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1989 (5) TMI 56 - SC - VAT and Sales TaxValidity of the levy of cess in respect, of tea estates under the West Bengal Rural Employment and Production Act, 1976 challenged Held that - For bringing the legislation within the saving provisions of article 304(b), it is necessary that the Bill or amendment should have been introduced or moved in the Legislature of the State with the previous sanction of the President. It is not disputed that the amendments to the West Bengal Act made in 1981 and 1982, did not satisfy that requirement. Indeed, it appears that the West Bengal Government had sent an earlier Bill to the President with the object of levying a tax, on the income from tea but the Presidential assent was not granted. It appears further that the Finance Minister of West Bengal made a statement in the West Bengal Legislature on February 27, 1981, stating that he would introduce the rural employment cess on despatches of tea. He referred to a Bill for amending the West Bengal Marketing (Regulation) Act, 1972, having been sent to the President and the President not having signified his consent to the amendment. Thus the impugned provisions brought into the West Bengal Act by the amendments in 1981 and 1982 so far as they purport to relate to tea estates are unconstitutional and void and cannot be given effect to. Appeal allowed & the petitioners are held entitled to the refund of cess paid by them under the impugned statutory provisions.
Issues Involved:
1. Validity of the levy of cess under the West Bengal Rural Employment and Production Act, 1976. 2. Violation of Article 14 and Article 301 of the Constitution. 3. Legislative competence of the State Government to impose the cess. Detailed Analysis: 1. Validity of the Levy of Cess: The petitioners challenged the validity of the levy of cess on tea estates under the West Bengal Rural Employment and Production Act, 1976. The Act aimed to provide additional resources for rural employment and production programs through a surcharge on land revenue and a rural employment cess. The amendments in 1981 and 1982 altered the cess structure, particularly affecting tea estates. 2. Violation of Article 14 and Article 301 of the Constitution: The petitioners argued that the cess violated Article 14 (Right to Equality) and Article 301 (Freedom of Trade, Commerce, and Intercourse) of the Constitution. The court focused on Article 301 and the legislative competence issue. The court referred to previous judgments, including Atiabari Tea Co. Ltd. v. State of Assam and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, which held that tax laws affecting trade and commerce could violate Article 301 if they directly impeded the movement of goods. The court noted that a tax on goods that directly impedes the movement of goods violates Article 301 unless it falls under Article 304(b), which allows reasonable restrictions in the public interest with the President's prior sanction. The court found that the cess on tea despatches constituted a direct and immediate restriction on trade and commerce, violating Article 301. The amendments did not comply with Article 304(b) as they lacked the President's prior sanction. 3. Legislative Competence of the State Government: The court examined whether the State Government had the legislative competence to impose the cess. If the cess were considered a tax on tea estates, it would fall under Entry 49 of List II (State List) of the Seventh Schedule of the Constitution, which covers "taxes on lands and buildings." However, the court concluded that the cess was, in substance, a tax on the despatches of tea rather than on tea estates. The court noted that Parliament had declared control over the tea industry under the Tea Act, 1953, including the imposition of a cess on tea produced in India. The impugned legislation, being a tax on tea despatches, encroached upon a field already covered by central legislation, making it void for want of legislative competence. Conclusion: The court declared the amendments to the West Bengal Rural Employment and Production Act, 1976, made in 1981 and 1982, as unconstitutional and void to the extent they related to tea estates. The petitioners were entitled to a refund of the cess paid under the impugned provisions and were awarded costs. The petitions were allowed.
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