TMI Blog2000 (9) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... mported. For the purpose of said import they have been charged to Central Excise Tariff under sub-heading No. 1701.39 being basic custom duties plus surcharge plus basic excise duty plus additional excise duty plus Cess. 4.Basic customs duties and full additional duties were exempted from any tax on the said head in so far as imported sugar is concerned in terms of a notification bearing No. 11/97-Customs which stood amended by a Notification No. 15/98 dated 28th April, 1998. However, from May 6, 1998 tax has now been imposed on the aforementioned head. The petitioners contend which has now been denied nor disputed that imported sugar now attracts 5% basic custom duty and full additional duty amounting to Rs. 850/- per metric ton equal to 'basic excise duty' plus additional duty plus Cess leviable thereupon. Special Customs duty, however, is not to be paid by reason of the exemption notification dated 28th April, 1998. The basic excise duty has varied from time to time but other duties have not accept from March 1, 2000, 10% surcharge on basic custom duty has been abolished. 5.Admittedly there exists an integrated scheme with regard to payment of sales tax by way of additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 286(3) of the Constitution of India, Central Sales Tax Act, 1956, Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Customs Tariff Act, 1975 it would appear that as regard payment of Sales Tax on sugar which has been declared to be a goods of special importance, a tax having been levied in terms of an integrated scheme to which the State of West Bengal is a party, the imposition of Sales Tax by reason of the impugned Act must be held to be bad in law. According to the learned Counsel, once tax is being paid in terms of 1957 Act, the self-same tax being realized over again under the State Act does not and cannot arise. Strong reliance in this connection has been placed on State of Kerala v. Attesee Agro. reported in 1988 (38) E.L.T. 720 (S.C.) = AIR 1989 SC 222 = 72 STC 1 and in State of Kerala Anr. v. State Trading Corporation of India Limited, reported in 1998 (100) E.L.T. 17 (S.C.) = 1999 (9) SCC 102. 12.In any event contends the learned Counsel, the retrospectivity given to the said tax is clearly violative of Article 14 of Constitution of India as the petitioners had not realized the said tax from the customers. Strong Reliance in this connection has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision is clearly within the legislative competence of the State Legislature. Reliance in this connection has been placed on State of Kerala v. Attesee Agro, reported in 1988 (38) E.L.T. 720 (S.C.) = AIR 1989 SC 222 and State of Bihar, etc. v. Bihar Chamber of Commerce, etc., reported in 1996 SC 2344. 16.As regard the question of applicability of Article 14 of the Constitution of India, the learned Counsel would contend that indigenous imported sugar formed different class and taxation on imported sugar cannot be said to be an unreasonable classification. Reliance in this connection has been placed on Federation of Hotel Restaurant Associations of India Ors. v. Union of India Ors., reported in 74 STC 102 = 1989 (3) SCC 634 and Varalakshmi Silk House v. State of Karnataka, reported in 112 STC 93. 17.The learned Counsel would contend that the only restriction which could be placed, having regard to the provisions of Central Sales Tax Act, 1956, read with 1957 Act was to impose tax not exceeding 4 per cent which has been done in the instant case. According to the learned Counsel all types of imported sugar have been treated equally. Article 301 of the Constitution of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin which that duty or tax is leviable in that year, and shall be distributed among those States in accordance with such principles of distribution as may be formulated by Parliament by law." 21.Clause (3) of Article 286 on other hand deals with a tax on sales which is otherwise within the exclusive legislative field of the State in view of Entry 54 List-II of the Seventh Schedule of the Constitution of India. Entry 54 List-II of the Seventh Schedule which empowers the State to make any enactment of tax on sale or purchase of the goods would be subject to the provision contained in Entry 92A List-I. Thus, whereas the power to impose tax on sale or purchase of goods other than the newspaper belongs to the State [Entry 54, List-II], but taxes on imports and exports [Entry 84 List-I] and taxes on inter-State trade and commerce [Entry 92A List-I] are exclusively Union subjects. 22.Article 286 of the Constitution of India was amended, in view of the decision of the Apex Court in Bengal Immunity Co. v. State of Bihar, reported in AIR 1955 SC 661 whereby and whereunder its earlier decision in State of Bombay v. United Motors reported in AIR 1953 SC 252 was overruled; in terms whereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on such goods in inter-State trade or commerce had been taxed under the Central Act. The said provision has come into force with effect from 1-10-1958 by reason of Central Sales Tax (Second Amendment) Act, 1958. The Parliament also enacted the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereinafter referred to as 1957 Act). The said Act has undergone amendment in years 1979, 1980, 1984, 1985 and 1986. Section 3 of 1957 Act reads thus :- "S.3. Levy and collection of additional duties - (1) There shall be levied and collected [in respect of the goods described in column (3) of the First Schedule] produced or manufactured in India and on all such goods lying in stock within the precincts of any factory, warehouse or other premises where the said goods were manufactured, stored or produced, or in any premises appurtenant thereto, duties of excise at the rate or rates [specified in column (4) of the said Schedule.]" 25.It is not in dispute that levy of additional duties of excise by reason of the said provisions is in replacement of the State Sales Tax on the commodities referred to therein as would appear from the statements and objects of the origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured in India which may or may not be declared goods whereas Section 3A provides for additional duty the rate of tax whereof has to be fixed having regard to the maximum Sales Tax of its sale or purchase in India. It does not refer to sell in course of inter-State trade or commerce or otherwise within the purview of Central Sales Tax Act. Sub-section (5) of Section 3A however, provides for exclusion of levy of additional duty on imported goods if such tax had been levied under Section 3(1) of the 1957 Act. It appears from the First Schedule of Central Excise and Tariff Act, a sum of Rs. 37 ad valorem is to be paid on sugar by way of duty under the said Act. Chapter 17 of Central Excise Tariff Act, 1985, thus, provides for levy of basic duty @ Rs. 34 per qntl and additional duty @ Rs. 37 per qntl in respect of the sugar falling under sub-heading No. 1701.39. Additional Duty is said to be leviable under the Additional Duties of Goods (Special Importance) Act, 1957. With the aforementioned backdrop the provisions of the impugned Act may now be considered. West Bengal Sales Tax Act, 1994 was enacted to levy sales tax. However, Item No. 79 of the First Schedule made in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rritories, as is set out against it in column 2 : Provided that if during that financial year there is levied and collected in any State a tax on the sale or purchase of sugar by or under any law of that State, no sums shall be payable to that State under this paragraph in respect of that financial year, unless the Central Government by special order otherwise directs. Section 4 of the Additional Duties of Excise etc. Act 1957 reads thus :- "S.4 Distribution of additional duties among States.- During each financial year, there shall be paid out of the Consolidated Fund of India to the States in accordance with the provisions of the Second Schedule such sums, representing a part of the net proceeds of the additional duties levied and collected during that financial year, as are specified in that Schedule." The aforementioned provisions clearly go to show that only because some goods have been declared to be goods of special importance in terms of the provisions of the Central Sales Tax Act, the same by itself would not take away the legislative competence of the State to make an enactment in relation thereto but as indicated hereinbefore having regard to the provisions conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner and extent of sales tax levy, in so far as declared goods are concerned, for such levy cannot transgress the limitations and restrictions of Section 15 thereof. Section 15 applies in respect of goods listed in Section 14 which, in turn, is linked to the list in the 1944 Act. The 1957 Act also has a bearing on the sales tax levy of various States. By levying sales tax on an item covered by the Schedule to the 1957 Act, the State will have to forego its share on distribution of the proceeds of the additional excise duty levied. Whether it should impose sales tax on an item of declared goods, limited by the restrictions in Section 15 of the CST Act and at the risk of losing a share in the additional excise duty levied in respect of those very items, is for the State to determine. As pointed out by Sri Potti, it was open to the Kerala Legislature to decide - and it did so also - that on some items there should be one or other of the levies or both of them and to modify these levies depending upon its own financial exigencies. But these factual or periodical variations do not detract from the basic reality that the policy of sales tax levy on declared goods has to keep in view, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Government, the States and the local authorities. For that purpose, the Commission recommended the constitution of an Inter-State Taxation Council. Admittedly, no such Council has ever been constituted. Similarly, the letter of the then Finance Minister, Sri T.T Krishnamachary, relied upon by Sri Ganesh, which we have set out hereinabove, is also not quite clear. The extract speaks, in the first instance, of "a complete exemption from sales tax or purchase tax or any other impost by whatever name called on these commodities under the respective State laws" but then it immediately proceeds to explain, what it means by the said expression, by saying, "(I)n other words, the State which does not exempt completely all these three commodities from its sales tax Act or any other similar legislation will not be entitled to partake in the distribution of the proceeds of the additional excise duties". Again, the fact that subsequent to the A.D.E. Act, certain States withdrew certain enactments providing for levy of taxes/fees other than sales tax on the scheduled commodities, in the light of the enactment of the A.D.E. Act - assuming that it was for that reason alone - is not relevant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the fact that in List III, the Concurrent Legislative List, there is no entry relating to a tax, but it only contains an entry relating to levy of fees in respect of matters given in that list other than court-fees. Thus, in our Constitution, a conflict of the taxing power of the Union and of the States cannot arise. That being so, it is difficult to comprehend the submission that there can be intrusion by a law made by Parliament under Entry 33 of List III into a forbidden field viz. the State's exclusive power to make a law with respect to the levy and imposition of a tax on sale or purchase of goods relatable to Entry 54 of List II of the Seventh Schedule. It follows that the two laws viz. sub-sec. (3) of Section 5 of the Act and Para 21 of the Control Order issued by the Central Government under sub-section (1) of Section 3 of the Essential Commodities Act, operate on two separate and distinct fields and both are capable of being obeyed. There is no question of any clash between the two laws and the question of repugnancy does not come into play." 37.In State of Kerala v. State Trading Corporation of India Ltd., reported in 1998 (102) E.L.T. 17 (S.C.) = 1999(9) SCC 102, 'su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of tax, the policy could be there to make different classification in a group. The Legislature is free with regard to the choice of articles which are to be taxed or the rate of tax or in granting the exemption to different categories of persons, transactions or object. The wide discretion for classification for tax purposes is the prerogative of the Legislature. The tax which is to be levied on raw silk and silk yarn which is imported from outside the country constitute a different class than the locally manufactured such commodities. There is no hostile discrimination or a deliberate intention to create discrimination. Exemption to the locally indigenous manufactured items is with the object to protect the local industries of the country. The legislation cannot be considered arbitrary or suffering from the vice of Article 14 of the Constitution. The classification is reasonable. This contention has no force." 39.In Federation of Hotel Restaurant Associations of India Ors. v. Union of India Ors., reported in 74 STC 102 = 1989 (3) SCC 634, it has been held :- "It is now well-settled that though taxing laws are not outside Article 14, however, having regard to the wid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purview of this article, but it is only those taxes, which directly and immediately restrict the trade which can be considered differential against this article. If the levy of tax does not affect the movement of the goods then it cannot be considered to be violative of Article 301 of the Constitution; discriminating the goods of one State with the other will offend the provisions of Article 301 of the Constitution unless it is saved by Article 304(a) of the Constitution. The State cannot levy tax on the goods imported from other States higher than the tax levied on similar goods manufactured in that State. Levy of tax excessive or prohibition rates impede the very flow of trade unless it is by way of regulatory measure or is compensatory in nature. This article of the Constitution guaranteeing the freedom of trade, commerce or intercourse is for the economic unity of the country for stability and progress of political and cultural unity of the country. The various decisions relied upon by the learned counsel for the petitioner on this point are not applicable because they were not in respect of goods imported from foreign countries or movement of such goods from foreign country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e turnover of sales, shall be levied - (a) .......................... (h) at the general rate of twelve per centum of such part of his taxable turnover of sales as represents sales of any goods specified in Schedule IX.]" As noticed hereinbefore the First Schedule referred to those items which are exempted from payment of tax whereas Section 10 read with Section I7(1)(c) envisage making of schedule 4 as a result whereof a single point levy is to be imposed. Section 17(l)(h) thus deals with a different situation. The 1994 Act has not been enacted in violation of the provisions of the 1957 Act nor Article 286(3) of the Constitution of India as thereby the rate of tax has been kept within the limit envisaged under clause (3) of Article 286. 1957 Act was initially enacted to the recommendation of Second Finance Commission so as to enable the Central Government to collect tax at once and distribute the same to the States who has not imposed any such tax. The said Act has not been enacted in terms of Item 92A of List-II appended to the Seventh Schedule of Constitution of India. The very fact that it now stands admitted that the rate of tax having regard to Article 286(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which goes to show that the Parliament had in its mind the items of goods which were to be so declared and not only those goods, sale or purchase whereof takes place outside the States. 44.Had the Parliament any intention to include all goods which would be the subject matter of inter-State trade or commerce or inter-State movement, they could have said so in explicit terms and it was not necessary for them to lay down that the Parliament may by law declare them as goods of Special importance. Sugar, thus, having been declared a goods of special importance in the course of inter-State trade or commerce, we are of the opinion that the retroactive operation thereof was not permissible in law. 45.The rate of tax has to be fixed by a statute. Such rate of tax having not been fixed under 1991 Act or 1954 Act, no sales tax was payable in relation to sugar. The provision in Item No. 70A has been brought out in the statute and not by reference only. Reference in this connection may also be made to State of Kerala v. STC, reported in 114 STC 7. Furthermore, the rate of tax may be fixed by way of a delegated legislation. It is a well-settled principle of law that unless and until the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem 28A of Rule 3 was amended and the objectionable portion appearing in Item 28A of Rule 3 was deleted." It has further been held :- "It is difficult to follow what is meant by the expression (the point raised is premature) but certainly it is no denial of the statement in paragraph 6 of the petition that cotton tape is a declared goods. Section 7 of the Additional Duties of Excise Act, 1957 and Section 14 of the Central Sales Tax Act, 1956 indicate that cotton fabrics are declared goods and coupled with the admissions made in the different letters to which I have already made reference and the allegations in paragraph 6 of the petition which are not specifically denied in the affidavit in opposition, it can be said that the petitioner has made out a prima facie case that cotton tapes are declared goods. The petitioner has confined the scope of this application, at the hearing, to cotton tapes only and contends that the general notices served on it to submit returns in so far as they relate to cotton tapes are illegal. It appears to me that the notice which is the subject-matter of this application is bad only in so far as it has any reference to cotton tapes and in so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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