9911796707
TMI Blog1989 (8) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... es hot rolled strips ("HR strips", for short) for its own use directly in the manufacture in West Bengal of cast iron goods, such as M.S. pipes and galvanised pipes. HR strips are declared goods of special importance in inter-State trade and commerce under section 14 of the CST Act. The company pays concessional rate of 2 per cent sales tax when it purchases HR strips from registered dealers by issuing declarations in form XXIVA according to the proviso to section 5(1)(bb) of the BFST Act. The applicant-company transfers its manufactured products to the branches outside West Bengal and also despatches consignments thereof to different places outside the State. Sub-section (6) was inserted in sections 4 and 5 of the BFST Act for the first time by the West Bengal Act 23 of 1977, for imposing with effect from 10th October, 1977, a purchase tax in respect of specified purchases at the rate of 4 per cent. The rate was reduced to 2 per cent by the West Bengal Act 14 of 1978 and again increased to 3 per cent with effect from April 1, 1983, by the West Bengal Act 8 of 1983. 3.. The company became liable to pay purchase tax for the first time for the financial year ending on 31st March, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailing of the concessional rate of sales tax, the products are not sold in West Bengal, but disposed of otherwise by way of sale in West Bengal or transferred outside the State. Without imposing any penalty in section 5A, the legislature has imposed the purchase tax for disposal or transfer of the products in an unauthorised manner, namely, in a manner contrary to the declaration given for payment of concessional sales tax at the rate of 2 per cent only. 6.. Mr. Pranab Pal, learned Advocate for the applicants, submitted at the first instance that the impugned provisions of the BFST Act, if construed by applying the pith and substance rule, is a consignment tax or a tax on despatch of goods. He went on to submit that it fell within the exclusive legislative power of the Parliament under entry 92B of List I of the Seventh Schedule to the Constitution. Looking at the real nature of the tax in question we see that it is exigible on purchase of goods intended to be used by the purchaser directly in the manufacture of goods in West Bengal for sale in West Bengal, where a concessional sales tax at the rate of 2 per cent was availed of at the time of purchase upon a declaration of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se judgments have a persuasive value as far as we are concerned. We have taken our own views and we hold that the impugned tax is only a purchase tax and not a consignment tax or tax on despatches of goods. Subsequent to the arguments, Mr. Sumit Kumar Chakraborty for the applicants drew our attention (in the presence of the State Representative) to a recent judgment dated May 12, 1989, of the Supreme Court in the case of Buxa Dooars Tea Co. Ltd. v. State of West Bengal [1989] 74 STC 447. The rural employment cess levied by section 4(2)(aa) of the West Bengal Rural Employment and Production Act, 1976, was held unconstitutional on the grounds that it amounted to a direct restriction on the movement of tea and that without sanction of the President under article 304(b), proviso, the State Legislature had no competence to levy such a tax clearly on despatches of tea from tea estates. That judgment has no bearing on the instant case, because the purchase tax has no manner of nexus with despatches or consignments. 7.. Mr. Pal next argued that the impugned provisions are violative of article 286(3) of the Constitution and section 15(a) of the CST Act. As regards the first ground of ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single point of tax can be imposed either on sale or purchase at one stage and not on both sale and purchase though forming the same transaction. Having regard to the language of section 15(a) of the CST Act and the ratio of the decisions of the Supreme Court discussed above, we are of the view that the State Legislature has no power to impose both sales tax and purchase tax on the same declared goods at the same stage, although the sale and the purchase may constitute one composite transaction. 8.. We have discussed and found in the course of our judgment in RN-125(T) of 1989 and other cases Tata Iisco Dealers' Association [1990] 76 STC 14 delivered on 31st July, 1989, that in the BFST Act the point of taxation on iron and steel, being declared goods, is the first point of sale. For the purpose of section 15(a) of the CST Act, sale and purchase, though parts or two aspects of the same transaction, are two separate stages or points mutually exclusive of each other. The State Legislature has to choose any one of the two aspects for the purpose of taxation. In respect of declared goods under section 14 of the CST Act, the State Legislature's power to tax is restricted. From that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification has a rational nexus with the object sought to be achieved (See the long title and the preamble to the BFST Act). Hence, there is no breach of article 14. The imposition of purchase tax does not by any means restrict the right under article 19(1)(g) and does not restrict the free flow of trade and commerce directly and immediately as contemplated in article 301. So, on these questions we are unable to agree with Mr. Pal. 10.. In the result, the writ petition succeeds to the extent indicated herein. As long as sales tax will be levied and collected in respect of declared goods under section 14 of the CST Act, 1956, including HR strips (in which the applicants are interested), the respondents shall not levy or collect purchase tax in respect of such goods on the strength of the provisions of sections 4(6)(ii) and 5(6)(b) of the BFST Act, 1941, as amended from time to time. All completed assessments of the applicantcompany commencing from the year ending on 31st December, 1981, shall be revised in terms of this judgment within three months. All pending assessments of the applicant-company shall be made in due course according to this judgment. Excess tax paid or realised s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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