1995 (2) TMI 418 - AT - VAT and Sales Tax

Issues Involved:
1. Propriety of payment of turnover tax under section 6B of the Bengal Finance (Sales Tax) Act, 1941.
2. Discrimination between auction sales and non-auction sales for payment of turnover tax.
3. Constitutional validity of section 6B and its amendments in 1987 and 1992.
4. Alleged confiscatory nature of the turnover tax.
5. Legislative competence of the State Legislature to enact section 6B.
6. Violation of Articles 14, 19(1)(g), 301, 304, and 300A of the Constitution.

Issue-wise Detailed Analysis:

1. Propriety of Payment of Turnover Tax:
The applicants challenged the imposition of turnover tax on sales of tea by private treaty by a broker member of the Calcutta Tea Traders Association (CTTA) under section 6B of the Bengal Finance (Sales Tax) Act, 1941. They argued that there was no justification for not excluding such sales from the payment of turnover tax, as is done for sales at auctions under the auspices of CTTA and Siliguri Tea Auction Committee (STAC). The Tribunal found that the imposition of turnover tax on sales by private treaty was justified and legal, as it stood on a different footing from auction sales.

2. Discrimination Between Auction Sales and Non-Auction Sales:
The applicants contended that the differential treatment between auction sales and non-auction sales for the payment of turnover tax was arbitrary and without any basis. The Tribunal held that the differential treatment was justified as it was dictated by the policy of the Government to encourage sales of tea through auctions to foster the interest of the trade. Sales of tea under private treaty were considered different from auction sales, and thus, the differential treatment was legal.

3. Constitutional Validity of Section 6B and Its Amendments:
The applicants argued that section 6B and its amendments in 1987 and 1992 were ultra vires the Constitution, illegal, and void. They claimed that the amendments were confiscatory and violated Articles 14, 19(1)(g), and 301 read with Article 304 of the Constitution. The Tribunal referred to previous decisions, including Century Spinning Mfg. Co. v. State of West Bengal and Trot Shoe Company Private Limited v. State of West Bengal, which upheld the validity and constitutionality of section 6B. The Tribunal agreed with these decisions and found that section 6B and its amendments were not confiscatory or violative of the Constitution.

4. Alleged Confiscatory Nature of the Turnover Tax:
The applicants claimed that the turnover tax was confiscatory as it required them to pay the tax from their capital, given that they could not increase their commission rate due to CTTA rules. The Tribunal referred to previous decisions, including Century Spinning Mfg. Co. and Trot Shoe Company, which held that the turnover tax was not confiscatory. The Tribunal found no factual foundation to show that the payment of turnover tax on sales by private treaty was expropriatory and concluded that the tax was not confiscatory.

5. Legislative Competence of the State Legislature:
The applicants contended that the State Legislature had no legislative competence to enact section 6B. The Tribunal referred to the decision in Century Spinning Mfg. Co., which held that the State Legislature was competent under entry 54 of List II in the Seventh Schedule of the Constitution to enact section 6B. The Tribunal agreed with this decision and found that the State Legislature had the competence to enact section 6B.

6. Violation of Articles 14, 19(1)(g), 301, 304, and 300A of the Constitution:
The applicants argued that section 6B and its amendments violated Articles 14, 19(1)(g), 301, 304, and 300A of the Constitution. The Tribunal referred to previous decisions, including Century Spinning Mfg. Co. and Afsar Rahaman Laskar v. State of West Bengal, which held that the imposition of turnover tax was not violative of these constitutional provisions. The Tribunal found that the classification between auction sales and private treaty sales bore a nexus to the object of the statute and was not arbitrary. The Tribunal also found that the imposition of turnover tax did not directly impede the free-flow of trade and was not violative of Articles 301 and 304. The Tribunal concluded that there was no violation of Articles 14, 19, 300A, 301, and 304 of the Constitution.

Conclusion:
The application was dismissed without any order as to costs, and the interim order passed by the High Court, Calcutta, was vacated. The Tribunal upheld the validity and constitutionality of section 6B and its amendments, finding that the imposition of turnover tax on sales of tea by private treaty was justified and legal.

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