2000 (2) TMI 810 - AT - VAT and Sales Tax

Issues Involved:
1. Whether expenditure tax collected under the Expenditure Tax Act, 1987, is part of the turnover and thus exigible to sales tax under the Bengal Finance (Sales Tax) Act, 1941, and the West Bengal Sales Tax Act, 1994.

Detailed Analysis:

1. Context and Background:
The applications under section 8 of the West Bengal Taxation Tribunal Act, 1987, questioned if the expenditure tax collected by hoteliers under the Expenditure Tax Act, 1987 (E.T. Act) should be included in their turnover and thus be subject to sales tax under the Bengal Finance (Sales Tax) Act, 1941 (1941 Act), and the West Bengal Sales Tax Act, 1994 (1994 Act).

2. Case of the Applicants:
The applicants argued that:
- Expenditure tax is levied on the chargeable expenditure incurred by customers, not by the hotelier.
- The amount collected does not form part of the sale price as defined under the 1941 Act.
- The hotelier is merely a collecting agent for the government, and the tax is not part of the consideration for the sale of goods.
- Including expenditure tax in the turnover for sales tax purposes violates articles 251 and 254 of the Constitution of India.

3. Case of the Respondents:
The respondents contended that:
- The expenditure tax collected forms part of the sale price and turnover.
- Sales tax is levied under entry 54 of List II of the Seventh Schedule to the Constitution, giving the State Legislature plenary power to impose sales tax on all sales.
- The entire amount in the bill, including expenditure tax, constitutes the consideration for the sale.

4. Legal Provisions and Definitions:
- Section 4 of the 1941 Act and section 9 of the 1994 Act state that tax is levied on "all sales."
- Definitions of "turnover" and "sale price" in the respective acts indicate that turnover includes the aggregate of sale prices.
- The E.T. Act imposes a tax on "chargeable expenditure" incurred by customers, and the hotelier is responsible for collecting this tax and remitting it to the Central Government.

5. Judicial Precedents:
- In cases like Food Corporation of India v. State of Kerala and Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax, it was held that amounts collected under statutory obligation do not form part of the turnover for sales tax purposes.
- The Supreme Court in McDowell & Co. Ltd. v. Commercial Tax Officer distinguished between the liability to pay excise duty and expenditure tax, emphasizing that the liability to pay excise duty was on the manufacturer, whereas expenditure tax is on the customer.

6. Tribunal's Analysis:
- The liability to pay expenditure tax is on the customer, not the hotelier.
- The hotelier collects the tax on behalf of the government, and it does not form part of the sale price or turnover.
- The statutory provisions for collection and remittance of expenditure tax are machinery provisions for administrative convenience and do not indicate a liability on the hotelier.

7. Conclusion:
- Expenditure tax collected by hoteliers does not form part of the sale price or turnover.
- Therefore, it is not subject to sales tax under the 1941 Act or the 1994 Act.
- The orders and actions taken by the respondents under section 11E(2) of the 1941 Act are invalid and quashed.

8. Final Judgment:
The applications are allowed, and the actions taken by the respondents are quashed. No costs were ordered. This judgment applies to all the applications involved.

Separate Judgments:
- J. Gupta (Judicial Member) and D. Bhattacharya (Technical Member) agreed with the judgment.

Applications Allowed.

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