1990 (9) TMI 317 - AT - VAT and Sales Tax

Issues Involved:
1. Competence of the State Legislature to enact certain tax provisions.
2. Constitutional validity of the amended tax provisions.
3. Validity of rules framed under the amended tax provisions.
4. Refund of taxes paid under the old and new provisions.
5. Awarding interest on refundable amounts.

Detailed Analysis:

1. Competence of the State Legislature to Enact Certain Tax Provisions:
The primary issue was whether the State Legislature was competent to enact clause (ii) of sub-section (6) of section 4 of the Bengal Finance (Sales Tax) Act, 1941, and clause (i) of sub-section (2) of section 4 of the West Bengal Sales Tax Act, 1954, as amended by the West Bengal Taxation Laws (Amendment) Act, 1990. The applicants argued that these provisions were, in pith and substance, a tax on consignments of goods, which falls under entry 92B of the Union List and is within the exclusive legislative competence of Parliament. The respondents contended that the tax was on the purchase of goods, falling under entry 54 of the State List.

The Tribunal held that the impugned provisions, in essence, levied a tax on the consignment of goods, which is under the exclusive domain of Parliament as per entry 92B of the Union List. The Tribunal found that the State Legislature lacked the competence to enact these provisions, rendering them ultra vires the Constitution.

2. Constitutional Validity of the Amended Tax Provisions:
The applicants challenged the constitutional validity of the amended provisions on the grounds that they violated articles 14, 19(1)(g), 301, and 304 of the Constitution. The amendments were alleged to be a colourable exercise of legislative power, aiming to nullify the Supreme Court's judgment in Goodyear India Ltd. v. State of Haryana.

The Tribunal held that the amended provisions, despite changes in language, essentially imposed a tax on the consignment of goods outside the State, which is beyond the legislative competence of the State Legislature. Thus, the amendments did not remove the infirmities pointed out by the Supreme Court and remained unconstitutional.

3. Validity of Rules Framed Under the Amended Tax Provisions:
The applicants also challenged the vires of the rules framed under the amended provisions. They argued that the rules were vague, ambiguous, and allowed for arbitrary application.

Given that the Tribunal found the amended provisions themselves to be ultra vires, the rules framed under these provisions were also declared invalid and unconstitutional.

4. Refund of Taxes Paid Under the Old and New Provisions:
The applicants sought a refund of taxes paid under both the old and new provisions, claiming that these taxes were collected under invalid laws.

The Tribunal held that the old provisions were also ultra vires the Constitution, as they imposed a tax on the consignment of goods, which is within the exclusive legislative competence of Parliament. Consequently, the applicants were entitled to refunds of the taxes paid under both the old and new provisions. The Tribunal directed the respondents to refund the amounts within six months from the date of the judgment.

5. Awarding Interest on Refundable Amounts:
The applicants claimed interest at the rate of 2% per month on the refundable amounts. However, this claim was not pressed during the hearing.

The Tribunal noted that the claim for interest was inspired by specific provisions in the 1941 and 1954 Acts, which were not applicable in the present cases. The Tribunal also observed that the right to refund arose only upon the declaration of the provisions as ultra vires. Therefore, the Tribunal refused to award interest on the refundable amounts.

Conclusion:
The applications were allowed, and the Tribunal declared the provisions of section 4(6)(ii) of the 1941 Act and section 4(2)(i) of the 1954 Act, both before and after the 1990 amendments, as ultra vires the Constitution. The relevant rules were also quashed. The respondents were directed to refund the taxes collected under these provisions within six months, but no interest on the refundable amounts was awarded.

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