1999 (10) TMI 711 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether sales of sugar imported from foreign countries are exigible to sales tax under the West Bengal Sales Tax Act, 1994.
2. Whether the distinction between imported sugar and country-made sugar under the 1994 Act is valid.
3. Whether the levy of sales tax on imported sugar violates articles 14, 19, 21, 265, 300A, 301, and 304 of the Constitution.
4. Whether the retrospective amendment of the 1994 Act by the West Bengal Finance Act, 1999, is valid.

Detailed Analysis:

1. Sales Tax on Imported Sugar:
The applicant contended that imported sugar is not covered by section 14(viii) of the Central Sales Tax Act (Central Act) and thus should not be taxed under the 1994 Act. However, the respondents argued that imported sugar is taxable at 12% under entry 8 of Schedule IX of the 1994 Act. The Tribunal clarified that imported sugar falls under sub-heading 1701.39 of the Central Excise Tariff Act, 1985, making it a goods of special importance under section 14 of the Central Act. Thus, imported sugar is subject to sales tax at 4% under entry 1 of Schedule VII of the 1994 Act, in line with section 15 of the Central Act.

2. Distinction Between Imported and Country-Made Sugar:
The applicant argued that the 1994 Act's distinction between imported and country-made sugar is arbitrary and violates article 14 of the Constitution. The Tribunal held that the Legislature has the competence to classify goods for taxation purposes. The classification between imported and country-made sugar is based on an intelligible differentia, as imported sugar does not suffer additional excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Hence, the classification is valid and does not violate article 14.

3. Constitutional Validity of Levy of Sales Tax:
The applicant challenged the levy of sales tax on imported sugar as violative of articles 301 and 304 of the Constitution, arguing it impedes free trade and commerce. The Tribunal found no evidence that the tax on imported sugar directly impeded the free flow of trade. The tax is levied at the first point of sale and does not affect the movement of goods within the state. Thus, the levy does not violate articles 301 or 304.

4. Retrospective Amendment by the West Bengal Finance Act, 1999:
The applicant contended that the retrospective amendment of the 1994 Act by the West Bengal Finance Act, 1999, which imposed a 4% sales tax on imported sugar, was arbitrary and unconstitutional. The Tribunal held that the amendment was clarificatory and declaratory, aiming to clarify the existing law rather than introduce a new tax. The retrospective amendment did not violate any vested rights or impose new penal consequences. The amendment was necessary to clarify the legislative intent and was constitutionally valid.

Conclusion:
The Tribunal dismissed the application, upholding the levy of sales tax on imported sugar under the West Bengal Sales Tax Act, 1994, as amended by the West Bengal Finance Act, 1999. The classification between imported and country-made sugar was found to be valid, and the retrospective amendment was held to be constitutional. The interim orders were vacated, and no costs were awarded.