1996 (7) TMI 541 - HC - VAT and Sales Tax

Issues Involved:
1. Applicability of purchase tax under the Bihar Finance Act, 1981, to sugarcane purchases.
2. Principle of special law excluding general law.
3. Double taxation.
4. Interpretation of Section 4 of the Bihar Finance Act, 1981.
5. Impact of Central Government control on the sugar industry.
6. Rate of tax applicable under Section 13.
7. Imposition of penalty.

Detailed Analysis:

1. Applicability of Purchase Tax:
The core issue is whether sugar companies are liable to pay purchase tax under Section 4 of the Bihar Finance Act, 1981, on the purchase of sugarcane. The petitioners argued that the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981 (Act of 1981), being a special Act, excludes the applicability of the Bihar Finance Act, 1981. The court noted that the Act of 1981 regulates the production, supply, and distribution of sugarcane and includes provisions for entry tax and purchase tax, but it does not exclude the applicability of the Bihar Finance Act.

2. Principle of Special Law Excluding General Law:
The petitioners contended that the Act of 1981, being a special law, should prevail over the general provisions of the Bihar Finance Act. The court referred to several Supreme Court judgments, including AIR 1961 SC 1170 and AIR 1984 SC 1543, to conclude that the special law does not necessarily exclude the general law unless there is a direct conflict. The court found no such conflict and held that both laws could operate concurrently.

3. Double Taxation:
The petitioners argued that double taxation should be avoided. The court acknowledged that while double taxation is generally avoided, it is permissible if imposed by different laws. The court cited the Full Bench decision in [1972] 29 STC 177 (Pat) [FB]; 1972 PLJR 39 [FB] and the Supreme Court's ruling in Sri Krishna Das v. Town Area Committee AIR 1991 SC 2096, which upheld the validity of double taxation under different enactments.

4. Interpretation of Section 4 of the Bihar Finance Act:
The petitioners argued that Section 4 should be interpreted to exclude sugarcane purchases from purchase tax as they already paid tax under the Act of 1981. The court rejected this interpretation, stating that the reference to non-payment of sales tax or non-payability must be understood to mean under the Bihar Finance Act, not any other Act. The court held that the conditions under Section 4 were fulfilled, making the petitioners liable for purchase tax.

5. Impact of Central Government Control:
The petitioners contended that the imposition of purchase tax would cripple the sugar industry, which is controlled by the Central Government. The court noted that while the industry is regulated by Central laws, the State has the power to levy taxes under Entry 54 of List II. The court held that the rate of tax is a matter of legislative policy and cannot be a subject of judicial review unless it is confiscatory or expropriatory, which was not proven.

6. Rate of Tax Under Section 13:
The petitioners argued that the rate of tax should be 2% under Section 13, not 8% under Section 12. The court did not delve into this issue, suggesting that the petitioners raise this question before the assessing authorities or in appeal, revision, or review, as the case may be.

7. Imposition of Penalty:
The petitioners contended that the penalty was unjustified as they acted under a bona fide belief that no purchase tax was payable under the Bihar Finance Act. The court noted that penalties should not be imposed as a matter of course and suggested that the petitioners seek remedy under the Bihar Finance Act before the appropriate authorities.

Conclusion:
The court dismissed the writ petitions, holding that the petitioners are liable to pay purchase tax under Section 4 of the Bihar Finance Act, 1981, in addition to any tax paid under the Act of 1981. The court allowed the petitioners to challenge the rate of tax and the imposition of penalties before the appropriate authorities.

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