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TMI Blog1997 (8) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... the last point, i.e., at the retailer s point. In view of the amendment the sales made by a dealer to a registered dealer was made deductible from the former s turnover in calculating taxable turnover. Thus, only a retail dealers became liable to collect and pay tax. The West Bengal Finance Act, 1994 further amended the 1941 Act omitting section 5(1)(d) from that Act and including FL in Schedule IV as entry No. 14, with taxable rate 15 per cent. Newly added sub-clause (vf) to clause (a) of section 5(2) [hereinafter referred to as sub-clause (vf) ] effective from April 11, 1994, made sales of FLs., including the items specified in the sub-clause, deductible from a dealer s turnover in calculating taxable turnover, provided the involved FL was purchased on or after April 11, 1994 from a registered dealer not being the one who had liability to pay excise duty but did not pay. Another new sub-clause (vg) provided for similar deduction if the selling dealer himself had the liability to pay excise duty but had not paid the same. On the basis of a Trade Circular bearing No. 1/94 dated May 2, 1994, issued pursuant to the amended law, various tax authorities unreasonably demanded from dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfusion in arriving at true import of the sub-clauses. Again, sub-clause (vf) is discriminatory because it allows deduction only in respect of purchases made on or after April 11, 1994 and not for purchases made earlier. These clauses are, therefore, violative of article 14 of the Constitution. The applicants pray for declaring that these subclauses are ultra vires the Constitution, that no tax is imposable on a retail dealer in respect of stock of FL held on April 10, 1994 and for quashing the Trade Circular along with the direction on the respondents to issue D form to the retailers in respect of purchases of FL made by them during the period from April 15, 1993 to April 10, 1994. 2.. The respondents contention as evident from the affidavit-in-opposition is as follows: The applicant being a non-trading organisation is not competent to file the application because it is not the person aggrieved by any order passed or action taken by the respondents and that since in view of the amendment effective from April 15, 1993 the sale of FL to a registered dealer against collection of D form was deductible from the seller s turnover, the dealers for their own benefit were asked by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of stock held on April 10, 1994 ; because when he made purchases of such stock against D form his seller in view of the existing law [i.e., under section 5(1)(a)(ii)] did not charge him any sales tax. Hence there is nothing wrong if the tax is realised on sale out of such stock at the last point. Hence, on and from April 11, 1994 a sale of FL is taxable in the hands of a dealer who had stock of FL on April 10, 1994 and also of a dealer having liability to pay excise duty paid the same. A retail dealer who has not paid sales tax on purchases on or before April 10, 1994 has to pay sales tax on his sales from April 11, 1994 and the turnover of such sales is not deductible from gross turnover under the said sub-clauses. But if a dealer purchases FL loaded with sales tax he is not liable to make payment of such taxes to the Government. Moreover, he can get reimbursement of the element of sales tax by way of transferring the same to his purchasers by including the same as part of the purchase price. From April 11, 1994 levy of sales tax on FL remains a single point levy. The provisions of the two sub-clauses are not vague, unascertainable or unworkable; nor are they violative of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l from a registered dealer other than a registered dealer who has liability to make payment of excise duty as required by the Bengal Excise Act, 1909 (Bengal Act 5 of 1909) but has not made payment of such excise duty payable by him in respect of such goods; (vg) sales of foreign liquor, whether made in India or not, including brandy, whisky, vodka, gin, rum, liqueur, cordials, bitters and wines or a mixture containing any of these, as also beer, ale, porter, cider, perry and other similar potable fermented liquors, when the registered dealer selling such goods has liability to make payment of excise duty as required by the Bengal Excise Act, 1909, but has not made payment of such excise duty payable by him in respect of such goods. Explanation.-For the removal of doubt, it is hereby declared that no turnover representing sales of goods referred to in sub-clause (vf) or sub-clause (vg) by a registered dealer shall be deducted under that clause where the registered dealer selling such goods makes payment of excise duty in respect of such goods under the Bengal Excise Act, 1909. 5.. The plain reading of sub-clause (vf) indicates that in computing the taxable turnover, a dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 11, 1994 the rate of tax became 15 per cent. There is no saving clause in the amending Act (W.B. Act No. 29 of 1994) whereby the old rate continued to be applicable to the stock held on April 10, 1994. So, from April 11, 1994 the tax whenever applicable became uniform irrespective of date to which a stock can be attributed. The trade circular being repugnant to such statutory provision, as introduced by the amendment, is liable to be quashed. The applicants have questioned the legality of imposition of tax at the retailers point on and after April 11, 1994 on the stock held on April 10, 1994. To appreciate the legal position after the amendment we must not fail to see that the law relating to taxability of FL has undergone a sea change by the amendment effective from April 11, 1994. Therefore, we propose to see how the scheme of taxation on FL stands after the amendment. On and after April 11, 1994 tax on FL became 15 per cent by virtue of inclusion of FLs. as item No. 14 in Schedule IV. 10.. We shall now examine the impact of the amendment from two premises; firstly, its impact on the stock held on April 10, 1994 and secondly its impact on the stock purchased on or after Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s make no whisper about extending any such deduction in respect of sales on and after April 11, 1994 out of stock held on April 10, 1994. We have already observed that deductions prescribed in section 5(2)(a)(ii) was no more available on sales of FL. Therefore, little argument is necessary for an inference that all sales of FL from April 11, 1994 out of stock held by a dealer (be a wholesaler or a retailer) on April 10, 1994 will attract sales tax at the rate of 15 per cent, because such sales shall now form part of taxable turnover of such dealer. Thus, at this point of sale the tax element will for the first time enter into the sale price on the stock held on April 10, 1994. For this, however, such seller cannot have any ground to be aggrieved because such stock held on April 10, 1994 was purchased by him taxfree on the strength of declaration form in terms of section 5(2)(a)(ii), which was at the point of such purchase (obviously before April 11, 1994) was applicable to FL. Moreover, he passes such tax element as part of sale price to the dealer who purchases from him. Therefore, in all subsequent sales (evidently occurring on or after April 11, 1994) the successive sellers shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources, namely, (a) manufacturer-dealer, (b) wholesaler-bonder, or (c) simple wholesaler, and hence it is not possible for a retailer to know (except in case of purchase directly from a manufacturer) as to which of the dealers, through whose hands the goods have passed before reaching him, actually paid the excise duty. Shri Ghosh, therefore, contends that in the absence of any built-in provision for ascertainment of material fact, viz., payment of excise duty or otherwise, by his vendor, a dealer is compelled to act either on surmise or on such information, as available from his vendor, whose correctness he (the dealer) cannot vouch for. This uncertainty, in the opinion of Shri Ghosh, is fatal for validity of these two sub-clauses. He seeks to derive support to his contentions from the decision in the case of Govind Saran Ganga Saran v. Commissioner of Sales Tax [1985] 60 STC 1 (SC). In this case, the petitioner before the Supreme Court questioned the validity of the tax liability imposed on him under a sales tax assessment in terms of the Bengal Finance (Sales Tax) Act, 1941 as applied to the Union Territory of Delhi. The petitioner was a dealer in cotton yarn which was a declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was levied was invalid. The Supreme Court having considered the scheme of the said Act vis-a-vis the provision of section 15 of the Central Sales Tax Act, 1956 has held (by the majority decision) that the goods involved being declared goods under the Central Sales Tax Act the provision of the State Act is violative of provision of section 15 of the Central Act, because the stage at which purchase tax is levied is neither defined nor ascertainable and there is possibility of tax being levied at more than one stage. In the majority judgment the following observation has been made: There is no machinery by which a dealer can ascertain whether his vendor of the declared goods has paid the tax already. Even otherwise, it will be seen that if a dealer, A, sells the declared goods to B, six months after the close of the year (B being a registered dealer), A becomes liable to purchase tax. But, if B sells the identical declared goods, again, after the period mentioned in subclause (vi), he will also be liable to pay purchase tax. That means in respect of the same item of declared goods, more than one person is made liable to pay tax and the tax is also levied at more than one stage. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or a bond has been executed for the payment thereof. 19.. Chapter V of the Act contains the provision relating to excise duty. Be it mentioned that execution of a bond for payment of the aforesaid duty for all practical purposes amounts to payment of excise duty within the meaning of the said section and the executant of the bond remains personally liable to make payment. It, thus, follows from the contents of the above section that whenever a dealer is in actual possession of any stock of FL by way of his purchase, such possession is the proof of payment of the excise duty either by his vendor or by any of the dealers through whose hands the particular stock of FL reached the said vendor. Therefore, once the dealer is in actual physical possession of stock of FL there cannot be any difficulty in knowing that excise duty has already been paid and his vendor is not a dealer who has not paid the duty inspite of his liability to pay. 20.. The position will not be much difference even in case of a dealer who has acquired ownership, on paper, in respect of any stock of FL whose physical possession is not with him, but still lying in the manufactory or any bonded warehouse. His at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch 15, 1993 to April 10, 1994 were not being issued to several retail dealers by the concerned Commercial Tax Officer inspite of appropriate applications for issue of D forms and that as a result retailers failed to supply the requisite D forms to their respective wholesalers. Shri Ghosh contends that in such a situation the wholesalers are unable to claim deductions for such sales on account of their failure to collect D form from the retailers making the purchases and are thereby exposed to the peril of payment of tax out of their own funds. The applicants have annexed some lists of dealers and the sale-particulars in respect of which issue of D form is still pending. This plea is clearly out of place so far as the main dispute relating to the validity of sub-clauses (vf) and (vg) is concerned. This lastly canvassed point is utmost a problem associated with D form issuing procedure and in no way arises specially out of the said two sub-clauses. However, if the retailers are stuck up in such a problem, it is highly desirable that the Commissioner of Commercial Taxes should look into the matter and ensure that the dealers are not put to unnecessary harassment. 23.. The applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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