1991 (11) TMI 230 - AT - VAT and Sales Tax

Issues Involved:
1. Prescription of filing monthly statements in the form of monthly returns.
2. Procedure of verification of returns/statements by a team of officers of the Commercial Tax Directorate.
3. Maintainability of the application due to clubbing of multiple causes of action.
4. Legality and reasonableness of the new scheme of payment of tax.
5. Validity of the trade circular issued by the Commissioner of Commercial Taxes, West Bengal.

Detailed Analysis:

1. Prescription of Filing Monthly Statements in the Form of Monthly Returns
The applicants challenged the prescription of filing monthly statements in the form of monthly returns as introduced by rule 26B of the Bengal Sales Tax Rules, 1941. However, the new rule 30, effective retrospectively from June 1, 1990, modified the requirement, mandating tax payments for the first two months of each quarter within 21 days and for the last month within 30 days along with the quarterly return. The Tribunal found these provisions reasonable and valid, rejecting the applicants' contention that the new scheme was arbitrary and unreasonable.

2. Procedure of Verification of Returns/Statements by a Team of Officers
The applicants contended that the trade circular issued by the Commissioner, which outlined a procedure for verification of returns by a team of officers, was not supported by any statutory provision and amounted to an indirect search and seizure operation. The Tribunal agreed with the applicants, stating that such visits for verification must be for a specific purpose sanctioned by law and within specified legal parameters. The circular was found to lack statutory backing and was thus quashed.

3. Maintainability of the Application Due to Clubbing of Multiple Causes of Action
The respondents argued that the application was not maintainable as it clubbed multiple causes of action, contrary to sub-rule (5) of rule 5 of the West Bengal Taxation Tribunal Rules, 1988. The Tribunal overruled this objection, stating that the main cause of action was the change in the mode of payment of tax and submission of returns, and the verification procedure outlined in the trade circular was consequential to this main cause of action.

4. Legality and Reasonableness of the New Scheme of Payment of Tax
The applicants argued that the new scheme of payment of tax was unreasonable as it required dealers to pay taxes within 21 days, which was not feasible due to the practice of credit sales. The Tribunal, however, held that the liability to pay tax arises as soon as the sale is completed, and the State has the authority to prescribe the mode of tax payment. The Tribunal cited precedents affirming the State's competence to frame laws regarding tax collection methods and found the provisions constitutional and reasonable.

5. Validity of the Trade Circular Issued by the Commissioner of Commercial Taxes, West Bengal
The trade circular dated June 4, 1990, was challenged on the grounds that it introduced a verification procedure not supported by the statute. The Tribunal found that the circular amounted to a new procedure or scheme without statutory backing, constituting a colorable exercise of power. Consequently, the circular was quashed.

Conclusion
The Tribunal upheld the validity of rules 19(1) and 30 of the Bengal Sales Tax Rules, 1941, as reasonable and valid, rejecting the applicants' challenge regarding the new scheme of tax payment. However, the trade circular issued by the Commissioner was quashed for lacking statutory authority. The application was allowed in part, with no order for costs.

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