1995 (4) TMI 268 - AT - VAT and Sales Tax

Summary

Issues Involved:

1. Constitutionality of sub-rules (3) and (4) of rule 48M of the Bengal Sales Tax Rules, 1941.
2. Legislative competence of the State regarding rule 48M.
3. Definition and treatment of "casual traders" under section 2(1a-1) of the Bengal Finance (Sales Tax) Act, 1941.
4. Validity of actions by taxing authorities at check-posts, including oral orders, detention of vehicles, and collection of advance tax.
5. Validity of sections 2(1a-1), 4C, and 4D of the Bengal Finance (Sales Tax) Act, 1941, and rules 48L and 48M.
6. Validity of Trade Circular No. 3/93.
7. Validity of forms VIB, VIC, and VID.
8. Refund of advance tax collected under rule 48M(3).
9. Compensation and costs for illegal detention of goods.

Detailed Analysis:

1. Constitutionality of sub-rules (3) and (4) of rule 48M:

The Tribunal held that sub-rule (3) of rule 48M, which allows for the collection of advance tax on "sales to be made," is invalid and unconstitutional. It was found to be beyond the legislative competence of the State under entry 54 of List II and ultra vires the 1941 Act. Sub-rules (4), (5), (6), and (7) of rule 48M, which are related to sub-rule (3), were also struck down. The Tribunal emphasized that tax should only be collected on actual sales, not on anticipated future sales.

2. Legislative Competence of the State:

The Tribunal examined whether the State had the legislative competence to enact rule 48M under entry 54 of List II of the Seventh Schedule to the Constitution. It was concluded that while the State can legislate on the sale or purchase of goods, the collection of advance tax before any sale has taken place is not within its competence. The Tribunal emphasized that the taxable event must be a completed sale or purchase within West Bengal.

3. Definition and Treatment of "Casual Traders":

The Tribunal upheld the definition of "casual trader" under section 2(1a-1) of the 1941 Act, including the Explanation 1 added in 1994. It was clarified that a transporter who fails to disclose the name and address of the consignee or consignor or fails to furnish relevant documents would be deemed a casual trader. However, it was also noted that mere transportation of goods does not automatically make a transporter liable to tax unless it is established that a sale or purchase has occurred in West Bengal.

4. Validity of Actions by Taxing Authorities at Check-posts:

The Tribunal ruled that oral orders for the collection of tax at check-posts are invalid. It was emphasized that any order for the collection of tax must be in writing. The detention of vehicles transporting bamboo-splits was deemed unlawful unless there was a valid legal provision authorizing such actions. The Tribunal also found that the practice of collecting tax through private guarantors was not supported by any legal provision.

5. Validity of Sections 2(1a-1), 4C, and 4D, and Rules 48L and 48M:

The Tribunal upheld the constitutionality of sections 2(1a-1), 4D, and sub-sections (1) to (5) and (8) of section 4C of the 1941 Act. However, sub-sections (6) and (7) of section 4C, which allowed for the seizure and auction of goods, were struck down as unconstitutional. Sub-rules (1) to (3) of rule 48L were upheld as valid, while sub-rule (4) was struck down.

6. Validity of Trade Circular No. 3/93:

The Tribunal declared that Trade Circular No. 3/93 dated April 20, 1993, issued by the Directorate of Commercial Taxes, has no legal standing and is merely an administrative communication. It was not necessary to set it aside, but it was clarified that it is subject to valid legal provisions.

7. Validity of Forms VIB, VIC, and VID:

Forms VIB, VIC, and VID were quashed as they did not conform to the legal requirements and were found to be invalid. The Tribunal emphasized that forms prescribed under the rules must reflect all the requirements of the law.

8. Refund of Advance Tax Collected:

The Tribunal directed that amounts collected as advance tax under the invalid sub-rules (3) and (6) of rule 48M should be refunded to the applicants within six weeks. In default, the respondents were ordered to pay interest as provided in section 10B of the 1941 Act.

9. Compensation and Costs for Illegal Detention of Goods:

The Tribunal awarded a token amount of Rs. 5,000 as compensation to the applicant in RN-152 of 1993 for the illegal detention of goods. Additionally, token costs of Rs. 5,000 were awarded in each of the cases RN-148 and 170 of 1993 and RN-124 of 1994.

Conclusion:

The Tribunal allowed the applications to the extent indicated, upholding certain provisions while striking down others as unconstitutional. The respondents were directed to refund the collected advance tax and pay compensation and costs as specified. The decision clarified the legal position on several contentious issues related to the Bengal Sales Tax Rules, 1941, and the Bengal Finance (Sales Tax) Act, 1941.