9911796707
TMI Blog1990 (1) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... dible and non-edible oils having its factory at 1/B, Madan Mohan Burman Street, Calcutta. The applicant No. 2 is a partner of the firm which is applicant No. 1. Being attracted and encouraged by the incentive scheme for industrial development and enjoyment of tax holiday, the applicant No. 1 drew up a scheme for manufacturing edible and non-edible oils and established a unit for the purpose. On an application for being registered as a small-scale industrial unit ("S.S.I." in short), the Director of Cottage and Small-scale Industries initially granted provisional registration on 11th August, 1982, which was renewed from time to time until permanent registration was granted in 1983. The partners of applicant No. 1 also applied for certificate of registration under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the BFST Act") and the Central Sales Tax Act, 1956 (hereinafter called "the CST Act") in April, 1983 and the applicant was granted registration certificates accordingly. In April, 1983, the applicant applied before the Assistant Commissioner of Commercial Taxes, North Circle, for issuance of eligibility certificate claiming exemption from payment of tax under rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to their rights and contentions. 5.. The case of the applicants in RN-316(T) of 1989 may be briefly stated thus: The applicant No. 1 is the managing partner of the partnership firm, applicant No. 2 is running the business of manufacture of raincoat, ground sheet, the G.P. cover, aluminium, D.T. cloth, etc. On application made by the applicant, the Commercial Tax Officer, Amratala Charge issued sales tax registration certificate on 11th September, 1987 and the applicant became a registered dealer under the BFST Act. The applicant was advised by their lawyer and the applicant also came to know of the provisions of rule 3(66) of the Rules under the BFST Act, 1941, that in order to provide an incentive to persons intending to set up small-scale industries a provision was made for tax holiday during the first five years of setting up of the industry. According to the provisions, total exemption was granted from payment of sales tax and turnover tax for the aforesaid period. Acting on such representation the applicant No. 1 formed a partnership firm in the name of applicant No. 2 and started its business at Howrah. The applicant also obtained a certificate for permanent registratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents to withdraw the impugned order of assessment made by the respondent No. 4, and declare that the West Bengal Taxation (Amendment) Act, 1987, is ultra vires the Constitution of India. 6.. The case of the applicants in RN-154(T) of 1989 also arises out of a writ application under article 226 of the Constitution of India. The case of the applicants in brief is as follows: The applicant No. 1 is a company within the meaning of the Companies Act, 1956 and the applicant No. 2 is a director thereof. The applicant No. 1 is registered under the Central Sales Tax Act, 1956 and BFST Act, 1941. The applicant No. 1 is a newly set up S.S.I. unit duly registered with the Directorate of Cottage and Small-scale Industries, Government of West Bengal. Under the provisions of the BFST Act and the Rules framed thereunder the applicant was entitled to tax holiday for a period of five years. The applicant was granted eligibility certificate by the Assistant Commissioner of Commercial Taxes in July, 1985. The application for renewal of the eligibility certificate is, however, pending for disposal. By an amendment made in 1987, clause (e) of sub-section (2) of section 6B of the BFST Act was omitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate during the said periods. On the grounds as alleged in RN-376(T) of 1989, the applicant has prayed for identical reliefs as in that case. 9.. The original applicant Shri Suresh Kumar Rungra having died, his heirs, namely, widow and two sons have been substituted, and brought on record. 10.. RN-371(T) of 1989 also arises out of the same matter and relates to an application for extension of the interim order granted by the High Court. The application for extension was disposed of by our order dated 29th May, 1989. 11.. The case of the applicant in RN-376(T) of 1989 is briefly as follows: The applicant-firm is engaged in the manufacture of edible oil as a newly set up S.S.I. unit. The applicant was granted eligibility certificate in terms of rule 3(66) from 8th April, 1981, and was renewed from time to time till 31st March, 1986. Assessment against the applicant in respect of his business for the period ending October, 1985, has been completed. No turnover tax was charged in respect of the previous accounting year. In a judgment delivered in C.R. No. 4769(W) of 1985 the High Court at Calcutta held that while rule 3(66) may not grant general exemption but section 6B(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of the said Amendment Act of 1987 in so far as it relates to the omission of clause (e) of section 6B(2) of the BFST Act, 1941 and assessment/collection of turnover tax from newly set up S.S.I. units during the period of eligibility certificate is ultra vires the Constitution. The applicant has also prayed for a declaration that the notice issued upon the applicant to show cause why the assessment order made for a period of four quarters ending KB/14, 2041 and the order of assessment for the subsequent year charging turnover tax be quashed and a writ or direction in the nature of prohibition commanding the respondents to forbear from giving any effect to or taking any steps whatsoever on the basis of and/or pursuant to the provisions of the Amendment Act of 1987. 12.. It will appear from the cases of the applicants as stated above, that each of the applicants has raised a short question, namely, whether a newly set up small-scale industrial unit enjoying the benefit of exemption from payment of sales tax under rule 3(66) of the Rules framed under the BFST Act, 1941, would or would not be liable to pay turnover tax under section 6B of the BFST Act during the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up small-scale industrial units. According to rule 3(66) small-scale industrial units, upon fulfilling certain conditions, are entitled to a tax holiday for a period of five years or seven years, as the case may be, depending upon the location of the industry. The demand has been challenged on various grounds one of which is that the Government is estopped from making the demand by reason of the inducement held out to them by making provision for tax holiday. In short, the contention is that the applicants, being assured of tax holiday, had altered their position, made considerable investments by setting up smallscale industries and that the Government cannot now veer round and demand turnover tax from them at least for a period during which they are entitled to the benefit of tax holiday. In other words, their contention is that the demand for turnover tax from eligibility certificate holders (for short "E.C. holders") is hit by the doctrine of promissory estoppel. In support of the contention, reliance was placed in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. reported in [1979] 44 STC 42 (SC). It was held in this case that in order to invoke the rule of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentation from the Government about exemption from the payment of sales tax for three years and that the appellant had acted on this representation. Therefore, the facts necessary for invoking the doctrine of promissory estoppel were found to have been clearly established. In the case of State of Bihar v. Usha Martin Industries Ltd. [1987] 65 STC 430 (SC) the facts were as follows: Under a resolution dated 29th September, 1973, amended by another resolution dated 29th June, 1976, the Government of Bihar decided to grant various sales tax incentives to new large and medium industrial units for a period of 10 years from the date they went into production. Relying on the resolution dated 29th June, 1976, the respondent took steps for setting up a new industrial unit. That resolution was later modified and amended by another dated 28th November, 1976. The respondent set up the industry during 1977-78 and went into production on 21st March, 1979. In the meantime, on 5th August, 1977, the respondent wrote to the Director of Industries for confirmation and the Director assured the respondent that it would get the incentive as stated in the resolution of the Government. The sales tax aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of exemption. In the facts of that case, however, it was held that the question of promissory estoppel did not arise. 18.. Finally, Mr. Somen Bose relied on a very recent decision of the Supreme Court in the case of Vij Resins Pvt. Ltd. v. State of Jammu and Kashmir reported in AIR 1989 SC 1629. In that case the petitioners had. claimed that pursuant to the arrangement entered into between them and the State following the invitation by the State, they had invested considerable sums of money in the shape of plant, machinery and erection of building. The petitioners were invited to set up industry by assuring them supply of raw materials. They changed their position on the basis of representation made by the State, and when the factories were ready and they were in a position to utilise the raw material, the impugned Act came into force to obliterate their rights and enabled the State to get out of the commitments. Their Lordships while allowing the petitions on the ground that the impugned Act suffered from the vice of taking away rights of property without providing for compensation at all and is hit by article 31(2) of the Constitution, observed as follows: "We are inclin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different question, but contains some observations which have a relevance to the point at issue. It was observed that the duty and obligation of the statutory authority was to adhere to the requirement of statute and no extraneous matter ought to be taken note of. The creators of the statute in taxing statutes were to follow the rigours of law and no extraneous matter ought to be taken into consideration in interpreting a taxing statute. 21.. The case of Pournami Oil Mills [1987] 65 STC 1 (SC) referred to earlier, had decided that the petitioners were, in the facts and circumstances of the case, entitled to plead the rule of estoppel in their favour when the State purported to act differently. In this case also the principle laid down in Motilal Padampat's case [1979] 44 STC 42 (SC) was applied and we have already indicated that there are clear observations in that case that the doctrine cannot be invoked to bind the Legislature. 22.. Mr. Bose, however, contended that while it may be true that the doctrine of promissory estoppel cannot be invoked to hinder legislative functions, yet Government is bound to keep its promise on the basis of which the petitioners had altered thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent view was taken in the case of Jit Ram Shiv Kumar v. State of Haryana AIR 1980 SC 1285 which held that the doctrine was not applicable against the exercise of executive functions of the State and the State cannot be prevented from exercising its functions under the law. This decision, however, expressed its disagreement with the observations made in the case of Motilal Padampat Sugar Mills Co Ltd. [1979] 44 STC 42 (SC). P.N. Bhagwati, Chief Justice, as his Lordship then was, also observed* that it was difficult to understand how a Bench of two Judges in Jit Ram's case AIR 1980 SC 1285 could possibly overturn or disagree with what was said by *See Union of India v. Godfrey Philips India Ltd. AIR 1986 SC 806 at 815.-Ed. another Bench of two Judges in Motilal Padampat Sugar Mills case [1979] 44 STC 42 (SC). It was further observed by his Lordship that it was not right on their part to express their disagreement with the enunciation of law by a co-ordinate Bench of three Judges. The view expressed on the main issue by Bhagwati, C.J., was the minority view but the majority view, however, agreed with the observations of the Chief Justice on the question of promissory estoppel. 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whether they are entitled to the benefit of exemption from turnover tax during the period they were holding eligibility certificates and whether the benefit of exemption can be revoked retrospectively by amending section 6B(2) of the BFST Act. The turnover tax was imposed by section 6B of the BFST Act. The liability arises if the totality of gross turnover exceeded the amounts specified in the Act. The liability is to pay, in addition to the tax payable by him under section 5 and section 6(c), a turnover tax at the rates specified in sub-section (3) on such part of his turnover as specified in sub-section (2). 28.. Sub-section (2) of section 6B provides that the turnover tax shall be levied on that part of the gross turnover of a dealer during any period which remains after deducting therefrom his turnover during the period on- (a) to (d) ................. (e) sales of goods which are generally exempt from tax under subclause (vi) of clause (a) of sub-section (2) of section 5; (f) ................... (g) such other sales as may be prescribed. This was the law as it stood prior to the amendment in 1987 whereby clause (e) referred to above was omitted. 29.. On the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case were different. The petitioners in that case were licensees in respect of sale of country spirit, amongst other articles. The petitioners contended that the sales made by them as licensees was not a sale within the meaning of the Sale of Goods Act and that the tax levied under the section imposed a restriction on the freedom of trade, commerce or intercourse and no previous sanction of the President under article 304(b) or no subsequent assent under article 255 having been taken, was unconstitutional. It was held that the sale was a sale in the legal sense, but on the other point, it was found as a fact that the gross profit left to the petitioners in respect of the business carried on by them (they could not sell at any price higher than the price fixed by the licensing authority), varied between 5.7 per cent and 7.8 per cent. In such circumstances, it was held that the imposition of sales tax at 6 per cent would render the business so unprofitable that no one could carry on the business unless one could pass on the tax to the consumers which, however, was prohibited under the rules. In such a situation, it was held that the imposition directly restricted and impeded th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of omission of clause (e) of section 6B(2) does not stand to reason, because section 6B relates to imposition of turnover tax which is not contemplated by rule 3. Section 5(2)(a)(vi) which was referred to in clause (e) of section 6B(2) and has now been deleted also, speaks of such other sales as may be prescribed. The prescription in section 5(2)(a)(vi) is in respect of the liability to pay tax under section 4 or section 8(3) of the Act and not in respect of section 6B of the Act. Therefore, it is not possible to agree with the view that the omission of clause (e) has deprived the applicant of the benefit of rule 3(66) as well. 33.. It was then argued that the expression "sales of goods which are generally exempt" has a special meaning. The expression has nowhere been defined or explained in the BFST Act. But the expression has been used in section 8(2A) of the Central Sales Tax Act. Being a cognate Act, reference was made to it in order to find out the meaning of the expression. It was contended that the expression did not cover the exemptions granted under rule 3(66). In support of this reliance was placed on the case of Himachal Conductors Private Ltd. v. Deputy Excise an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the erstwhile clause (e) of section 6B(2), are of goods generally exempt from tax. They are exempt only at the hands of some of the dealers depending on the performance or existence of the conditions laid down in the proviso to rule 3(66). Consequently, no analogy can be drawn from the interpretation of the expression "generally exempt" as in section 8(2A) of the Central Act. It is not possible to say that the goods are totally exempt from tax under the State Act as was the case in Indian Aluminium Cables Ltd. v. State of Haryana [1976] 38 STC 108 (SC). 35.. It has been contended on behalf of the Revenue that the amendment effected in 1987 by deleting clause (e) of section 6B(2) of the BFST Act, is merely clarificatory in nature. An amendment is said to be clarificatory or in the nature of a minor repair when the language or phraseology used in the Act creates some ambiguity or confusion and it is felt necessary to remove the defect or lacuna. For reasons we shall presently discuss, we are in agreement with the contention of the Revenue that the amendment is merely clarificatory in nature. 36.. Under sub-section (2) of section 5 of the BFST Act "taxable turnover" is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generally exempt such sales of goods because conditions have been attached thereto. In support of the contention that the impugned amendment of 1987 by which clause (e) of section 6B(2) was omitted was merely clarificatory or in the nature of a minor repair, the learned State Representatives pointed out that with effect from 1st June, 1987, by the same amendment Act, 44 items which originally found place in different sub-rules of rule 3, were transferred from rule 3 to Schedule I which contains the list of tax-free goods under section 6. Upon a reference to section 6B(2)(d) which exempts sales of goods declared tax-free under section 6, it will be clear that by transferring sales which were generally exempt, to Schedule I, the Legislature sought to clarify the position that the remaining items of this rule were not "generally exempt". Moreover, since such transfer of those 44 items from rule 3 to Schedule I was prospective in effect, the Legislature, it was pointed out by the learned State Representatives, inserted clause (4) in rule 3(2A) and declared that sales of goods in respect of the said 44 items up to 31st May, 1987, were to be exempted or deducted for the purpose of compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the respective legislative list of the Constitution, then it has plenary and unrestricted power including the power to legislate with retrospective operation subject only to the other provisions in the Constitution such as articles 14 and 19. As regards prospective operation of the amendment of 1987 which omitted section 6B(2)(e), we find that it was perfectly valid and no unconstitutionality has been brought to our notice. 40.. The foundation of the argument on behalf of the applicants challenging the retrospectivity of the 1987 amendment deleting section 6B(2)(e) is that such deletion resulted in withdrawing the exemption from turnover tax under section 6B which was otherwise available as long as clause (e) was in the statute book. The argument of the learned Advocates on behalf of the applicants, has proceeded on the assumption that by refusing to grant exemption, as claimed, a new tax has in effect been introduced or imposed with retrospective operation. Reliance was placed by the applicants on a decision of the Supreme Court in D. Cawasji Co. v. State of Mysore reported in [1985] 58 STC 1 (SC). It was held in that case that it may be open to the Legislature to impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to levy the same retrospectively. In that particular case the court held that the amendment of the definition of "dealer" in the Haryana General Sales Tax Act was primarily to remove an ambiguity created in the statute by interpretation and to provide for the lacuna which had allowed taxable items to escape revenue levy. The retrospective operation in that case was held to be within the rule of small repairs and within the ambit of constitutionality. The respondents also referred to the decision of the Supreme Court in the case of Krishnamurthy and Co. [1973] 31 STC 190. In that case the Supreme Court held affirming the decision of the Madras High Court, that the language used by the Legislature in the impugned provision was found by the High Court to be inappropriate for levying tax for sale of non-lubricant mineral oils and the Amendment Act was passed to rectify and remove the defect in the language found by the High Court in the decision reported in [1968] 21 STC 227 (Mad.) (Burmah Shell Oil Storage and Distributing Co. of India Ltd v. State of Madras). In that case, however, retrospective operation was for a short period. 42.. The respondents also relied on the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
