1992 (3) TMI 337 - AT - VAT and Sales Tax

Issues Involved:

1. Whether turnover tax is payable on the turnover of footwear sold at Rs. 15 or less per pair under rule 3(97) of the Bengal Sales Tax Rules, 1941, read with section 6B(2)(g) of the Bengal Finance (Sales Tax) Act, 1941.
2. Whether section 2(4)(b)(ii) of the West Bengal Taxation Laws (Amendment) Act, 1987, which deleted clause (e) of section 6B(2) of the 1941 Act with retrospective effect, is ultra vires the Constitution.

Detailed Analysis:

Issue 1: Turnover Tax on Footwear Sold at Rs. 15 or Less per Pair

The applicant, a registered dealer under the 1941 Act, argued that sales of footwear priced at Rs. 15 or less per pair should be exempt from turnover tax based on rule 3(97) of the 1941 Rules, which allows deductions for such sales when calculating taxable turnover. The applicant stopped paying sales tax and turnover tax on such footwear, believing that the exemption from sales tax also implied an exemption from turnover tax.

The respondents contested this, stating that the exemption under rule 3(97) was not a general exemption and, therefore, did not apply to turnover tax. Rule 3(97) was deleted effective April 1, 1989, and the exemption under section 5(2)(a)(vi) was not available for sales of footwear priced at Rs. 15 or less per pair.

The Tribunal held that rule 3(97) was framed under section 5(2)(a)(vi) for sales tax purposes and not under section 6B(2)(g) for turnover tax. Rule 3(2A), framed under section 6B(2)(g), did not include footwear sold at Rs. 15 or less per pair. Therefore, the applicant was not entitled to any deduction or exemption under section 6B(2)(g) for such sales.

Issue 2: Constitutionality of Retrospective Omission of Section 6B(2)(e)

The applicant challenged the retrospective omission of clause (e) of section 6B(2) by the 1987 amendment, arguing it was arbitrary, ultra vires, and unconstitutional. The respondents defended the amendment, asserting that it was valid and merely clarificatory.

The Tribunal noted that rule 3(97) provided a conditional exemption, not a general one. The retrospective omission of section 6B(2)(e) was held to be valid and clarificatory, as decided in a previous case ([1991] 82 STC 26, Calcutta Oil Industries Ltd. v. State of West Bengal). The Tribunal concluded that the retrospective deletion of clause (e) of section 6B(2) by the 1987 amendment was valid and merely clarificatory concerning rule 3(97).

Additional Constitutional Challenges

The applicant argued that the 1987 amendments, which increased the rates of turnover tax, lowered the exemption limit, and retrospectively omitted section 6B(2)(e), violated articles 301 and 304(b) of the Constitution. The Tribunal found no direct or immediate restriction on the free flow of trade and commerce under article 301. The applicant failed to demonstrate how the amendments created such a restriction. The Tribunal also rejected the claim that the amendments infringed article 19(1)(g) or were confiscatory, citing that the determination of tax rates is within the legislative domain and does not inherently create a restriction.

Conclusion

The Tribunal dismissed the application, upholding the validity of the 1987 amendments and the imposition of turnover tax on sales of footwear priced at Rs. 15 or less per pair from April 1, 1983. The interim orders were vacated, and no order for costs was made.

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