Calcutta High Court (Appellete Side)
Reckitt Benckiser (India) Ltd. & Anr vs The Commissioner Of Commercial Taxes & ... on 3 September, 2013
Author: Harish Tandon
Bench: Harish Tandon
In The High Court At Calcutta
Constitutional Writ Jurisdiction
Appellate side
Present :
The Hon'ble Justice Harish Tandon.
W. P. No. 24883 (w) of 2013
Reckitt Benckiser (India) Ltd. & Anr.
-vs-
The Commissioner of Commercial Taxes & Ors.
For the petitioner : Mr. Sudipta Sarkar,
: Ms. Moshumi Bhatt,
: Mr. J. Pal,
: Mr. Partha Basu,
: Mr. N. Roy.
For the Respondents : Mr. Abhratosh Majumder,
: Mr. Soumitra Mukherjee.
Heard On : 22.08.2013
Judgment on : 03.09.2013
HARISH TANDON, J.:
A preliminary objection is taken by the respondents as to the maintainability of the writ petition because of the interdiction of Section 5 & 6 of the West Bengal Taxation Tribunal Act, 1987.
The salient facts of the case are required to be narrated to address the point taken by way of demurrer. The petitioner imports and resells the medicine, soap, dettol, mosquito repellents, floor cleaner, toilet cleaner, utensil cleaner barley etc. The petitioner was classifying the mosquito repellent under the brand name 'motrin' and the toilet cleaner under the brand name 'harpic' under Entry 22 of Part-1 to Schedule-C to the West Bengal Value Added Tax Act. According to the petitioner, the classification of the 'motrin' should be considered as insecticide and 'harpic' as pesticide and have been assessed at such between the period from 2005-2006 to 2009-2010. The petitioner was served with a notice dated 30.05.2012 issued by the respondent no.2 i.e. Deputy Commissioner Central Audit Unit, Office of Commissioner, Commercial Taxes informing that the books of accounts in respect of the returns for the assessment year 2010-2011 have been selected for audit under Section 43 of the West Bengal Value Added Tax Act (Vat Act). The Audit reported dated 30.04.2013 suggest the classification adopted by the petitioner does not fall within Entry 22 of Part-1 of Schedule-C of the Vat Act as they are neither the insecticide nor the pesticide. The report also contains the computation of the tax payable by the petitioner and the demand of the even date in Form 27 was also prepared. Both the report and the demand were duly served on the petitioner which are assailed in this writ petition.
The petitioner relies upon a judgment of the Supreme Court in case of Sonic Electrochem & Another -vs- Sales Tax Officer & Others reported in (1998) 6 SCC 397, in support of his contention that the mosquito repellent is an insecticide and should be classified as such. Further reliance is placed upon a judgment of the Allahabad High Court in case of M/s Knight Queen Industries (p) Ltd., -vs- State of U.P. reported in STI 2006 Allahabad High Court 109 wherein it is held that in absence of any specific entry relating to mosquito repellent, it can reasonably be said that it would ordinarily come within the entry mentioning insecticides and the levy thereupon would be attracted.
The respondent, however, took a preliminary objection that the writ petition is not maintainable because of the specific provision contained under Section 5 & 6 of the West Bengal Taxation Tribunal Act, 1987 (Taxation Tribunal Act) which excludes the jurisdiction of the High Court to entertain the writ petition. In support of the above contention, reliance is placed upon a judgment of the Supreme Court rendered in case of L. Chandra Kumar -vs- Union of India & Ors., reported in (1997) 3 SCC
261. The learned Advocate appearing for the respondent submits that Section 43 of the Vat Act empowers the Commissioner to select on random basis or upon information or otherwise, such class or classes of dealer as may be prescribed, for audit of the accounts, registers or documents maintained or kept by such dealer for any year or part thereof not being a period which has ended five years previous to the date of selection. It is further contended that Sub-section 3 of Section 43 permits the petitioner to prepare a report stating the observations and findings relating to the correctness of the returns and the admissibility of various claims of the dealer of the period of audit and shall also compute the quantification of tax interest or late fees payable by the dealer. According to the petitioner, the order assailed in this writ petition is passed upon invocation of the provisions contained under Section 43 and, therefore, can only be assailed before the tribunal constituted under the Taxation Tribunal Act.
In reply the petitioner submits that a different meaning should be attributable to the term "levy" and the "assessment" and the authorities have misconstrued the line of distinction and placed reliance upon a judgment of the Apex Court in case of Assistant Collector of Central Excise, Calcutta Division -vs- National Tobacco Co. of India Ltd., reported in (1972) 2 SCC 560.
Having considered the respective submissions of the parties, one must find the genesis of the constitution of the taxation tribunal which could be deciphered from the object for which it is constituted. The West Bengal Taxation Tribunal Act, 1987 was enacted with a view to expedite the disposal of disputes in relation to the assessment of taxes, imposition of penalties and allied matters under specified State Act. The said tribunal is constituted in exercise of the powers conferred by Article 323B of the Constitution of India. Section 5 of the Taxation Tribunal Act contains the provision for its applicability in relation to all matters of adjudication of any disputes, complaints or offences with respect to levy, assessment, collection and enforcement of any tax under any specified State Act. The specified State Act has been defined under Section 2 (k) to mean a State Act mentioned in the Schedule. The Schedule indisputably contains the West Bengal Value Added Tax Act, 2003 which was brought by the West Bengal Act 4 of 2005 with effect from 01.04.2005.
Section 6 of the Taxation Tribunal Act deals with a jurisdiction, powers and authority of the tribunal and excludes the jurisdiction of all Courts including the High Court in relation to all matters covered under Section 5 thereof but excludes the jurisdiction of the Supreme Court of India. The Division Bench dealing a matter in case of L. Chandra Kumar
-vs- Union of India reported in (1995) 1 SCC 400 doubted the correctness of the decision rendered by five judge constitution bench in case of S.P. Sampath Kumar -vs- Union of India reported in (1987) 1 SCC 124 and referred the matter to the Hon'ble Chief Justice for constituting a larger bench. The larger bench in case of L. Chandra Kumar (supra) framed the questions required for an answer which would be relevant to quote as under:
"(1) Whether the power conferred upon Parliament or the State Legislatures, as the case may be, by sub-clause (d) of clause (2) of Article 323-A or by sub-clause (d) of clause (3) of Article 323-B of the Constitution, to totally exclude the jurisdiction of 'all courts', except that of the Supreme Court under Article 136, in respect of disputes and complaints referred to in clause (1) of Article 323-A or with regard to all or any of the matters specified in clause (2) of Article 323-B, runs counter to the power of judicial review conferred on the High Courts under Articles 226/227 and on the Supreme Court under Article 32 of the Constitution? (2) Whether the Tribunals, constituted either under Article 323-A or under Article 323-B of the Constitution, possess the competence to test the constitutional validity of a statutory provision/rule? (3) Whether these Tribunals, as they are functioning at present, can be said to be effective substitutes for the High Courts in discharging the power of judicial review? If not, what are the changes required to make them conform to their founding objectives?"
The first and third questions in my view are relevant in the present context while answering the aforesaid question, the bench held:
"90. We may first address the issue of exclusion of the power of judicial review of the High Courts. We have already held that in respect of the power of judicial review, the jurisdiction of the High Courts under Articles 226/227 cannot wholly be excluded. It has been contended before us that the Tribunals should not be allowed to adjudicate upon matters where the vires of legislations is questioned, and that they should restrict themselves to handling matters where constitutional issues are not raised. We cannot bring ourselves to agree to this proposition as that may result in splitting up proceedings and may cause avoidable delay. If such a view were to be adopted, it would be open for litigants to raise constitutional issues, many of which may be quite frivolous, to directly approach the High Courts and thus subvert the jurisdiction of the Tribunals. Moreover, even in these special branches of law, some areas do involve the consideration of constitutional questions on a regular basis; for instance, in service law matters, a large majority of cases involve an interpretation of Articles 14,15 and 16 of the Constitution. To hold that the Tribunals have no power to handle matters involving constitutional issues would not serve the purpose for which they were constituted. On the other hand, to hold that all such decisions will be subject to the jurisdiction of the High Courts under Articles 226/227 of the Constitution before a Division Bench of the High Court within whose territorial jurisdiction the Tribunal concerned falls will serve two purposes. While saving the power of judicial review of legislative action vested in the High Courts under Articles 226/227 of the Constitution, it will ensure that frivolous claims are filtered out through the process of adjudication in the Tribunal. The High Court will also have the benefit of a reasoned decision on merits which will be of use to it in finally deciding the matter.
91. It has also been contended before us that even in dealing with cases which are properly before the Tribunals, the manner in which justice is dispensed by them leaves much to be desired. Moreover, the remedy provided in the parent statutes, by way of an appeal by special leave under Article 136 of the Constitution, is too costly and inaccessible for it to be real and effective. Furthermore, the result of providing such a remedy is that the docket of the Supreme Court is crowded with decisions of Tribunals that are challenged on relatively trivial grounds and it is forced to perform the role of a first appellate court. We have already emphasized the necessity for ensuring that the High Courts are able to exercise judicial superintendence over the decisions of the Tribunals under Article 227 of the Constitution. In R.K. Jain Case, after taking note of these facts, it was suggested that the possibility of an appeal from the Tribunal on questions of law to a Division Bench of a High Court within whose territorial jurisdiction the Tribunal falls, be pursued. It appears that no follow-up action has been taken pursuant to the suggestion. Such a measure would have improved matters considerably. Having regard to both the aforestated contentions, we hold that all decisions of Tribunals, whether created pursuant to Article 323-A or Article 323-B of the Constitution, will be subject to the High Court's writ jurisdiction under Articles 226/227 of the Constitution, before a Division Bench of the High Court within whose territorial jurisdiction the particular Tribunal falls."
(emphasis supplied) The jurisdiction of the High Court has not been expressly excluded as contextually appeared from the provision of Section 6 of the Taxation Tribunal Act but can be invoked under Article 226 or 227 of the Constitution of India before the Division Bench. What necessarily follows from the ratio of the judgment rendered in L. Chandra Kumar (supra) is that the writ petition cannot be entertained by the High Court at the Court of first instance but should be routed through the tribunal and the Division Bench is competent to deal those matters. The Tribunals are constituted to discharge the functions supplementarily subject to the scrutiny by the Division Bench of the High Court, in respect of the matters provided under Section 5 of the Taxation Tribunal Act passed under any specified State Act.
In view of the clear pronouncement of law by the Apex Court in case of L. Chandra Kumar (supra), the matter under the specified Act and defined under Section 5 of the Taxation Tribunal Act cannot be assailed directly before the High Court before approaching the tribunal.
It leads to a further ancillary point whether the order complained in this writ petition is covered under Section 5 of the Taxation Tribunal Act or not. It would be pertinent to quote the provisions of Section 5 of the Taxation Tribunal Act which reads thus:
"5.The State Acts to which this Act shall apply- This Act shall apply to every State Act specified in the Schedule to this Act with effect from the date on which such State Act is so specified, and the Tribunal, save as otherwise expressly provided under such State Act and subject to the other provisions of this Act, shall exercise jurisdiction, powers and authority in relation to all matters of adjudication or trial of any disputes, complaints or offences with respect to levy, assessment, collection and enforcement of any tax under any specified State Act and of matters connected therewith or incidental thereto; and no Court except the Supreme Court of India shall, with effect from such date, exercise any jurisdiction, powers or authority in the matter of adjudication or trial of any disputes, complaints or offences with respect to the aforesaid matters."
From the reading of the aforesaid provisions, the disputes must relate to a levy, assessment, collection and enforcement of any tax under the specified Act or any matter connected there with or incidentally thereto. Section 43 of the Value Added Tax Act empowers the Commissioner to audit the accounts, registers or documents of a dealer for any year or part thereof not being a period which ended five years previous to the date of selection. Sub-section 3 as already indicated above requires the preparation of the report containing the observation and findings, regarding correctness of the returns, admissibility of various claims of the dealer for which the audit is conducted and the preparation of computation sheet quantifying the tax interest or late fees. Sub-section 5A of the Act says that if the dealer fails to pay the tax interest and late fees stated in the computation sheet within one month of the receipt of such report, it would culminate into an order of assessment and shall be deemed to be notice of demand. There is a distinction between the levy and the assessment, as the levy is wider in its import than the assessment so as to include both the imposition of tax and the assessment as held in case of National Tobacco Company Ltd.,(supra) in these words:
"19. The term "levy" appears to us to be wider in its import than the term "assessment". It may include both "imposition" of a tax as well as assessment. The term "imposition" is generally used for the levy of a tax or duty by legislative provisions indicating the subject- matter of the tax and the rates at which it has to be taxed. The term "assessment", on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate "levy" with an "assessment" as well as with the collection of a tax when it held that " when the payment of tax is enforced, there is a levy". We think that, although the connotation of the term "levy" seems wider than that of "assessment", which it includes, yet, it does not seem to us to extend to "collection". Article 265 of the Constitution makes a distinction between "levy" and "collection". We also find that in N.B. Sanjana, Assistant Collector of Central Excise, Bombay and Others -vs- The Elphinstone Spinning and Weaving Mills Co. Ltd., this Court made a distinction between "levy" and "collections"
as used in the Act and the rules before us. It said there with reference to Rule 10:
"We are not inclined to accept the contention of Dr. Syed Mohammad that the expression 'levy' in Rule 10 means actual collection of some amount. The charging provision Section 3(1) specifically says: There shall be levied and collected in such a manner as may be prescribed the duty of excise...........It is to be noted that sub-section (i) uses both the expressions 'levied and collected' and that clearly shows that the expression 'levy' has not been used in the Act or the Rules as meaning actual collection."
Section 5A of Section 43 of the Act specifically provides that in default of the payment of the tax interest or the late fees stated in the computation sheet, it would partake the character of an order of assessment and shall be deemed to be a notice of demand. Rule 54 (7A) of the West Bengal Value Added Tax Rule, 2005 also makes the determination of tax interest or late fees in the computation sheet be deemed to be an order of assessment in default of its payment within a specified date.
This Court, therefore, have no hesitation to hold that the audit made under Section 43 and the computation of tax, penalty and late fees shall be deemed to an order of assessment in default of the payment within one month from the date of the service of the report and the computation sheet is amenable to be challenged before the tribunal under Section 5 & 6 of the Taxation Tribunal Act.
This Court, therefore, finds that the preliminary objection taken by the respondent succeeds.
The writ petition is dismissed as not maintainable. There shall be, however, no order as to costs.
Urgent photostat certified copy be supplied to the parties, if applied for, on priority basis.
(Harish Tandon, J.)