Calcutta High Court
Jadunath Saha And Anr. vs Commissioner Of Commercial Taxes on 3 March, 1987
Equivalent citations: [1988]70STC273(CAL)
Author: Suhas Chandra Sen
Bench: Suhas Chandra Sen
JUDGMENT Suhas Chandra Sen, J.
1. The petitioners, Jadunath Saha and Shyamendralal Saha, carry on Business in partnership under the name and style of M/s. Nityananda Bhandar. The petitioners are registered dealers under the West Bengal Sales Tax Act, 1954, the Bengal Finance (Sales Tax) Act, 1941 and also under the Central Sales Tax Act, 1956. There is no dispute that the petitioners are dealers in various notified commodities, like flour, suji, atta, soap, sugar, detergent powder, turmeric, fertiliser, etc., for which the petitioners are liable to pay sales tax. The petitioners also carry on business of purchase and sale of various commodities like kerosene oil, high speed diesel oil, mobil oil and vegetable oil which are not liable to be included in the "taxable turnover" of the petitioners for the purpose of computation of sales tax liability. The dispute, in the case, is about the includibility of the transactions relating to kerosene oil, high speed diesel oil, mobil oil and vegetable oil in the turnover of the petitioners for the purpose of levy of turnover tax. It has been contended on behalf of the petitioners that since the turnovers in respect of these commodities are not to be included in the taxable turnover of the petitioners, turnover tax should not be calculated by taking into consideration these items which have been specifically kept out of the purview of the Bengal Finance (Sales Tax) Act, 1941 by the Schedule annexed to the Act read with Section 6 of the Act.
2. The charging section of the Bengal Finance (Sales Tax) Act, 1941 is Section 4 which lays down that every dealer whose gross turnover in a given year exceeded the taxable quantum shall be liable to pay tax under that Act on all sales effected during the year. "Taxable quantum" has been defined in Section 4(5) to mean, in relation to any dealer who imports for sale any goods into West Bengal, Rs. 20,000, in relation to any dealer who manufactures or produces any goods for sale, Rs. 50,000 and in relation to any other dealer, Rs. 1,00,000.
"Gross turnover" has not been defined in the Act. "Turnover" has, however, been defined by Section 2(1) to mean the aggregate of sale prices or parts of sale prices receivable during any given period. There are some special cases also mentioned in that definition which are not material for the purpose of this case.
3. Section 5 lays down the rate of tax and provides that the tax payable by a dealer shall be levied on his "taxable turnover" at the rates specified therein. Section 5(2) defines "taxable turnover"-In the case of a dealer who is liable to pay tax under Section 4 or under Section 8(3), that part of his gross turnover during any period which remains after deducting therefrom various categories of turnover enumerated in that sub-section.
4. Section 6(1) is important for the purpose of this case and it lays down "no tax shall be payable under this Act on the sale of goods specified in the first column of Schedule I, subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof."
5. The scheme of the Bengal Finance (Sales Tax) Act is to levy tax on "all sales effected" of all commodities except which have been specified as tax-free in the first column of Schedule I to the Act subject to the conditions and exceptions set out therein. Entry 17 of the Schedule deals with inferior grade of kerosene oil and entry 50 refers to kerosene oil other than the inferior grade of kerosene oil referred to in entry 17.
6. Section 6B creates the liability to pay turnover tax and lays down the rates thereof. Section 6B provides :
6B. Liability to payment of turnover tax and rate thereof.-(1) Notwithstanding anything contained elsewhere in this Act,-
(a) every dealer, whose aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 (West Ben. Act IV of 1954) during the last year ending on or before the 31st day of March, 1979, exceeds rupees fifty lakhs, shall, in addition to the tax payable by him under Section 5 and Section 6C, if any, be liable to pay from the 1st day of April, 1979, a turnover tax at the rate specified in Sub-section (3) of such part of his turnover as specified in Sub-section (2);
(b) every dealer, other than those referred to in Clause (a), whose aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 during any year ending on or after the 1st day of April, 1979, exceeds rupees fifty lakhs, shall, in addition to the tax payable by him under Section 5 and Section 6C, if any, be liable to pay from the first day of the year immediately following such year a turnover tax at the rate specified in Sub-section (3) of such part of his turnover as specified in Sub-section (2);
(c) ...
(d) ...
(2) The turnover tax shall be levied on that part of the gross turnover of a dealer during any period which remains after deducting therefrom his turnover during that period on-
(a) sales of goods referred to in Section 14 of the Central Sales Tax Act, 1956 (74 of 1956);
(b) sales of electrical energy and newspapers;
(c) sales of 'motor spirit' as defined in Clause (b) of Section 2 of the West Bengal Motor Spirit Sales Tax Act, 1974 (West Ben. Act XI of 1974);
(d) sales of goods declared tax-free under Section 6;
(e) sales of goods which are generally exempt from tax under Sub-clause (vi) of Clause (a) of Sub-section (2) of Section 5;
(f) sales referred to in Sub-clause (v) of Clause (a) of Sub-section (2) of Section 6 of goods, other than those specified in Clauses (a), (b), (c), (d) and (e);
(g) such other sales as may be prescribed.
(3) The turnover tax shall be levied at the rate of-
(a) one per centum of such part of the turnover as specified in Sub-section (2), if the aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 (West Ben. Act IV of 1954), of the dealer liable to pay such tax exceeds rupees one crore during the year in respect of which or part of which the turnover tax is levied;
(b) one-half of one per centum of such part of the turnover as specified in Sub-section (2), if the provisions of Clause (a) do not apply :
Provided that the tax payable by a dealer under Clause (a) shall not exceed a sum equivalent to the aggregate of one-half of the tax payable by him in accordance with the said clause and ten per centum of the amount by which his aforesaid gross turnover exceeds rupees one crore.
(4) No dealer shall realise from his purchaser the turnover tax payable by him under this section.
7. Section 6B was inserted in the Bengal Finance (Sales Tax) Act, 1941 by an amendment with effect from 1st April, 1979. Section 6B makes it clear that it is a tax payable by a dealer "in addition to the tax payable by him under Section 5 and Section 6C". Although the tax is designated as turnover tax, it is nothing but an additional levy on a special category of dealers. Under Section 6B(a) and (b) the dealers who are liable to pay this tax are only those "whose aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 ...exceeds Rs. 60,00,000". The tax, however, has not been levied on the aggregate gross turnover. But tax is on "such part of his turnover as specified in Sub-section (2)".
8. Therefore, for imposition of turnover tax, the first step is to find out the dealers who are liable to pay this tax. For this purpose, aggregation of gross turnovers is necessary. The goods specified in the first column of Schedule I of the Act which have been declared to be tax-free are not to be kept out for the purpose of calculation of gross turnover. Section 6 merely says that "no tax shall be payable under this Act" on such goods. Section 6B does not seek to impose any tax on the goods which have been declared tax-free by Section 6. Section 6B, however, seeks to impose an additional burden of tax on big dealers whose aggregate gross turnover exceeds Rs. 50,00,000.
9. The only question, therefore, is whether in computation of gross turnover, the goods that have been declared tax-free under Section 6 can be taken into consideration. Section 6 does not say that the goods specified in the first column of Schedule I shall not be included in the turnover of a dealer. The definition of "turnover" in Section 2(i) is very wide and it means aggregate of sale prices or parts of such sale prices receivable during any given period. There is no reason to hold that the "turnover" will not include sale price of goods included in the column 1 of Schedule I to the Act.
10. Section 5(2) has defined "taxable turnover" to mean that part of gross turnover during any period which remains after deducting therefrom various categories of turnover enumerated in that section.
11. Therefore, the words "gross turnover" has to be understood in general sense and not in any special sense. In general sense, gross turnover will include the entire turnover of a dealer without any deduction. The taxable turnover is computed after making various deductions from the gross turnover. One of the deductions in Section 6(2)(a)(i) is "sale of goods declared tax-free under Section 6". This makes it clear that one of the categories of sales which have to be excluded from gross turnover "is the sale of goods declared tax-free under Section 6". In other words, sales of tax-free goods which are includible in gross turnover has to be deducted for the purpose of calculation of taxable turnover under Section 5(2) of the Act.
12. Therefore, there is nothing in the Act to indicate that for the purpose of computation of gross turnover, the sales of tax-free goods should not be included. The position is made abundantly clear by Section 6B(2) by which it is provided that "turnover tax shall be levied on that part of the gross turnover of a dealer which remains after deducting therefrom his turnover" on, inter alia, "sales of goods declared tax-free under Section 6".
13. For the reasons aforesaid, I am unable to uphold the argument advanced by Mr. S.C. Bose, on behalf of the petitioner, that "gross turnover" must mean taxable turnover as defined in Section 4 of the Act, for the purpose of levy of turnover tax.
14. On behalf of the petitioners, it was further contended that the construction suggested by the petitioners would be equitable, otherwise a person who has a turnover of rupees forty-nine lakhs of export sales and one lakh of taxable sales under the West Bengal Act will have to pay turnover tax, whereas a person who deals in rupees forty-nine lakhs worth the goods in West Bengal will not pay any turnover tax at all.
15. If a tax Act is analysed deeply, many illogical situations may be found, but that will not make the levy unlawful. Every inequitable tax is not unlawful. Lord Halsbury in the case of Scoble v. Secretary for State of India 4 STC 618, that income-tax is not and cannot be cast upon absolutely logical lines.
16. I was referred to a judgment of the Supreme Court in the case of State of Karnataka v. Ranganatha Reddy AIR 1978 SC 215, in particular paragraph 36. There, the Supreme Court observed that reading down of some provisions of law is permissible. It was argued on behalf of the petitioners that the Supreme Court found it necessary to do so because, otherwise, the Act under review was liable to be declared unconstitutional.
17. But that is not the situation here. The constitutional validity of the Act has not been challenged. Morever, I fail to see how the Act becomes unconstitutional if in this case plain meaning is given to the words of the statute. It is laid down that if a dealer's aggregate gross turnover exceeds a certain limit, he will have to pay an additional tax designated "turnover tax". I fail to see how this can be called unconstitutional.
18. In view of the aforesaid, this writ petition must fail and is dismissed. The interim order is vacated.
19. There will be no order as to costs.