A seven-judge Constitution bench of the Supreme Court has upheld the legislative power of states to impose additional taxes, surcharges and cesses on top of the taxes already applicable on sales and purchases. A bench headed by CJI Justice Surya Kant said that the already established legal position in this regard still applies.
Tezzbuzz Desk – The Supreme Court has upheld the right of state legislatures to impose additional tax, surcharge or cess on the basis of the tax already applicable on sale or purchase. A seven-judge Constitution bench headed by Chief Justice of India Justice Surya Kant said that the legislative power of states to impose additional levy on sales tax has been recognized in an earlier judgment and that legal position still applies.
This case was referred to a bench of seven judges about 27 years ago. The dispute was related to Section 5A of the Odisha Sales Tax Act, 1947. Under this, a provision was made to impose additional tax on some businessmen on the basis of their annual turnover.
Additional tax was based on the turnover of businessmen
Under the controversial provision, there was a provision to impose 10 percent additional tax on businessmen whose annual turnover was between Rs 10 lakh and Rs 1 crore. At the same time, 15 percent additional tax was to be imposed on businessmen with annual turnover of more than Rs 1 crore.
The petitioners had raised the question whether the state government has the right to impose additional tax in this way. His argument was that this levy amounts to a tax on the income of businessmen rather than a tax on sales or purchases and interferes with the jurisdiction of Parliament.
In its decision, the Supreme Court bench of five judges S. Cited the case of Kodar vs. State of Kerala. In that decision the additional sales tax was held to be valid.
The bench of seven judges clarified that the additional tax determined on the basis of sales tax is also in the nature of tax on sale or purchase. The Court thus upheld the previously established legal position regarding the legislative power of the states to impose additional levies.
Due to changed law the practical importance of the dispute is less.
The Supreme Court said that the legal provision in question has been changed later or other laws have been implemented in its place. In such a situation, the question sent before the bench of seven judges no longer has practical importance and has remained of academic nature.
During the hearing, Solicitor General Tushar Mehta had also argued that after the implementation of GST in 2017, the importance of this dispute has lost to a great extent. Despite this, the Court maintained the previously established legal position regarding the legislative power of the states.
Who were included in the Constitution bench of seven judges?
CJI Justice Surya Kant presided over the constitution bench of seven judges which gave the verdict in this case. He was joined on the bench by Justices KV Vishwanathan, SVN Bhatti, Joymalya Bagchi, NV Anjaria, Arun Palli and V. Mohana. Justice KV Vishwanathan also wrote a separate concurring judgment.
This decision of the Supreme Court has upheld the longstanding legal position with regard to the legislative power of the States to impose additional levies on top of the tax already imposed on sales or purchases.