1970 (2) TMI 123 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of the State Act of 1954 to the sales in question.
2. Assessment of tax as "nil" under Section 8(2A) of the Central Sales Tax Act, 1956.
3. Validity of the imposition of tax under the Central Sales Tax Act in light of the Supreme Court decision in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons.
4. Constitutionality of the Central Sales Tax Act under Article 301 of the Constitution of India.
5. Alleged discrimination under Article 14 of the Constitution of India.
6. Legality of the imposition of penalty for late filing of returns under Rule 11 of the Central Sales Tax (West Bengal) Rules, 1958.

Issue-wise Detailed Analysis:

1. Applicability of the State Act of 1954 to the sales in question:
The petitioner argued that the sales of betel-nuts within West Bengal would not be liable to tax under the State Act of 1954 as they were not first-degree sales. This contention was not disputed by the opposite party. The court noted that the State Act of 1954 would not apply if the sales took place inside West Bengal as they would not be first-degree sales, which are the only sales liable to taxation under the State Act of 1954.

2. Assessment of tax as "nil" under Section 8(2A) of the Central Sales Tax Act, 1956:
The petitioner contended that the tax should be assessed as "nil" under Section 8(2A) of the Central Act. The court examined the provisions of Section 8(2A) and concluded that for the tax to be "nil," the sale or purchase of the goods must be exempt from tax generally under the sales tax law of the appropriate State. It was found that betel-nuts were not exempt from tax generally under the State Act of 1941 or the State Act of 1954. Therefore, the tax payable on the turnover relating to the sales of betel-nuts could not be "nil."

3. Validity of the imposition of tax under the Central Sales Tax Act in light of the Supreme Court decision in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons:
The petitioner relied on the Supreme Court decision which held that if the State law exempts any goods from tax, the same exemption should apply under the Central Act. However, the court noted that the Central Sales Tax (Amendment) Act, 1969, had introduced significant changes, including the insertion of sub-section (1A) in Section 6, which stated that a dealer would be liable to pay tax under the Central Act on inter-State sales notwithstanding that no tax would have been leviable under the State law if the sale had taken place within the State. The court concluded that the petitioner's reliance on the Supreme Court decision was misplaced due to the amendments made by the 1969 Act.

4. Constitutionality of the Central Sales Tax Act under Article 301 of the Constitution of India:
The petitioner argued that the provisions of the Central Act impeded the movement of goods and the free flow of trade, thus violating Article 301 of the Constitution. The court referred to the Supreme Court decision in State of Madras v. N.K. Nataraja Mudaliar, which upheld the constitutionality of the Central Act, stating that it did not directly impede the movement of goods or the free flow of trade. The court overruled the petitioner's contention.

5. Alleged discrimination under Article 14 of the Constitution of India:
The petitioner contended that the Central Act discriminated between dealers effecting sales within the State and those effecting inter-State sales. The court held that dealers effecting sales within the State were not similarly situated as those effecting inter-State sales. The court found no discrimination and overruled the petitioner's contention.

6. Legality of the imposition of penalty for late filing of returns under Rule 11 of the Central Sales Tax (West Bengal) Rules, 1958:
The petitioner argued that Rule 11 was ultra vires the rule-making power of the State. The court examined the provisions of the Central Act and the State Act of 1941, noting that Section 9(2) of the Central Act, as substituted by the Amendment Act, provided for the application of the State law provisions relating to returns. The court concluded that Rule 11 was consistent with the Central Act and subserved its purposes. The petitioner's contention was overruled.

Conclusion:
All the contentions on behalf of the petitioner were overruled, and the Rule was discharged without any order for costs.