1990 (11) TMI 355 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay tax on second sales of photographic paper.
2. Interpretation of Section 6D of the Bengal Finance (Sales Tax) Act, 1941.
3. Applicability of exemptions under Section 6D(2) of the 1941 Act.
4. Validity of administrative circulars in tax interpretation.

Issue-wise Detailed Analysis:

1. Liability to pay tax on second sales of photographic paper:
The applicant, a partnership firm engaged in printing, developing, and enlarging color photo films, argued that it should not be liable to pay tax on second sales of photographic paper. The firm claimed that since the photographic paper had already suffered sales tax at the first point of sale under the West Bengal Sales Tax Act, 1954, no further tax was payable on subsequent sales under the Bengal Finance (Sales Tax) Act, 1941.

2. Interpretation of Section 6D of the Bengal Finance (Sales Tax) Act, 1941:
The core issue was whether photographic paper, which was taxable under the 1954 Act and then under section 5(1)(cccc)(i) of the 1941 Act, is exigible to tax under section 6D of the 1941 Act when such paper is locally purchased and had already suffered sales tax at the first point of sale. The judgment clarified that section 6D is a self-contained code designed to cover goods and commodities liable to sales tax under both the 1941 Act and the 1954 Act. Explanation 2 to section 6D explicitly states that "notwithstanding anything contained in this Act or in the West Bengal Sales Tax Act, 1954, tax shall be levied on such commodities under this section."

3. Applicability of exemptions under Section 6D(2) of the 1941 Act:
The applicant sought exemption under clauses (a) and (c) of section 6D(2). Clause (a) refers to goods under section 14 of the Central Sales Tax Act, 1956, which does not include photographic paper. Clause (c) pertains to goods generally exempt from tax under section 5(2)(a)(vi) of the 1941 Act. The court held that the term "generally exempt" means unconditionally exempt, which does not apply to the conditional exemptions under section 5(1)(cccc) and rule 3(108). Therefore, the applicant was not entitled to exemption from tax under section 6D for second or subsequent sales of goods.

4. Validity of administrative circulars in tax interpretation:
The applicant relied on a trade circular stating that commodities notified under the 1954 Act would not be subjected to tax under section 6D if tax had already been paid on them earlier. The court found this interpretation incorrect and held that administrative circulars without legal authority do not bind assessing officers. The court emphasized that the correct interpretation is that section 6D overrides section 23 of the 1954 Act, including its proviso (ia).

Conclusion:
The application was dismissed, and the court held that the applicant is liable to pay tax under section 6D of the 1941 Act on the local purchases of photographic paper, even if those commodities had already suffered tax on a prior sale. The court also vacated the interim orders and directed that any security furnished by the applicant be adjusted against the tax demand or refunded within twelve weeks.

Judgment:
Application dismissed. Both judicial and technical members concurred with the decision.