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TMI Blog1992 (3) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... cture and sale of footwear of different varieties sold at Rs. 15 and above per pair. The business was started in the year 1963 as a small-scale industrial unit duly registered on July 8, 1981, under the Directorate of Cottage and Smallscale Industries, Government of West Bengal. Previously, a provisional registration certificate was obtained from the said Directorate. Turnover tax was introduced for the first time, when section 6B was inserted in the 1941 Act with effect from April 1, 1979 and similarly the tax was introduced in the West Bengal Sales Tax Act, 1954, by a new section 4AAA with effect from the said date. In terms of section 6B(2) of the 1941 Act, while calculating the turnover for the purpose of computing turnover tax, deduction should be made of sales of goods generally exempt from tax under section 5(2)(a)(vi) and such other sales, as may be prescribed under section 6B(2)(g). In terms of rule 3(97) of the 1941 Rules, in calculating taxable turnover for payment of tax under section 4 or 8(3) of the 1941 Act, deduction should be made of the turnover on sales of footwear priced at not exceeding Rs. 15 per pair. For this reason, the applicant-company stopped paying sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le because of the amendment in the Act, omitting clause (e) of section 6B(2) with retrospective effect. The goods which enjoyed general exemption under section 6B(2)(e) were transferred to Schedule I to the 1941 Act. But, footwear covered by rule 3(97) was not so transferred. The further case of the respondents is that the relevant rule framed under section 6B(2)(g) is rule 3(2A). Allegedly, declaration forms could not be issued, as the applicant had not paid turnover tax. However, under interim order dated September 12, 1988 passed by the Division Bench of the High Court, issuance of declaration forms was resumed. The said interim order was extended by this Tribunal by an order dated January 4, 1990. It is claimed by the respondents that the applicant-company is liable to pay turnover tax on sales of footwear at a price not exceeding Rs. 15 per pair with effect from April 1, 1983, in spite of the fact that rule 3(97) was in force up to March 31, 1989. They have denied the constitutional challenges. 4.. The applicant filed an affidavit-in-reply, stating that the object of rule 3(97) was to encourage manufacture and sale of footwear at a price not exceeding Rs. 15 per pair for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax under rule 3(97) of the 1941 Rules. Finally, rule 3(97) was omitted by an amendment with effect from April 1, 1989. That being so, whatever exemption was available under rule 3(97) was withdrawn with effect from April 1, 1989. Turnover tax was introduced with effect from April 1, 1979, in both the 1941 and the 1954 Acts. Sub-section (2) of section 6B of the 1941 Act lays down the deduction to be made from the gross turnover of a dealer for computing the quantum of turnover on which turnover tax should be paid. Section 6B(2)(e) said that sales of goods which were generally exempt from tax under section 5(2)(a)(vi) should be deducted from the gross turnover for the above purpose. Similarly, section 6B(2)(g) lays down that for the purpose of computing the turnover on which the turnover tax should be paid, the turnover on such other sales as may be prescribed should be deducted from the gross turnover. Rule 3(97) was prescribed under section 5(2)(a)(vi). That rule stated that in calculating the taxable turnover of a dealer liable to pay tax under section 4 or 8(3) the turnover on sales of footwear of all descriptions at a price not exceeding Rs. 15 per pair should be deducted from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owered the appropriate authorities to make rules for laying down exemptions or deductions of other types for the purpose of computation of turnover tax itself. It was rightly argued by Mr. P.K. Chakraborty, learned State Representative that rule 3(2A) of the 1941 Rules is the rule framed under and for the purpose of clause (g) of section 6B(2). It looks like a sub-rule of rule 3 framed under section 5(2)(a)(vi). But, in reality, it is an independent rule unconnected with rule 3 and the fact that it is framed under section 6B(2)(g) is clear from the starting words which are like this: "for the purpose of clause (g) of sub-section (2) of section 6B, the following sales are prescribed:" Neither side has contended that footwear sold at a price not exceeding Rs. 15 per pair was exempted under rule 3(2A). On a reading of rule 3(2A) I find that no footwear is prescribed there. Thus, I hold that (i) rule 3(97) was framed under section 5(2)(a)(vi) and not under section 6B(2)(g), (ii) that rule 3(2A) was framed under clause (g) of section 6B(2) and (iii) that rule 3(2A) did not apply to footwear sold at a price not exceeding Rs. 15 per pair. Accordingly, the applicant-company is not enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite. Here, in rule 3(97) sales of footwear is not generally exempt. Sales are exempt when sale price of footwear is not more than Rs. 15 per pair. Here, only one condition has been imposed. If the sale price exceeds Rs. 15 per pair, no exemption can be claimed or given. So, it amounts to a conditionality. One may say that it is a classification. But it is also a condition. A classification may be based on a condition. Therefore, I am of the opinion that sales prescribed in rule 3(97) are not generally but conditionally exempt. 11.. The second question is whether retrospective omission of section 6B(2)(e) by the 1987 amendment of the 1941 Act (the amendment coming into force on June 1, 1987) is valid and merely clarificatory with regard to rule 3(97). I have held that rule 3(97), like rule 3(66), prescribes only a conditional exemption as distinct from making the relevant sales "generally exempt". In [1991] 82 STC 26 (Calcutta Oil Industries Limited v. State of West Bengal) this Tribunal held that the retrospective omission was validly enacted by the 1987 amendment, because it was clarificatory in nature. In that case the question was answered in the context of rule 3(66). Two of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption limit was lowered from Rs. 50 lakhs to Rs. 25 lakhs, and section 6B(2)(e) was omitted with retrospective effect, was invalid and unconstitutional in respect of the applicant on the ground that it contravened articles 301 and 304(b) of the Constitution. According to him, such tax directly impeded freedom of trade guaranteed by article 301 and there was non-compliance of article 304(b), for not obtaining previous sanction or subsequent assent of the President. He also contended that no such restriction should be said to be reasonable or in the public interest. He referred to the decisions in the cases of Atiabari Tea Co. Ltd. AIR 1961 SC 232, Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, State of Madras v. N.K. Nataraja Mudaliar [1968] 22 STC 376 (SC) and Buxa Dooars Tea Co. Ltd. [1989] 74 STC 447 (SC); AIR 1989 SC 2015, in support of his contention. Mr. P.K. Chakraborty, learned State Representative contended that the withdrawal of exemption under section 6B(2)(e), both prospectively and retrospectively, the upward revision of the rates of turnover tax and the lowering of the exemption limit of turnover did not amount to a restriction on the free-flow of trade a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1987 amendments imposed a restriction. For instance, he has not shown how a restriction is imposed on free-flow of trade and commerce when a dealer, who was paying so long turnover tax at the rate of one half of one per cent of his turnover, is now required to pay the tax at the rate of one per cent. Determination of quantum or rate of tax is principally within the domain of the Legislature. There is no presumption that a revised higher rate of tax ordinarily created a restriction under article 301. In every case, it should be shown that a restriction has actually been created. There is nothing to show in the instant case that the amendment of 1987 in section 6B created a trade barrier or restricted free movement of shoes sold by the applicant at a price not exceeding Rs. 15 per pair. It was purely the choice of the applicant. If he sold such shoes, he had to pay turnover tax at the original rates with effect from April 1, 1983 or at the revised rates with effect from June 1, 1987. This does not appear to be a restriction within the meaning of article 301. The contentions of Mr. Bose in this respect cannot be accepted. 16.. The next contention of Mr. Bose is that the 1987 ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the legislative judgment and as long as a tax retains its avowed character and does not confiscate property to the State under the guise of a tax, its reasonableness is outside the judicial ken. In the instant case, there is no compulsion on the applicant to sell shoes at a price not exceeding Rs. 15 per pair. I am satisfied that the liability to pay higher amount of tax by reason of the 1987 amendments did not impose any restriction on the freedom under article 19(1)(g) and did not make the tax confiscatory. The turnover tax is levied on the aggregate of turnover of sales under the 1941 Act and also the 1954 Act after allowing the prescribed deductions under section 6B(2). The tax is not separately levied on the turnover of sales of shoes at a price not exceeding Rs. 15 per pair. The challenges were based on a statement, annexure "X" of the affidavit-inreply. The statement shows that for the period from July, 1983 to March, 1989, the profit on the sales of shoes per pair varied from 17 paise to 41 paise and from July, 1982 to June, 1983 there was a loss of 13 paise per pair. On that basis, Mr. Bose argued that if the applicant had to pay turnover tax, there would be a net loss, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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