1990 (7) TMI 361 - AT - VAT and Sales Tax

Summary

Issues:
Interpretation of the phrase "those on which tax is levied at a rate of two per centum or less" in section 6B(2)(a) of the Bengal Finance (Sales Tax) Act, 1941, as amended in 1987, to determine if it includes sales exempt from tax under rule 3(66a) of the Bengal Sales Tax Rules, 1941.

Analysis:
The case involved a dispute regarding the interpretation of the phrase "those on which tax is levied at a rate of two per centum or less" in section 6B(2)(a) of the Bengal Finance (Sales Tax) Act, 1941, as amended in 1987. The applicants, engaged in the business of manufacturing and selling iron and steel goods, argued that sales exempted from tax under rule 3(66a) of the Bengal Sales Tax Rules should not be considered as sales on which tax is levied at a rate of two per cent or less. They contended that since they were exempt from charging sales tax on their products, such sales should be excluded from the calculation of turnover tax under section 6B(2)(a).

The Commercial Tax Officer had refused to issue declaration forms to the applicants for a concessional tax rate, citing non-payment of turnover tax under section 6B. The officer believed that zero per cent tax should be considered as included in the phrase "two per centum or less." However, the applicants argued that zero or nil tax should not be considered as a rate less than two per cent, as it essentially means no tax is levied.

The Tribunal analyzed the provisions of the Act and the rules and concluded that sales exempted from tax under rule 3(66a) are not to be included in the category of sales "on which tax is levied at a rate of two per centum or less." The Tribunal emphasized that the word "less" implies a positive rate of tax, not just zero, and that zero rate of tax essentially means no tax is levied. Therefore, the Tribunal held that the applicants were not liable to pay turnover tax on sales exempted from tax under rule 3(66a) and allowed the application.

The Tribunal directed the respondents to reevaluate the application for declaration forms in light of the judgment and dispose of it promptly. The decision was unanimous among the Tribunal members, and the application was allowed without any order as to costs.