1991 (12) TMI 258 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of purchase tax provisions under the Bengal Finance (Sales Tax) Act, 1941, and the West Bengal Sales Tax Act, 1954.
2. Refund of purchase taxes paid by the applicants.
3. Interim orders for non-payment of purchase tax and issuance of declaration forms.
4. Legislative competence of the State of West Bengal to levy purchase tax.
5. Applicability of the doctrine of unjust enrichment and prospective overruling.

Issue-wise Detailed Analysis:

1. Validity of Purchase Tax Provisions:
The Tribunal examined the amendments made to the Bengal Finance (Sales Tax) Act, 1941, and the West Bengal Sales Tax Act, 1954, by the West Bengal Taxation Laws (Amendment) Act, 1990. The amendments were introduced following the Supreme Court's judgment in Goodyear India Ltd. v. State of Haryana, which held that the State Government had no competence to levy purchase tax on goods dispatched outside the State. The Tribunal reaffirmed its earlier decision in Rasoi Limited v. State of West Bengal, declaring the provisions of section 4(6)(ii) of the Act of 1941 and section 4(2)(i) of the Act of 1954, both before and after the amendments, as ultra vires the Constitution.

2. Refund of Purchase Taxes Paid by the Applicants:
The applicants sought refunds for purchase taxes paid under the invalidated provisions. The Tribunal considered the doctrine of unjust enrichment and the retrospective effect of the amendments. It concluded that refunds should not be granted for taxes paid prior to the judgment in Rasoi Limited on September 11, 1990, due to the potential for unjust enrichment and the long period of unprotested payments. However, it directed refunds for taxes paid from September 11, 1990, onwards, as both the State and the applicants were aware of the invalidity of the tax provisions from that date.

3. Interim Orders for Non-Payment of Purchase Tax and Issuance of Declaration Forms:
In cases RN-4 of 1991, RN-5 of 1991, and RN-31 of 1991, the applicants sought interim orders to prevent the State from insisting on the deposit of purchase tax and to ensure the issuance of declaration forms. The Tribunal noted that the applicants had not been paying purchase tax in compliance with the Rasoi Limited judgment and directed that declaration forms should not be withheld for non-payment of purchase tax for the period from September 11, 1990.

4. Legislative Competence of the State of West Bengal to Levy Purchase Tax:
The Tribunal examined the legislative competence of the State of West Bengal under entry 54 in List II of the Seventh Schedule to the Constitution. It reaffirmed that the State lacked the competence to levy purchase tax on goods dispatched outside the State, aligning with the Supreme Court's decision in Goodyear India Ltd. and subsequent cases like Mukerian Papers Limited v. State of Punjab.

5. Applicability of the Doctrine of Unjust Enrichment and Prospective Overruling:
The Tribunal applied the doctrine of unjust enrichment, noting that the applicants had likely passed the burden of purchase tax to consumers. It also considered the principle of prospective overruling, as established in India Cement Ltd. v. State of Tamil Nadu and Orissa Cement Ltd. v. State of Orissa, to deny refunds for taxes paid prior to September 11, 1990. The Tribunal emphasized that refunds should be limited to taxes paid after the invalidity of the provisions was declared.

Conclusion:
The applications were allowed in part. The Tribunal declared that purchase tax was not payable under the invalidated provisions and directed the State to refund purchase taxes paid from September 11, 1990, within six months. It also ordered the issuance of declaration forms to the applicants in specified cases without considering non-payment of purchase tax for the period from September 11, 1990. The Tribunal rejected the State's request for a stay of the judgment's operation.