1997 (7) TMI 644 - AT - VAT and Sales Tax

Issues Involved:
1. Whether turnover tax is payable by retailers dealing in Indian-made foreign liquors (IMFL) under the Bengal Finance (Sales Tax) Act, 1941, for sales effected on or after April 11, 1994.
2. Allegation of hostile discrimination against retail dealers of IMFL.
3. Whether the demand of turnover tax is violative of Articles 14 and 19(1)(g) of the Constitution of India.
4. The legislative competence to impose turnover tax under section 6B of the 1941 Act.

Issue-Wise Detailed Analysis:

1. Turnover Tax Payability by Retailers of IMFL:
The primary issue was whether retailers of IMFL were liable to pay turnover tax under the Bengal Finance (Sales Tax) Act, 1941, for sales made on or after April 11, 1994. The applicants contended that the amendments to the 1941 Act shifted the burden of sales tax from the retail point to the first point of sale, relieving retailers from the obligation of collecting and paying sales tax. However, despite this shift, the respondents continued to demand turnover tax from the retailers. The Tribunal held that while the amendments relieved retailers from sales tax obligations, they did not exempt them from turnover tax obligations under section 6B of the 1941 Act.

2. Allegation of Hostile Discrimination:
The applicants alleged that retail dealers of IMFL were subjected to hostile discrimination as they continued to be governed by the 1941 Act, whereas dealers of other commodities were shifted to the West Bengal Sales Tax Act, 1954, and relieved from turnover tax. The Tribunal found no merit in this argument, stating that the State Legislature is competent to decide the manner of raising revenue from sales tax and determine exemptions. The Tribunal concluded that there was no hostile discrimination against retail dealers of IMFL.

3. Violation of Articles 14 and 19(1)(g) of the Constitution:
The applicants argued that the demand for turnover tax was arbitrary, discriminatory, and violative of Articles 14 and 19(1)(g) of the Constitution of India. The Tribunal rejected this argument, stating that the economic wisdom of a tax is within the exclusive province of the Legislature. The Tribunal emphasized that the validity of the levy of turnover tax does not depend on whether a selling dealer can collect the tax from customers. The Tribunal held that the demand for turnover tax was neither unreasonable nor arbitrary.

4. Legislative Competence to Impose Turnover Tax:
The applicants questioned the legislative competence to impose turnover tax under section 6B of the 1941 Act. They argued that turnover tax is in the nature of sales tax and should not be payable if no sales tax is payable under section 5. The Tribunal referred to the case of Century Spinning Mfg. Co., which held that turnover tax is a tax on sales and not on income, and the State Legislature is competent to enact section 6B under entry 54 of List II of the Seventh Schedule to the Constitution. The Tribunal concluded that the expression "in addition to" in section 6B(1)(a) indicates that turnover tax is an additional tax and is payable even if no tax is payable under section 5 or section 6D.

Conclusion:
The application was dismissed without any order for costs. The Tribunal upheld the validity of the demand for turnover tax from retail dealers of IMFL for sales made on or after April 11, 1994, and found no violation of constitutional provisions or legislative incompetence in imposing turnover tax under section 6B of the 1941 Act.

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