Sc Wants Central Body To Settle Inter-State St Disputes
The Supreme Court has asked the Union government to consider the establishment of a central mechanism to decide inter-state disputes over the levy of sales tax on companies which do countrywide business.
The problem arose in the case of Ashok Leyland and several other companies in Tamil Nadu. Ashok Leyland manufactures motor vehicles in several states and maintains regional sales offices in different cities. These offices stock vehicles and sell them in the respective states.
This situation led to confusion over which state had the right to charge sales tax on the sale of the vehicles. The case refers not only to Leyland, but to most units which are functioning on a nationwide basis.
The immediate provocation for the litigation was supplied by the Tamil Nadu government's move to begin claiming sales tax from local units even when these units were only sending manufactured goods to other states for sale there.
The state government maintained that the transfer of vehicles or goods from Tamil Nadu to other states was not mere consignments but constituted inter-state sales.
Therefore, the state government began to reopen concluded assessments claiming its tax under the Central Sales Tax Act. Such a tax would ultimately go to Tamil Nadu by virtue of the provisions contained in Articles 269 and 286 of the Constitution and the Central Sales Tax Act.
The companies argued that there was no sale in Tamil Nadu. There was only one sale, and that was in the other state. Therefore, Tamil Nadu's move would result in double taxation on the same transaction by two states.
The reassessment spree amounted to serious harassment, they submitted before the Supreme Court.
The division bench consisting of Justice B P Jeevan Reddy and Justice S B Majmudar dismissed the batch of appeals and referred their cases to the appellate tribunal in Tamil Nadu to be decided by it. The companies have a right to appeal to the apex court if the decision goes against them.
The judges pointed out that the orders of several state authorities have become final regarding the sales effected there. There is no way provided in the law by which the finality of those orders could be undone and the true nature of the transaction decided afresh with the participation of the state authorities of both states.
Besides, the other states have begun objecting to the jurisdiction of the Tamil Nadu sales authorities to summon them to discuss an issue which may require them to revise their own orders. Each cash-strapped state is eager to levy the tax.
It is in this context that the Supreme Court suggested the establishment of a central mechanism to resolve such impasses.
For now, the apex court has asked the companies to go before the sales tax tribunal and the appellate authority and resolve their problem. If they are still aggrieved, they may again approach the apex court