2006 (1) TMI 565 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Rule 27C(2) of the Bengal Sales Tax Rules, 1941.
2. Competence of State Legislature in framing rules contrary to the Central Sales Tax Act, 1956.
3. Alleged violation of Articles 14, 19(1)(g), and 301 of the Constitution of India.

Detailed Analysis:

1. Validity of Rule 27C(2) of the Bengal Sales Tax Rules, 1941:
The petitioner challenged the validity of Rule 27C(2) of the Bengal Sales Tax Rules, 1941, which required a separate declaration form XXXIII for each sale bill or cash memo to claim tax exemption under Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941. The petitioner argued that this rule was ultra vires the rule-making power of the State and inconsistent with the Central Sales Tax Act, 1956, and the Central Sales Tax (Registration and Turnover) Rules, 1957. The Tribunal held that the requirement of a separate declaration for each transaction was not mandated by the Central Sales Tax Act or the rules framed thereunder. The Tribunal found Rule 27C(2) to be contrary to the provisions of the Central Sales Tax Act and thus liable to be struck down.

2. Competence of State Legislature in Framing Rules Contrary to the Central Sales Tax Act, 1956:
The Tribunal examined whether the State Legislature had the authority to frame rules that were inconsistent with the Central Sales Tax Act, 1956. It was argued that the State Legislature could not impose conditions that were repugnant to the Central Act and the rules framed by the Central Government. The Tribunal referred to the Supreme Court's decision in the case of State of Madras v. R. Nand Lal Co., which held that the authority to prescribe forms and declarations under the Central Sales Tax Act rested with the Central Government. Therefore, the State Legislature's rule requiring a single declaration form for each transaction was beyond its competence and inconsistent with the Central Act.

3. Alleged Violation of Articles 14, 19(1)(g), and 301 of the Constitution of India:
Although the petitioner raised the issue of violation of Articles 14 (equality before law), 19(1)(g) (right to practice any profession or to carry on any occupation, trade, or business), and 301 (freedom of trade, commerce, and intercourse) of the Constitution of India, the Tribunal did not find it necessary to delve into these constitutional questions. The primary focus was on the inconsistency of Rule 27C(2) with the Central Sales Tax Act and rules.

Judgment:
The Tribunal concluded that Rule 27C(2) of the Bengal Sales Tax Rules, 1941, was inconsistent with the Central Sales Tax Act, 1956, and the rules framed thereunder. Consequently, the suo motu revisional orders passed by the Deputy Commissioner and the orders of the West Bengal Commercial Taxes Appellate and Revisional Board were set aside. The application was allowed, and Rule 27C(2) was struck down. There was no order as to costs.

Separate Judgments:
- P.K. Sen, J. (Chairman): Concurred with the judgment and reasons provided by P.K. Ganguly, Judicial Member, and emphasized that Rule 27C(2) was contrary to the Central Sales Tax Act and violated constitutional provisions.
- B.K. Majumdar (Technical Member): Agreed with the judgment.
- Post-Judgment: A request for a stay on the operative portion of the judgment was refused by the Tribunal.

Conclusion:
The application was allowed, Rule 27C(2) was struck down, and the revisional orders were set aside. The Tribunal found the State Legislature's rule inconsistent with the Central Sales Tax Act and beyond its legislative competence.