1997 (8) TMI 487 - AT - VAT and Sales Tax

Issues Involved:
(i) Ambiguity or vagueness in sub-clauses (vf) and (vg) leading to confusion and uncertainty.
(ii) Validity of the demand for sales tax as per the trade circular dated May 2, 1994.
(iii) Legality of the imposition of tax from April 11, 1994, at the retailer's point for stock held on April 10, 1994.
(iv) Discrimination in sub-clauses (vf) and (vg) violating Article 14 of the Constitution.
(v) Uncertainty in determining taxable turnover due to excise duty payment by vendors.
(vi) Non-issuance of declaration forms resulting from anomalies in the sub-clauses.

Issue-wise Detailed Analysis:

(i) Ambiguity or Vagueness in Sub-clauses (vf) and (vg):
The applicants argued that the language of sub-clauses (vf) and (vg) is obscure, causing confusion. However, the Tribunal found no ambiguity in the language of these sub-clauses. Sub-clause (vf) allows deductions for sales of foreign liquor purchased on or after April 11, 1994, from a registered dealer who has paid excise duty or is not liable to pay excise duty. Sub-clause (vg) provides similar deductions if the selling dealer himself has the liability to pay excise duty but has not paid it. The Tribunal concluded that the provisions are clear and do not suffer from ambiguity or vagueness.

(ii) Validity of the Trade Circular Dated May 2, 1994:
The Trade Circular No. 1/94 dated May 2, 1994, demanded sales tax at the old rates on the stock of foreign liquor held by retailers on April 10, 1994. The Tribunal found this circular to be repugnant to the statutory provision introduced by the amendment effective from April 11, 1994, which set a uniform tax rate of 15 percent. The circular was quashed as it misconstrued the legal position and was inconsistent with the amended law.

(iii) Legality of Imposition of Tax from April 11, 1994:
The applicants contended that imposing tax from April 11, 1994, on the stock held on April 10, 1994, was illegal. The Tribunal examined the impact of the amendment and concluded that all sales of foreign liquor from April 11, 1994, out of stock held on April 10, 1994, would attract sales tax at the rate of 15 percent. This imposition was deemed legal as the stock purchased before April 11, 1994, was tax-free, and the tax element would enter the sale price at the first sale after April 11, 1994.

(iv) Discrimination in Sub-clauses (vf) and (vg):
The applicants argued that sub-clauses (vf) and (vg) are discriminatory as they allow deductions only for purchases made on or after April 11, 1994, violating Article 14 of the Constitution. The Tribunal found no discrimination in these sub-clauses. The imposition of tax on the stock held on April 10, 1994, was a necessary consequence of the tax scheme's transition from taxing at the retailer's point to the first point of sale. The sub-clauses were not found to be discriminatory or violative of Article 14.

(v) Uncertainty in Determining Taxable Turnover:
The applicants claimed that retailers faced uncertainty in determining their taxable turnover due to the difficulty in ascertaining whether their vendors had paid excise duty. The Tribunal held that the ascertainment of excise duty payment is not so onerous as to invalidate the sub-clauses. Section 17 of the Bengal Excise Act, 1909, ensures that no intoxicant can be removed from storage unless excise duty is paid or a bond is executed. Thus, the actual possession of foreign liquor implies that excise duty has been paid, eliminating uncertainty.

(vi) Non-issuance of Declaration Forms:
The applicants contended that the non-issuance of declaration forms (D forms) by tax authorities resulted in retailers' inability to claim deductions, thereby exposing wholesalers to the risk of paying sales tax from their own funds. The Tribunal noted that this issue is related to the D form issuing procedure and not directly to sub-clauses (vf) and (vg). However, it recommended that the Commissioner of Commercial Taxes should ensure that dealers are not unnecessarily harassed regarding the issuance of D forms.

Conclusion:
The application was allowed in part. The Tribunal did not find sub-clauses (vf) and (vg) to be ultra vires the Constitution. However, it quashed Circular No. 1/94 dated May 2, 1994. The Commissioner of Commercial Taxes was directed to address the grievances related to the non-issuance of D forms and dispose of any pending applications within one month. No order as to costs was made.

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