TMI Blog1999 (10) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... short "the 1954 Act") and also under the West Bengal Sales Tax Act, 1994 (hereinafter referred to as "the 1994 Act"). The 1994 Act has replaced 1941 Act and 1954 Act with effect from May 1, 1995. According to an amendment to Schedule I to the 1994 Act, effective from May 1, 1995, sugar manufactured or made in India is tax-free under entry 79 of Schedule I read with section 24 of the 1994 Act. By a circular dated October 27, 1997, annexure B, the respondent No. 2 stated that sale of imported sugar is taxable at the rate of 4 per cent and at only one stage in view of section 15 of the Central Act. Schedule VII to 1994 Act enumerates the goods sales of which are taxable at the rate of 4 per cent. Entry 1 of Schedule VII mentions goods referred to in section 14 of the Central Act excluding those specified in any other Schedule. According to the applicant, imported sugar is not covered by section 14(viii) of the Central Act, and hence it is not covered by entry 1 of Schedule VII. Therefore, sales tax cannot be imposed on imported sugar, i.e., sugar imported from outside India, according, to the said circular issued by respondent No. 2. The applicant states that, misled by that cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1 has attempted to levy tax on sugar imported from abroad. Importation of sugar has commenced, according to applicant, in order to overcome shortfall of country-made sugar. It is said that while the aggregate of basic excise duty, additional duty of excise and cess per tonne of country-made sugar comes to Rs. 850, the Union of India (respondent No. 5) levied by notification dated April 28, 1998 an equal amount, Rs. 850 on imported sugar per tonne as additional duty of customs, the basic customs duty on C.I.F. value being 5 per cent in addition. Thus, by means of section 3 of the Customs Tariff Act, 1975 the burden on imported sugar has been equalised with that on country-made sugar. Hence, applicant contends that levy of sales tax at 4 per cent on sales of imported sugar is ultra vires, illegal, without jurisdiction, unjust, unreasonable and discriminatory. Such levy is said to be colourable, because it is levied on the ground that: (i) the Union does not give a share of additional customs duty to the State and, (ii) the State wants to give protection to sugar industry of the country. 5.. Applicant further contends that the protectionist policy of the State (for exemption g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacting entry 79 of Schedule I to 1994 Act, although there is no dispute that prior to May 1, 1995 "sugar of any kind was not taxable". According to the contesting respondents (the respondent No. 5, Union of India having made no appearance), sugar other than sugar manufactured or made in India is taxable at 12 per cent under entry 8 of Schedule IX of 1994 Act, instead of at 4 per cent as applicable to declared goods within the meaning of section 14 of Central Act. The impugned circular dated October 27, 1997 has been struck down by this Tribunal and has no force of law for determining the rate of tax. Even if imported sugar does not fall under section 14(viii) of Central Act and hence does not attract tax at 4 per cent, it is a taxable goods under entry 8 of Schedule IX of 1994 Act. It is said that applicant was liable to pay tax on sales of imported sugar. Therefore, the question of refund does not arise at this stage. The correct amount of tax, will however, be assessed at the time of assessment. 10.. The further case of contesting respondents is that the provisions of "Central Act", the Central Excises and Salt Act, 1944 and the Central Excise Tariff Act, 1985 do not stand i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it is a legislative policy in pursuance of which country-made sugar has been made tax-free, but tax has been levied on imported sugar. Articles 301 and 304 have no application to imported sugar sold in West Bengal, because the tax does not directly or remotely impede free movement of goods. Sales tax is not levied on sugar industry. Therefore, the State Legislature has not encroached upon the field covered by entry 41 of the Union List. Incidence of sales tax is on "sale" of imported sugar, which is covered by entry 54 of List II. The State has not usurped the power of Union of India conferred by entries 41, 52 and 83 of the Union List, which are general entries and not taxing entries. No specific case has been made out by applicant as to how articles 14, 19, 21, 265, 300A, 301 and 304 of the Constitution have been contravened. 11.. According to the contesting respondents, imported sugar is not a declared goods under section 14(viii) of "Central Act", and hence does not attract restrictions contemplated in section 15 of "Central Act" and article 286(3) of the Constitution. It is said that President's assent was obtained to 1994 Act, published in the Calcutta Gazette, Extraordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at imported sugar is a goods of special importance under section 14 of Central Act, and that the State Legislature is not competent to levy tax more than 4 per cent on sugar whether imported or indigenous, in view of section 15 of the Central Act. According to applicant, imported sugar is covered by Schedule VII and the rate of tax is the rate prescribed under section 17(1)(h) of 1994 Act. The applicant contends: "I say with all emphasis that sugar other than sugar manufactured or made in India cannot be made taxable under the existing law of the land including the Constitution of India so long country-made sugar is exempted". The returns were allegedly filed by mistake and hence the amounts already paid at 4 per cent are refundable to the applicant. The applicant does not agree that imported sugar is not covered by section 14(viii) of Central Act. Allegedly imposition of tax on sales of imported sugar under 1994 Act is ultra vires section 7 of Act of 1957 read with section 15 of Central Act. If sugar is liable to tax under 1994 Act, country-made sugar cannot be exempted from tax and imported sugar cannot be subjected to tax. The applicant maintains that both country-made and impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem 70A of Schedule IV to 1994 Act, while indigenous sugar has already been exempted from tax by placing it in item 79 of Schedule I. Such amendment is attacked as arbitrary, unreasonable, discriminatory and violative of article 14. The earlier contention is repeated that sugar cannot be split into two types of sugar, namely, imported and country-made. The Legislature was allegedly oblivious of the impact of the levy of tax on society, its economic consequences and administrative convenience, while classifying the same commodity into two different commodities. The amendment tends to deceive consumers and help traders to become unduly rich. Both indigenous and imported sugar "being equally counter-balanced by excise, additional excise, cess and additional customs duty in addition to a basic duty of C.I.F. value of 27.5 per cent, any sales tax on imported sugar would discourage sale of imported sugar. The levy is said to be violative of articles 14, 19, 21, 301, 304, 304(a), 300A, 551A and 265 of the Constitution of India. The amendment has been given retrospective effect. That is alleged to be neither bona fide nor reasonable, when the question is pending before this Tribunal. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticles of the Constitution has also been denied. The amendment has been given retrospective effect "in order to replace multi-point levy of sales tax by the single point levy...........and that too with a reduced rate of tax less than what was applicable before the retrospective amendment". No new imposition of tax, or new obligation, or new disability has been given retrospective effect. The plenary power of taxation can be exercised both retrospectively and prospectively. According to these respondents: "I say that the petitioner was liable to pay sales tax on sugar, other than sugar manufactured or made in India under the existing law as stood before such retrospective amendments. The traders who made sales of such sugar at any point of sales subsequent to first point of sales in West Bengal will be relieved of this liability to pay tax with retrospective effect and thus there is no penal action against the traders who have been left out of the tax retrospectively. That apart, consequent upon reduction of rate of tax of 4 per cent with retrospective effect, no penal action lies against even the dealers who were liable to pay tax at higher rate of tax and paid tax at that rate. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugar was taxable at the rate of 4 per cent under item No. 1 of Schedule VII to 1994 Act read with section 14(viii) of Central Act. On behalf of the taxing authorities it was submitted by Mr. K.K. Saha, learned advocate in that case (RN-119 of 1998*) that imported sugar did not fall under section 14(viii) of Central Act and consequently did not fall under Sl. No. 1 of Schedule VII to 1994 Act. On that concession made by Mr. K.K. Saha appearing for taxing authorities, the circular dated October 27, 1997 issued by the Commissioner of Commercial Taxes was quashed with liberty to make assessment or take any other action according to law. That was done by a judgment dated November 3, 1998 by this Tribunal. In view of the concession made by Mr. Saha, there was no occasion in RN-119 of 1998 to examine whether imported sugar was covered by section 14(viii) of Central Act. Therefore, it is clear that the sales tax authorities as well as certain traders including the present applicant (who has taken contradictory stands in the main application and the affidavit-in-reply) were under a confusion as to the correct position. 16.. The sub-headings referred to in section 14(viii) of Central Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mported sugar sold by the present applicant is covered by sub-heading 1701.39 which relates to sugar other than khandsari sugar and other than sugar required by Central Government to be sold under section 3(2)(f) of the Essential Commodities Act. If the imported sugar sold by the present applicant falls under sub-heading 1702.11 and because it is covered by sub-heading 1701.39, it is a goods of special importance under section 14 of Central Act. 17.. Whatever might be the confusion at the earlier stages, at the stage of arguments in the present case, the applicant has taken the unambiguous stand that imported sugar is a goods of special importance under section 14 of Central Act. At page 5 of the synopsis of argument of the applicant the following sentence occurs in the third paragraph: "Therefore, the definition of sugar in Central Sales Tax Act in section 14, clause (viii) includes both indigenous and imported sugar." In oral arguments also Mr. Gopal Chakraborty, learned counsel for the applicant, submitted that imported sugar sold by the applicant is covered Here italicised. by the definition of "sugar" in the relevant sub-headings of the Central Excise Tariff Act, 1985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll under section 14(viii) of Central Act and consequently did not fall under serial No. 1 of Schedule VII of 1994 Act. 18.. In course of oral arguments in the present case, Mr. K.K. Saha, learned advocate for respondents, submitted that imported sugar was not covered by section 14(viii) of Central Act. According to him, section 14(viii) of Central Act applied to only sugar manufactured in India, because the sub-headings of the Central Excise Tariff Act, 1985 mentioned therein cannot be interpreted in isolation, i.e., without reference to provisions of the Central Excises and Salt Act, 1944, such as section 3, which refers to "duties of excise on all excisable goods other than salt which are produced or manufactured in India". Thus, Mr. Saha maintained that section 14(viii) of Central Act referred to only sugar which was manufactured in India. He also referred to section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, where reference is made to goods manufactured in India. 19.. Mr. Gopal Chakraborty, learned advocate for the applicant opposed the contentions of Mr. Saha. He referred to Metha Brothers v. State of Gujarat [1979] 43 STC 208 (Guj) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned "sugar" simpliciter or "sugar" in general, nor gave a definition of its own. It also did not merely refer to the Central Excise Tariff Act, 1985 or to the Central Excises and Salt Act, 1944. It incorporated several sub-headings of the Schedule to the Act of 1985. It is true that the Act of 1985 is closely linked to the Act of 1944. But when the Sales Tax Act lifted the sub-headings from the Act of 1985, it was not linking itself to the Act of 1985 or to the Act of 1944; it also could not do so, because one is about sales tax, another is about excise duty on production. In such a situation, the true construction is that the sub-headings have been transplanted into the Central Sales Tax Act, 1956. After such transplantation, the descriptions or definitions constituting the sub-headings become an integral part of the Central Act of 1956, as amended, irrespective of the purpose, object or context in which they were enacted earlier in the Act of 1985. Those sub-headings in the Act of 1985 may relate to goods manufactured in India. But, when the sub-headings are placed in the fabric of the Act of 1956, they are to be understood in tune with the purpose, object and context of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is a General Sales Tax Act. Unless exempted, sale of every goods is exigible to sales tax under the Act. 1994 Act came into operation with effect from May 1, 1995. Before it was brought into operation, sugar was covered by entry 1 of Schedule III which is for goods taxable at 15 per cent. When the Act was brought into effect on May 1, 1995, entry 1 of Schedule III was omitted. Schedule I gives a list of goods exempted from sales tax, or tax-free goods. Imported sugar is not included therein. In entry 79 of Schedule I sales of "sugar manufactured or made in India" have been exempted from sales tax. That position remains unaltered from the inception of the Act on May 1, 1995 till this day. This is an undisputed position. Until the amendment of 1999 was made, sugar other than sugar manufactured or made in India was not specifically mentioned in any of the Schedules to 1994 Act. But in Schedule VII which is a Schedule for goods taxable at 4 per cent, entry 1 was as under: "goods referred to in section 14 of the Central Sales Tax Act, 1956 (74 of 1956), excluding those specified in any other Schedule." In this connection mention should be made of entry 8 of Schedule IX which was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia has continued to stay in Schedule I of 1994 Act. But a new entry, entry No. 70A, was inserted in the following words in Schedule IV with express retrospective effect from May 1, 1995: "70A. Sugar, other than sugar manufactured or made in India as specified against serial No. 79 of Schedule I." Schedule IV is a Schedule of "goods on sale of which tax is leviable at such rate as may be fixed by notification under section 18 (single point levy) read with sub-clause (a) of clause (40) of section 2". There is no dispute that by Notification No. 946-F.T. dated April 1, 1999 rate of tax for entry No. 70A was fixed at four per cent. Side by side with this change, entry No. 1 of Schedule VII and entry No. 8 of Schedule IX which are relevant for the present purpose, were omitted with effect from April 1, 1999. It is undisputed that with effect from April 1, 1999 the sales tax on sugar not manufactured or made in India has been made 4 per cent on the first sale. But applicant is questioning the validity of such levy as well as the retrospective effect to it granted by the new entry No. 70A of Schedule IV. We will consider those questions presently. Therefore, after the 1999 amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionally valid. 25.. It may be noted at this stage that while entry 70A was inserted with retrospective effect in Schedule IV by 1999 amendment (which was brought into force on April 1, 1999), entry 1 of Schedule VII and entry 8 of Schedule IX were omitted by the same amendment. Those omissions were not given retrospective effect. The result is that with effect from May 1, 1995, i.e., from the commencement of 1994 Act, sugar, not manufactured or made in India, inclusive of imported, foreign-made sugar, became taxable under entry 70A of Schedule IV, instead of under entry 1 of Schedule VII. It is to be remembered that prior to 1999 amendment, those declared goods including imported sugar under section 14 of Central Act which were not specified in any other Schedule, were exigible to sales tax at 4 per cent at one stage only in view of section 15 of Central Act. After 1999 amendment, imported, foreign made, sugar, continued to be exigible to sales tax at the same rate of 4 per cent at one stage only under entry 70A of Schedule IV, in conformity with section 15 of Central Act. What we wish to make clear is that 1999 amendment merely shifted imported, foreign-made sugar, from Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rational relation to the object sought to be achieved by the statute in question. It was also held that classification may be founded on different bases, such as, geographical, or according to objects or occupations or the like. Mr. Saha referred to East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529 (SC) where it was laid down that while deciding whether a taxing law is discriminatory or not, it is necessary to bear in mind that the State had a wide discretion in selecting persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects, and not others. It is only when within the range of selection, the law operates unequally, and that cannot be justified on as a valid classification, that it would be violative of article 14. It was also laid down that if a State can validly pick and choose one commodity for taxation and that is not open to attack under article 14, the same result must follow when the State picks out one category of goods and subjects it to taxation. Mr. Saha also relied on Federation of Hotel Restaurant Association of India [1989] 74 STC 102 (SC) at pages 126-127. It was held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade sugar. Therefore, here the classification is founded on geographical base, and one group or class of sugar does not include any sugar of the other group or class. The second test is whether there is a nexus of such classification with the object which the statute seeks to achieve. The object of 1994 Act is to collect revenue for running the State. The Legislature, in its wisdom and discretion, has chosen to make indigenous sugar tax-free but has chosen to levy tax on sugar which is not manufactured or made in India, namely, on foreign-made sugar which is imported into West Bengal and sold there. In our opinion, such classification is constitutionally valid and conforms to article 14. In this connection we may refer to Hira Lal Rattan Lal v. Sales Tax Officer [1973] 31 STC 178 (SC), where it was held that Legislature was competent to separate processed or split foodgrains from unprocessed, unsplit foodgrains and treat them as two separate and independent goods. 28.. It was argued by Mr. Chakraborty that imported, foreign-made sugar cannot be distinguished by appearance from India-made sugar. According to him, such similar appearance of both classes of sugar will create confu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket between India made sugar and imported, foreign made, sugar. He has also submitted that mere levy of tax cannot be contended to be an impediment to free-flow of trade and commerce. According to him, if mere levy of tax is so considered, then no tax can be levied on any goods. Mr. Saha argued that since no difference in price has been shown, and no handicap for sale or movement of imported sugar vis-a-vis sale or movement of India made sugar has been shown, the contention of contravention of article 301 or 304 should fall through as not substantiated. In this connection he relied on some of the decisions referred by the learned advocate for the applicant and further he relied on [1999] 112 STC 93 (Kar) (Varalakshmi Silk House v. State of Karnataka). In the Karnataka case the learned single Judge held that if the levy of tax does not affect the movement of goods, then there is no violation of article 301. In that case, imported raw silk and silk yarn were considered to be a separate category from indigenously manufactured raw silk and silk yarn. There was no notification prohibiting movements of the goods. On those facts, it was held that the tax levied on the imported material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (i) to value and preserve rich heritage of our composite culture vide article 51A(f), (ii) love to all, (iii) non-violence, and (iv) not to injure others. Mr. Saha appearing for respondents, submitted that article 51A has no application to the facts of the case. The contention of Mr. Chakraborty for the applicant is disposed of by observing that article 51A has no role to play regarding levy of tax on imported, foreign made, sugar. That article contains much higher and greater ideals relevant in the national and wider social context, having no nexus with levy of sales tax. The contention is, in our opinion, wholly irrelevant. 31.. One of the contentions of Mr. Chakraborty was that the 1999 amendment was enacted by the State Legislature while the present application was pending for decision. He raised objection to such legislative activity, and at the same time argued by referring to Collector of Customs v. East Punjab Traders (1998) 9 SCC 115 (paragraph 7) that pending the decision on this application no amendment could be made affecting the parties or bringing penal consequences on them. The scheme of the Constitution of India envisages distribution of powers among the importa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hedule IX. We have already held that entry 8 of Schedule IX was not relevant and had no application to sales of imported sugar. According to us, such sales were previously governed by entry 1 of Schedule VII, because imported sugar was included in section 14(viii) of Central Act and the rate of tax was 4 per cent only, and that too on a single point. According to Mr. Saha, the 1999 amendment is actually clarificatory and declaratory, because the law was already there for taxation. By the amendment, the law has been declared in clearer terms so that there is no scope for any possible confusion. Entry 79 of Schedule I has been governing sales of India made sugar right from May 1, 1995 when 1994 Act came into force. With insertion of entry 70A in Schedule IV, it was declared and clarified that sugar other than India made sugar was taxable at 4 per cent at a single stage (on the first sale). Having considered the state of law prior to the 1999 amendment, and the nature of amendment effected from April 1, 1999 by which not only entry 70A of Schedule IV was inserted, but entry 1 of Schedule VII and entry 8 of Schedule IX were omitted, we are convinced that the 1999 amendment is merely cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penal consequences if it is held that levy of tax at 4 per cent is valid with effect from May 1, 1995. Since it is a taxing statute, and since the provisions were there in the former state of law to the effect that tax could be imposed at 4 per cent, vulnerability of the applicant to penal consequences under the law for non-payment of tax has no effect on the 1999 amendment and its retrospective operation. Truly, the amendment does not impose any new levy of tax, and hence it is not retrospective in that sense. It is, however, retrospective to the extent that it declares the law in clearer terms leaving no scope for argument. In view of the above finding, the contentions of Mr. Chakraborty to the effect that retrospectivity of 1999 amendment is unconstitutional, cannot be accepted. In this connection we may refer to Hira Lal Rattan Lal v. Sales Tax Officer [1973] 31 STC 178 (SC) where a retrospective levy was held constitutionally valid, because the amendment was necessary in order to bring out clearly the legislative intention to separate one class of the same commodity from another (processed or split foodgrains from unprocessed or unsplit foodgrains). It was also held that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mported goods, the State Legislature shall be denuded of the competence to legislate for imposing sales tax on the same goods. Nor did Mr. Gopal Chakraborty, learned advocate for the applicant, claim that in view of the Act of 1957 or the Customs Tariff Act, 1975, the State Legislature lost its competence to legislate for imposing sales tax. By hearing his arguments it appeared to us that he was drawing our attention to the so-called immorality on the part of the State to impose sales tax on imported goods which have been subjected to various kinds of customs duty. Taxation does not really concern itself with morality; to our mind, there is no immorality involved in imposition of sales tax on imported sugar. Similarly, we find no substance in the contention of Mr. Chakraborty that imported sugar being subject to Price Control Order, the State Legislature should not impose sales tax. Mr. Chakraborty, in fact, referred to Sugar (Control) Order, 1966 as amended by Sugar (Control) Amendment Order, 1999 issued by the Government of India in exercise of powers conferred by section 3 of the Essential Commodities Act, 1955. In our view, the said order or orders have no relevance to impositi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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