1990 (7) TMI 354 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether sales of turmeric and black pepper in powder form are exigible to sales tax under the West Bengal Sales Tax Act, 1954.
2. Whether the applicants are "dealers" under section 2(b) of the 1954 Act.
3. Whether converting whole turmeric and black pepper into powder form constitutes "processing" under the 1954 Act.
4. Whether sales tax can be levied on the second or subsequent sales of turmeric and black pepper in West Bengal.
5. Whether section 5 of the West Bengal Taxation Laws (Amendment) Act, 1980, is ultra vires article 304 of the Constitution of India.

Detailed Analysis:

Issue 1: Sales Tax on Powdered Turmeric and Black Pepper
The applicants argued that turmeric and black pepper, once subjected to sales tax when purchased in whole form, should not be taxed again when sold in powder form. They contended that the commodities remain the same irrespective of form, and under the scheme of the 1954 Act, tax is levied at a single point of sale. The respondents countered that the applicants are liable to pay tax on sales of these commodities in powder form as they are considered to be processed goods.

Issue 2: Definition of "Dealer"
The applicants contended that they do not fall under the definition of "dealer" in section 2(b) of the 1954 Act, as converting whole turmeric and black pepper into powder does not involve processing. The respondents argued that the applicants are dealers as they sell notified commodities processed by them in West Bengal.

Issue 3: Processing of Turmeric and Black Pepper
The Tribunal examined the meaning of "processing" and concluded that converting whole turmeric and black pepper into powder form amounts to processing. This interpretation was supported by various judicial precedents which defined processing as any operation that brings about a change or effect on the commodity, even if it does not result in a new commercial commodity.

Issue 4: Levy of Sales Tax on Subsequent Sales
The applicants argued that tax cannot be levied on second or subsequent sales of turmeric and black pepper as the commodities had already been taxed at the time of purchase. The Tribunal found no evidence of sales tax payment at the time of purchase and held that even if tax was paid, it would be immaterial as the commodities were not taxable in their whole form under the 1954 Act. The Tribunal concluded that the scheme of the 1954 Act allows for tax to be levied on processed goods even if they had been taxed at an earlier stage.

Issue 5: Constitutionality of Section 5 of the West Bengal Taxation Laws (Amendment) Act, 1980
This issue was not raised or pressed during the hearing, and thus, the Tribunal did not address it in its judgment.

Conclusion:
The Tribunal dismissed the application, holding that the applicants are dealers under section 2(b) of the 1954 Act for processing whole turmeric and black pepper into powdered form for sale. It concluded that sales of these powdered commodities are exigible to sales tax under the 1954 Act. The Tribunal also noted that the applicants had voluntarily obtained a registration certificate as manufacturing and processing dealers, further supporting their liability to pay sales tax. The application was dismissed with no order as to costs, and any security deposited by the applicants was to be adjusted against assessed dues.