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TMI Blog1998 (7) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of section 4AAA of the 1954 Act resort must be had to the definition of the expression turnover as given in section 2(e) of the Act. The returns for the aforesaid years remained unassessed till the concept of deemed assessment was incorporated into the Act by substituting the old section 9A by a new section by West Bengal Finance Act, 1993 effective from April 15, 1993. In terms of this new section 9A, the said returns were accepted as correct and complete and that the assessments were deemed to have been made. But by notice dated November 15, 1996 the respondent No. 1 (Deputy Commissioner of Commercial Taxes, Corporate Division) asked the applicant to show cause why the said deemed assessment should not be reopened on the ground of furnishing of incorrect statement of turnover by eliminating therefrom the element of sales tax and thereby causing reduction of the amount of tax payable. The company denies to have made any incorrect statement in the returns and asserts to have correctly applied the formula as given in section 4(1a) for assessing the turnover under section 2(e) for calculating the turnover tax under section 4AAA. According to the company, imposition of turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 9A(2). According to them the vires of section 9A is unshakeable since the powers conferred under the section are not arbitrary and the issue relating to inclusion of sales tax element in the turnover for the purpose of section 4AAA not having been yet decided finally for or against the company by the respondent No. 1 the instant application before the Tribunal is premature. 3.. The issues debated before this Tribunal are whether in determining the gross turnover for the purpose of section 4AAA of the 1994 Act the definition of turnover as given in section 2(e) is to be taken into consideration and whether section 9A is liable to be declared ultra vires on the ground of its being arbitrary and unreasonable. 4.. Before I probe into these issues, I propose to take the plea of the respondents as to the maintainability of the instant application. They contend that when an assessing authority has information which provides the reasons to believe that some taxable transaction has escaped assessment, it is within his legal competence to decide if the assessment should be reopened or not, and it is not open to the High Court exercising power under article 226 of the Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illation that the contents of a return come very much within the expression information or otherwise . The word otherwise may be used, according to Webster s Seventh New Collegiate Dictionary, as adverb to mean in a different way or manner or as adjective to mean different . So the expression information and otherwise means information as such, or any knowledge collected in a different way or manner. The word otherwise having a very wide amplitude, in our opinion the contents of a return submitted under section 8 of the 1954 Act will themselves come under the ambit of this word. Moreover, law does not enjoin that information must be from some extraneous source. We may refer to the decision of the Supreme Court in the case of Kalyanji Mavji Co. v. Commissioner of Income-tax [1976] 102 ITR 287. In that case, under the Income-tax Act, 1961, while examining the validity of initiation of reassessment proceeding, it came up for the court s decision as to what constitutes information within the meaning of expression in consequence of information . In a subsequent decision reported in [1991] 189 ITR 285 (SC); [1991] 2 SCC 558 (A.L.A. Firm v. Commissioner of Income-tax, Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of the same would definitely render the statement, made in the return in regard to the turnover, incorrect attracting mischief of section 9A(2). Therefore, the core issue is whether sales tax component of sale price constitutes the part of taxable turnover for the purpose of turnover tax under section 4AAA of the 1954 Act. 7.. Mr. Bajoria proceeds with the argument that turnover tax is of the nature of sales tax since it is based on turnover of sales and that if the sale price as a whole, without deducting its sales tax component, is subjected to turnover tax, it will result in imposition of tax on tax. According to him tax on tax, though not inconceivable in law, is not permissible unless the Legislature in express terms or by necessary implication sanctions its levy. He points out that here in section 4AAA of the Act there is neither any express intention of the Legislature nor any necessary implication for levy tax on tax. He has also contended that the 1954 Act having provided a specific definition of the expression turnover in section 2(e) allowing certain deductions, it is not legitimate to conveniently dislodge the definition for the purpose of a particular sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfined within the domain covered by such section/provision and not beyond. Secondly, we shall see that the expression notwithstanding anything contained elsewhere in this Act (hereinafter referred to as the non obstante clause ) is not intended to make section 4AAA independent of the definition of turnover given in the Act. Be it mentioned that the non obstante clause covers only sub-section (1) which speaks of the new impost, viz., the turnover tax, and specifies the types of dealers liable to pay such turnover tax. This signifies that notwithstanding the fact that the provisions of the 1954 Act are solely concerned with sales tax and purchase tax on notified goods, some specified types of dealers shall be subjected to turnover tax, the new impost, and that such tax despite the original scheme of the Act shall be part of the Act. Again, as already pointed out, a non obstante clause should be applied only to the extent it is intended to be applied and not beyond, so that the remaining provisions of the statute are left unhampered by the clause. Therefore, after the types of dealers, liable to pay turnover tax, are determined under sub-section (1) of section 4AAA notwithstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4AAA of the 1954 Act. This factor clearly does not fit in with the scheme of the 1954 Act. The Legislature was conscious of this aspect and hence has used the non obstante clause in the said sub-section to save the provisions of this section for being incompatible with the scheme of the Act and to indicate that despite the exclusive domain of the 1941 Act over non-notified goods, for the purpose of ascertaining the liability to pay turnover tax under section 4AAA, the turnover under the 1941 Act will be a factor. It may similarly be seen that in section 23A of the 1954 Act where certain provisions of 1941 Act is a deciding factor the same non obstante clause has been used for the same purpose. 10.. It is not out of place to mention here that the position would be quite different if an independent Act commences with the expression notwithstanding anything contained in any other Act . In such event the provisions of the new Act will have full play, as far as its text in its normal reading stands, notwithstanding any repugnant provisions of any other Act for the time being in force. In other words, such Act shall be operative as far as the text in its normal reading permits ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r appearing in section 4AAA is separate and distinct from the expression turnover as defined in section 2(e) and that while the definition in section 2(e) by virtue of its deduction under clause (ii) excludes sales tax component of the sale price out of its ambit, the expression gross turnover does not provide for such deductions. In our opinion, the word gross has not been used in the expression to create a new definition distinct from the one given in section 2(e), but only to indicate that it consists of several items of turnover as we shall see now. 13.. Sub-section (2) of section 4AAA runs thus: (2) 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 that period on- (a) Sales of goods referred to in section 14 of the Central Sales Tax Act, 1956 (74 of 1956), if specified under section 25 for the purpose of taxation under this Act; (b) sales of notified commodities for which the rate of tax fixed under section 4 is nil; (c) sales which are shown to the satisfaction of the prescribed authority to have taken place in the course of inter-State trade or commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] and such other sales as may be prescribed, are to be deducted in arriving at the taxable turnovers for the levy of turnover tax. Since before such deductions the turnover, as calculated under section 2(e), remains impregnated with these distinct types of turnovers, it is expressed, as already mentioned above, as the gross turnover for the purpose of turnover tax alone. But it does not cease to be the turnover within the meaning of section 2(e). Thus, the combined effect of section 2(e) and section 4AAA(2) is that turnover is first to be calculated in terms of section 2(e) and the outcome shall be the gross turnover for the purpose of turnover tax since specified deductions, as mentioned in section 4AAA(2), shall have to be made to find the taxable turnover for turnover tax. 16.. This position will further be borne out by the fact that if definition of turnover given in section 2(e) is not made applicable to section 4AAA, the deductions mentioned in section 2(e), i.e., clause (ii) and clause (iii) of section 2(e) will remain part of the turnover for the purpose of turnover tax . This would mean that dealers shall have to pay turnover tax even on the amount, if any, refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He argues that these are all taxes on tax and there is no reason why turnover tax cannot be levied on sales tax or on turnover tax itself on the same analogy. We have already observed that tax on tax is not inconceivable but the levy of tax on tax must have the legislative sanction either by express provision or by necessary implication. As regards surcharge and additional sales tax it may be said that it is the Legislature which by specific enactments amended the taxing statute to incorporate such imposts, viz., surcharge and additional sales tax. In the case before us there is no such express legislative intent to introduce turnover tax on turnover tax or turnover tax on sales tax. The respondents infer such intent only on account of presence of non obstante clause and of the word gross in section 4AAA. But in my opinion, as I have already discussed, such clause or word cannot be treated as the legislative expression approving levy of turnover tax on turnover tax or turnover tax on sales tax and also of rejection of section 2(e) for the purpose of section 4AAA. 19.. In view of such legal position it does not appear convincing that the mere use of word gross before the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be determined by applying a certain rate or certain rates to the amount of the turnover of the previous year, the Act and the Rules have provided for certain deductions to be made from the turnover determined for purposes of section 3, proviso (2) . Be it mentioned that section 3, proviso (2) contains provisions for determining a dealer has become liable to pay tax. Thus, the ratio of the decision in that case is not that the definition of turnover stands altogether obliterated for the purpose of assessment of tax of a dealer; but because of the express provisions in the Act and the Rules the definition stands modified by way of deduction from the sale proceeds for the purpose of calculation of quantum of tax payable. In the case before us, there is no express provision or latent implication in section 4AAA of the 1954 Act modifying the definition of section 2(e). We have already seen that mere presence in section 4AAA(1) some expressions like the non obstante clause [that too is controlling only subsection (1)] or in sub-section (2), the word like gross before the turnover will not constitute a new definition of the expression turnover for the purpose of the section sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4(2) of the West Bengal Act V of 1987, effective from June 1, 1987, the formula as given in section 4(1a) was introduced for calculating sales tax component of the turnover. The definition of turnover in section 2(e) was also amended simultaneously to the effect that the amount arrived at by applying the formula shall be deducted, inter alia, from the aggregate of sale price to find out turnover under section 2(e). Again, by section 5(1) of the West Bengal Act VI of 1991, effective from August 16, 1991, the provision of additional sales tax was introduced by adding section 4B to the 1954 Act and simultaneously section 2(e) of that Act was amended by introducing a new clause (iii) providing deduction from the aggregate sale price any amount separately charged as additional tax, to arrive at turnover under section 2(e). By West Bengal Act XVI of 1994 effective from April 11, 1994, the provision of additional sales tax was withdrawn by deleting and simultaneously the provision relating to deduction of additional sales tax [i.e., the then clause (iii) was deleted from section 2(e)]. By the same amending Act, the turnover tax under section 4AAA of the 1954 Act was made real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depriving the assessee to make any submission in support of his return, whereas provision of subsection (2) vest on the prescribed authority arbitrary power to re-open the assessment and to eventually penalise the assessee. He relies on the decision reported in [1987] 168 ITR 38 (P H) (Jaswant Theatre v. State of Punjab) and is of the opinion that in the absence of such machinery provision the section is invalid. But the reasoning does not seem to be convincing. The necessity for any machinery provision in any taxing statute is, inter alia, to ensure that a party gets adequate opportunity to make the submissions in his defence before he is levied with an impost. In other words, such machinery provision is required so that no order prejudicial to him is passed without affording an opportunity of being heard. But in a deemed assessment whatever return is submitted by a dealer is taken as correct and accepted. So, at that stage [as provided in sub-section (1) of section 9A] the dealer is in no way prejudiced. But when the prescribed authority, on account of reasons as enumerated in sub-section (2), proposes to re-open the assessment, there is a specific provision for giving such deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enial breach of the provisions of the Act or where breach of law occurs from the bona fide plea that the offender is not liable to act in the manner prescribed by the statute. Thus, it is not expected that the competent authority would act mechanically without due application of mind as to the nature and extent of infractions of the statutory provisions and the circumstances in which the same has been committed. 29.. As a result the prayer of the applicant is allowed in part. The respondents are restrained from giving effect to or acting on the basis of the impugned notice dated November 15, 1996. The interim order passed by this Tribunal on January 6, 1997 is hereby made absolute. We make no order as to costs. M.K. KAR GUPTA (Technical Member).-The applicant has urged that once turnover is defined in section 2(e) gross turnover should mean only the total of such turnovers because the definition of turnover given in section 2(e) should be applicable in section 4AAA also. 31.. In the definition clause of section 2 of the 1954 Act it has been clearly mentioned that the definitions given in section 2 will apply unless there is anything repugnant in the subject or context. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale prices received by the dealer after deducting (i) the amount, if any, refunded by the dealer in respect of any notified commodities returned by the purchaser; (ii) the amount arrived at by applying the formula referred to in sub-section (1a) of section 4 and (iii) the amount separately charged as turnover tax payable under section 4AAA. Incidentally, the amount arrived at by applying the formula referred to in sub-section (1a) of section 4 is equal to the sales tax charged on the sale in any particular transaction of sale. Therefore, the turnover as defined in section 2(e) means the sale prices received by a dealer after deducting the amount refunded by the dealer in respect of purchased notified commodities returned by the purchaser, the amount of sales tax paid and the amount, if any, separately charged as turnover tax. The word gross means total, including everything , according to Chambers 20th Century dictionary (1983 Edition). If this Dictionary meaning of the term gross is accepted then gross turnover would mean the total turnover of a dealer where meaning of turnover is as given in section 2(e). If this definition of gross turnover is accepted, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hairman).-I have gone through the draft judgments of Honourable Mr. J. Gupta (Judicial Member) and Honourable Mr. M.K. Kar Gupta (Technical Member). I am in agreement with Honourable Judicial Member s views on maintainability of the present application and constitutional validity of section 9A of 1954 Act. But I could not agree with the interpretation given to section 4AAA of 1954 Act and applicability of definition of turnover in section 2(e). To appreciate the question of interpretation of section 4AAA, it is once more necessary to reproduce section 2(e) below: 2. Definition.-In this Act, unless there is anything repugnant in the subject or context,- ..................... (e) turnover used in relation to any period means the aggregate of the sale prices or parts of sale prices receivable by a dealer or, if a dealer so elects, actually received by the dealer during such period after deducting- (i) the amount, if any, refunded by the dealer in respect of any notified commodities returned by the purchaser within such period; (ii) the amount arrived at by applying the formula referred to in subsection (1a) of section 4; and (iii) the amount, if any, separately charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said clause and ten per centum of the amount by which his aforesaid aggregate of the gross turnover under this Act and the gross turnover under the Bengal Finance (Sales Tax) Act, 1941 (Ben. Act VI of 1941), exceeds one crore rupees; Explanation.-For the purposes of this section year means the year referred to in the Explanation II to sub-section (1) of section 4A. 38.. It is true that from the point of view of legislative competence, turnover tax takes the character of tax on sales under entry 54 of List II of the Seventh Schedule to the Constitution of India, but the levy and assessment of turnover tax do not run parallel to basic sales tax. A comparison of charging provisions of sales tax on the one hand and those of turnover tax on the other will make this position clear. It is also to be kept in view that in the original 1954 Act there was no provision for levy of turnover tax. Subsequently by way of amendment it was levied by virtue of section 4AAA. Sub-section (2) of section 4AAA plays a major role in levy and calculation of turnover tax. Sub-section (3) of section 4AAA prescribes the rate or rates of turnover tax. Thus the scheme of section 4AAA is that it is a self- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition in section 2(e) does not agree with the subject or context of section 4AAA: (i) The definition in section 2(e) does not define the expression gross turnover which is used in section 4AAA. When section 2(e) was amended often, it could be amended for defining gross turnover as well. (ii) All the sub-sections and, particularly sub-section (1) of section 4AAA clearly lay down that turnover tax is to be levied on that part of turnover or gross turnover as specified in sub-section (2). (iii) Sub-section (2) of section 4AAA is self-contained with no express or implied reference to section 2(e). (iv) Section 2(e) and also section 4 do not conceive of aggregate of turnover under the Act of 1941 and that under the Act of 1954. Sub-section (1) of section 4AAA lays down that for being liable to pay turnover tax the aggregate of turnovers of a dealer under both the Acts will be considered. (v) Section 4AAA speaks of gross turnover, but section 2(e) does not contemplate gross turnover at all. (vi) The charging provision in section 4(1) which is intimately linked to section 2(e) is quite different in character from the charging provision in section 4AAA. The latter la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is levied at every subsequent sale on tax already charged at every previous stage. In Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1 (SC) at page 17 it was held that a surcharge partakes of the nature of sales tax . In S. Kodar v. State of Kerala [1974] 34 STC 73 (SC) it was held that additional tax levied under the Tamil Nadu Additional Sales Tax Act, 1970, is really a tax on the sale of goods and the fact that the quantum of the additional tax is determined with reference to the sales tax imposed would not alter the character. Additional tax is an enhancement in the rate of sales tax. In fact, turnover tax under section 4AAA is in the nature of additional sales tax. In Century Spinning Mfg. Co. v. State of West Bengal [1989] 73 STC 277 (Cal.) at page 288 it was held that turnover tax is a tax on sales. The Division Bench of the High Court went on to say that: What constitutes the gross annual turnover of a dealer is the sale proceeds of individual sale transactions ... and, therefore, the turnover tax which is imposable on taxable turnover of a dealer is a tax on each sale transaction of a dealer....... And, the sale proceeds or sale price of a transaction n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dde Venkateswar Rao s case AIR 1966 SC 828). 42.. Sub-section (2) of section 4AAA contains all the deductions which are to be made from gross turnover for calculating the taxable turnover for the purpose of turnover tax. The language of all the three sub-sections of section 4AAA and sub-section (2) in particular leave no room for doubt that the deductions from the gross turnover have been exhaustively mentioned in subsection (2), and no other deductions are to be made from gross turnover for the purpose of levy of turnover tax. Attention should also be paid to the proviso to sub-section (3) of section 4AAA which softens the rigours, if any, of the impact of turnover tax, where the higher rate applies. The origin of a non obstante clause is to be found in British constitutional history. There was a rule that the royal prerogative in England was regulated by law, namely, by common law and above all by statute. In the seventeenth century an attempt was made to get round this rule that the prerogative is regulated by law. The device used was that of non obstante. This worked through the issue of royal instruments announcing that they had effect non obstante aliquo statuto in con ..... 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