TMI Blog1993 (3) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... l after purchasing the same from registered dealers of the respective States by furnishing declaration "C" forms to the selling dealers outside West Bengal. While filing returns under the 1941 Act, the applicant deducts from his gross turnover sales of rice purchased from mills in West Bengal and sellers outside West Bengal under section 5(2) of the 1941 Act. In the year 1979 section 6B of the 1941 Act was introduced, imposing turnover tax at the rate of 1/2 per cent on dealers having turnover exceeding Rs. 50,000 but not exceeding rupees one crore and at the rate of one per cent on dealers having turnover exceeding rupees one crore, but no turnover tax was levied on sale of rice. But by the West Bengal Act 5 of 1987, section 6B was amended providing that turnover tax would be levied at the rate of 1/2 per cent on dealers having turnover between Rs. 25 lakhs and Rs. 50 lakhs, at the rate of one per cent on dealers having turnover over Rs. 50 lakhs and not exceeding rupees one crore and at the rate of 1 1/2 per cent on dealers having turnover exceeding rupees one crore. At all material points of time turnover tax was made to be borne by the dealers who could not pass it on to the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases have been resisted by the respondents by affidavits-inopposition. In RN-55 of 1992 their case is that the allegations of invalidity or unconstitutionality of the impugned provisions of the 1941 Act are groundless. According to them, up to May 31, 1983, rice was a tax-free goods, as it was included in Schedule I to the 1941 Act. Since June 1, 1983 rice was omitted from Schedule I, thereby it was brought under the taxing scheme. Under section 5(2)(vb) rice purchased from a registered dealer within West Bengal and resold in the State was exempted from tax on the ground that sale of rice by the first registered dealer in West Bengal occasioned payment of sales tax. Since rice was a declared goods under section 14 of the Central Sales Tax Act, 1956, levy of sales tax on any subsequent sale would be hit by section 15 of the 1956 Act. During the period from June 1, 1983 to May 31, 1987, sale of rice was not subjected to turnover tax in view of section 613(2)(a) to the effect that sales of declared goods was not subject to turnover tax. During that period, however, sales of rice purchased from outside West Bengal were taxable for the purpose of general sales tax, although no turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olative of any constitutional provision. 5.. A similar affidavit-in-opposition was filed by the respondents in RN-56 of 1992. In paragraph 20 of the affidavit-in-opposition some facts have been stated regarding issuance of declaration forms. 6.. In both the cases the respective applicants have filed their affidavitsin-reply, chiefly denying the allegations made in the affidavits-in-opposition. It is further stated that there ought to have been such graduated rate of higher slabs for turnover tax so as to minimise the hardship of marginal dealers having high turnover on the lines of the Income-tax Act, Bengal Agricultural Income-tax Act and other fiscal statutes. In section 6B an arbitrary principle of higher slabs has been followed. For example, a dealer with a turnover of rupees one crore and one lakh would pay turnover tax of rupees one lakh and one thousand at the rate of one per cent, while a dealer with a turnover of rupees ninety-nine lakh has to pay a turnover tax at the rate of 1/2 per cent amounting to Rs. 49,500 only. Such higher rates of tax impede the flow of trade, thereby contravening articles 301 and 304. 7.. The present dispute is in respect of the period comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general sales tax. It is confined to turnover tax. Sub-section (2) of section 6B lays down the deductions which should be made while computing the turnover for the purpose of levy of turnover tax. For this purpose clauses (a) and (g) are relevant. Let us reproduce below the provisions of section 6B(2)(a) and (g): "The turnover tax shall be levied on that part of the gross turnover of dealer during any period which remains after deducting therefrom his turnover during that period on- (a) sales, other than those on which tax is levied at a rate of two per centum or less, of goods referred to in section 14 of the Central Sales Tax Act, 1956 (74 of 1956); .......... (g) such other sales as may be prescribed." In terms of section 6B(2)(g), rule 3(2A) was prescribed. Sub-rule (2) is relevant. It is as follows: "(2) Sales of goods specified in section 14 of the Central Sales Tax Act, 1956 (74 of 1956), on a prior sale whereof in West Bengal tax is shown to the satisfaction of the Commissioner to have been levied." If these provisions are scanned, it will appear that by clause (a) of section 6B(2) turnover tax shall be levied on sales of rice as those have been subjected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over tax, amounts to a direct and immediate impediment to the flow or movement of trade in rice between one State and another. According to Mr. D. Majumdar, learned State Representative, the position obtaining on imposition of turnover tax on imported rice at the hands of the applicants is in full conformity with section 15 of the Central Sales Tax Act and article 286(3) of the Constitution. He contended that since the applicants are really resellers of rice which they purchased in West Bengal, and since tax, namely, general sales tax as well as turnover tax, had already been levied at the time of the first sale in West Bengal, namely, at the time of the applicants' purchase in West Bengal, there could not be a further imposition of tax in view of section 15 of the 1956 Act. He submitted that no question of discrimination can be validly raised, because the applicants are resellers in West Bengal in respect of rice purchased and then resold by them in West Bengal. But the applicants are primary or first sellers of rice which they imported from outside the State of West Bengal. In West Bengal the sales made by the applicants of imported rice were the first sales, and such rice had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (State of Madras v. N.K. Nataraja Mudaliar) and submitted that if there is no preference given to one State over another or no discrimination between one State and another, article 303 will not be attracted. According to him, generally tax does not amount to a restriction on free-flow of trade in contravention of article 301. In the instant cases, imposition of turnover tax does in no manner create an impediment to the free-flow of trade, what to speak of direct and immediate impediment. As regards articles 301 and 304(a), it is well-settled that these constitutional provisions will be attracted, only where there is a direct and immediate impediment to the free-flow of trade. Mr. Bose could not elaborate how levy of turnover tax on sales of imported rice was amounting to such direct and immediate impediment. He simply argued but could not demonstrate how the impediment was operating. Mr. Majumdar opposed the contention and submitted that there was no question of impediment to free-flow of trade, not to speak of any direct and immediate impediment. In our view, there is nothing before us on which we can hold that imposition of turnover tax ranging from one half of one per cent to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orises the making of, any discrimination between one State and another." 13.. Mr. Bose appearing for the applicants contended that the taxable event is the import of rice from outside West Bengal. According to Mr. D. Majumdar, learned State Representative, the taxable event is sale and not import. Mr. Bose replied that import should be held to be the taxable event, because the applicants are not expected to simply hoard rice imported from outside the State. But the provisions of section 6B regarding imposition of turnover tax are, in our opinion, clear that the turnover consists of sale prices of only sales or completed sales. If there is no fructified sale, it does not become a part of the turnover. In this connection, a reference to the definitions of "turnover" and "sale price" in section 2(i) and (h) respectively of the 1941 Act will be helpful. Those definitions are reproduced below: "(i) 'turnover' used in relation to any period means the aggregate of the sale prices or parts of sale prices receivable, or if a dealer so elects, actually received by the dealer during such period after deducting the amounts, if any, refunded by the dealer in respect of any goods returned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the taxing State is not imposing rates of tax on imported goods different from rates of tax on goods manufactured or produced in West Bengal. In the instant case, there is no grievance and in point of fact, rates of turnover tax and sales tax in respect of imported rice are not different from or higher than the rates of tax applicable to rice produced in West Bengal. The contention of Mr. Bose is that the applicants are to pay turnover tax on sales of imported rice, but not on sales of rice produced in West Bengal. This contention does not depict the actual position either correctly or clearly; because from a careful reading of rule 3(2A)(2) it is seen that no turnover tax is payable on any sales of rice where, to the satisfaction of the Commissioner, tax had already been paid on a prior sale thereof, irrespective of the fact whether it is imported or produced in the State. Therefore, as rule 3(2A)(2) stands, it does not make any distinction or discrimination between imported rice and rice produced in West Bengal. But Mr. Bose highlighted the fact that the applicants are not required to pay turnover tax on rice purchased in West Bengal. This is adequately and rightly explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on this question. 17.. In their affidavits-in-reply in both the cases the applicants have taken the plea that the graduated slabs of turnover laid down in section 6B of the 1941 Act for imposition of higher rates of turnover tax are arbitrary, because a dealer having a turnover of Rs. 99,00,000 (below rupees one crore) pays turnover tax at the rate of one half of one per cent amounting to Rs. 49,500 only, whereas a dealer having a turnover of Rs. 1,01,00,000 (above rupees one crore) being larger than the earlier case by merely Rs. 2,00,000, is liable to pay turnover tax at the higher rate of one per cent. Thus, for only an additional turnover of rupees two lakhs the second dealer is to pay an extra tax of Rs. 50,500 (wrongly stated by applicants as Rs. 50,000). This has been alleged to be violative of articles 14 and 19(1)(g) of the Constitution. Learned State Representative opposed this contention. It is now well-settled that in taxing statutes the Legislature enjoys a wide freedom in making classifications, although every classification should satisfy the minimum requirements of article 14. Only they should belong to the same class, who have certain common factors and one sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in [1991] 82 STC 302, the Tribunal upheld the validity of section 6B, taking the same view as in [1989] 73 STC 277 (Cal) (Century Spinning Mfg. Co. v. State of West Bengal). Section 10A also came up for consideration before this Tribunal in the case of Kingsway Co. reported in [1990] 76 STC 119. It was held in paragraph 22 of the said judgment at page 131 of the report that the liability to pay turnover tax accrues not from the date of the judgment of the Calcutta High Court in the case of Century Spinning Mfg. Co. [1989] 73 STC 277, but from the moment the provision was statutorily given effect to and the running of time for payment of interest cannot for that reason be stopped. In prayer (dd) of RN-55 and in prayer (b) of RN-56 there is an identical prayer for declaration that section 10A(2) is unconstitutional. Paragraph 24 of the main application in RN-55 deals with grounds. No ground was mentioned therein regarding the challenge to section 10A(2). But in paragraph 23 of the main application in RN-55 it was stated that section 10A(2) is arbitrary and violative of articles 14 and 19(1)(g) of the Constitution, for "an assessing authority because of a decision of any higher autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oot House v. State of J. K. [1984] 56 STC 212 (SC) and submitted that in those two cases where there was no provision like section 10A of the Bengal Finance (Sales Tax) Act, 1941, the ultimate decision rested on the interpretation of the respective statute and the decision was that interest was payable upon assessment. In the course of his oral arguments, Mr. Bose contended that the liability to pay interest under section 10A(2) should commence from the date of assessment of tax and not from the date of liability to pay tax. Mr. D. Majumdar the learned State Representative, opposed the contention of Mr. Bose and argued that section 10A has already been considered by this Tribunal in the case of Kingsway Co. [1990] 76 STC 119. He also relied on the case of Khazan Chand [1984] 56 STC 214 (SC) and contended that interest is payable from the date of liability to pay tax. 21.. Section 10A(1) lays down that interest at the rate of 2 per cent per month is payable from the first day of the month next following the prescribed date for payment of tax according to return. Section 10A(2) lays down that similar interest is payable from the first day of the month next following the prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mode of recovery of tax and well within the legislative power of the State to impose a tax. In that case some other questions were also involved regarding the applicability of the graduated rates of tax in the case of the dealers who filed writ petitions. As we see it, the case of Khazan Chand [1984] 56 STC 214 (SC) does not come to the aid of the applicants before us. In the other case of Royal Boot House [1984] 56 STC 212 (SC) it was held that where the tax payable on the basis of a quarterly return is not paid before the expiry of the last date for filing such return under the Jammu and Kashmir General Sales Tax Act, 1962, it is not necessary to issue any notice of demand, but on default being committed, the dealer becomes liable to pay interest under section 5(2) on the amount of such tax from the last date for filing the quarterly return prescribed under the Act. This decision also does not help the applicants before us in any manner. Here, it is urged on behalf of the applicants that the provisions of section 10A(2) should be so interpreted that interest should accrue from the date of assessment of tax and not from the expiry of the prescribed date of payment. The decisions i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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