1993 (3) TMI 336 - AT - VAT and Sales Tax

Issues Involved:
1. Validity and constitutionality of Section 6B of the Bengal Finance (Sales Tax) Act, 1941, and Rule 3(2A) of the Bengal Sales Tax Rules, 1941.
2. Alleged discrimination in the levy of turnover tax on imported rice.
3. Validity of Section 10A of the Bengal Finance (Sales Tax) Act, 1941, regarding interest on unpaid tax.
4. Alleged arbitrariness in the graduated slabs of turnover tax.

Issue-Wise Detailed Analysis:

1. Validity and Constitutionality of Section 6B and Rule 3(2A):
The primary issue was whether Section 6B of the Bengal Finance (Sales Tax) Act, 1941, and Rule 3(2A) of the Bengal Sales Tax Rules, 1941, were invalid and unconstitutional. The applicants argued that the imposition of turnover tax on imported rice under these provisions was discriminatory and in contravention of Articles 301 and 304(a) of the Constitution of India. They contended that the amendment to Section 6B in 1987 was made without the prior sanction or assent of the President as required by Articles 304 and 255 of the Constitution.

The respondents countered that the provisions were valid and did not violate any constitutional provisions. They explained that rice was subjected to turnover tax only on the first sale in West Bengal, whether by an importer or a registered dealer. The turnover tax was levied at graduated rates and did not exceed the restrictions under Section 15 of the Central Sales Tax Act, 1956.

The Tribunal held that the provisions of Section 6B and Rule 3(2A) were valid and constitutional. The turnover tax was levied in compliance with Section 15 of the Central Sales Tax Act, 1956, which restricted the tax to one stage and a maximum rate of four per cent. The Tribunal found no violation of Articles 301 or 304(a) as the tax did not impede the free flow of trade.

2. Alleged Discrimination in Levy of Turnover Tax:
The applicants argued that the imposition of turnover tax on imported rice, while exempting rice purchased within West Bengal, constituted discrimination and violated Articles 301 and 304(a) of the Constitution. They claimed that this created an impediment to the free flow of trade between states.

The respondents argued that the tax was levied uniformly on the first sale of rice in West Bengal, whether imported or locally produced. They contended that there was no discrimination as the tax was imposed only once and at the same rate.

The Tribunal held that there was no discrimination in the levy of turnover tax. The tax was uniformly applied to the first sale of rice in West Bengal, irrespective of whether it was imported or locally produced. The Tribunal found no violation of Articles 301 or 304(a) as the tax did not create an impediment to the free flow of trade.

3. Validity of Section 10A Regarding Interest on Unpaid Tax:
The applicants challenged the validity of Section 10A of the Bengal Finance (Sales Tax) Act, 1941, which provided for interest at the rate of two per cent per month on unpaid tax. They argued that this provision was arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution.

The respondents contended that Section 10A was valid and constitutional. They argued that the provision for interest was a means of compelling timely payment of tax and was within the legislative power of the state.

The Tribunal upheld the validity of Section 10A, citing previous judgments that had affirmed its constitutionality. The Tribunal found that the provision for interest was a legitimate means of ensuring timely payment of tax and did not violate Articles 14 or 19(1)(g).

4. Alleged Arbitrariness in Graduated Slabs of Turnover Tax:
The applicants argued that the graduated slabs for turnover tax in Section 6B were arbitrary and violated Articles 14 and 19(1)(g) of the Constitution. They contended that the slabs created an unreasonable burden on marginal dealers with high turnover.

The respondents argued that the graduated slabs were based on economic superiority and were a conscious decision of the legislature. They contended that the classification was reasonable and did not violate constitutional provisions.

The Tribunal held that the graduated slabs in Section 6B were not arbitrary and did not violate Articles 14 or 19(1)(g). The classification was based on economic superiority, and the legislature had the freedom to make such classifications in taxing statutes.

Conclusion:
The Tribunal dismissed the applications, upholding the validity and constitutionality of Section 6B and Rule 3(2A) of the Bengal Finance (Sales Tax) Act, 1941. The Tribunal found no discrimination in the levy of turnover tax on imported rice and upheld the validity of Section 10A regarding interest on unpaid tax. The graduated slabs for turnover tax were also found to be reasonable and not in violation of constitutional provisions. The Tribunal allowed the assessing authority to recalculate the amount of turnover tax if the proviso to Section 6B(3) was not considered during the assessment, providing some marginal relief to the assessees.

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