally and includes value added tax law;
(j) “turnover” used in relation to any dealer liable to tax under this Act means
the aggregate of the sale prices received and receivable by him in respect of sales of
any goods in the course of inter-State trade or commerce made during any prescribed
period and determined in accordance with the provisions of this Act and the rules
3
made thereunder;
(ja) “works contract” means a contract for carrying out any work which
includes assembling, construction, building, altering, manufacturing, processing,
fabricating, erection, installation, fitting out, improvement, repair or commissioning
of any movable or immovable property;
(k) “year”, in relation to a dealer, means the year applicable in relation to him
under the general sales tax law of the appropriate State, and where there is no such
year applicable, the financial year.
CHAPTER II
Formulation of Principles for determining when a Sale or
Purchase of goods takes place in the course of inter-State
trade or commerce or outside a State or in the course of
Import or Export
3 When is a sale or purchase of goods said to take place in the course of
inter-State trade or commerce
A sale or purchase of goods shall be deemed to take place in the course of
inter-State trade or commerce if the sale or purchase-
(a) occasions the movement of goods from one State to another; or
(b) is effected by a transfer of documents of title to the goods during their
movement from one State to another.
Explanation 1 - Where goods are delivered to a carrier or other bailee for
transmission, the movement of the goods shall, for the purposes of clause (b), be
deemed to commence at the time of such delivery and terminate at the time when
delivery is taken from such carrier or bailee.
Explanation 2 - Where the movement of goods commences and terminates
in the same State it shall not be deemed to be a movement of goods from one State to
another by reason merely of the fact that in the course of such movement the goods
pass through the territory of any other State.
4 When is a sale or purchase of goods said to take place outside a State
(1) Subject to the provisions contained in section 3, when a sale or purchase of
goods is determined in accordance with sub-section (2) to take place inside a State,
such sale or purchase shall be deemed to have taken place outside all other States.
(2) A sale or purchase of goods shall be deemed to take place inside a State, if
the goods are within the State—
(a) in the case of specific or ascertained goods, at the time the contract of sale
is made; and
(b) in the case of unascertained or future goods, at the time of their
4
appropriation to the contract of sale by the seller or by the buyer, whether assent of
the other party is prior or subsequent to such appropriation.
Explanation - Where there is a single contract of sale or purchase of goods
situated at more places than one, the provisions of this sub-section shall apply as if
there were separate contracts in respect of the goods at each of such places.
5 When is a sale or purchase of goods said to take place in the course of
import or export
(1) A sale or purchase of goods shall be deemed to take place in the course of
the export of the goods out of the territory of India only if the sale or purchase either
occasions such export or is effected by a transfer of documents of title to the goods
after the goods have crossed the customs frontiers of India.
(2) A sale or purchase of goods shall be deemed to take place in the course of
the import of the goods into the territory of India only if the sale or purchase either
occasions such import or is effected by a transfer of documents of title to the goods
before the goods have crossed the customs frontiers of India.
(3) Notwithstanding anything contained in sub-section (1), the last sale or
purchase of any goods preceding the sale or purchase occasioning the export of those
goods out of the territory of India shall also be deemed to be in the course of such
export, if such last sale or purchase took place after, and was for the purpose of
complying with, the agreement or order for or in relation to such export.
(4) The provisions of sub-section (3) shall not apply to any sale or purchase of
goods unless the dealer selling the goods furnishes to the prescribed authority in the
prescribed manner a declaration duly filled and signed by the exporter to whom the
goods are sold in a prescribed form obtained from the prescribed authority.
(5) Notwithstanding anything contained in sub-section (1), if any designated
Indian carrier purchases Aviation Turbine Fuel for the purposes of its international
flight, such purchase shall be deemed to take place in the course of the export of
goods out of the territory of India.
Explanation. – For the purposes of this sub-section, “designated Indian
carrier” means any carrier which the Central Government may, by notification in the
Official Gazette, specify in this behalf.
CHAPTER III
Inter-State Sales Tax
6 Liability to tax on inter-State sales
(1) Subject to the other provisions contained in this Act, every dealer shall, with
effect from such date as the Central Government may, by notification in the Official
Gazette, appoint, not being earlier than thirty days from the date of such notification,
be liable to pay tax under this Act on all sales of goods other than electrical energy
effected by him in the course of inter-State trade or commerce during any year on
and from the date so notified:
PROVIDED that a dealer shall not be liable to pay tax under this Act on any
5
sale of goods which, in accordance with the provisions of sub-section (3) of section
5, is a sale in the course of export of those goods out of the territory of India.
(1A) A dealer shall be liable to pay tax under this Act on a sale of any goods
effected by him in the course of inter-State trade or commerce notwithstanding
that no tax would have been leviable (whether on the seller or the purchaser)
under the sales tax law of the appropriate State if that sale had taken place inside
that State.
(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A),
where a sale of any goods in the course of inter-State trade or commerce has either
occasioned the movement of such goods from one State to another or has been
effected by a transfer of documents of title to such goods during their movement
from one State to another, any subsequent sale during such movement effected by a
transfer of documents of title to such goods,-
(a) to the Government, or
(b) to a registered dealer other than the Government, if the goods are of the
description referred to in sub-section (3) of section 8,
shall be exempt from tax under this Act :
PROVIDED that no such subsequent sale shall be exempt from tax under
this sub-section unless the dealer effecting the sale furnishes to the prescribed
authority in the prescribed manner and within the prescribed time or within such
further time as that authority may, for sufficient cause, permit, -
(a) a certificate duly filled and signed by the registered dealer from
whom the goods were purchased containing the prescribed particulars in a prescribed
form obtained from the prescribed authority; and
(b) if the subsequent sale is made—
(i) to a registered dealer, a declaration referred to in clause (a) of
sub-section (4) of section 8, or
(ii) to the Government, not being a registered dealer, a certificate
referred to in clause (b) of sub-section (4) of Section 8:
PROVIDED FURTHER that it shall not be necessary to furnish the
declaration or the certificate referred to in clause (b) of the preceding proviso in
respect of a subsequent sale of goods if, -
(a) the sale or purchase of such goods is, under the sales tax law of the
appropriate State, exempt from tax generally or is subject to tax generally at a rate
which is lower than four per cent (whether called a tax or fee or by any other name);
and
(b) the dealer effecting such subsequent sale proves to the satisfaction
of the authority referred to in the preceding proviso that such sale is of the nature
referred to in clause (a) or clause (b) of this sub-section.
(3) Notwithstanding anything contained in this Act, no tax under this Act shall
be payable by any dealer in respect of sale of any goods made by such dealer, in the
course of inter-State trade or commerce, to any official, personnel, consular or
diplomatic agent of –
6
(i) any foreign diplomatic mission or consulate in India; or
(ii) the United Nations or any other similar international body,
entitled to privileges under any convention or agreement to which India
is a party or under any law for the time being in force, if such official, personnel,
consular or diplomatic agent, as the case may be, has purchased such goods for
himself or for the purposes of such mission, consulate, United Nations or other
body.
(4) The provisions of sub-section (3) shall not apply to the sale of goods made
in the course of inter-State trade or commerce unless the dealer selling such goods
furnishes to the prescribed authority a certificate in the prescribed manner on the
prescribed form duly filled and signed by the official, personnel, consular or
diplomatic agent, as the case may be.
6A Burden of proof, etc., in case of transfer of goods claimed otherwise
than by way of sale
(1) Where any dealer claims that he is not liable to pay tax under this Act, in
respect of any goods, on the ground that the movement of such goods from one State
to another was occasioned by reason of transfer of such goods by him to any other
place of his business or to his agent or principal, as the case may be, and not by
reason of sale, the burden of proving that the movement of those goods was so
occasioned shall be on that dealer and for this purpose he may furnish to the
assessing authority, within the prescribed time or within such further time as that
authority may, for sufficient cause, permit, a declaration, duly filled and signed by
the principal officer of the other place of business, or his agent or principal, as the
case may be, containing the prescribed particulars in the prescribed form obtained
from the prescribed authority, along with the evidence of despatch of such goods
and if the dealer fails to furnish such declaration, then, the movement of such
goods shall be deemed for all purposes of this Act to have been occasioned as a
result of sale..
(2) If the assessing authority is satisfied after making such inquiry as he may
deem necessary that the particulars contained in the declaration furnished by a dealer
under sub-section (1) are true, he may, at the time of, or at any time before, the
assessment of the tax payable by the dealer under this Act, make an order to that
effect and thereupon the movement of goods to which the declaration relates shall be
deemed for the purposes of this Act to have been occasioned otherwise than as a
result of sale.
Explanation - In this section, “assessing authority”, in relation to a dealer,
means the authority for the time being competent to assess the tax payable by the
dealer under this Act.
7 Registration of dealers
(1) Every dealer liable to pay tax under this Act shall, within such time as may
be prescribed for the purpose, make an application for registration under this Act to
such authority in the appropriate State as the Central Government may, by general or
7
special order, specify, and every such application shall contain such particulars as
may be prescribed.
(2) Any dealer liable to pay tax under the sales tax law of the appropriate State, or
where there is no such law in force in the appropriate State or any part thereof, any
dealer having a place of business in that State or part, as the case may be, may,
notwithstanding that he is not liable to pay tax under this Act, apply for registration
under this Act to the authority referred to in sub-section (1), and every such
application shall contain such particulars as may be prescribed.
Explanation- For the purposes of this sub-section, a dealer shall be deemed
to be liable to pay tax under the sales tax law of the appropriate State
notwithstanding that under such law a sale or purchase made by him is exempt from
tax or a refund or rebate of tax is admissible in respect thereof.
(2A) Where it appears necessary to the authority to whom an application is made
under sub-section (1) or sub-section (2) so to do for the proper realisation of the tax
payable under this Act or for the proper custody and use of the forms referred to in
clause (a) of the first proviso to sub-section (2) of section 6 or sub-section (1) of
section 6A or clause (a) of sub-section (4) of section 8, he may, by an order in
writing and for reasons to be recorded therein, impose as a condition for the issue of
a certificate of registration a requirement that the dealer shall furnish in the
prescribed manner and within such time as may be specified in the order such
security as may be so specified, for all or any of the aforesaid purposes.
(3) If the authority to whom an application under sub-section (1) or sub-section
(2) is made is satisfied that the application is in conformity with the provisions of this
Act and the rules made thereunder and the condition, if any, imposed under subsection
(2A), has been complied with, he shall register the applicant and grant to him
a certificate of registration in the prescribed form which shall specify the class or
classes of goods for the purposes of sub-section (1) of section 8.
(3A) Where it appears necessary to the authority granting a certificate of
registration under this section so to do for the proper realisation of tax payable under
this Act or for the proper custody and use of the forms referred to in sub-section
(2A), he may, at any time while such certificate is in force, by an order in writing and
for reasons to be recorded therein, require the dealer, to whom the certificate has
been granted, to furnish within such time as may be specified in the order and in the
prescribed manner such security, or, if the dealer has already furnished any security
in pursuance of an order under this sub-section or sub-section (2A), such additional
security, as may be specified in the order, for all or any of the aforesaid purposes.
(3B) No dealer shall be required to furnish any security under sub-section (2A) or
any security or additional security under sub-section (3A) unless he has been given
an opportunity of being heard.
(3BB) The amount of security which a dealer may be required to furnish under
sub-section (2A) or sub-section (3A) or the aggregate of the amount of such security
and the amount of additional security which he may be required to furnish under subsection
(3A), by the authority referred to therein, shall not exceed-
(a) in the case of a dealer other than a dealer who has made an application, or
who has been registered in pursuance of an application, under sub-section (2), a sum
8
equal to the tax payable under this Act, in accordance with the estimate of such
authority, on the turnover of such dealer for the year in which such security or, as the
case may be, additional security is required to be furnished; and
(b) in the case of a dealer who has made an application, or who has been
registered in pursuance of an application, under sub-section (2), a sum equal to the
tax leviable under this Act, in accordance with the estimate of such authority on the
sales to such dealer in the course of inter-State trade or commerce in the year in
which such security or, as the case may be, additional security is required to be
furnished, had such dealer been not registered under this Act.
(3C) Where the security furnished by a dealer under sub-section (2A) or subsection
(3A) is in the form of a surety bond and the surety becomes insolvent or dies,
the dealer shall, within thirty days of the occurrence of any of the aforesaid events,
inform the authority granting the certificate of registration and shall within ninety
days of such occurrence furnish a fresh surety bond or furnish in the prescribed
manner other security for the amount of the bond.
(3D) The authority granting the certificate of registration may by order and for
good and sufficient cause forfeit the whole or any part of the security furnished by a
dealer, -
(a) for realising any amount of tax or penalty payable by the dealer;
(b) if the dealer is found to have misused any of the forms referred to in subsection
(2A) or to have failed to keep them in proper custody :
PROVIDED that no order shall be passed under this sub-section without
giving the dealer an opportunity of being heard.
(3E) Where by reason of an order under sub-section (3D), the security furnished
by any dealer is rendered insufficient, he shall make up the deficiency in such
manner and within such time as may be prescribed.
(3F) The authority issuing the forms referred to in sub-section (2A) may refuse to
issue such forms to a dealer who has failed to comply with an order under that subsection
or sub-section (3A), or with the provisions of sub-section (3C) or sub-section
(3E), until the dealer has complied with such order or such provisions, as the case
may be.
(3G) The authority granting a certificate of registration may, on application by the
dealer to whom it has been granted, order the refund of any amount or part thereof
deposited by the dealer by way of security under this section, if it is not required for
the purposes of this Act.
(3H) Any person aggrieved by an order passed under sub-section (2A), subsection
(3A), sub-section (3D) or sub-section (3G) may, within thirty days of the
service of the order on him, but after furnishing the security, prefer, in such form and
manner as may be prescribed, an appeal against such order to such authority
(hereafter in this section referred to as the “appellate authority”) as may be
prescribed:
PROVIDED that the appellate authority may, for sufficient cause, permit
such person to present the appeal, -
9
(a) after the expiry of the said period of thirty days; or
(b) without furnishing the whole or any part of such security.
(3I) The procedure to be followed in hearing any appeal under sub-section (3H),
and the fees payable in respect of such appeals shall be such as may be prescribed.
(3J) The order passed by the appellate authority in any appeal under subsection
(3H) shall be final.
(4) A certificate of registration granted under this section may-
(a) either on the application of the dealer to whom it has been granted or,
where no such application has been made, after due notice to the dealer, be amended
by the authority granting it if he is satisfied that by reason of the registered dealer
having changed the name, place or nature of his business or the class or classes of
goods in which he carries on business or for any other reason the certificate of
registration granted to him requires to be amended; or
(b) be cancelled by the authority granting it where he is satisfied, after due
notice to the dealer to whom it has been granted, that he has ceased to carry on
business or has ceased to exist or has failed without sufficient cause, to comply
with an order under sub-section (3A) or with the provisions of sub-section (3C) or
sub-section (3E) or has failed to pay any tax or penalty payable under this Act, or
in the case of a dealer registered under sub-section (2) has ceased to be liable to
pay tax under the sales tax law of the appropriate State or for any other sufficient
reason.
(5) A registered dealer may apply in the prescribed manner not later than six
months before the end of a year to the authority which granted his certificate of
registration for the cancellation of such registration, and the authority shall, unless
the dealer is liable to pay tax under this Act, cancel the registration accordingly, and
where he does so, the cancellation shall take effect from the end of the year.
8 Rates of tax on sales in the course of inter-State trade or commerce
(1) Every dealer, who in the course of inter-State trade or commerce-
(a) sells to the Government any goods; or
(b) sells to a registered dealer other than the Government goods of the
description referred to in sub-section (3);
shall be liable to pay tax under this Act, with effect from such date as may
be notified by the Central Government in the Official Gazette for this purpose, which
shall be two percent of his turnover or at the rate applicable to the sale or purchase of
such goods inside the appropriate State under the sales tax law of that State, or, as the
case may be, under any enactment of that State imposing value added tax, whichever
is lower:
PROVIDED that the rate of tax payable under this sub-section by a dealer
shall continue to be four per cent of his turnover, until the rate of two per cent takes
effect under this sub-section.
(2) The tax payable by any dealer on his turnover in so far as the turnover or any
part thereof relates to the sale of goods in the course of inter-State trade or commerce
10
not falling within sub-section (1)—
(a) in the case of declared goods, shall be calculated at twice the rate
applicable to the sale or purchase of such goods inside the appropriate State [***];
(b) in the case of goods other than declared goods, shall be calculated at the
rate of ten per cent or at the rate applicable to the sale or purchase of such goods
inside the appropriate State, whichever is higher; and;
(c) in the case of goods, the sale or, as the case may be, the purchase of which
is, under the sales tax law of the appropriate State, exempt from tax generally shall
be nil,
and for the purpose of making any such calculation under clause (a) or
clause (b), any such dealer shall be deemed to be a dealer liable to pay tax under the
sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so
liable under that law.
Explanation - For the purposes of this sub-section, a sale or purchase of
any goods shall not be deemed to be exempt from tax generally under the sales tax
law of the appropriate State if under that law the sale or purchase of such goods is
exempt only in specified circumstances or under specified conditions or the tax is
levied on the sale or purchase of such goods at specified stages or otherwise than
with reference to the turnover of the goods.
[***]
(3) The goods referred to in clause (b) of sub-section (1) -
[***]
(b) [***] are goods of the class or classes specified in the certificate of
registration of the registered dealer purchasing the goods as being intended for resale
by him or subject to any rules made by the Central Government in this behalf,
for use by him in the manufacture or processing of goods for sale or in the
telecommunications network or in mining or in the generation or distribution of
electricity or any other form of power ;
(c) are containers or other materials specified in the certificate of registration
of the registered dealer purchasing the goods, being containers or materials intended
for being used for the packing of goods for sale ;
(d) are containers or other materials used for the packing of any goods or
classes of goods specified in the certificate of registration referred to in [***] clause (b)
or for the packing of any containers or other materials specified in the certificate of
registration referred to in clause (c).
(4) The provisions of sub-section (1) shall not apply to any sale in the course of
inter-State trade or commerce unless the dealer selling the goods furnishes to the
prescribed authority in the prescribed manner-
(a) a declaration duly filled and signed by the registered dealer to whom the
goods are sold containing the prescribed particulars in a prescribed form obtained
from the prescribed authority; or
(b) if the goods are sold to the Government, not being a registered dealer, a
certificate in the prescribed form duly filled and signed by a duly authorised officer
of the Government:
11
PROVIDED that the declaration referred to in clause (a) is furnished
within the prescribed time or within such further time as that authority may, for
sufficient cause, permit.
(5) Notwithstanding anything contained in this section, the State Government may
on the fulfillment of the requirements laid down in sub-section (4) by the dealer if it
is satisfied that it is necessary so to do in the public interest, by notification in the
Official Gazette, and subject to such conditions as may be specified therein, direct,-
(a) that no tax under this Act shall be payable by any dealer having his place of
business in the State in respect of the sales by him, in the course of inter-State trade or
commerce, to a registered dealer or the Government from any such place of business of
any such goods or classes of goods as may be specified in the notification, or that the
tax on such sales shall be calculated at such lower rates than those specified in subsection
(1) or sub-section (2) as may be mentioned in the notification;
(b) that in respect of all sales of goods or sales of such classes of goods as
may be specified in the notification, which are made, in the course of inter-State
trade or commerce, to a registered dealer or the Government by any dealer having his
place of business in the State or by any class of such dealers as may be specified in
the notification to any person or to such class of persons as may be specified in the
notification, no tax under this Act shall be payable or the tax on such sales shall be
calculated at such lower rates than those specified in sub-section (1) or sub-section (2) as
may be mentioned in the notification.
(6) Notwithstanding anything contained in this section, no tax under this Act shall
be payable by any dealer in respect of sale of any goods made by such dealer, in the
course of inter-State trade or commerce to a registered dealer for the purpose of
setting up, operation, maintenance, manufacture, trading, production, processing,
assembling, repairing, reconditioning, re-engineering, packaging or for use as
packing material or packing accessories in an unit located in any special economic
zone or for development, operation and maintenance of special economic zone by the
developer of the special economic zone, if such registered dealer has been authorised
to establish such unit or to develop, operate and maintain such special economic zone
by the authority specified by the Central Government in this behalf.
(7) The goods referred to in sub-section (6) shall be the goods of such class or
classes of goods as specified in the certificate of registration of the registered dealer
referred to in that sub-section.
(8) The provisions of sub-sections (6) and (7) shall not apply to any sale of
goods made in the course of inter-State trade or commerce unless the dealer selling
such goods furnishes to the prescribed authority referred to in sub-section (4) a
declaration in the prescribed manner on the prescribed form obtained from the
authority specified by the Central Government under sub-section (6) duly filled in
and signed by the registered dealer to whom such goods are sold.
Explanation - For the purposes of sub-section (6), the expression “special
economic zone” has the meaning assigned to it in clause (iii) to Explanation 2 to the
proviso to section 3 of the Central Excise Act, 1944 (1 of 1944).
12
8A Determination of turnover
(1) In determining the turnover of a dealer for the purposes of this Act, the
following deductions shall be made from the aggregate of the sale prices, namely: -
(a) the amount arrived at by applying the following formularate
of tax x aggregate of sale prices
100 plus rate of tax
PROVIDED that no deduction on the basis of the above formula shall be
made if the amount by way of tax collected by a registered dealer, in accordance with
the provisions of this Act, has been otherwise deducted from the aggregate of sale
prices.
Explanation - Where the turnover of a dealer is taxable at different rates,
the aforesaid formula shall be applied separately in respect of each part of the
turnover liable to a different rate of tax;
(b) the sale price of all goods returned to the dealer by the purchasers of such
goods,-
(i) within a period of three months from the date of delivery of the goods,
in the case of goods returned before the 14th day of May, 1966;
(ii) within a period of six months from the date of delivery of the goods, in
the case of goods returned on or after the 14th day of May, 1966:
PROVIDED that satisfactory evidence of such return of goods and of
refund or adjustment in accounts of the sale price thereof is produced before the
authority competent to assess or, as the case may be, re-assess the tax payable by the
dealer under this Act; and
(c) such other deductions as the Central Government may, having regard to
the prevalent market conditions facility of trade and interests of consumers,
prescribe.
(2) Save as otherwise provided in sub-section (1), in determining the turnover of
a dealer for the purposes of this Act, no deduction shall be made from the aggregate
of the sale prices.
9 Levy and collection of tax and penalties
(1) The tax payable by any dealer under this Act on sales of goods effected by
him in the course of inter-State trade or commerce, whether such sales fall within
clause (a) or clause (b) of section 3, shall be levied by the Government of India and
the tax so levied shall be collected by that Government in accordance with the
provisions of sub-section (2), in the State from which the movement of the goods
commenced:
PROVIDED that, in the case of a sale of goods during their movement from
one State to another, being a sale subsequent to the first sale in respect of the same
goods and being also a sale which does not fall within sub-section (2) of section 6,
the tax shall be levied and collected-
(a) where such subsequent sale has been effected by a registered dealer, in the
State from which the registered dealer obtained or, as the case may be, could have
obtained, the form prescribed for the purposes of clause (a) of sub-section (4) of
13
section 8 in connection with the purchase of such goods; and
(b) where such subsequent sale has been effected by an unregistered dealer, in
the State from which such subsequent sale has been effected.
(2) Subject to the other provisions of this Act and the rules made thereunder, the
authorities for the time being 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-asses, collect and 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 by such a dealer under this Act is a tax or interest or
penalty payable under the general sales tax 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; and the provisions of such law, including provisions relating to returns,
provisional assessment, advance payment of tax, registration of the transferee of any
business, imposition of the tax liability of a person carrying on business on the
transferee of, or successor to, such business, transfer of liability of any firm or Hindu
undivided family to pay tax in the event of the dissolution of such firm or partition of
such family, recovery of tax from third parties, appeals, reviews, 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:
PROVIDED that if in any State or part thereof there is no general sales tax
law in force, the Central Government may, by rules made in this behalf make
necessary provision for all or any of the matters specified in this sub-section.
(2A) All the provisions relating to offences, interest and penalties (including
provisions relating to penalties in lieu of prosecution for an offence or in addition to
the penalties or punishment for an offence but excluding the provisions relating to
matters provided for in sections 10 and 10A) of the general sales tax law of each
State shall, with necessary modifications, apply in relation to the assessment,
reassessment, collection and the enforcement 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
under this Act were a tax under such sales tax law.
(2B) If the tax payable by any dealer under this Act is not paid in time, the dealer
shall be liable to pay interest for delayed payment of such tax and all the provisions
for delayed payment of such tax and all the provisions relating to due date for
payment of tax, rate of interest for delayed payment of tax and assessment and
collection of interest for delayed payment of tax, of the general sales tax laws of each
State, shall apply in relation to due date for payment of tax, rate of interest for
delayed payment of tax, and assessment and collection of interest for delayed
payment of tax under this Act in such States as if the tax and the interest payable
under this Act were a tax and an interest under such sales tax law.
(3) The proceeds in any financial year of any tax, including any interest or
penalty, levied and collected under this Act in any State (other than a Union
Territory) on behalf of the Government of India shall be assigned to that State and
14
shall be retained by it; and the proceeds attributable to Union Territories shall form
part of the Consolidated Fund of India.
9A Collection of tax to be only by registered dealers
No person who is not a registered dealer shall collect in respect of any sale
by him of goods in the course of inter-State trade or commerce any amount by way
of tax under this Act, and no registered dealer shall make any such collection except
in accordance with this Act and the rules made thereunder.
9B Rounding off of tax, etc.
The amount of tax, interest, penalty, fine or any other sum payable, and the
amount of refund due, under the provisions of this Act shall be rounded off to the
nearest rupee and, for this purpose, where such amount contains a part of a rupee
consisting of paise, then, if such part is fifty paise or more, it shall be increased to
one rupee and if such part is less than fifty paise, it shall be ignored:
PROVIDED that nothing in this section shall apply for the purpose of
collection by a dealer of any amount by way of tax under this Act in respect of any
sale by him of goods in the course of inter-State trade or commerce.
10 Penalties
If any person—
(a) furnishes a certificate or declaration under sub-section (2) of section 6 or
sub-section (1) of section 6A or sub-section (4) or sub-section (8) of section 8, which
he knows, or has reason to believe, to be false ; or
(aa) fails to get himself registered as required by section 7 or fails to comply with
an order under sub-section (3A) or with the requirements of sub-section (3C) or subsection
(3E) of that section ; or
(b) being a registered dealer, falsely represents when purchasing any class of
goods that goods of such class are covered by his certificate of registration ; or
(c) not being a registered dealer, falsely represents when purchasing goods in
the course of inter-State trade or commerce that he is a registered dealer ; or
(d) after purchasing any goods for any of the purposes specified in clause (b) or
clause (c) or clause (d) of sub-section (3) or sub-section (6) of section 8 fails, without
reasonable excuse, to make use of the goods for any such purpose; or
(e) has in his possession any form prescribed for the purpose of sub-section (4)
or sub-section (8) of section 8 which has not been obtained by him or by his principal
or by his agent in accordance with the provisions of this Act or any rules made
thereunder; or
(f) collects any amount by way of tax in contravention of the provisions
contained in section 9A,
he shall be punishable with simple imprisonment which may extend to six
months, or with fine or with both; and when the offence is a continuing offence, with
a daily fine which may extend to fifty rupees for every day during which the offence
15
continues.
10A Imposition of penalty in lieu of prosecution
(1) If any person purchasing goods is guilty of an offence under clause (b) or
clause (c) or clause (d) of section 10, the authority who granted to him or, as the
case may be, is competent to grant to him a certificate of registration under this
Act may, after giving him a reasonable opportunity of being heard, by order in
writing, impose upon him by way of penalty a sum not exceeding one-and-a-half
times the tax which would have been levied under sub-section (2) of section 8 in
respect of the sale to him of the goods, if the sale had been a sale falling within
that sub-section.:
PROVIDED that no prosecution for an offence under section 10 shall be
instituted in respect of the same facts on which a penalty has been imposed under this
section.
(2) The penalty imposed upon any dealer under sub-section (1) shall be
collected by the Government of India in the manner provided in sub-section (2) of
section 9-
(a) in the case of an offence falling under clause (b) or clause (d) of section
10, in the State in which the person purchasing the goods obtained the form
prescribed for the purposes of clause (a) of sub-section (4) of section 8 in connection
with the purchase of such goods ;
(b) in the case of an offence falling under clause (c) of section 10, in the State
in which the person purchasing the goods should have registered himself if the
offence had not been committed.
11 Cognizance of offences
(1) No court shall take cognizance of any offence punishable under this Act or
the rules made thereunder except with the previous sanction of the Government
within the local limits of whose jurisdiction the offence has been committed or of
such officer of that Government as it may, by general or special order, specify in this
behalf; and no court inferior to that of a presidency magistrate or a magistrate of the
first class shall try any such offence.
(2) All offences punishable under this Act shall be cognizable and bailable.
12 Indemnity
No suit, prosecution or other legal proceeding shall lie against any officer of
Government for anything which is in good faith done or intended to be done under
this Act or the rules made thereunder.
13 Power to make rules
(1) The Central Government may, by notification in the Official Gazette, make
rules providing for —
(a) the manner in which applications for registration may be made under this
16
Act, the particulars to be contained therein, the procedure for the grant of such
registration, the circumstances in which registration may be refused and the form in
which the certificate of registration may be given ;
(aa) the manner of determination of the sale price and the deductions from the
total consideration for a works contract under the proviso to clause (h) of section 2;
(ab) the form and the manner for furnishing declaration under sub-section (8) of
section 8 ;
(b) the period of turnover, the manner in which the turnover in relation to the
sale of any goods under this Act shall be determined, and the deductions which may
be made under clause (c) of sub-section (1) of section 8A in the process of such
determination ;
(c) the cases and circumstances in which, and the conditions subject to which,
any registration granted under this Act may be cancelled ;
(d) the form in which and the particulars to be contained in any declaration or
certificate to be given under this Act the State of origin of such form or certificate
and the time within which any such certificate or declaration shall be produced or
furnished;
(e) the enumeration of goods or class of goods used in the manufacture or
processing of goods for sale or in mining or in the generation or distribution of
electricity or any other form of power ;
(f) the matters in respect of which provision may be made under the proviso
to sub-section (2) of section 9 ;
(g) the fees payable in respect of applications under this Act ;
(h) the proper functioning of the Authority constituted under section 19;
(i) the salaries and allowances payable to, and the terms and conditions of
service of, the Chairman and Members under sub-section (3) of section 19 ;
(j) any other matter as may be prescribed.
(2) Every rule made by the Central Government under sub-section (1) shall be
laid, as soon as may be after it is made, before each House of Parliament, while it is
in session, for a total period of thirty days which may be comprised in one session or
in two or more successive sessions, and if, before the expiry of the session
immediately following the session or the successive session aforesaid, both Houses
agree in making any modification in the rule or both Houses agree that the rule
should not be made, the rule shall thereafter have effect only in such modified form
or be of no effect, as the case may be; so, however, that any such modification or
annulment shall be without prejudice to the validity of anything previously done
under that rule.
(3) The State Government may make rules, not inconsistent with the
provisions of this Act and the rules made under sub-section (1), to carry out the
purpose of this Act.
(4) In particular and without prejudice to the powers conferred by sub-section
(3), the State Government may make rules for all or any of the following purposes,
namely :-
17
(a) the publication of lists of registered dealers, of the amendments made in
such lists from time to time, and the particulars to be contained in such lists;
(aa) the manner in which security may be furnished under sub-section (2A) or
sub-section (3A) or sub-section (3C) of section 7 and the manner in which and the time
within which any deficiency may be made up under sub-section (3E) of that section ;
(b) the form and manner in which accounts relating to sales in the course of
inter-State trade or commerce shall be kept by registered dealers ;
(c) the furnishing of any information relating to the stocks of goods of
purchases, sales and deliveries of goods by, any dealer or any other information
relating to his business as may be necessary for the purposes of this Act ;
(d) the inspection of any books, accounts or documents required to be kept
under this Act, the entry into any premises at all reasonable times for the purposes of
searching for any such books, accounts or documents kept or suspected to be kept in
such premises and the seizure of such books, accounts or documents ;
(e) the authority from whom, the conditions subject to which and the fees subject
to payment of which any form of certificate prescribed under clause (a) of the first
proviso to sub-section (2) of section 6 or of declaration prescribed under sub-section
(1) of section 6A or sub-section (4) of section 8 may be obtained, the manner in
which such forms shall be kept in custody and records relating thereto maintained
and the manner in which any such form may be used and any such certificate or
declaration may be furnished ;
(ee) the form and manner in which, and the authority to whom, an appeal may
be preferred under sub-section (3H) of section 7, the procedure to be followed in
hearing such appeals and the fees payable in respect of such appeals ;
(f) in the case of an Undivided Hindu Family, association, club, society, firm or
company or in the case of a person who carries on business as a guardian or trustee or
otherwise on behalf of another person, the furnishing of a declaration stating the name
of the person who shall be deemed to be the manager in relation to the business of the
dealer in the State and the form in which such declaration may be given ;
(g) the time within which, the manner in which and the authorities to whom
any change in the ownership of any business or in the name, place or nature of any
business carried on by any dealer shall be furnished.
(5) In making any rule under this section the Central Government or, as the case
may be, the State Government may direct that a breach thereof shall be punishable
with fine which may extend to five hundred rupees and when the offence is a
continuing offence, with a daily fine which may extend to fifty rupees for every day
during which the offence continues.
CHAPTER IV
Goods of special importance in inter-State trade or commerce
14 Certain goods to be of special importance in inter-State trade or
18
commerce
It is hereby declared that the following goods are of special importance in
inter-State trade or commerce:-
(i) cereals, that is to say,-
(i) paddy (Oryza sativa L.);
(ii) rice (Oryza sativa L.);
(iii) wheat (Triticum vulgare, T. Compactum, T. sphaerococcum, T. durum, T.
aestivum L., T. dicoccum);
(iv) Jowar or milo (Sorghum vulgare Pers);
(v) bajra (Pennisetum typhoideum L.);
(vi) maize (Zea mays L.);
(vii) ragi (Eleusine coracana Gaertn);
(viii) kodon (Paspalum scrobiculatum L.);
(ix) kutki (Panicum miliare L.);
(x) barley (Hordeum vulgare L.);
(ia) coal, including coke in all its forms, but excluding charcoal:
PROVIDED that during the period commencing on the 23rd day of
February, 1967 and ending with the date of commencement of section 11 of the
Central Sales Tax (Amendment) Act, 1972 (61 of 1972) this clause shall have effect
subject to the modification that the words “but excluding charcoal” shall be omitted;
(ii) cotton, that is to say, all kinds of cotton (indigenous or imported) in its
unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but
not including cotton waste;
(iia) cotton fabrics covered under heading Nos. 52.05, 52.06, 52.07, 52.08,
52.09, 52.10, 52.11, 52.12, 58.01, 58.02, 58.03, 58.04, 58.05, 58.06, 59.01, 59.03,
59.05, 59.06 and 60.01 of the Schedule to the Central Excise Tariff Act, 1985 (5 of
1986);
(iib) cotton yarn, but not including cotton yarn waste;
(iic) crude oil, that is to say, crude petroleum oils and crude oils obtained from
bituminous minerals (such as shale, calcareous rock, sand), whatever their
composition, whether obtained from normal or condensation oil-deposits or by the
destructive distillation of bituminous minerals and whether or not subjected to all or
any of the following processes:-
(1) decantation ;
(2) de-salting ;
(3) dehydration ;
(4) stabilisation in order to normalise the vapour pressure ;
(5) elimination of very light fractions with a view to returning them to the oil
deposits in order to improve the drainage and maintain the pressure ;
(6) the addition of only those hydrocarbons previously recovered by physical
methods during the course of the above mentioned processes ;
19
(7) any other minor process (including addition of pour point depressants or
flow improvers) which does not change the essential character of the substance ;
(iid) Aviation Turbine Fuel sold to a Turbo-Prop Aircraft ;
Explanation- For the purposes of this clause, “Turbo-Prop Aircraft” means
an aircraft deriving thrust, mainly from propeller, which may be driven by either
turbine engine or piston engine;
(iii) hides and skins, whether in a raw or dressed state;
(iv) iron and steel, that is to say,-
(i) pig iron, sponge iron and cast iron including ingot the moulds, bottom
plates, iron scrap, cast iron scrap, runner scrap and iron skull scrap ;
(ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and
sizes) ;
(iii) skelp bars, tin bars, sheet bars, hoe-bars and sleeper bars ;
(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and
ribbed or twisted, in coil form as well as straight lengths) ;
(v) steel structurals (angles, joists, channels, tees, sheet piling sections, Z
sections or any other rolled sections) ;
(vi) sheets, hoops, strips and skelp both black and galvanised, hot and cold
rolled, plain and corrugated, in all qualities, in straight lengths and in coil form, as
rolled and in rivetted condition ;
(vii) plates both plain and chequered in all qualities ;
(viii) discs, rings, forgings and steel castings ;
(ix) tool, alloy and special steels of any of the above categories ;
(x) steel melting scrap in all forms including steel skull, turnings and borings ;
(xi) steel tubes both welded and seamless, of all diameters and lengths,
including tube fittings ;
(xii) tin-plates, both hot dipped and electrolytic and tin free plates ;
(xiii) fish plate bars, bearing plate bars, crossing sleeper bars, fish plates,
bearing plates, crossing sleepers and pressed steel sleepers, rails-heavy and light
crane rails ;
(xiv) wheels, tyres, axles and wheels sets ;
(xv) wire rods and wires-rolled, drawn, galvanised, aluminised, tinned or
coated such as by copper ;
(xvi) defective, rejects, cuttings or end pieces of any of the above categories ;
(v) jute, that is to say, the fibre extracted from plants belonging to the species
Corchorus capsularis and Corchorus olitorius and the fibre known as mesta or bimli
extracted from plants of the species Hibiscus cannabinus and Hibscus subdariffa –
Var altissima and the fibre known as Sunn or Sunn-hemp extracted from plants of the
species Crotalaria juncea whether baled or otherwise ;
(va) Liquefied petroleum gas for domestic use;
20
(vi) oilseeds, that is to say,-
(i) Groundnut or Peanut (Arachis hypogaea);
(ii) Sesamum or Til (Sesamum orientale);
(iii) Cotton seed (Gossypium Spp.);
(iv) Soyabean (Glycine seja);
(v) Rapeseed and Mustard-
(1) Toria (Brassica campestris var toria);
(2) Rai (Brassica juncea);
(3) Jamba-Taramira (Eruca Satiya);
(4) Sarson, yellow and brown (Brassica campestris var sarson);
(5) Banarsi Rai or True Mustard (Brassica nigra);
(vi) Linseed (Linum usitatissimum);
(vii) Castor (Ricinus communis);
(viii) Coconut (i.e., Copra excluding tender coconuts) (cocosnucifera);
(ix) Sunflower (Helianthus annus);
(x) Nigar seed (Guizotia abyssinica);
(xi) Neem, vepa (Azadirachta indica);
(xii) Mahua, Illupai, Ippe (Madhuca indica M. Latifolia, Bassia, Latifolia and
Madhuca longifolia syn. M. Longifolia) ;
(xiii) Karanja, Pongam, Honga (Pongamia pinnata syn. P. Glabra);
(xiv) Kusum (Schleichera oleosa, syn. S. Trijuga) ;
(xv) Punna, Undi (Calophyllum inophyllum) ;
(xvi) Kokum (Carcinia indica);
(xvii) Sal (Shorea robusta);
(xviii) Tung (Aleurites fordii and A. montana);
(xix) Red palm (Elaeis guinensis);
(xx) Safflower (Carthanus tinctorius);
(via) pulses, that is to say,-
(i) gram or gulab gram (Cicerarietinum L.) ;
(ii) tur or arhar (Cajanus cajan) ;
(iii) moong or green gram (Phaseolus aureus) ;
(iv) masur or lentil (Lens esculenta Moench, Lens culinaris Medic) ;
(v) urad or black gram (Phaseolus mungo) ;
(vi) moth (Phaseolus aconitifolius Jacq) ;
(vii) lakh or khesari (Lathyrus sativus L.) ;
(vii) man made fabrics covered under heading Nos. 54.08, 54.09, 54.10, 54.11,
54.12, 55.07, 55.08, 55.09, 55.10, 55.11, 55.12, 58.01, 58.02, 58.03, 58.04, 58.05,
58.06, 59.01, 59.02, 59.03, 59.05, 59.06 and 60.01 of the Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986);
(viii) sugar, covered under sub-heading Nos. 1701.20, 1701.31, 1701.39 and
1702.11 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
21
(ix) unmanufactured tobacco and tobacco refuse covered under the subheading
No. 2401.00 cigars and cheroots of tobacco covered under heading No.
24.02, cigarettes and cigarillos of tobacco covered under sub-heading Nos.
2403.11 and 2403.21 and other manufactured tobacco covered under sub-heading
Nos. 2404.11, 2404.12, 2404.13, 2404.19, 2404.21, 2404.29, 2404.31, 2404.39,
2404.41, 2404.50 and 2404.60 of the Schedule to the Central Excise Tariff Act,
1985 (5 of 1986);
(x) woven fabrics of wool covered under heading Nos. 51.06, 51.07, 58.01, 58.02,
58.03 and 58.05 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(xi) [omitted]
15 Restrictions and conditions in regard to tax on sale or purchase of
declared goods within a State
Every sales tax law of a State shall, in so far as it imposes or authorises the
imposition of a tax on the sale or purchase of declared goods, be subject to the
following restrictions and conditions, namely:
(a) the tax payable under that law in respect of any sale or purchase of such
goods inside the State shall not exceed four percent of the sale or purchase price
thereof, [***] ;
(b) where a tax has been levied under that law in respect of the 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 Act in respect of the 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;
(c) where a tax has been levied under that law in respect of the sale or purchase
inside the State of any paddy referred to in sub-clause (i) of clause (i) of section 14,
the tax leviable on rice procured out of such paddy shall be reduced by the amount of
tax levied on such paddy ;
(ca) where a tax on sale or purchase of paddy referred to in sub-clause (i) of
clause (i) of section 14 is leviable under that law and the rice procured out of such
paddy is exported out of India, then, for the purpose of sub-section (3) of section 5,
the paddy and rice shall be treated as a single commodity ;
(d) each of the pulses referred to in clause (vi-a) of section 14, whether whole or
separated, and whether with or without husk, shall be treated as a single commodity
for the purposes of levy of tax under that law.
CHAPTER V
Liability in Special Cases
22
16 Definitions
In this Chapter, —
(a) “appropriate authority”, in relation to a company, means the authority
competent to assess tax on the company;
(b) “company” and “private company” have the meanings respectively
assigned to them by clauses (i) and (iii) of sub-section (1) of section 3 of the
Companies Act, 1956 (1 of 1956).
17 Company in liquidation
(1) Every person —
(a) who is the liquidator of any company which is being wound up, whether
under the orders of a court or otherwise; or
(b) who has been appointed the receiver of any assets of a company,
(hereinafter referred to as the liquidator) shall, within thirty days after he has become
such liquidator, give notice of his appointment as such to the appropriate authority.
(2) The appropriate authority shall, after making such inquiry or calling for such
information as it may deem fit, notify to the liquidator within three months from the
date on which he receives notice of the appointment of the liquidator the amount
which, in the opinion of the appropriate authority would be sufficient to provide for
any tax which is then, or is likely thereafter to become, payable by the company.
(3) The liquidator shall not part with any of the assets of the company or the
properties in his hands until he has been notified by the appropriate authority under
sub-section (2) and on being so notified, shall set aside an amount equal to the
amount notified and, until he so sets aside such amount, shall not part with any of the
assets of the company or the properties in his hands :
PROVIDED that nothing contained in this sub-section shall debar the
liquidator from parting with such assets or properties in compliance with any order of
a court or for the purpose of the payment of the tax payable by the company under
this Act or for making any payment to secured creditors whose debts are entitled
under law to priority of payment over debts due to Government on the date of
liquidation or for meeting such costs and expenses of the winding up of the company
as are in the opinion of the appropriate authority reasonable.
(4) If the liquidator fails to give the notice in accordance with sub-section (1) or
fails to set aside the amount as required by, or parts with any of the assets of the
company or the properties in his hands in contravention of the provisions of subsection
(3), he shall be personally liable for the payment of the tax which the
company would be liable to pay:
PROVIDED that if the amount of any tax payable by the company is
notified under sub-section (2), the personal liability of the liquidator under this subsection
shall be to the extent of such amount.
(5) Where there are more liquidators than one, the obligations and liabilities
attached to the liquidator under this section shall attach to all the liquidators jointly
and severally.
23
(6) The provisions of this section shall have effect notwithstanding anything to
the contrary contained in any other law for the time being in force.
18 Liability of directors of private company in liquidation
Notwithstanding anything contained in the Companies Act, 1956 (1 of
1956), when any private Company is wound up after the commencement of this
Act, and any tax assessed on the company under this Act for any period, whether
before or in the course of or after its liquidation, cannot be recovered, then, every
person who was a director of the private company at any time during the period
for which the tax is due shall be jointly and severally liable for the payment of
such tax unless he proves that the non-recovery cannot be attributed to any gross
neglect, misfeasance or breach of duty on his part in relation to the affairs of the
company.
CHAPTER VI
Authority to settle disputes in course of inter-State
trade or commerce
19 Central Sales Tax Appellate Authority
(1) The Central Government shall constitute by notification in the Official
Gazette, an Authority to settle inter-State disputes falling under section 6A read with
section 9 of this Act, to be known as “the Central Sales Tax Appellate Authority
(hereinafter referred to as the Authority)”.
(2) The Authority shall consist of the following Members appointed by the
Central Government, namely:-
(a) a Chairman, who is a retired Judge of the Supreme Court, or a retired
Chief Justice of a High Court;
(b) an officer of the Indian Legal Service who is, or is qualified to be, an
Additional Secretary to the Government of India; and
(c) an officer of a State Government not below the rank of Secretary or an
officer of the Central Government not below the rank of Additional Secretary, who is
an expert in sales tax matters.
(2A) Notwithstanding anything contained in sub-section (2), the Chairman or a
Member holding a post as such in the authority for Advance Rulings appointed under
clause (a) or clause (c), as the case may be, of sub-section (2) of section 245-O of the
Income-tax Act, 1961 (43 of 1961) may, in addition to his being the Chairman or a
Member of that authority, be appointed as the Chairman or a Member, as the case
may be, of the authority under this Act.
(3) The salaries and allowances payable to, and the terms and conditions of
24
service of the Chairman and Members shall be such as may be prescribed.
(4) The Central Government shall provide the Authority with such officers and
staff as may be necessary for the efficient exercise of the powers of the Authority
under this Act.
19A Vacancies, etc., not to invalidate proceedings
No proceeding before the authority shall be questioned or shall be invalid on
the ground merely of the existent of any vacancy or defect in the constitution of the
authority.
20 Appeals
(1) The provisions of this chapter shall apply to appeals filed by any aggrieved
person against any order of the highest appellate authority of a State, made under
section 6A read with section 9.
Explanation. — For the purposes of this section and sections 21, 22 and 25
“highest appellate authority of a State” means any authority or Tribunal or court
(except the High Court) established or constituted under the General Sales Tax Law
of a State, by whatever name called.
(2) Notwithstanding anything contained in the general sales tax law of a State,
the authority shall adjudicate an appeal filed under sub-section (1).
(3) An appeal under sub-section (1) may be filed within ninety days from the date
on which the order referred to in that sub-section is served on any aggrieved person :
PROVIDED that the authority may entertain any appeal after the expiry of
the said period of ninety days, but not later than one hundred and fifty days from the
date of such service, if it is satisfied that the appellant was prevented by sufficient
cause from filing the appeal in time :
PROVIDED FURTHER that the authority may entertain any appeal from an
aggrieved person within sixty days from the commencement of the Central Sales Tax
(Amendment) Act, 2005, where such aggrieved person had the right to file an appeal
against the order of the highest appellate authority of the State under sub-section (1)
as it stood immediately before the commencement of the said Act, but has not
availed of the right to file the appeal during the period commencing on and from the
3rd day of December, 2001 and ending with the 16th day of March, 2005.
(4) The application shall be made in quadruplicate and be accompanied by a fee
of five thousand rupees.
21 Procedure on receipt of application
(1) On receipt of an appeal, the Authority shall cause a copy thereof to be
forwarded to the assessing authority concerned as well as to each State Government
concerned with the appeal and to call upon them to furnish the relevant records:
PROVIDED that such records shall, as soon as possible, be returned to the
assessing authority or such State Government concerned, as the case may be.
(2) The Authority shall adjudicate and decide upon the appeal filed against an
25
order of the highest appellate authority.
(3) The Authority, after examining the appeal and the records called for, by
order, either allow or reject the appeal :
PROVIDED that no appeal shall be rejected unless an opportunity has been
given to the appellant of being heard in person or through a duly authorised
representative, and also to each State Government concerned with the appeal of
being heard.:
PROVIDED FURTHER that whether an appeal is rejected or accepted,
reasons for such rejection or acceptance shall be given in the order.
(4) The Authority shall make an endeavour to pronounce its order in writing
within six months of the receipt of the appeal.
(5) A copy of every order made under sub-section (3) shall be sent to the
appellant, assessing authority, respondent and highest appellate authority of the State
Government concerned.
22 Powers of the Authority
(1) The Authority shall have the same powers as are vested in a court under the
Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respect of the
following matters, namely:-
(a) enforcing the attendance of any person, examining him on oath or
affirmation;
(b) compelling the production of accounts and documents;
(c) issuing commission for the examination of witnesses;
(d) the reception of evidence on affidavits;
(e) any other matter which may be prescribed.
(1A) The authority may grant stay of the operation of the order of the highest
appellate authority against which the appeal is filed before it or order the pre-deposit
of the tax before entertaining the appeal and while granting such stay or making such
order for the pre-deposit of the tax, the authority shall have regard, if the assessee has
made pre-deposit of the tax under the General Sales Tax Law of the State concerned, to
such pre-deposit or pass such appropriate order as it may deem fit.
(2) Every proceeding before the Authority shall be deemed to be a judicial
proceeding within the meaning of sections 193 and 228 of the Indian Penal Code (45
of 1860) and the Authority shall be deemed to be a civil court for the purposes of
section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
23 Procedure of Authority
The Authority shall, subject to the provisions of this Chapter, have power to
regulate its own procedure in all matters, including stay of recovery of any demand
arising out of the exercise of powers under this Act.
26
24 Authority for advance rulings to function as Authority under this Act
(1) Notwithstanding anything contained in any other law for the time being
in force and in section 19 of this Act, the Authority for Advance Rulings
constituted under section 245-O of the Income-Tax Act, 1961 (43 of 1961) shall
be notified by the Central Government in the Official Gazette, with such
modifications as may be necessary, to make its composition in conformity with
section 19 of this Act, as the Authority under this Act till such time an Authority
is constituted under that section.
(2) On and from the date of the constitution of the Authority in accordance with
the provisions of section 19 of this Act, the proceedings pending with the Authority
for Advance Rulings shall stand transferred to the Authority constituted under that
section from the stage at which such proceedings stood before the date of
constitution of the said Authority.
25 Transfer of pending proceedings
(1) On and from the commencement of the Central Sales Tax (Amendment)
Act, 2005, all appeals (except appeals against orders of the highest appellate
authority of the State) pending before the authority notified under sub-section (1) of
section 24 shall stand transferred together with the records thereof to the highest
appellate authority of the concerned State.
(2) Such highest appellate authority of the State to which such appeal has been
transferred under sub-section (1) on receipt of such records shall proceed to deal with
such appeal so far as may be in the same manner as in the case of an appeal filed
before such highest appellate authority of the State according to the general sales tax
law of the appropriate State, from the stage which was reached before such transfer
or from any earlier stage or de novo as such highest appellate authority of the State
may deem fit :
PROVIDED that where the highest appellate authority finds that the
appellant has not availed of the opportunity of filing first appeal before appellate
authority, such case shall be forwarded to such authority.
26 Applicability of order passed
An order passed by the Authority under this Chapter shall be binding on
each State Government concerned, the assessing authorities and other authorities
created by or under any law relating to general sales tax, in force for the time being
in any State {***}.
27
28