1995 (4) TMI 265 - AT - VAT and Sales Tax

Summary

Issues:
- Whether section 6B(2)(a) of the Bengal Finance (Sales Tax) Act, 1941 has become ultra vires the Constitution of India and section 15 of the Central Sales Tax Act, 1956 after an amendment.
- Whether the imposition of turnover tax at 2 per cent in addition to sales tax at 2 per cent results in a total tax exceeding 4 per cent, thus violating section 15(a) of the 1956 Act.
- The interpretation of "sale or purchase price" under section 15(a) of the 1956 Act and its application in the context of sales tax and turnover tax.
- Whether the provisions of sections 6B(2)(a) and 6B(3)(a) of the 1941 Act are in conformity with section 15(a) of the 1956 Act and article 286(3) of the Constitution.

Analysis:
The judgment revolves around the interpretation and application of section 6B(2)(a) of the Bengal Finance (Sales Tax) Act, 1941 and section 15(a) of the Central Sales Tax Act, 1956 concerning the imposition of turnover tax in addition to sales tax. The applicant, a registered dealer, challenged the amendment to section 6B(3)(a) of the 1941 Act, which led to an increase in turnover tax from 2 per cent to 4.04 per cent. The applicant argued that this exceeded the 4 per cent limit set by section 15(a) of the 1956 Act. The State taxing authorities contended that the total tax rate of 4 per cent was not breached, as sales tax and turnover tax combined equaled 4 per cent. The Tribunal analyzed the legislative intent behind section 15(a) and concluded that the 4 per cent limit applies to the basic price of goods, excluding the sales tax element. The Tribunal emphasized that turnover tax is akin to sales tax and should not result in a total tax exceeding 4 per cent.

The Tribunal further examined the provisions of rule 3(2A)(6) of the Bengal Sales Tax Rules, 1941, which provided for deductions from turnover for the levy of turnover tax. The Tribunal highlighted the importance of adhering to the 4 per cent limit prescribed by section 15(a) of the 1956 Act to prevent any contravention. It directed the State taxing authorities to utilize the provisions of the 1941 Act and Rules to ensure that dealers are not required to pay tax exceeding 4 per cent effectively. The Tribunal emphasized the need for compliance with the provisions to maintain the validity and constitutionality of the laws in question.

In conclusion, the Tribunal directed the State taxing authorities to follow specific modalities during the assessment and calculation of tax to ensure that the total tax payable by dealers does not surpass 4 per cent of the basic price of declared goods. By adhering to these directions, the Tribunal ruled that the impugned provisions would be in line with section 15(a) of the 1956 Act and the Constitution, thereby safeguarding their validity and constitutionality. The application was disposed of without costs, with all members concurring with the decision.