State Taxation Tribunal - West Bengal
Haroon M. Adam vs State Of West Bengal And Ors. on 8 October, 1999
Equivalent citations: [2001]121STC134(TRIBUNAL)
JUDGMENT
L.N. Ray (Chairman)
1. In this application under Section 8 of the West Bengal Taxation Tribunal Act, 1987, which is in the nature of a writ application under Article 226 of the Constitution of India, the point at issue is whether sales of sugar imported from foreign countries is exigible to sales tax under the West Bengal Sales Tax Act, 1994.
2. The applicant's case in the main application may be summarised thus. He is the sole proprietor of Adam and Company which carries on business in sale of imported sugar in Calcutta, Bombay and other places in India. The Calcutta business was commenced on September 6, 1998, and dealer's registration numbers were obtained under the 1994 Act and the Central Sales Tax Act, 1956 (in short, "Central Act"). Sugar is one of the goods of special importance under Section 14 of the Central Act. Sugar was not taxable under the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act") and the West Bengal Sales Tax Act, 1954 (in short "the 1954 Act") and also under the West Bengal Sales Tax Act, 1994 (hereinafter referred to as "the 1994 Act"). The 1994 Act has replaced 1941 Act and 1954 Act with effect from May 1, 1995. According to an amendment to Schedule I to the 1994 Act, effective from May 1, 1995, sugar manufactured or made in India is tax-free under entry 79 of Schedule I read with Section 24 of the 1994 Act. By a circular dated October 27, 1997, annexure B, the respondent No. 2 stated that sale of imported sugar is taxable at the rate of 4 per cent and at only one stage in view of Section 15 of the Central Act. Schedule VII to 1994 Act enumerates the goods sales of which are taxable at the rate of 4 per cent. Entry 1 of Schedule VII mentions goods referred to in Section 14 of the Central Act excluding those specified in any other Schedule. According to the applicant, imported sugar is not covered by Section 14(viii) of the Central Act, and hence it is not covered by entry 1 of Schedule VII. Therefore, sales tax cannot be imposed on imported sugar, i.e., sugar imported from outside India, according, to the said circular issued by respondent No. 2. The applicant states that, misled by that circular, he deposited sales tax amounting to Rs. 7,00,000 and Rs. 4,12,000 by two challans dated September 11, 1998 on sales of imported sugar, and filed returns for the month of September, 1998 with respondent No. 3, Commercial Tax Officer, Park Street Charge. He prays for refund of those amounts.
3. The next grievance of the applicant is that while Central Act does not make any distinction between imported sugar and country-made sugar, 1994 Act makes a distinction by leaving country-made sugar out of the tax-net. The contention is that "sugar" is defined in Section 14(viii) as "covered under sub-heading Nos. 1701.20, 1701.31, 1701.39 and 1702.11 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)". The definition makes no difference between country-made sugar and imported sugar, except laying down the percentage of sugar content or sucrose content. If the State tax is levied on imported sugar but not on country-made sugar, then according to applicant, Section 9(2) of Central Act becomes otiose and inoperative and it comes in conflict with the State provision for taxation, which consequently is ultra vires Section 15 of Central Act and Article 286(3) of Constitution of India as well as ultra vires Section 7 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (in short, "Act of 1957").
4. One of the contentions of applicant (in paragraphs 9 to 19 of the application) is that States' power to levy tax under entry 54 of List II of the Seventh Schedule was curtailed by insertion of entry 92A in List I. While the States lost that power, they were sought to be compensated by distribution of duties levied by the Union through legislations under Article 272, such as Act of 1957. According to applicant, another curb on States' power to levy tax under entry 54 of List II is to be found in Article 286(3), in relation to goods of special importance in inter-State trade or commerce. Act of 1957 gives effect to Sections 14 and 15 of Central Act. In view of Act of 1957, State Legislatures "are enjoined to give complete exemption (from tax) to the articles enumerated" therein. The State also allegedly entered into an agreement to exempt sugar from tax on the assurance of sharing additional excise duty, and since 1957 the State has been exempting sugar irrespective of its origin. By amendment of Schedule I to 1994 Act, the respondent No. 1 has attempted to levy tax on sugar imported from abroad. Importation of sugar has commenced, according to applicant, in order to overcome shortfall of country-made sugar. It is said that while the aggregate of basic excise duty, additional duty of excise and cess per tonne of country-made sugar comes to Rs. 850, the Union of India (respondent No. 5) levied by notification dated April 28, 1998 an equal amount, Rs. 850 on imported sugar per tonne as additional duty of customs, the basic customs duty on C.I.F. value being 5 per cent in addition. Thus, by means of Section 3 of the Customs Tariff Act, 1975 the burden on imported sugar has been equalised with that on country-made sugar. Hence, applicant contends that levy of sales tax at 4 per cent on sales of imported sugar is ultra vires, illegal, without jurisdiction, unjust, unreasonable and discriminatory. Such levy is said to be colourable, because it is levied on the ground that : (i) the Union does not give a share of additional customs duty to the State and, (ii) the State wants to give protection to sugar industry of the country.
5. Applicant further contends that the protectionist policy of the State (for exemption given to country-made sugar) is repugnant to Articles 301 and 304 of the Constitution.
6. Applicant then contends that respondent No. 1 is usurping the legislative field of the Union inasmuch as the impugned sales tax relates to import which is the subject of entry 41 of List I, and this device contravenes Article 286, and comes into conflict also with entries 52 and 83 of List I.
7. The next grievance is that imported sugar and country-made sugar are indistinguishable from one another. Therefore, once sugar imported through a port outside West Bengal comes to the market, it becomes unidentifiable as imported sugar. When a dealer imports sugar from another State of India, the sales tax authorities may try to levy sales tax thereon on mere suspicion and surmise, though the dealer would not be able to distinguish between country-made sugar and imported sugar, particularly so in cases of sugar imported from neighbouring countries like Pakistan and China. That may allegedly lead to large-scale evasion of tax.
8. Applicant challenges levy of tax on imported sugar as violative of Articles 14, 19, 21, 265, 300A, 301 and 304 of the Constitution. He alleges that sugar is not specified in Schedule IV to 1994 Act under Section 18, and hence it is not a commodity on which tax is levied at a single point. It is said that classification between imported and country-made sugar is arbitrary, unreasonable and without nexus with the tax. Levy of tax will, it is said, impede free-flow of trade and business and will be an unreasonable restriction on trade and commerce. No assent of the President of India was obtained before levy of the tax in terms of Articles 301 and 304. Levy of the tax allegedly will result in chaos and uncertainty in the trade of sugar and dealers will face seizure of books of account.
9. The following is the case of respondent Nos. 1 to 4 in their affidavit-in-opposition. They have contended that sugar is a goods of special importance in terms of Section 14(viii) of Central Act, but Section 14 does not prohibit levy of sales tax thereon. The State Legislature was competent to levy sales tax on sugar with effect form May 1, 1995 under the provisions of 1994 Act on the authority of entry 54 of List II, independent of the impugned circular dated October 27, 1997. In doing so, the State Legislature in its wisdom made country-made sugar tax-free by enacting entry 79 of Schedule I to 1994 Act, although there is no dispute that prior to May 1, 1995 "sugar of any kind was not taxable". According to the contesting respondents (the respondent No. 5, Union of India having made no appearance), sugar other than sugar manufactured or made in India is taxable at 12 per cent under entry 8 of Schedule IX of 1994 Act, instead of at 4 per cent as applicable to declared goods within the meaning of Section 14 of Central Act. The impugned circular dated October 27, 1997 has been struck down by this Tribunal and has no force of law for determining the rate of tax. Even if imported sugar does not fall under Section 14(viii) of Central Act and hence does not attract tax at 4 per cent, it is a taxable goods under entry 8 of Schedule IX of 1994 Act. It is said that applicant was liable to pay tax on sales of imported sugar. Therefore, the question of refund does not arise at this stage. The correct amount of tax, will however, be assessed at the time of assessment.
10. The further case of contesting respondents is that the provisions of "Central Act", the Central Excises and Salt Act, 1944 and the Central Excise Tariff Act, 1985 do not stand in the way of levy of sales tax by the State Legislature. The State Legislature cannot be deprived of its competence to levy tax on sugar, because additional excise duty was levied. Moreover, sugar imported from outside India is not liable to additional excise duty. In any case, imposition of tax under 1994 Act is not ultra vires Section 7 of Act of 1957 or Section 15 of "Central Act". These respondents contend that sugar imported from abroad to West Bengal or imported to any other part of India but brought into West Bengal and sold here make no difference inasmuch as the taxable commodity is sugar which is not manufactured or made in India, and "the incidence of tax is sale". If sale takes place in West Bengal, tax is payable. Levy of additional duty of custom at the rate of Rs. 850 cannot rob the State Legislature of the competence to levy sales tax on sugar. It is admitted by applicant that imported sugar is not a declared goods within the meaning of Section 14(viii) of "Central Act". Reference is made to Section 3A(I) of the Customs Tariff Act, 1975 which empowers the Central Government to levy special additional duty on any imported article having regard to the maximum sales tax, local tax or any other charges for the time being leviable on sale or purchase in India. Special additional duty is not leviable under Section 3A(5) of the Central Excise Tariff Act, 1985 "on any article which is chargeable to additional excise duty under Act of 1957". "An importer of any article imported from abroad is not required to pay special additional custom duty if they pay sales tax to the State Government on the sales of the goods imported from abroad". In this connection, these respondents refer to Notification No. 56/98 dated August 1, 1998 issued by the Central Government under Section 3A of the Customs Tariff Act, 1975. The contesting respondents deny that levy of sales tax on imported sugar contravenes any provision of the Constitution of India or discriminatory in any manner. Sugar manufactured or made in India suffers additional excise duty under Act of 1957 and hence sale of the same is made tax-free under entry 79 of Schedule I to 1994 Act under Section 24 of that Act ; but imported sugar does not suffer that duty under Act of 1957 and hence made taxable under 1994 Act. Such classification is claimed to be based on an intelligible differentia. It is said that it is a legislative policy in pursuance of which country-made sugar has been made tax-free, but tax has been levied on imported sugar. Articles 301 and 304 have no application to imported sugar sold in West Bengal, because the tax does not directly or remotely impede free movement of goods. Sales tax is not levied on sugar industry. Therefore, the State Legislature has not encroached upon the field covered by entry 41 of the Union List. Incidence of sales tax is on "sale" of imported sugar, which is covered by entry 54 of List II. The State has not usurped the power of Union of India conferred by entries 41, 52 and 83 of the Union List, which are general entries and not taxing entries. No specific case has been made out by applicant as to how Articles 14, 19, 21, 265, 300A, 301 and 304 of the Constitution have been contravened.
11. According to the contesting respondents, imported sugar is not a declared goods under Section 14(viii) of "Central Act", and hence does not attract restrictions contemplated in Section 15 of "Central Act" and Article 286(3) of the Constitution. It is said that President's assent was obtained to 1994 Act, published in the Calcutta Gazette, Extraordinary of March 23, 1995. They have pointed out that the applicant has not challenged any specific provision of 1994 Act regarding levy of tax on sales of imported sugar. The tax levied on imported sugar is not violative of any provision of the Constitution of India and there is neither any uncertainty, nor any chaos in the trade of sugar due to the levy of tax. Contesting respondents have denied that there is any hostile discrimination between sugar manufactured or made in India and sugar imported from abroad. It is stated that the applicant will be required to prove to the satisfaction of the assessing authority that "sugar sought to be taxed is manufactured or made in India". Reference is made to entry 8 of Schedule IX to 1994 Act, according to which goods not specified in any other Schedule or in any other entry of Schedule IX is to be taxed at the rate specified in Schedule IX. "Since, imported sugar, not being admittedly declared goods, within meaning of the Section 14(viii) of the 1956 Act, is not subject to any restriction under Article 286(3) of the Constitution of India and Section 15 of the 1956 Act", according to these respondents, classification between imported sugar and country-made sugar is valid and reasonable. No provision of 1994 Act prevents any wholesaler from dealing in imported or indigenous sugar. There can be no violation of Article 404, because the President of India gave his assent to 1994 Act. Levy of tax on sales of sugar is under entry 54 of List II of the Seventh Schedule to the Constitution of India. Levy of additional duty of customs at Rs. 850 per tonne does not denude or rob the State Legislature of the competence to levy sales tax on sales of imported sugar. Imported sugar is different from country-made sugar, and hence there will be no differential treatment. The impugned circular dated October 27, 1997 issued by the Commissioner of Commercial Taxes, quashed by this Tribunal in another case, was not the only authority upon which sales tax was levied on sales of imported sugar. It was merely a communication of the Commissioner's views. Levy of tax made by this statute itself independent of the impugned circular. Refund of tax, claimed by applicant is denied.
12. On behalf of the applicant affidavit-in-reply was filed. Most of the contentions in the main application have been repeated therein. The applicant has stated that imported sugar is a goods of special importance under Section 14 of Central Act, and that the State Legislature is not competent to levy tax more than 4 per cent on sugar whether imported or indigenous, in view of Section 15 of the Central Act, According to applicant, imported sugar is covered by Schedule VII and the rate of tax is the rate prescribed under Section 17(1)(h) of 1994 "Act. The applicant contends : "I say with all emphasis that sugar other than sugar manufactured or made in India cannot be made taxable under the existing law of the land including the Constitution of India so long country-made sugar is exempted". The returns were allegedly filed by mistake and hence the amounts already paid at 4 per cent are refundable to the applicant. The applicant does not agree that imported sugar is not covered by Section 14(viii) of Central Act. Allegedly imposition of tax on sales of imported sugar under 1994 Act is ultra vires Section 7 of Act of 1957 read with Section 15 of Central Act. If sugar is liable to tax under 1994 Act, country-made sugar cannot be exempted from tax and imported sugar cannot be subjected to tax. The applicant maintains that both country-made and imported sugar fall within the meaning of "sugar" as mentioned in Section 14 of Central Act. There cannot be any statutory provision which splits up sugar, being a goods of special importance under Central Act, into imported sugar and country-made sugar. Such classification violates Parts III and XIII of the Constitution. Such classification is not based on any intelligible differentia. The applicant denies contention of contesting respondents that levy of sales tax on imported sugar does not directly or remotely hamper free movement of goods. Levy of sales tax on imported sugar allegedly encroaches upon the legislative power of the Parliament under entries 41, 52 and 83 of the Union List. In paragraph 16 of the reply, the applicant contends that "unless there is specific provision for identifying a specific goods before imposition of tax, the imposition of tax would be ultra vires. Sugar is the genus. There may be various species and there may be different kinds of sugar as indicated in the Central Excise Act or Central Excise Tariff Act. Therefore, the identification and imposition of tax would be arbitrary if these provisions are absent in the Sales Tax Act, State and Central and it would be illegal and unconstitutional". Central Act "speaks of sugar and therefore imported sugar also comes within the ambit of Section 14" of Central Act, and it attracts restrictions under Section 15 of Central Act and Article 286(3) of the Constitution. Therefore, such sugar is "to be taxed only at one stage and only at single point within the State". In paragraph 24 of the reply, the applicant contends :
"The petitioner's objection is not to the rate of 4 per cent or 12 per cent. The question is the imposition of tax on imported sugar, when indigenous sugar is being exempted. Further, so long sugar is goods of special importance under Section 14 of the Central Sales Tax Act, 1956, there cannot be any levy of sales tax more than 4 per cent and also more than in one stage."
13. The applicant filed a supplementary affidavit, when the respondents produced a copy of the Calcutta Gazette, published on March 31, 1999 regarding amendments to 1994 Act through the West Bengal Finance Act, 1999. One of the amendments was regarding sugar other than indigenous sugar. By the said amendment, provision was made for imposition of sales tax at 4 per cent on imported sugar mentioned in item 70A of Schedule IV to 1994 Act, while indigenous sugar has already been exempted from tax by placing it in item 79 of Schedule I. Such amendment is attacked as arbitrary, unreasonable, discriminatory and violative of Article 14. The earlier contention is repeated that sugar cannot be split into two types of sugar, namely, imported and country-made. The Legislature was allegedly oblivious of the impact of the levy of tax on society, its economic consequences and administrative convenience, while classifying the same commodity into two different commodities. The amendment tends to deceive consumers and help traders to become unduly rich. Both indigenous and imported sugar "being equally counter-balanced by excise, additional excise, cess and additional customs duty in addition to a basic duty of C.I.F. value of 27.5 per cent, any sales tax on imported sugar would discourage sale of imported sugar. The levy is said to be violative of Articles 14, 19, 21, 301, 304, 304(a), 300A, 551A and 265 of the Constitution of India. The amendment has been given retrospective effect. That is alleged to be neither bona fide nor reasonable, when the question is pending before this Tribunal. The amendment has been made to cover up the deficiency in law, because prior to the amendment, there was no law empowering levy of sales tax on imported sugar. The retrospective operation of the amendment is challenged on the grounds that it is the neither declaratory nor clarificatory, and because it rather affects the substantive or vested right. The retrospective operation of the amendment is invalid, because allegedly it would lead to certain penal consequences without mens rea. The retrospective operation is said to be confiscatory in nature. It affects the operation of Sections 9(2), 14 and 15 of the Central Act. The applicant has prayed for a declaration that the amendment in Sub-clause (i) of Clause (18) of Section 11 of the West Bengal Finance Act (3 of 1999), and any notification relating thereto regarding imposition of sales tax on imported sugar in preference to indigenous sugar is unconstitutional and ultra vires.
14. The supplementary affidavit is resisted by contesting respondents through an affidavit-in-opposition. It is said that by the West Bengal Finance Act (3 of 1999), sugar, other than sugar manufactured or made in India as specified in SI. No. 79 of Schedule I, has been inserted in SI. No. 70A of Schedule IV to 1994 Act with retrospective effect from May 1, 1995 for levy of tax on the first sales in West Bengal. Before such amendment sugar attracted multi-point levy of sales tax under 1994 Act. The contention of these respondents is that the rate of tax is 4 per cent on all sales of sugar with effect from May 1, 1995 in terms of Notification No. 946 FT dated April 1, 1999 issued under Section 18(1) of 1994 Act. During pendency of the present application before this Tribunal, the amendment was made "for proper adjudication of the dispute". The classification of imported sugar and country-made sugar is justified as reasonable, and it is stated that the Legislature can pick and choose for the purpose of taxation. Country-made sugar, according to the contesting respondents, is identifiable as a different category of commodity. Imported sugar attracts single point levy in the hands of the importer. The Legislature was not oblivious of impact of the levy, or its economic consequences or administrative convenience. The material averments in the supplementary affidavit are denied by them. The allegation that the amendment has violated various articles of the Constitution has also been denied. The amendment has been given retrospective effect "in order to replace multi-point levy of sales tax by the single point levy...........and that too with a reduced rate of tax less than what was applicable before the retrospective amendment". No new imposition of tax, or new obligation, or new disability has been given retrospective effect. The plenary power of taxation can be exercised both retrospectively and prospectively. According to these respondents :
"I say that the petitioner was liable to pay sales tax on sugar, other than sugar manufactured or made in India under the existing law as stood before such retrospective amendments. The traders who made sales of such sugar at any point of sales subsequent to first point of sales in West Bengal will be relieved of this liability to pay tax with retrospective effect and thus there is no penal action against the traders who have been left out of the tax retrospectively. That apart, consequent upon reduction of rate of tax of 4 per cent with retrospective effect, no penal action lies against even the dealers who were liable to pay tax at higher rate of tax and paid tax at that rate."
According to these respondents, no new obligation has been created, the amendment is not a major repair of law affecting life, liberty or property of any citizen and no new obligation has been created for anyone leading to penal action or mens rea. There will be no conflict with the provisions of Central Act.
15. One of the points of controversy which has surfaced from the pleadings and contentions of the parties including the "synopsis of argument" submitted in writing on behalf of the applicant, is whether imported sugar or sugar not manufactured or made in India is a goods of special importance and comprehended in Clause (viii) of Section 14 of Central Act. Let us first solve that controversy. Section 14(viii) of Central Act relates to sugar covered under sub-heading Nos. 1701.20, 1701.31, 1701.39 and 1702.11 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). In the main application the stand taken by the applicant was that imported sugar was not covered by Section 14(viii) of Central Act and hence not covered by entry 1 of Schedule VII. In the affidavit-in-opposition to the main application respondent Nos. 1 to 4 stated that sugar other than sugar manufactured or made in India was taxable at the rate of 12 per cent under entry 8 of Schedule IX to 1994 Act, instead of at the rate of 4 per cent as applicable to declared goods under Section 14 of Central Act. Elsewhere, the contesting respondents stated in the affidavit-in-opposition that the applicant admitted that imported sugar was not a declared goods under Central Act. In the affidavit-in-reply, applicant stated that imported sugar is a goods of special importance under Section 14 of Central Act. Kothari Global Ltd. and another (RN-119 of 1998 decided on November 3, 1998--WBTT) had filed an application under Section 8 of the West Bengal Taxation Tribunal Act, 1987, challenging a circular dated October 27, 1997 issued by Commissioner of Commercial Taxes, West Bengal, stating that, while sugar manufactured or made in India was exempt from payment of sales tax under SI. No. 79 of Schedule I to 1994 Act, sugar not made or not manufactured in India was liable to sales tax under 1994 Act, but the rate of tax would be 4 per cent and that would be leviable at only one stage in view of Sections 14 and 15 of Central Act. There, the taxing authorities took the stand that imported sugar was taxable at the rate of 4 per cent under item No. 1 of Schedule VII to 1994 Act read with Section 14(viii) of Central Act. On behalf of the taxing authorities it was submitted by Mr. K.K. Saha, learned advocate in that case (RN-119 of 1998 Kothari Global Limited v. State of West Bengal, decided on November 3, 1998--WBTT.) that imported sugar did not fall under Section 14(viii) of Central Act and consequently did not fall under SI. No. 1 of Schedule VII to 1994 Act. On that concession made by Mr. K.K. Saha appearing for taxing authorities, the circular dated October 27, 1997 issued by the Commissioner of Commercial Taxes was quashed with liberty to make assessment or take any other action according to law. That was done by a judgment dated November 3, 1998 by this Tribunal. In view of the concession made by Mr. Saha, there was no occasion in RN-119 of 1998 to examine whether imported sugar was covered by Section 14(viii) of Central Act. Therefore, it is clear that the sales tax authorities as well as certain traders including the present applicant (who has taken contradictory stands in the main application and the affidavit-in-reply) were under a confusion as to the correct position.
16. The sub-headings referred to in Section 14(viii) of Central Act are the sub-headings of the Schedule to the Central Excise Tariff Act, 1985. Let us reproduce below the said sub-headings together with the relevant provisions in chapter 17 of the Central Excise Tariff Act, 1985 :
"Chapter 17 Sugar and sugar confectionery 1 .........................
2. For the purposes of sub-heading Nos. 1701.10, 1701.20, 1701.31 and 1701.39, 'sugar' means any form of sugar in which the sucrose content, if expressed as a percentage of the material dried to constant weight at 105? C, would be more than 90.
3. For the purposes of this Chapter,--
(a) 'khandsari sugar' means sugar in the manufacture of which neither a vacuum pan nor a vacuum evaporator is employed.
(b) 'palmyra sugar' means sugar manufactured from the juice of the palmyra palm or from jaggery obtained by boiling the juice of the palmyra palm.
17.01 Cane or beet sugar and chemically pure sucrose in solid form.
1701.20 khandsari sugar Sugar, other than khandsari sugar 1701.31 Required by the Central Government to be sold under Clause (f) of Sub-section (2) of Section 3 of the Essential Commodities Act, 1955 (10 of 1955) 1701.39 Other 17.02 Other sugars, including chemically pure lactose, maltose, glucose and fructose in any form and preparations thereof ; sugar syrups not containing added flavour or colouring matter ; artificial honey, whether or not mixed with natural honey ; caramel other sugars, including chemically pure lactose, maltose, glucose and fructose in any form 1702.11 palmyra sugar."
(The underlining indicates the description of goods in headings) As we have seen, it is nobody's case that the imported sugar which is sold by the applicant is either khandsari sugar or sugar, other than khandsari sugar, required by the Central Government to be sold under Section 3(2)(f) of the Essential Commodities Act. Those two types of sugar are covered by sub-headings 1701.20 and 1701.31. The other two sub-headings mentioned in Section 14(viii) of Central Act are 1701.39 which covers other types of sugar and 1702.11 which covers palmyra sugar. What is "palmyra sugar" can be seen from the above quotation. The sugar sold by the present applicant may or may not be palmyra sugar, because neither party has clarified that aspect. But we do not find any reason to doubt that the imported sugar sold by the present applicant is covered by sub-heading 1701.39 which relates to sugar other than khandsari sugar and other than sugar required by Central Government to be sold under Section 3(2)(f) of the Essential Commodities Act. If the imported sugar sold by the present applicant falls under sub-heading 1702.11 and because it is covered by sub-heading 1701.39, it is a goods of special importance under Section 14 of Central Act.
17. Whatever might be the confusion at the earlier stages, at the stage of arguments in the present case, the applicant has taken the unambiguous stand that imported sugar is a goods of special importance under Section 14 of Central Act. At page 5 of the synopsis of argument of the applicant the following sentence occurs in the third paragraph :
"Therefore, the definition of sugar in Central Sales Tax Act in Section 14, Clause (viii) includes both indigenous and imported sugar."
In oral arguments also Mr. Gopal Chakraborty, learned counsel for the applicant, submitted that imported sugar sold by the applicant is covered by the definition of "sugar" in the relevant sub-headings of the Central Excise Tariff Act, 1985 to which reference has been made in Section 14(viii) of Central Act.
The respondents appear to have been confused on this issue. In the affidavit-in-opposition affirmed on January 28, 1999 by Sri Maniklal Maitra (A.O. in short), in paragraph 4 they took the following stand :
"......... I say also that sugar within the meaning of Section 14(viii) of the Central Sales Tax Act, 1956......is, no doubt, a goods of special importance. I say further that the provisions of Section 14 of the 1956 Act does not prohibit levy of sales tax on sugar being one of the goods of special importance." Here, respondents have used the general term "sugar".
In paragraph 8 of the A.O. they said : "I say further that sugar, other than sugar manufactured or made in India specified in entry 79 of Schedule I to the 1994 Act, is taxable at the rate of 12 per cent under entry No. 8 of Schedule IX ......., instead of 4 per cent as applicable to declared goods within the meaning of Section 14 of the 1956 Act". Thus, it was impliedly pleaded that imported sugar is outside the scope of Section 14(viii) of Central Act, because otherwise it cannot be claimed that imported sugar is liable to tax at a rate more than 4 per cent. At the end of the same paragraph, however, the confusion is even more discernible from the following words : "......the imported sugar is very much taxable and the rate of tax has also been specified in Schedule IX of the 1994 Act. The correct amount of tax will be assessed at the time of assessment......". In paragraph 20. they said : "....... sugar which are not manufactured or made in India is not a declared goods within the meaning of Section 14(viii) of the 1956 Act". In the circular dated October 27, 1997, which was quashed on concession of the learned advocate for respondents in RN 119 of 1998 (judgment dated November 3, 1998 of this Tribunal) (Kothari Global Limited v. State of West Bengal) respondent No. 2 in the present application (Commissioner of Commercial Taxes) stated that imported sugar was exigible to sales tax at 4 per cent and in terms of Section 15 of Central Act, such tax was not to be levied at more than one stage. So, in that circular, it was conceded that imported sugar was covered by Section 14(viii) of Central Act. But at the time of disposal of RN 119 of 1998, the learned advocate for respondents took the stand that imported sugar did not fall under Section 14(viii) of Central Act and consequently did not fall under serial No. 1 of Schedule VII of 1994 Act.
18. In course of oral arguments in the present case, Mr. K.K. Saha, learned advocate for respondents, submitted that imported sugar was not covered by Section 14(viii) of Central Act. According to him, Section 14(viii) of Central Act applied to only sugar manufactured in India, because the sub-headings of the Central Excise Tariff Act, 1985 mentioned therein cannot be interpreted in isolation, i.e., without reference to provisions of the Central Excises and Salt Act, 1944, such as Section 3, which refers to "duties of excise on all excisable goods other than salt which are produced or manufactured in India". Thus, Mr. Saha maintained that Section 14(viii) of Central Act referred to only sugar which was manufactured in India. He also referred to Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, where reference is made to goods manufactured in India.
19. Mr. Gopal Chakraborty, learned advocate for the applicant opposed the contentions of Mr. Saha. He referred to Metha Brothers v. State of Gujarat [1979] 43 STC 208 (Guj) and Tirunagar Co-operative Stores Limited v. State of Tamil Nadu [1984] 55 STC 39 (Mad.). He also referred to State Trading Corporation of India Ltd. v. Assistant Commissioner (Assessment) [1986] 61 STC 190 (Ker), affirmed in State of Kerala v. State Trading Corporation of India Ltd. [1999] 114 STC 7 (SC) ; but the last two decisions deserve more detailed discussion which will follow in another context.
20. In our opinion, the contention of Mr. K.K. Saha may be wholly or partly valid, where the legislation is by reference ; it has no applicability where the legislation is by incorporation. According to Craies on Statute Law, Seventh Edition, 1971 (page 29) : "Legislation by reference occurs where an earlier statement is amended, applied, etc., by a mere specific reference to the section or part affected without any description of its subject-matter, necessitating in consequence resort to the enactment cited to appreciate what the later enactment is affecting." In page 174 of Justice G.P. Singh's "Principles of Statutory Interpretation", 4th Edition, 1988, we find the following principle regarding legislation by incorporation :
"............when an earlier Act or certain of its provisions are incorporated by reference into a later Act, the provisions so incorporated become part and parcel of the later Act as if they had been 'bodily transposed into it'............ The result is to constitute the later Act along with the incorporated provisions of the earlier Act, an independent legislation which is not modified or repealed by a modification or repeal of the earlier Act". In the same book at page 178, the following observation occurs : "A distinction has also been drawn between a mere reference on citation of one statute into another and incorporation. In the former case a modification, repeal or re-enactment of the statute that is referred will also have effect for the statute in which it is referred ; but in the latter case any change in the incorporated statute by way of amendment or repeal has no repercussion on the incorporating statute. It is a question of construction whether a particular former statute is merely referred to or cited in a later statute or is wholly or partially incorporated therein."
Now, is Section 14(viii) of Central Act a legislation by reference, or one by incorporation ? It is really a matter of construction. Section 14(viii) neither mentioned "sugar" simpliciter or "sugar" in general, nor gave a definition of its own. It also did not merely refer to the Central Excise Tariff Act, J985 or to the Central Excises and Salt Act, 1944. It incorporated several sub-headings of the Schedule to the Act of 1985. It is true that the Act of 1985 is closely linked to the Act of 1944. But when the Sales Tax Act lifted the sub-headings from the Act of 1985, it was not linking itself to the Act of 1985 or to the Act of 1944 ; it also could not do so, because one is about sales tax, another is about excise duty on production. In such a situation, the true construction is that the sub-headings have been transplanted into the Central Sales Tax Act, 1956. After such transplantation, the descriptions or definitions constituting the sub-headings become an integral part of the Central Act of 1956, as amended, irrespective of the purpose, object or context in which they were enacted earlier in the Act of 1985. Those sub-headings in the Act of 1985 may relate to goods manufactured in India. But, when the sub-headings are placed in the fabric of the Act of 1956, they are to be understood in tune with the purpose, object and context of the Act of 1956. Sales tax under Act of 1956 is not confined to sales of only goods manufactured in India. So, there is no justification for holding that the sales of goods (sugar) described or defined in Section 14(viii) exclude sales of sugar imported from outside India. Therefore, Section 14(viii) of the Central Act of 1956 is a legislation by incorporation. The parameters and context of the Acts of 1985 and 1944 and also of the Act of 1957 do not govern Section 14(viii) and do not cast any influence or effect on it. As already said, we will discuss the decision in [1999] 114 STC 7 (SC) (State of Kerala v. State Trading Corporation of India Ltd.) in another context. But one thing is clear that in a comparable situation, it was held in that case that the definition of "sugar" in the First Schedule to the Act of 1944 was "incorporated" in Schedule III to the Kerala General Sales Tax Act, 1963. This decision, therefore, is in support of the construction that Section 14(viii) is an enactment by incorporation. As a result of our above finding, we hold that imported sugar or sugar not manufactured or made in India being a species of the genus "sugar" is a goods of special importance and comprehended in Section 14(viii) of the Central Act of 1956. That being the correct position in law, the concession made by Mr. Saha in RN 119 of 1998 (Kothari Global Limited and another) was not correct. It is well-settled that a wrong concession on a question of law made by counsel is not binding on client, and such concession cannot constitute a just ground for a binding precedent (Uptron India Limited v. Shammi Bhan AIR 1998 SC 1681).
21. In this application, while challenging the attempts of the respondents to levy sales tax on sales of imported sugar, the applicant has questioned the validity of the provisions of the West Bengal Sales Tax Act, 1994 as it stands after the amendment published in the Calcutta Gazette, Extraordinary dated March 31, 1999, through the West Bengal Finance Act, 1999, Clause 11, as well as the 1994 Act as it stood before that amendment in so far as they relate to the claim of the respondents to the effect that both before and after the amendment imported sugar was and has been exigible to sales tax. Therefore, we have to see what the legal position was before the said amendment and what the legal position has become after it.
22. The 1994 Act is a General Sales Tax Act. Unless exempted, sale of every goods is exigible to sales tax under the Act. 1994 Act came into operation with effect from May 1, 1995. Before it was brought into operation, sugar was covered by entry 1 of Schedule III which is for goods taxable at 15 per cent. When the Act was brought into effect on May 1, 1995, entry 1 of Schedule III was omitted. Schedule I gives a list of goods exempted from sales tax, or tax-free goods. Imported sugar is not included therein. In entry 79 of Schedule I sales of "sugar manufactured or made in India" have been exempted from sales tax. That position remains unaltered from the inception of the Act on May 1, 1995 till this day. This is an undisputed position. Until the amendment of 1999 was made, sugar other than sugar manufactured or made in India was not specifically mentioned in any of the Schedules to 1994 Act. But in Schedule VII which is a Schedule for goods taxable at 4 per cent, entry 1 was as under :
"goods referred to in Section 14 of the Central Sales Tax Act, 1956 (74 of 1956), excluding those specified in any other Schedule."
In this connection mention should be made of entry 8 of Schedule IX which was in these words : "All other goods not specified in this Schedule or in any other Schedule". The respondents have contended that prior to the 1999 amendment, imported sugar was covered by entry 8 of Schedule IX which is a Schedule for goods taxable at 12 per cent, because imported sugar was not covered by Section 14(viii) of Central Act and consequently not covered by entry 1 of Schedule VII of 1994 Act. The contention of applicant is that imported sugar was not covered by any of the Schedules, and as soon as India made sugar was made tax-free, imported sugar was also made or became tax-free. His contention is also that there was no provision in 1994 Act prior to the 1999 amendment for levy of sales tax on sales of imported sugar. We have already held that imported sugar or sugar not manufactured or made in India is covered by Section 14(viii) of Central Act and is a goods of special importance. That being our finding, we are unable to agree with the contentions of either the applicant or respondents. In our view, until the 1999 amendment was made, sugar not manufactured or made in India including imported sugar was covered by entry 1 of Schedule VII and sales thereof was taxable at 4 per cent only and at a single stage in view of Section 15 of the Central Act of 1956. Once it is held, as we have decided, that imported sugar was covered by entry 1 of Schedule VII, the contention of the respondents stands rejected. Their contention was that imported sugar was covered by entry 8 of Schedule IX. But that cannot be the correct position, because it is covered by entry 1 of Schedule VII. Entry 8 of Schedule IX is a residuary entry. Since imported sugar was covered by entry 1 of Schedule VII, it could not come under entry 8 of Schedule IX. Similarly, the contention of the applicant cannot be accepted to the effect that there was no legal provision for taxing sales of imported sugar. Entry 1 of Schedule VII read with Section 17(1)(f) of 1994 Act is the provision of law under which sales of sugar other than sugar manufactured or made in India (vide entry 79 of Schedule I) were taxable at 4 per cent up to the time the 1999 amendment came into force.
23. Now we shall look into the position of law obtaining after the 1999 amendment, which came into force from April 1, 1999 except those changes which were given retrospective effect. Sugar manufactured or made in India has continued to stay in Schedule I of 1994 Act. But a new entry, entry No. 70A, was inserted in the following words in Schedule IV with express retrospective effect from May 1, 1995 :
"70A. Sugar, other than, sugar manufactured or made in India as specified against serial No. 79 of Schedule I."
Schedule IV is a Schedule of "goods on sale of which tax is leviable at such rate as may be fixed by notification under Section 18 (single point levy) read with Sub-clause (a) of Clause (40) of Section 2". There is no dispute that 'by Notification No. 946-F.T. dated April 1, 1999 rate of tax for entry No. 70A was fixed at four per cent. Side by side with this change, entry No. 1 of Schedule VII and entry No. 8 of Schedule IX which are relevant for the present purpose, were omitted with effect from April 1, 1999. It is undisputed that with effect from April 1, 1999 the sales tax on sugar not manufactured or made in India has been made 4 per cent on the first sale. But applicant is questioning the validity of such levy as well as the retrospective effect to it granted by the new entry No. 70A of Schedule IV. We will consider those questions presently. Therefore, after the 1999 amendment, the statutory position is that sales tax is leviable at 4 per cent on the first sale of imported sugar (i.e., sugar imported into West Bengal from outside India) with retrospective effect from May 1, 1995. Respondents are going by this statutory position.
24. An argument has been made on behalf of applicant that on the authority of State of Kerala v. State Trading Corporation of India Ltd. [1999] 114 STC 7 (SC) which affirmed the judgment of Kerala High Court in State Trading Corporation of India Ltd. v. Assistant Commissioner [1986] 61 STC 190 (Ker), it must be held that imported sugar is comprehended in Section 14(viii) of the Central Sales Tax Act, 1956 ; and since no distinction was made in Central Act between India made sugar and foreign made or imported sugar, it must be held that as soon as India made sugar was made tax-free under entry No. 79 of Schedule I to 1994 Act, imported sugar also became tax-free, and no tax can be levied thereon. We have already held that imported, foreign made sugar is comprehended in Section 14(viii) of Central Act and is, therefore, a goods of special importance. We have also no hesitation to hold that Section 14(viii) has made no distinction between India made sugar and imported, foreign made, sugar. But, in our view it does not necessarily follow from [1999] 114 STC 7 (SC) (State of Kerala v. State Trading Corporation of India Ltd.) that in view of entry No. 79 of Schedule I to 1994 Act imported, foreign made, sugar is tax-free. The Kerala High Court as well as the Supreme Court decided that case on the basis of the relevant entry in the Kerala General Sales Tax Act, 1963 which reads as : "Sugar as defined in item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944". But in the 1994 West Bengal Act, entry 79 of Schedule I is significantly different. It covers only India made sugar, thus leaving aside imported sugar. Then, by the 1999 amendment, in entry 70A of Schedule IV, sugar other than India-made sugar has been taken care of. These two entries in the two Schedules together cover and comprehend all sugar, whether India made or foreign made and imported. That being so, in our opinion imported, foreign made, sugar is not tax-free, but is exigible to tax at 4 per cent on first sales in West Bengal after importation. That is the correct position, provided the statutory provisions are constitutionally valid.
25. It may be noted at this stage that while entry 70A was inserted with retrospective effect in Schedule IV by 1999 amendment (which was brought into force on April 1, 1999), entry 1 of Schedule VII and entry 8 of Schedule IX were omitted by the same amendment. Those omissions were not given retrospective effect. The result is that with effect from May 1, 1995, i.e., from the commencement of 1994 Act, sugar, not manufactured or made in India, inclusive of imported, foreign-made sugar, became taxable under entry 70A of Schedule IV, instead of under entry 1 of Schedule VII. It is to be remembered that prior to 1999 amendment, those declared goods including imported sugar under Section 14 of Central Act which were not specified in any other Schedule, were exigible to sales tax at 4 per cent at one stage only in view of Section 15 of Central Act. After 1999 amendment imported, foreign made, sugar, continued to be exigible to sales tax at the same rate of 4 per cent at one stage only under entry 70A of Schedule IV, in conformity with Section 15 of Central Act. What we wish to make clear is that 1999 amendment merely shifted imported, foreign-made sugar, from Schedule VII to Schedule IV, but did not affect or alter the character of sugar as declared goods under Section 14(viii) of Central Act and did not alter the rate of tax or single point levy.
26. A statute is presumed to be constitutionally correct. Amrit Banaspati Co. Ltd. v. Union of India AIR 1995 SC 1340 and Shri Ram Krishna Dalmia v. Justice S.R. Tendolkar AIR 1958 SC 538 at page 547. The burden is on the party who challenges constitutionality to establish that a statute is unconstitutional. The first contention of Mr. Gopal Chakraborty, learned counsel for the applicant, regarding constitutionality of the provisions relating to levy of sales tax on sales of imported sugar, is that since sugar is a goods of special importance and is covered by Section 14(viii) of Central Act, which did not make a distinction between India made sugar and foreign made sugar, the distinction or classification made by the State Legislature by means of entry 79 of Schedule I and later by incorporating entry 70A in Schedule IV of 1994 Act is hit by Article 14 of the Constitution, and no such classification is permissible. Mr. K.K. Saha, advocate appearing for respondents, submitted that the State Legislature independently exercises its legislative powers under List II of Seventh Schedule to the Constitution of India, and except where specific mention is made about any restriction, it is free to enact under the entries of List II without any control from any enactment by the Parliament. He further submitted that the State Legislature had the competence to pick and choose subject-matter, persons, goods, taxing event, etc., in a taxing law. Mr. Chakraborty wanted to assert that Indian made sugar and imported, foreign made, sugar are not commercially different goods, and hence they cannot be separately classified. In this connection Mr. Saha rightly referred to Shri Ram Krishna Dalmia v. Justice S.R. Tendolkar AIR 1958 SC 538. It was held in that case that Article 14 forbids class legislation, but does not forbid reasonable classification for the purposes of legislation. It was laid down that to pass the test of permissible classification, two conditions must be fulfilled : (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) that the differentia must have a rational relation to the object sought to be achieved by the statute in question. It was also held that classification may be founded on different bases, such as, geographical, or according to objects or occupations or the like. Mr. Saha referred to East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529 (SC) where it was laid down that while deciding whether a taxing law is discriminatory or not, it is necessary to bear in mind that the State had a wide discretion in selecting persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects, and not others. It is only when within the range of selection, the law operates unequally, and that cannot be justified on as a valid classification, that it would be violative of Article 14. It was also laid down that if a State can validly pick and choose one commodity for taxation and that is not open to attack under Article 14, the same result must follow when the State picks out one category of goods and subjects it to taxation, Mr. Saha also relied on Federation of Hotel & Restaurant Association of India [1989] 74 STC 102 (SC) at pages 126-127. It was held in the case that the Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc.; for taxation, and the tests of the vice of discrimination in a taxing law are less rigorous, A Legislature does not have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. But it was also held that in spite of such latitude, a classification in a taxing law must be rational and based on some qualities and characteristics which are to be found in all the persons grouped together and absent in the others left out of the class ; and the differentia must have a rational nexus with the object sought to be achieved by the law. By referring to the case of Kerala Hotel & Restaurant Association [1990] 77 STC 253 (SC), Mr. Saha submitted that the Legislature is required to consider felt needs of time and the classification of cooked food was held to be valid. He referred to [1962] 13 STC 529 (SC) (East India Tobacco Company v. State of Andhra Pradesh) to show that separate classification of country tobacco and Virginia tobacco was valid. Similarly, he referred to [1999] 112 STC 93 (Kar) (Varalakshmi Silk House v. State of Karnataka) at page 103 to show that the classification made by exemption given to indigenous sugar was valid. Similarly, his reference to [1988] 69 STC 119 (Ker) (Hotel Elite v. State of Kerala) was to show that classification of cooked food for the purpose of taxation was valid.
27. In the present case, the Legislature has clearly made separate classifications of India-made sugar and sugar not manufactured or made in India which includes imported, foreign-made, sugar. That is the object of entry 79 of Schedule I and subsequently incorporated entry 70A of Schedule IV. India-made sugar has been made tax-free, while the other sugar has been made taxable, be it under entry 1 of Schedule VII or under entry 70A of Schedule IV. From the principles already discussed, it is well-settled that the Legislature is free to do such classification for the purpose of taxation. If we apply the two tests laid down by the Supreme Court, we see that India-made sugar constitutes a uniform or identical type of sugar, to which class imported, foreign-made, sugar does not belong. Similarly, sugar not made or manufactured in India does not include any India-made sugar. Therefore, here the classification is founded on geographical base, and one group or class of sugar does not include any sugar of the other group or class. The second test is whether there is a nexus of such classification with the object which the statute seeks to achieve. The object of 1994 Act is to collect revenue for running the State. The Legislature, in its wisdom and discretion, has chosen to make indigenous sugar tax-free but has chosen to levy tax on sugar which is not manufactured or made in India, namely, on foreign-made sugar which is imported into West Bengal and sold there. In our opinion, such classification is constitutionally valid and conforms to Article 14. In this connection we may refer to Him Lal Rattan Lal v. Sales Tax Officer [1973] 31 STC 178 (SC), where it was held that Legislature was competent to separate processed or split foodgrains from unprocessed, unsplit foodgrains and treat them as two separate and independent goods.
28. It was argued by Mr. Chakraborty that imported, foreign-made sugar cannot be distinguished by appearance from India-made sugar. According to him, such similar appearance of both classes of sugar will create confusion in the matter of taxation. But, in our view, the apprehension of Mr. Chakraborty has no foundation. Because, the State is levying tax on imported, foreign-made, sugar at the first point of sale, and not at any other stage. Therefore, imported sugar coming into the hands of a dealer who is importing it and selling in West Bengal, is liable to taxation. The question of identity by appearance, even if it is true, is wholly irrelevant in this context. As we know, india-made sugar is tax-free. Therefore, there is no possibility of any confusion. Mr. Chakraborty hinted that may be that the applicant is importing sugar from foreign countries direct to West Bengal and selling the same in West Bengal, but a possibility cannot be ruled out that sugar is imported from outside the country to a port in a State other than West Bengal, and then it is transported into West Bengal for sale. He suggested that in such a case, there will be confusion whether such sugar is India-made or imported from foreign country. We do not like to enter into such hypothetical facts, because generally a court does not decide a legal issue on a hypothesis. As and when a dispute arises on such facts as suggested by Mr. Chakraborty, this Tribunal will have the occasion to decide. We, therefore, do not express any opinion on the suggested facts. In the present case, the applicant is undisputedly importing sugar direct into West Bengal from foreign countries and selling such sugar in West Bengal. Therefore, on the facts of the present case, there is no possibility of confusion about levy of tax.
29. Mr. Chakraborty on behalf of the applicant has argued that the provisions for levy of tax on sales of imported sugar are violative of Articles 301 and 304, and particularly 304(b) of the Constitution of India. He has referred to Atiabari Tea Co. Ltd. AIR 1961 SC 232, Rai Ramkrishna [1963] 50 ITR 171 (SC) ; AIR 1963 SC 1667, State of Madras v. N.K. Nataraja Mudaliar [1968] 22 STC 376 (SC) and Video Electronics v. State of Punjab [1990] 77 STC 82 (SC) ; (1990) 3 SCC 87. He contended that levy of tax at 4 per cent on imported sugar is a direct and immediate impediment to the free-flow of trade, commerce and intercourse. Mr. K.K. Saha, learned advocate for respondents, submitted that no facts have been presented by the applicant to at least show that there is actually any difference in price in the market between India made sugar and imported, foreign made, sugar. He has also submitted that mere levy of tax cannot be contended to be an impediment to free-flow of trade and commerce. According to him, if mere levy of tax is so considered, then no tax can be levied on any goods. Mr. Saha argued that since no difference in price has been shown, and no handicap for sale or movement of imported sugar vis-a-vis sale or movement of India made sugar has been shown, the contention of contravention of Article 401 or 304 should fall through as not substantiated. In this connection he relied on some of the decisions referred by the learned advocate for the applicant and further he relied on [1999] 112 STC 93 (Kar) (Varalakshmi Silk House v. State of Karnataka). In the Karnataka case the learned single Judge held that if the levy of tax does not affect the movement of goods, then there is no violation of Article 401. In that case, imported raw silk and silk yarn were considered to be a separate category from indigenously manufactured raw silk and silk yarn. There was no notification prohibiting movements of the goods. On those facts, it was held that the tax levied on the imported material cannot be considered as affecting free-flow of trade or commerce and it does not directly or immediately restrict or impede free-flow or movement of trade. In Andhra " Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212 (SC), it was held : "Normally, a tax on sale of goods does not directly impede the free movement or transport of goods" (page 225). In the case of Nataraja Mudaliar [1968] 22 STC 376 (SC), it was held that in certain cases a tax directly and immediately restrict or hampers the flow of trade, but every imposition of tax does not do BO. It was further held that the guarantee in Article 401 is not restricted to inter-State trade or movement. It protects also intra-State trade or movement. Therefore, if the applicant wants to establish that levy of tax at 4 per cent at the first point of sale of imported, foreign-made, sugar is amounting to a direct and immediate impediment to intra-State trade or movement, then he must establish that the tax has actually resulted in such an impediment. Mere contention or argument is not sufficient, because mere levy of tax by itself does not amount to such an impediment. In the present case, the applicant has totally failed to establish that levy of the tax has resulted in such an impediment. It was submitted before us by Mr. Gopal Chakraborty, learned advocate for the applicant, that in the market in West Bengal India-made sugar and imported, foreign-made, sugar both are being sold at the same price. Therefore, we have no reason to hold that there has been contravention of Article 401. That being so, there is no contravention of Article 404 as well. There is no grievance that any impediment has been created by any means to sale or movement of imported, foreign-made, sugar within the State of West Bengal. In this connection it is goods to remember that this is a case of imported, foreign-made, sugar directly brought into the State of West Bengal for sale. Inter-State movement is not involved here. Therefore, we hold that the contentions on violation of Article 401 or 304(a) are without substance.
30. Mr. Gopal Chakraborty, learned advocate for the applicant, invoked Article 51A in Part IVA of the Constitution of India and submitted that imposition of tax on sales of imported, foreign-made, sugar amounts to non-performance of fundamental duties. He identified the following as important fundamental duties : (i) to value and preserve rich heritage of our composite culture vide Article 51A(f), (ii) love to all, (iii) non-violence, and (iv) not to injure others. Mr. Saha appearing for respondents, submitted that Article 51A has no application to the facts of the case. The contention of Mr. Chakraborty for the applicant is disposed of by observing that Article 51A has no role to play regarding levy of tax on imported, foreign made, sugar. That article contains much higher and greater ideals relevant in the national and wider social context, having no nexus with levy of sales tax. The contention is, in our opinion, wholly irrelevant.
31. One of the contentions of Mr, Chakraborty was that the 1999 amendment was enacted by the State Legislature while the present application was pending for decision. He raised objection to such legislative activity, and at the same time argued by referring to Collector of Customs v. East Punjab Traders (1998) 9 SCC 115 (paragraph 7) that pending the decision on this application no amendment could be made affecting the parties or bringing penal consequences on them. The scheme of the Constitution of India envisages distribution of powers among the important organs of the State. Powers have been clearly distributed between Legislature and judiciary. If it is argued that the Legislature cannot freely legislate within its powers, while a judicial review of existing law, is pending, it can also be argued that judiciary cannot decide a dispute, while a legislative proceeding touching that dispute is pending before the Legislature. Any such contention will disturb the fine balance effected by distribution of powers. In our view, the Constitution does not lay down any prohibition or limitation on exercise of legislative powers by the Legislature, while a dispute is pending before the judiciary for decision. Therefore, the contention has no substance.
32. Mr. Chakraborty appearing for the applicant, contended that the 1999 amendment was not merely declaratory, procedural or clarificatory. It affected vested rights of the applicant and made the applicant subject to penal consequences. He challenged the amendment as not bona fide, arbitrary and unreasonable. Some of the decisions relied on by him are K. Gopinathan Nair v. State of Kerala [1997] 105 STC 580 (SC) ; (1997) 10 SCC 1 (paragraphs 20 and 54) ; Collector of Customs v. East Punjab Traders (1998) 9 SCC 115 ; D. Cawasji & Co. v. State of Mysore [1985] 58 STC 1 (SC); Jawaharmal v. State of Rajasthan AIR 1966 SC 764 ; Krishnamurthi and Co. v. State of Madras [1973] 31 STC 190 (SC) and State of Gujarat v. Raman Lal Keshav Lal (1983) 2 SCC 33. Mr. Chakraborty contended that before levy of tax by selection of any commodity, aspects such as impact of the levy on the society, economic consequences and administrative convenience will have to be considered. According to him, those things were not considered in this case. He also referred to Sati Oil Udyog Ltd. v. Commissioner of Income-tax [1998] 232 ITR 502 (Gauhati) wherein retrospective amendment of Section 143(1A) of the Income-tax Act was held to be ultra vires the Constitution. Mr. K.K. Saha, learned advocate for respondents, opposed the contentions. He submitted that the law was already there with effect from May 1, 1995 regarding imposition of tax on sales of imported, foreign made, sugar. Of course, he submitted that at that time the provisions for levy of tax permitted taxation at the rate of 12 per cent. Obviously, this submission was made on the basis that sales of imported sugar were covered by entry 8 of Schedule IX. We have already held that entry 8 of Schedule IX was not relevant and had no application to sales of imported sugar. According to us, such sales were previously governed by entry 1 of Schedule VII, because imported sugar was included in Section 14(viii) of Central Act and the rate of tax was 4 per cent only, and that too on a single point. According to Mr. Saha, the 1999 amendment is actually clarificatory and declaratory, because the law was already there for taxation. By the amendment, the law has been declared in clearer terms so that there is no scope for any possible confusion. Entry 79 of Schedule I has been governing sales of India made sugar right from May 1, 1995 when 1994 Act came into force. With insertion of entry 70A in Schedule IV, it was declared and clarified that sugar other than India made sugar was taxable at 4 per cent at a single stage (on the first sale). Having considered the state of law prior to the 1999 amendment, and the nature of amendment effected from April 1, 1999 by which not only entry 70A of Schedule IV was inserted, but entry 1 of Schedule VII and entry 8 of Schedule IX were omitted, we are convinced that the 1999 amendment is merely clarificatory and declaratory. Its object and purpose are to declare that rate of tax would be only 4 per cent and at a single stage. In Mithilesh Kumari v. Prem Behari Khare AIR 1989 SC 1247, it was held that a statute is not properly called a retrospective statute, because a part of the requisites for its action is drawn from a time antecedent to its passing. The court must look at the general scope and purview of the statute and at the remedy sought to be applied and consider what was the former state of law, and what the legislation contemplated. Following that principle, we find that the 1999 amendment was made in order to put the former state of law in clearer terms. We do not find, nor has anything been shown to us to the effect, that the applicant had a vested right on the basis of the former law which was being taken away by the amendment. The grievance about penal consequences emanating from 1999 amendment is not correct. Since imported sugar has always been exigible to tax at 4 per cent both before and after the amendment, whatever the penal provisions are, they have always been there ; and there is no new penal consequence. The applicant had a wrong impression, as we have seen, that there was no law before the 1999 amendment for levy of tax on sales of imported sugar. But actually the law was to the effect that tax could be levied at 4 per cent, and at a single stage. The Commissioner's circular dated October 27, 1997 correctly stated that position of the law. Therefore, the question of any rights already accrued to the applicant being impaired by 1999 amendment, does not arise at all. It was held in Rai Ramkrishna [1963] 50 ITR 171 (SC) ; [1964] 1 SCR 897 that the power to make a law carried with it the power to give it retrospective operation. In Krishnamurthi & Co. [1973] 31 STC 190 (SC) ; [1973] 2 SCR 54, it was, inter alia, held that the fact that a dealer was not in a position to pass on the sales tax to others did not affect the competence of the Legislature to enact a law imposing sales tax retrospectively. In the present case, it has not been clearly argued that the applicant had failed to pass on the sales tax to the buyers prior to 1999 amendment. Even if the applicant's case had been so, it could not affect the competence of the Legislature to enact the 1999 amendment with so-to-say retrospective operation. Mr, Chakraborty referred to the penal consequences if it is held that levy of tax at 4 per cent is valid with effect from May 1, 1995. Since it is a taxing statute, and since the provisions were there in the former state of law to the effect that tax could be imposed at 4 per cent, vulnerability of the applicant to penal consequences under the law for non-payment of tax has no effect on the 1999 amendment and its retrospective operation. Truly, the amendment does not impose any new levy of tax, and hence it is not retrospective in that sense. It is, however, retrospective to the extent that it declares the law in clearer terms leaving no scope for argument. In view of the above finding, the contentions of Mr. Chakraborty to the effect that retrospectivity of 1999 amendment is unconstitutional, cannot be accepted. In this connection we may refer to Him Lal Rattan Lal v. Sales Tax Officer [1973] 31 STC 178 (SC) where a retrospective levy was held constitutionally valid, because the amendment was necessary in order to bring out clearly the legislative intention to separate one class of the same commodity from another (processed or split foodgrains from unprocessed or unsplit foodgrains). It was also held that the fact that the retrospective levy did not afford an opportunity to dealers to pass on the tax to consumers had no relevance in considering legislative competence of the levy.
33. At some stage of the arguments, Mr. Chakraborty submitted in passing that the tax is confiscatory in nature. But the applicant has failed to plead or show that in point of fact his capital was being eroded because of the tax with either prospective operation or retrospective operation. Mere raising of a contention that the tax is confiscatory in nature, leads us nowhere. No material has been placed to show that the tax is confiscatory at any stage. We, therefore, reject that contention.
34. Mr. Chakraborty did not fail to argue that the State Legislature was powerless in imposing sales tax on sales of imported, foreign-made, sugar, because the State is sharing the proceeds of additional excise duty levied by the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and because sugar imported from foreign countries has been subjected to additional customs duty under the Customs Tariff Act, 1975. Mr. Sana appearing for respondents submitted that none of those two Acts affected the competence of State Legislature in imposing tax on sales of sugar imported from foreign countries. As regards the Act of 1957, it is clear from Section 3 that the levy of additional excise duty is upon goods manufactured in India. It has nothing to do with foreign goods imported from foreign countries. Moreover, the Act of 1957 makes certain provisions under which certain consequences follow, if a State takes the share of collection of additional excise duty and simultaneously imposes sales tax on the same goods. But the Act of 1957 does not, and could not, curtail or limit the legislative powers of the State to impose tax under the provisions of the Constitution of India according to the distribution of legislative powers contained in List II. As regards the additional customs duty levied on imported, foreign-made, sugar under the Customs Tariff Act, 1975, it appears that levy of additional customs duty has been made equal to excise duty. No provision has been shown from the Customs Tariff Act, 1975 or from any other law for the time being in force, or from the Constitution of India to the effect that if customs duty, additional customs duty or even special customs duty is levied oh any imported goods, the State Legislature shall be denuded of the competence to legislate for imposing sales tax on the same goods. Nor did Mr. Gopal Chakraborty, learned advocate for the applicant, claim that in view of the Act of 1957 or the Customs Tariff Act, 1975, the State Legislature lost its competence to legislate for imposing sales tax. By hearing his arguments it appeared to us that he was drawing our attention to the so-called immorality on the part of the State to impose sales tax on imported goods which have been subjected to various kinds of customs duty. Taxation docs not really concern itself with morality ; to our mind, there is no immorality involved in imposition of sales tax on imported sugar. Similarly, we find no substance in the contention of Mr. Chakraborty that imported sugar being subject to Price Control Order, the State Legislature should not impose sales tax. Mr. Chakraborty, in fact, referred to Sugar (Control) Order, 1966 as amended by Sugar (Control) Amendment Order, 1999 issued by the Government of India in exercise of powers conferred by Section 3 of the Essential Commodities Act. 1955. In our view, the said order or orders have no relevance to imposition of sales tax by State Legislature under entry 54 of List II. These are all the contentions made on behalf of applicant.
35. Thus, all the contentions on behalf of the applicant fail. The application is dismissed, The interim orders passed in this case stand vacated. No order is made for cost.
After the judgment has been delivered, learned counsel for the applicant, orally prays for stay of operation thereof. Mr. K.K. Saha, learned advocate for respondents, opposes the prayer. Having regard to the circumstances of the case including the fact that no order of assessment has been made yet, the prayer for stay is rejected.
J. Gupta (Judicial Member)
36. I agree.
D. Bhattacharyya (Technical Member)
37. I agree.