1964 (9) TMI 83 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exemption under Rule 3(26) of the Bengal Sales Tax Rules, 1941
2. Exemption under Rule 3(28)(a) of the Bengal Sales Tax Rules, 1941
3. Ultra vires and unconstitutionality of Rule 3(28)(a)
4. Contravention of Article 19(1)(g) of the Constitution
5. Article 14 of the Constitution
6. Principles of natural justice

Issue-wise Detailed Analysis:

1. Exemption under Rule 3(26) of the Bengal Sales Tax Rules, 1941:
The petitioner claimed exemption for sales of handloom-woven cotton cloth under Rule 3(26). The court found that the petitioner was barred from obtaining relief under Article 226 because the claim for exemption was rejected based on a factual finding by the Commercial Tax Officer. The petitioner failed to show that the goods were manufactured on handloom, and did not pursue the available administrative remedies. The court cited "Shri Ambica Mills Co. Ltd. v. S. B. Bhatt" to support this position, concluding that the petitioner's case on this point must fail.

2. Exemption under Rule 3(28)(a) of the Bengal Sales Tax Rules, 1941:
The petitioner sought exemption for sales of cotton fabrics under Rule 3(28)(a), which required proof that additional excise duty had been paid under the Central Act of 1957. The petitioner produced some certificates but failed to provide evidence for goods produced by manufacturers with fewer than four power-looms, which were exempt from additional excise duty. The Commercial Tax Officer disallowed the deduction for these goods, leading to the disputed assessment.

3. Ultra vires and unconstitutionality of Rule 3(28)(a):
The petitioner contended that the restrictive words "on which duty has been paid" in Rule 3(28)(a) were ultra vires and unconstitutional. The court referred to its previous judgment in "Dilip Mukherjee v. C. T. O." and concluded that the imposition of sales tax at a rate exceeding 2% was ultra vires and unconstitutional, as it was inconsistent with Section 15 of the Central Sales Tax Act, 1956, and Article 286(3) of the Constitution. The court held that the impugned assessment was invalid from April 1, 1958, as Section 15 of the Central Sales Tax Act circumscribed the validity of Section 5(1) of the Bengal Act.

4. Contravention of Article 19(1)(g) of the Constitution:
The court established that an imposition of sales tax that offends against Article 286 of the Constitution or is otherwise ultra vires will also fail for contravention of Article 19(1)(g). The petition succeeded on this additional ground due to the inconsistency with Article 286(3) and Section 7 of the Central Act of 1957.

5. Article 14 of the Constitution:
The petitioner argued that the levy of sales tax on cotton fabrics produced by not more than four power-looms was discriminatory and violated Article 14. The court rejected this contention, stating that the two imposts (additional excise duty and sales tax) were levied by two independent legislatures, and Article 14 could not be invoked due to inequality resulting from laws made by different legislatures, citing "State of M.P. v. G. C. Mandawar."

6. Principles of natural justice:
The petitioner claimed that the refusal of the Commercial Tax Officer to summon Excise Department officials violated the principles of natural justice. The court found no substance in this claim, as the petitioner did not argue that additional excise duty was paid but rather that it was not payable due to the goods being produced by establishments with fewer than four power-looms.

Conclusion:
The court concluded that the assessment regarding cotton fabrics was invalid due to its inconsistency with Article 286(3) of the Constitution and the Central Act of 1957. The petition succeeded in part, with the court issuing a mandamus directing the respondents not to enforce the impugned assessment order without deducting Rs. 3,00,000 from the petitioner's gross turnover. The assessment concerning handloom cloth was deemed separate and severable, and the rule was made absolute in part with no order as to costs.