1984 (12) TMI 274 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the West Bengal Taxation Laws (Second Amendment) Act, 1979.
2. Inclusion of non-taxable sales in gross turnover.
3. Validity of Departmental Circulars issued by the Commissioner, Commercial Taxes, West Bengal.
4. Interim order for payment of turnover tax and provision of bank guarantees.
5. Applicability of Supreme Court judgments in similar cases.

Issue-wise Detailed Analysis:

1. Validity of the West Bengal Taxation Laws (Second Amendment) Act, 1979:
The court examined the imposition of turnover tax introduced by the West Bengal Taxation Laws (Second Amendment) Act, 1979. The Act introduced section 6B in the Bengal Finance (Sales Tax) Act, 1941, and section 4AAA in the West Bengal Sales Tax Act, 1954. The court upheld the validity of these provisions, stating they are a valid piece of legislation. The court noted that the provisions of section 6B and section 4AAA cannot be declared invalid or beyond legislative competency.

2. Inclusion of Non-taxable Sales in Gross Turnover:
The court referred to a previous judgment by B.C. Basak, J., which held that in the calculation of gross turnover, non-taxable sales (sales referred to in section 27 of the Act and article 286 of the Constitution) are not to be considered. The appellants moved a Special Leave Petition before the Supreme Court, which resulted in an interim order confirming the stay on the condition that the appellants would pay the entire amount with interest if they failed in the appeal.

3. Validity of Departmental Circulars Issued by the Commissioner, Commercial Taxes, West Bengal:
The court examined the Departmental Circular No. 523 dated 6th April 1983, and its addendum dated 3rd September 1983, issued by the Commissioner, Commercial Taxes, West Bengal. The circular directed assessing authorities to assess and levy turnover tax in accordance with the observations made in the judgment in Associated Pigments case and the Supreme Court's decision in Hoechst Pharmaceuticals Ltd. v. State of Bihar. The court noted that these circulars were issued based on the determinations of higher courts and thus were not irregular or unauthorized.

4. Interim Order for Payment of Turnover Tax and Provision of Bank Guarantees:
The court reviewed the interim order issued by the trial judge, which restrained the respondents from including any turnover in respect of sales outside West Bengal for determining liability of turnover tax. The petitioners were directed to pay 50% of the turnover tax in cash and furnish a bank guarantee for the remaining 50%. The court modified this order, directing the petitioners to deposit 50% of the turnover tax in cash and secure the remaining 50% by bank guarantee within six weeks from the date of demand.

5. Applicability of Supreme Court Judgments in Similar Cases:
The court referred to the Supreme Court's decision in Hoechst Pharmaceuticals Ltd. v. State of Bihar, which upheld the constitutional validity of provisions similar to those in the West Bengal Act. The Supreme Court held that the state legislature could include transactions covered by article 286 of the Constitution for purposes of dealer registration and submission of returns. The court also referred to the Supreme Court's decision in Dunlop India Ltd., emphasizing that interim orders should not jeopardize public revenue and that governments require liquid cash for smooth functioning.

Conclusion:
The court allowed the application to the extent of modifying the interim order, directing the petitioners to deposit 50% of the turnover tax in cash and secure the remaining 50% by bank guarantee. The court emphasized the importance of balance of convenience and public interest in making such determinations. The applications in related cases were disposed of similarly, with no order as to costs.

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