JUDGMENT
Satyabrata Sinha, J.
1. The jurisdiction of the State of West Bengal to impose sales tax on imported sugar is in question in these writ applications.
2. As a pure question of law is involved in these applications, it is not necessary to state the fact of the matter in great details. Suffice it to say that the petitioners herein are importers of sugar. They are registered under both Central Sales Tax Act, 1956, and West Bengal Sales Tax Act, 1994. They import sugar in terms of contracts registered with “Agricultural Processed Food Products Export Development Authority”, Ministry of Commerce, Government of India, New Delhi. Sugar is imported from China, Thailand, Brazil, Pakistan and other countries.
3. The petitioners in the writ applications had given details the name of the ship which importing sugar, the dates of arrival thereof and the quantities of sugar imported.
For the purpose of said import they have been charged to Central Excise Tariff under sub-heading No. 1701.39 being basic custom duties plus surcharge plus basic excise duty plus additional excise duty plus cess.
4. Basic customs duties and full additional duties were exempted from any tax on the said head in so far as imported sugar is concerned in terms of a notification bearing No. 11 of 1997 Customs which stood amended by a notification No. 15 of 1998 dated 28th April, 1998, However, from May 6, 1998 tax has now been imposed on the aforementioned head. The petitioners contend which has not been denied nor disputed that imported sugar now attracts 5 per cent basic custom duty and full additional duty amounting to Rs. 850 per metric ton equal to “basic excise duty” plus additional duty plus cess leviable thereupon. Special customs duty, however, is not to be paid by reason of the exemption notification dated 28th April, 1998. The basic excise duty has varied from time to time but other duties have not except from March 1, 2000, 10 per cent surcharge on basic custom duty has been abolished.
5. Admittedly there exists an integrated scheme with regard to payment of sales tax by way of additional duty. Allegedly in terms of the provisions of the West Bengal Sales Tax Act, 1941, West Bengal Sales Tax Act, 1954 and West Bengal Sales Tax Act, 1994, no rate of tax was fixed for payment of sales tax on imported sugar. On or about 27th October, 1997 a circular was issued by the Directorate of Commercial Tax declaring that sugar which is not made or manufactured in India (which is exempted from payment of sales tax) would be liable to sales tax under the West Bengal Sales Tax Act, 1994.
6. Kothari Global Ltd., one of the petitioners herein impugned the constitutionality, legality and validity of the said circular dated 27th October, 1997 before the West Bengal Taxation Tribunal and the said circular was declared ultra vires. The West Bengal Sales Tax Act, 1994, was thereafter amended by a notification bearing No. 946-FT, in terms whereof a new serial bearing No. 70A was inserted in the Schedule IV of Part A of the said Act stipulating :
“70A, Sugar, other than sugar manufactured or made in India as specified against serial No. 79 of the Schedule I would be charged to tax”.
A retrospective effect and retroactive operation was given to the said entry with effect from 1st May 1995, levying 4 per cent tax levied thereupon, by and under Section 8 read with sub-clause (a) of Clause 40 of Section 2 along with the Notification bearing No. 1109-FT dated April 20, 1995.
7. Vires of the said Act had been questioned by the petitioners before the Taxation Tribunal and by reason of a judgment and the order dated 8th October 1999, [2001] 121 STC 134, in case No. RN-309 of 1998 (Haroon M Adam v. State of West Bengal) since reported in 35 Sales Tax Advises 92, the said application has been dismissed.
8. The State has also filed a writ application before this Court – questioning a part of the said decision of the Tribunal to the effect that imposition of the sugar in one of the goods of special importance.
9. In these writ applications the petitioners herein have, inter alia, prayed for issuance of a writ of or in the nature of mandamus directing the respondents to withdraw, recall, cancel or set aside/quash the impugned order as contained in annexure “O” to the writ application and other consequential reliefs.
10. Mr. Sakti Nath Mukherjee, the learned Senior Counsel appearing on behalf of the petitioners, inter alia, submitted that having regard to the provisions contained in Article 286(3) of the Constitution of India, Central Sales Tax Act, 1956, Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Customs Tariff Act, 1975 it would appear that as regard the payment of sales tax on sugar which has been declared to be a goods of special importance, a tax having been levied in terms of an integrated scheme to which the State of West Bengal is a party, the imposition of sales tax by reason of the impugned Act must be held to be bad in law. According to the learned counsel, once tax is being paid in terms of 1957 Act, the self-same tax being realised over again under the State Act does not and cannot arise. Strong reliance in this connection has been placed on State of Kerala v. Attesee (Agro Industrial Trading Corporation) and in State of Kerala v. State Trading Corporation of India Ltd. .
11. In any event contends the learned counsel, the retrospectivity given to the said tax is clearly violative of Article 14 of the Constitution of India as the petitioners had not realised the said tax from the customers. Strong -reliance in this connection has been placed on the State of Rajasthan v. Bhatnagar Cement Co. (Pvt.) Ltd., .
12. Mr. Gopal Chakraborty, the learned Senior Counsel appearing on behalf of the petitioners adopted the submission of Mr. Mukherjee but added that in absence of the rate of tax having been specified in terms of the Acts, no tax was leviable prior to coming into force of the West Bengal Finance Act, 1999. The learned counsel would contend that by imposition of the said tax, a discrimination has been made between sugar manufactured in India and imported sugar and unequals have been treated as equals. The learned counsel would contend that no retrospectivity can be given in relation to a tax by reason of a delegated notification. Strong reliance in this connection has been placed on Industrial Weavers (P) Ltd. v. Commissioner of Commercial Taxes reported in (1965) III R.L.R. 14 and State of Bihar v. Krishna Kumar Kabra .
13. Mr. Chakraborty, the learned counsel appearing on behalf of the petitioners in one of the writ petition, inter alia, submitted that by reason of the residuary provision contained in IX Schedule appended to the West Bengal Sales Tax Act, 1994 what is permissible is to include goods but not goods of any specified type and having regard to the fact that sugar manufactured in India had already been exempted, the other types of sugar could not have been brought within the purview thereof.
14. Mr. Anindya Mitra, the learned Senior Counsel appearing on behalf of the respondent, on the other hand, submitted that the 1967 Act does not prohibit imposition of any tax by the State. According to the learned counsel, desirability to avoid such taxation as has been expressed in one of the decisions cannot take away the legislative power particularly when such legislative power on the State has expressly been acknowledged in the Parliamentary Act itself. As regards the matter, contends Mr. Mitra of distribution of the amount of tax between the Central Government and the State is a matter between them and the tax-payer has no say in respect thereof. It was submitted that the question as to whether the Central Government would pay any amount of tax collected by it to the State of West Bengal in view of its independent imposition thereof, depends on the discretion of the Central Government. Such a provision is clearly within the legislative competence of the State Legislature. Reliance in this connection has been placed on State of Kerala v, Attesee (Agro Industrial Trading Corporation) and State of Bihar v. Bihar Chamber of Commerce .
15. As regards the question of applicability of Article 14 of the Constitution of India, the learned counsel would contend that indigenous imported sugar formed a different class and taxation on imported sugar cannot be said to be an unreasonable classification. Reliance in this connection has been placed on Federation of Hotel and Restaurant Association of India v. Union of India and Varalakshmi Silk House v. State of Karnataka reported in [1999] 112 STC 93 (Kar).
16. The learned counsel would contend that the only restriction which could be placed, having regard to the provisions of the Central Sales Tax Act, 1956, read with 1957 Act was to impose tax not exceeding 4 per cent which has been done in the instant case. According to the learned counsel all types of imported sugar have been treated equally, Article 401 of the Constitution of India which must have a direct and immediate effect in inter-State trade and commerce, will have thus no application in the instant case. It is not a case, Mr. Mitra would contend, which will affect the movement of goods as no discrimination thereby has been committed on the basis of origin of the commodity within India. As regard the retrospectivity of the said provision, it was submitted that as earlier the rate of tax was at 12 per cent per annum, the same having been reduced to 4 per cent by West Bengal Sales Tax (Amendment) Act, 1999, it has not prejudicially affected right of anybody but in fact is beneficial to the dealers.
17. Mr. Mukherjee, the learned counsel in reply, inter alia, submitted that the apex Court neither in State of Kerala v. Attesee (Agro Industrial Trading Corporation) , nor reported in State of Bihar v. Bihar Chamber of Commerce was concerned with the matter of import of goods of special importance. The power under Article 286(3) of the Constitution of India is not exhausted with the enactment of the Central Sales Tax Act or 1957 Act but such a provision must be deemed to have been included in Sub-section (5) of Section 3A of the Customs Tariff Act, 1975. Article 286(3) of the Constitution of India deals with any law of a State imposing a sales tax on declared goods whereas under Article 269(1)(g) deals with the sale taking place in course of inter-State trade or commerce, the Union is to impose sales tax thereon.
18. By reason of entry 92A, List I of the Seventh Schedule to the Constitution of India, the power to tax on sale taking place in course of inter-State trade or commerce is within the exclusive legislative field of the Union.
19. Article 269(1)(g) and 269(2) of the Constitution of India read thus :
“Article 269(1). The following duties and taxes shall be levied and collected by the Government of India but shall be assigned to the States in the manner provided in clause (2), namely,–
(a) to (f)………..
(g) taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.
Article 269(2). The net proceeds in any financial year of any such duty or tax, except in so far as those proceeds represent proceeds attributable to Union Territories, shall not form part of the Consolidated Fund of India, but shall be assigned to the States within which that duty or tax is leviable in that year, and shall be distributed among those States in accordance with such principles of distribution as may be formulated by Parliament by law.”
Clause (3) of Article 286 on the other hand deals with a tax on sales which is otherwise within the exclusive legislative field of the State in view of entry 54, List II of the Seventh Schedule to the Constitution of India. Entry 54, List II of the Seventh Schedule which empowers the State to make any enactment of tax on sale or purchase of the goods would be subject to the provision contained in entry 92A, List I. Thus, whereas the power to impose tax on sale or purchase of goods other than the newspaper belongs to the State (entry 54, List II), but taxes on imports and exports (entry 84, List I) and taxes on inter-State trade and commerce (entry 92A, List I) are exclusively Union subjects.
Article 286 of the Constitution of India was amended, in view of the decision of the apex Court in Bengal Immunity Company Limited v. State of Bihar whereby and whereunder its earlier decision in State of Bombay v. United Motors (India) Ltd. was overruled; in terms whereof sales tax imposed by the State was not interfered with. Imports and inter-State trade and commerce which were matter of national concern. Article 286 of the Constitution of India however, only lays down certain limitations upon the power of State to enact sales legislation which are :
(a) No tax shall be imposed on sale or purchase which takes place outside the State [Cl: (1)(a)].
(b) No tax shall be imposed on sale or purchase which takes place in the course of import into or export out of India [Cl. (1)(b)].
The power to tax sales taking place in the course of inter-State trade and commerce is within the exclusive competence of Parliament [Article 269(1)(g) ; entry 92A of List I].
Even if a sale does not take place “in the course of inter-State trade or commerce”, State taxation would be subject to restrictions and conditions imposed by Parliament if the sale relates to goods declared by Parliament to be of special importance in inter-State trade and commerce.
Each one of the aforementioned limitations is independent and distinct.
Bearing in mind the aforementioned provisions, let us now consider the relevant Central legislation.
20. The Central Sales Tax Act, 1956 (hereinafter referred to as 1956 Act) was enacted for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject.
21. Section 14(viii) of the 1956 Act, inter alia, contains a declaration to the effect “sugar covered under sub-heading Nos. 1701.20, 1701.31, 1701.39 and 1702.11 of the Schedule appended to the Central Excise Tariff Act, 1985” are goods of special importance.
22. Section 15 of the 1956 Act deals with restrictions and conditions in regard to tax on sale or purchase of declared goods within a State providing :
(a) such a tax shall not exceed 4 per cent and shall not be levied at more than one stage;
(b) State shall tax on declared goods to be refunded when a sale of tax on such goods in inter-State trade or commerce had been taxed under the Central Act.
23. The said provision has come into force with effect from October 1, 1958 by reason of Central Sales Tax (Second Amendment) Act, 1958. The Parliament also enacted the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereinafter referred to as 1957 Act). The said Act has undergone amendment in years 1979, 1980, 1984, 1985 and 1986.
24. Section 3 of 1957 Act reads thus :
“S. 3. Levy and collection of additional duties.–(1) There shall be levied and collected [in respect of the goods described in column (3) of the First Schedule] produced or manufactured in India and on all such goods lying in stock within the precincts of any factory, warehouse or other premises where the said goods were manufactured, stored or produced, or in any premises appurtenant thereto, duties of excise at the rate or rates [specified in column (4) of the said Schedule].”
25. It is not in dispute that levy of additional duties of excise by reason of the said provisions is in replacement of the State sales tax on the commodities referred to therein as would appear from the statements and objects of the original Bill, Act 23 of 1979, Act 29 of 1984 and Act 27 of 1985.
26. Column (3) of the First Schedule, inter alia, referred to sugar under sub-heading 1701.39, the rate of additional duty whereof had been fixed at Rs. 36 per qntl. Sugar of course thus, is covered by the First Schedule of the 1957 Act in general terms and without any qualification but in relation to the sugar other than those, subheading whereof had specifically been mentioned no rate of additional duty is payable.
27. The Customs Tariff Act, 1975 (hereinafter referred to as 1975 Act) on the other hand, provides for imposition of tariffs to be levied under the Customs Act, 1962. Section 2 of the 1975 Act provides for levy of duties of customs as specified in the First and Second Schedules.
28. Section 3 of the 1975 Act provides for levy of additional duty in addition to the duties envisaged under Section 2; such duty being equal to the excise duty for the time being leviable on a like article. If produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article.
29. Sub-sections (1) and (5) of Section 3A of the said Act which are relevant for the purpose of these cases read thus :
“Section 3A. Special additional duty.–(1) Any article which is imported into India shall in addition be liable to a duty (hereinafter referred to in this section as the special additional duty), which shall be levied at a rate to be specified by the Central Government, by notification in the official Gazette, having regard to the maximum sales tax, local tax or any other charges for the time being leviable on a like article on its sale or purchase in India :
Provided that until such rate is specified by the Central Government, the special additional duty shall be levied and collected at the rate of eight per cent of the value of the article imported into India.
(5) Nothing contained in this section shall apply to any article, which is chargeable to additional duties levied under Sub-section (1) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957).”
30. Under the said Act therefore, an additional duty equal to a State duty is to be payable on a like article if produced or manufactured in India which may or may not be declared goods whereas Section 3A provides for additional duty the rate of tax whereof has to be fixed having regard to the maximum sales tax of its sale or purchase in India. It does not refer to sale in course of inter-State trade or commerce or otherwise within the purview of the Central Sales Tax Act.
31. Sub-section (5) of Section 3A however, provides for exclusion of levy of additional duty on imported goods if such tax had been levied under Section 3(1) of the 1957 Act.
32. It appears from the First Schedule of Central Excise Tariff Act, a sum of Rs. 37 ad valorem is to be paid on sugar by way of duty under the said Act. Chapter 17 of Central Excise Tariff Act, 1985, thus, provides for levy of basic duty at Rs. 34 per qntl. and additional duty at Rs. 37 per qntl. in respect of the sugar falling under sub-heading No. 1701.39. Additional duty is said to be leviable under the Additional Duties of Goods (Special Importance) Act, 1957.
33. With the aforementioned backdrop the provisions of the impugned Act may now be considered. West Bengal Sales Tax Act, 1994 was enacted to levy sales tax. However, item No. 79 of the First Schedule made in terms of Section 24 provides that sugar manufactured or made in India is exempted from payment of any sales tax whereas by reason of the impugned Act purported to have been made in terms of Section 10 read with Section 17(1)(c) shall be liable for single point levy. Item No. 70A was inserted by West Bengal Act No. 3 of 1999 with effect from May 1, 1995 retrospectively in relation to sugar other than sugar manufactured or made in India as specified in serial No. 79 of Schedule I.
34. Clause (3) of Article 286 of the Constitution of India is a regulatory provisions, in terms whereof any law of a State in so far as it imposes or authorises to impose of tax on sale or purchase of the goods be subject to such restrictions and conditions in regard to system of levy, rates and other Incidence of tax as Parliament made by law specify.
35. There is no conflict between the provisions of Article 286(3) of the Constitution of India and Article 269(1)(g) or for that matter entry 54, List II of the Seventh Schedule to the Constitution of India. They operate in different fields. So far as the matter relating to import and export as provided under entry 83, List I of the Constitution of India is concerned as soon as the goods are imported, the operation of the legislation in relation thereto comes to an end. If in relation to such imported goods a further transaction takes place, the same may be subject to any other law made by the Parliament and/ or the State Legislature as the case may be depending on the respective legislative field or competence.
36. The only question which therefore, arises for consideration is as to whether only because the additional duty imposed on imported sugar in terms of 1957 Act was levied purported to be in lieu of the sales tax and the rate whereof is the maximum sales tax, the legislative competence of the State is necessarily taken away. The answer to the said question must be rendered in negative.
37. The 1957 Act in the Second Schedules itself provides :
Sugar. During [the financial year commencing on the 1st day of April, 1984, there shall be paid (………)] to each of the States specified in column 1 of the Table below such percentage of the net proceeds of additional duties levied and collected during that financial year in respect of sugar, after deducting therefrom a sum equal to 3.271 per cent of the said proceeds as being attributable to Union Territories, as is set out against it in column 2 :
Provided that if during that financial year there is levied and collected in any State a tax on the sale or purchase of sugar by or under any law of that State, no sums shall be payable to that State under this paragraph in respect of that financial year, unless the Central Government by special order otherwise directs.
Section 4 of the Additional Duties of Excise, etc., Act, 1957 reads thus:
Section 4. Distribution of additional duties among States.–During each financial year, there shall be paid out of the Consolidated Fund of India to the States in accordance with the provisions of the Second Schedule such sums, representing a part of the net proceeds of the additional duties levied and collected during that financial year, as are specified in that Schedule.”
38. The aforementioned provisions clearly go to show that only because some goods have been declared to be goods of special importance in terms of the provisions of the Central Sales Tax Act, the same by itself would not take away the legislative competence of the State to make an enactment in relation thereto but as indicated hereinbefore having regard to the provisions contained in clause (3) of Article 286 of the Constitution of India, the same shall be subject to the restrictions contained therein. The effect of limitation of the legislative compliance has been stated in the said Acts.
39. We may proceed on the basis that although it is possible to interpret that goods, which are lying in stock within the precincts of any factory, warehouse, etc. as stated, in the 1957 Act, may include the goods which had once been imported, but in our opinion, the same does not make any difference.
40. It is true that while importing the goods the duties provided for both under Section 3 and 3(a) of 1975 Act which includes the rate equivalent to the additional duties payable under the 1957 Act under sub-heading 1701.39 have been paid. But such a duty was otherwise payable also. Having regard to Sub-section (5) of Section 3A of 1975 Act, the special additional duty paid is not payable once-over-again. Such duties under the 1957 Act are therefore being paid only once irrespective of the fact as to whether the person upon whom such burden is imposed is manufacturer of sugar in India or an importer thereof.
41. Once the power of State to impose tax is not disputed, the same would not be declared unconstitutional as measure of such tax is referable to provisions of a Central tax.
42. It is also well-known that even double taxation is not prohibited.
43. Both the manufacturer of sugar in India as also the importer of duty thus stand on the same footing in terms of 1957 Act. There cannot be any doubt that the Central Sales Tax Act, 1957 and 1975 Act are to be treated as related parts of integrated scheme but that scheme does not take away the power of the State to levy tax subject of course to the restriction imposed in terms of clause (3) of Article 286 of the Constitution of India.
44. In State of Kerala v. Attesee (Agro Industrial Trading Corporation) , whereupon learned counsel for both the parties strongly relied states the law thus :
“Sri Potti is certainly correct in saying that the wordings of the Acts do not show an exact correlation between the liability to pay additional excise duty and the exemption from the levy of sales tax under the 1963 Act. But it would not be correct to say that the provisions of the latter can be interpreted without reference to the other two legislations. The C.S.T. Act has a definite impact on the manner and extent of sales tax levy, in so far as declared goods are concerned, for such levy cannot transgress the limitations and restrictions of Section 15 thereof. Section 15 applies in respect of goods listed in Section 14 which, in turn, is linked to the list in the 1944 Act. The 1957 Act also has a bearing on the sales tax levy of various States. By levying sales tax on an item covered by the Schedule to the 1957 Act, the State will have to forego its share on distribution of the proceeds of the additional excise duty levied. Whether it should impose sales tax on an item of declared goods, limited by the restrictions in Section 15 of the C.S.T. Act and at the risk of losing a share in the additional excise duty levied in respect of those very items, is for the State to determine. As pointed out by Sri Potti, it was open to the Kerala Legislature to decide–and it did so also–that on some items there should be one or other of the levies or both of them and to modify these levies depending upon its own financial exigencies. But these factual or periodical variations do not detract from the basic reality that the policy of sales tax levy on declared goods has to keep in view, and be. influenced by, the provisions of the C.S.T, Act and the 1957 Act. The reference to the 1944 Act definitions for purposes of grant of exemption in the 1963 Act as enacted originally as well as when the latter was amended in 1967 and the specific reference to the 1957 Act when the First Schedule to the 1963 Act was amended in 1980 are quite significant in this context. We, therefore, think that, though the 1963 Act referred only to the definitions in the 1944 Act, the entries in the Schedule have to be juxtaposed into the broad pattern or scheme evolved by the 1956-57 enactments set out earlier in the judgment. Doing so, and even assuming that the reference in the items of the Schedule to the definitions in the 1944 Act is by way of incorporation and not reference, one cannot escape the conclusion that the circumstances are covered by the exceptions outlined in State of Madhya Pradesh v. Narasimhan . They certainly fall within the scope of exception (a) mentioned therein and also fall within exception (c) if we read ‘unworkable and ineffectual’ to take in also ‘unrealistic and impractical’.”
The said decision clearly shows :
(1) that there is no exact co-relation between the liability to pay additional excise duty and the levy of sales tax. The State can levy its independent tax irrespective of 1957 Act only at the risk of losing a share in the additional excise duty levied in respect of those items.
(2) It is for the Central Government, having regard to the Second Schedule of 1957 Act, to decide the quantum of tax collected by it under 1957 Act from each State.
45. In State of Bihar v. Bihar Chamber of Commerce , the apex Court in no uncertain terms stated :
“We are also of the opinion that the scope of the ADE Act cannot be extended by reference to anterior reports or correspondence between the Centre and the States, as the case may be, apart from the fact that the material referred to is not unambiguous. Para 32 at page 126 of the Taxation Enquiry Commission Report (1953-54), the relevant portion whereof we have extracted hereinbefore, is more in the nature of a statement of fact coupled with a recommendation. All that it says is that the States had imposed several duties and other imposts upon tobacco which were casting an unduly heavy burden upon it and that, therefore, there should be co-ordination between different taxes on tobacco levied by the Central Government, the States and the local authorities. For that purpose, the Commission recommended the constitution of an Inter-State Taxation Council. Admittedly, no such council has ever been constituted. Similarly, the letter of the then Finance Minister, Sri T.T. Krishnamachary, relied upon by Sri Ganesh, which we have set out hereinabove, is also not quite clear. The extract speaks, in the first instance, of ‘a complete exemption from sales tax or purchase tax or any other impost by whatever name called on these commodities under the respective State laws’ but then it immediately proceeds to explain, what it means by the said expression, by saying, ‘In other words, the State which does not exempt completely all these three commodities from its Sales Tax Act or any other similar legislation will not be entitled to partake in the distribution of the proceeds of the additional excise duties’. Again, the fact that subsequent to the ADE Act, certain States withdrew certain enactments providing for levy of taxes/fees other than sales tax on the scheduled commodities, in the light of the enactment of the ADE Act–assuming that it was for that reason alone–is not relevant on the meaning and interpretation of the ADE Act or for that matter, the proviso to rule (2) in the Second Schedule thereto. So long as the language of the enactment is clear and unambiguous, it is not permissible to refer to the kind of material relied upon by Sri Ganesh for altering, expanding or modifying the meaning or scope of the provisions of the Act. We are, therefore, unable to say that by agreeing to take a share in the proceeds of the additional duties of excise, the State of Bihar has deprived itself of its power to levy entry tax under and by virtue of entry 52 in List II in the Seventh Schedule to the Constitution. Indeed, it has not even forsaken its power to levy taxes on sale or purchase of tobacco or any other scheduled commodity; if it does so, all that would happen is that the consequence provided in the proviso to rule (2) in the Schedule to the ADE Act will follow and nothing more. The ADE Act does not affect the legislative competence of the State Legislature to make a law with reference to any of the entries in List II. The contention of Sri Ganesh on this score is accordingly rejected.”
46. The constitutional scheme with regard to legislative field is that conflict therein should be avoided. Exercise of conflict therein may not be presumed what is necessary for the said purpose is to invoke the doctrine of “pith and substance”. The State or the Union may incidentally entrench upon the legislative field occupied by the other but what is prohibited is substantial entrenchment and not an incidental one.
47. In Hoechst Pharmaceuticals Ltd. v. State of Bihar , it has been held :
“It would therefore appear that there is a distinction made between general subjects of legislation and taxation. The general subjects of legislation are dealt with in one group of entries and power of taxation in a separate group. In M.P. Sundararamier & Co, v. State of Andhra Pradesh this Court dealt with the scheme of the separation of taxation powers between the Union and the States by mutually exclusive lists. In List I, entries 1 to 81 deal with general subjects of legislation; entries 82 to 92-A deal with taxes. In List II, entries 1 to 44 deal with general subjects of legislation; entries 45 to 63 deal with taxes. This mutual exclusiveness is also brought out by the fact that in List III, the Concurrent Legislative List, there is no entry relating to a tax, but it only contains an entry relating to levy of fees in respect of matters given in that list other than court-fees. Thus, in our Constitution, a conflict of the taxing power of the Union and of the States cannot arise. That being so, it is difficult to comprehend the submission that there can be intrusion by a law made by Parliament under entry 33 of List III into a forbidden field, viz., the State’s exclusive power to make a law with respect to the levy and imposition of a tax on sale or purchase of goods relatable to entry 54 of List II of the Seventh Schedule. It follows that the two laws, viz., Sub-section (3) of Section 5 of the Act and paragraph 21 of the Control Order issued by the Central Government under Sub-section (1) of Section 3 of the Essential Commodities Act, operate on two separate and distinct fields and both are capable of being obeyed. There is no question of any clash between the two laws and the question of repugnancy does not come into play.”
48. In State of Kerala v. State Trading Corporation of India Ltd. , “sugar” as such was exempted. The apex Court therefore, held that having regard to the definition of “sugar” as contained in Kerala General Sales Tax Act, 1963 every grain of sugar whether imported or produced in India is exempt from the levy of tax under the said Act provided that it has been produced in a factory ordinarily using power in the course of production of sugar. In that context it was held that all sugars are so exempted. Such is not the position.
49. So far as the question of the said Act attracting the wrath of Article 14 is concerned it is now well-settled that in the matter of taxation the Parliament or the State Legislature has a wider power. It has the legislative capacity to levy tax on a wide range of subjects. It can do so also in respect of certain categories of the same subjects. Imported sugar is taxable at the first point of sale in India after such process of importation is complete. Furthermore, the impugned Act is in concurrence with the provisions of the 1957 Act.
50. In Varalakshmi Silk House v. State of Karnataka reported in [1999] 112 STC 93 (Kar), it has been held :
“The various contentions raised by the petitioner are summarised and discussed as under :
(1) Whether the provisions of Section 2(24)(xxi) of the Karnataka Taxation Laws (Amendment) Act, 1994 inserting entry 38-A in the Fifth Schedule of the Act giving exemption to the indigenous raw silk and silk yarn imported from outside the country at the rate of 4 per cent is discriminatory and violative of Article 14 of the Constitution of India.
Article 14 of the Constitution of India provided that the State shall not deny to any person equality before the law or the equal protection of laws within the territory of India. It may be observed that differential treatment per se is not violative of Article 14 if there is a reasonable basis for differentiation. The provisions of Article 14 are applicable to taxation law as well. The only thing which has to be seen whether there is a reasonable basis for such a classification or that the Act of the State to cause such a discrimination is with a deliberate intention causing discrimination. Greater latitude has to be given to the Legislature in the matter of classification. The statute may divide the object of tax into groups or categories so that equality and unity is retained in each of such group. Even in the matter of exemption or the rate of tax, the policy could be there to make different classification in a group. The Legislature is free with regard to the choice of articles which are to be taxed or the rate of tax or in granting the exemption to different categories of persons, transactions or object. The wide discretion for classification for tax purposes is the prerogative of the Legislature. The tax which is to be levied on raw silk and silk yarn which is imported from outside the country constitute a different class than the locally manufactured such commodities. There is no hostile discrimination or a deliberate intention to create discrimination. Exemption to the locally indigenous manufactured items is with the object to protect the local industries of the country. The legislation cannot be considered arbitrary or suffering from the vice of Article 14 of the Constitution, The classification is reasonable. This contention has no force.”
51. In Federation of Hotel & Restaurant Association of India v. Union of India , it has been held :
“It is now well-settled that though taxing laws are not outside Article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy, the Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. A Legislature does not, as an old saying goes, 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. Decisions of this Court on the matter have permitted the legislatures to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes.”
52. In the instant case Article 269(1)(g) thus cannot have any application in relation to the subsequent sale which an importer of sugar may cause to be made inasmuch as such subsequent transaction does not attract the wrath thereof. As regard application of Article 286(3) read with entry 92A, List I vis-a-vis entry 54, List II of Seventh Schedule to the Constitution of India is concerned, as indicated hereinbefore, the power of the State to make any legislation imposing sales tax on any goods declared to be of special importance in inter-State trade or commerce irrespective of such transactions having taken or likely to take place is not affected. It would bear repetition to contend that by reason of Article 286(3) of the Constitution, only restrictions and conditions had been imposed as regards systems of levy and rate of tax which the Parliament by law may specify.
53. In Varalakshmi Silk House v. State of Karnataka reported in [1999] 112 STC 93 (Kar), it has been held :
“The various contentions raised by the petitioner are summarised and discussed as under :
(1)………..
(2) Whether the above provision of law is violative of Article 401 of the Constitution of India which imposes a limitation upon the exercise of legislative power in respect of free trade, commerce and intercourse throughout the territory of India.
This article of the Constitution provides the freedom of trade not only in the inter-State but also intra-State movement. Tax laws are within the purview of this article, but it is only those taxes which directly and immediately restrict the trade which can be considered differential against this article. If the levy of tax does not affect the movement of the goods then it cannot be considered to be violative of Article 401 of the Constitution ; discriminating the goods of one State with the other will offend the provisions of Article 401 of the Constitution unless it is saved by Article 404(a) of the Constitution. The State cannot levy tax on the goods imported from other States higher than the tax levied on similar goods manufactured in that State. Levy of tax excessive or prohibition rates impede the very flow of trade unless it is by way of regulatory measure or is compensatory in nature. This article of the Constitution guaranteeing the freedom of trade, commerce or intercourse is for the economic unity of the country for stability and progress of political and cultural unity of the country. The various decisions relied upon by the learned counsel for the petitioner on this point are not applicable because they were not in respect of goods imported from foreign countries or movement of such goods from foreign country to India or after importation from foreign country their movement in different States of India. So far as the raw silk and silk yarn imported from other States is concerned, or even movement in this State, i.e., in the course of inter-State trade or commerce or intra-State or by way of transfer from other State it is equally treated. Imported raw silk and silk yarn have been considered to be a separate category than the indigenous manufactured raw silk and silk yarn. There is no notification prohibiting the movement of the goods. The tax which has been levied on the imported material cannot be considered as affecting the free-flow of trade or the guarantee which has been given in the Constitution of India for free movement from one place to other in the same State or in inter-State trade or commerce ; it does not directly and immediately restrict or impede the free-flow or movement of trade. The levy, therefore, cannot be considered as violative of Article 401 of the Constitution of India for even requiring the assent of the President of India for such legislation.”
54. Yet again in State of Madras v. N.K. Nataraja Mudaliar, , it has been held :
“The flow of trade does not necessarily depend upon the rates of sales tax ; it depends upon a variety of factors, such as the source of supply, place of consumption, existence of trade channels, the rates of freight, trading facilities, availability of efficient transport and other facilities for carrying on trade. It is where differentiation is based on considerations not dependent upon natural or business factors which operate with more or less force in different localities that Parliament is prohibited from making a discrimination. Prevalence of differential rates of tax on sales of the same commodity cannot be regarded in isolation as determinative of the object to discriminate between one State and another.”
55. For the reasons aforementioned this Court is of the opinion that the power of the State to enact 1994 Act has not been taken away.
56. The question which now arises for consideration is as to whether the said Act could be given retrospective effect.
Section 17(1)(h) of the West Bengal Sales Tax Act, 1994 reads thus:
“Levy and rates of tax on sales.–[(1) Subject to the provisions of [Sub-section (2) or Sub-section (2A),] the tax payable by a dealer, who is liable to pay tax under Section 9, Section 10 or Sub-section (3) of Section 27 on his taxable turnover of sales, shall be levied–
(a) to (g)………………
(h) at the general rate of twelve per centum of such part of his taxable turnover of sales as represents sales of any goods specified in Schedule IX.”
As noticed hereinbefore the First Schedule referred to those items which are exempted from payment of tax whereas Section 10 read with Section 17(1)(c) envisage making of Schedule IV as a result whereof a single point levy is to be imposed.
57. Section 17(1)(h) thus deals with a different situation. The 1994 Act has not been enacted in violation of the provisions of the 1957 Act nor Article 286(3) of the Constitution of India as thereby the rate of tax has been kept within the limit envisaged under clause (3) of Article 286. 1957 Act was initially enacted to the recommendation of Second Finance Commission so as to enable the Central Government to collect tax at once and distribute the same to the States who has not imposed any such tax. The said Act has not been enacted in terms of item 92A of List I appended to the Seventh Schedule of the Constitution of India.
58. The very fact that it now stands admitted that the rate of tax having regard to Article 286(3) of the Constitution of India could not have been more than 4 per cent, the question of levying any tax at the rate of 12 per cent, bringing the same within the purview of Sixth Schedule of the 1994 Act does not arise.
59. It is therefore not correct to contend that prior to enactment of the provisions of the Sales Tax (Laws of Amendment) Act, 1999 rates of tax on sugar was at 12 per cent per annum as envisaged under Ninth Schedule thereof. This is borne out from the fact that the Legislature is presumed to know law as clause (3) of Article 286 of the Constitution of India debars a State Legislature from enacting any enactment in contradiction and inconsistent with the provision of sections 14 and 15 of the Central Sales Tax Act, and, thus, the question of levying 12 per cent of tax by reason of Section 17(1)(h) and Ninth Schedule appended to the 1994 Act did not and could not arise. For the said purpose rate of tax envisaged under Schedule IV has been provided and although, thus, in terms of item 10 of the Ninth Schedule, 12 per cent per annum tax had been levied and all other goods not specified in that Schedule or any other schedule must be held to mean such goods which are not covered do not come within the purview of Article 286(3) of the Constitution of India. The said provision therefore, was ultra vires. The learned Tribunal has also found (which finding of course has been questioned by the State in W.P.T.T. 123 of 2000) that sugar is a goods of special importance.
60. Having regard to the integrated scheme, as noticed hereinbefore, we agree with the submission made by the learned counsel for the petitioners that sugar is one of the articles which has been declared to be specially importance in inter-State trade or commerce. In this case the goods which were imported in a particular State from a foreign country, the same may be exported to any other State. Article 286 read with entry 92A, List I must be given a broad meaning. It may be noticed that by reason of Section 3 of 1957 Act, goods only in relation to inter-State trade or commerce within the territory of India have been mentioned, Thus, these articles which were imported and may be subject to inter-State trade or commerce may also come within the purview of clause (3) of Article 286 of the Constitution of India. What is necessary is declaration of a goods which has special importance in inter-State trade or commerce which goes to show that the Parliament had in its mind the items of goods which were to be so declared and not only those goods, sale or purchase whereof takes place outside the States.
61. Had the Parliament any intention to include all goods which would be the subject-matter of inter-State trade or commerce or inter-State movement, they could have said so in explicit terms and it was not necessary for them to lay down that the Parliament may by law declare them as goods of special importance. Sugar, thus, having been declared a goods of special importance in the course of inter-State trade or commerce, we are of the opinion that the retroactive operation thereof was not permissible in law.
62. The rate of tax has to be fixed by a statute. Such rate of tax having not been fixed under 1994 Act or 1954 Act, no sales tax was payable in relation to sugar. The provision in item No. 70A has been brought out in the statute and not by reference only. Reference in this connection may also be made to State of Kerala v. State Trading Corporation of India Ltd., .
63. Furthermore, the rate of tax may be fixed by way of a delegated legislation. It is a well-settled principle of law that unless and until the Legislature authorises a delegatee to make a law with retrospective effect it ordinarily does not have such a power unless and until subordinate legislation so made is procedural in nature. It is not so. In that view of the matter it is not possible to hold that the State Legislature was competent by amending the 1994 Act with retrospective effect from April 1, 1995.
64. Mr. Chakraborty, the learned counsel in this connection has rightly brought to our notice the forms which had been prescribed under the Act, in relation to a goods of special importance, therein no provision has been made for payment of any tax.
65. In Industrial Weavers (P) Ltd. v. Commissioner of Commercial Taxes reported in 1996 III RLR 14, the law is stated in the following terms :
“That this was the real effect of the amendment as made by Act 31 of 1958 with regard to Section 15 of the Central Sales Tax Act, 1956 was appreciated by the State Legislature and consequently necessity was felt of making consequential amendments in the Bengal Finance (Sales Tax) Act and ultimately such amendment was effected by West Bengal Act 13 of 1959 and Section 5 of the Bengal Finance (Sales Tax) Act was amended accordingly in the following manner :
Section 5(1)(c).–The tax payable by a dealer under this Act shall be levied on his taxable turnover at the rate of two per centum of such part of his taxable turnover as represents sales of goods referred to in Section 14 of the Central Sales Tax Act, 1956.”
66. The result, therefore is that in respect of the period from first of April, 1956 up to December, 1958 no sales tax in respect of declared goods could be levied under the provisions of Section 5 of the Bengal Finance (Sales Tax) Act, 1941 as during this period the restrictions and conditions specified in Section 15 of the Central Sales Tax Act, 1956 were not incorporated in the Bengal Act.
67. An argument was advanced that under the Bengal Sales Tax Rules, Rule 3, item 28A, the State was competent to levy the tax in question. But it appears that item 28A of Rule 3 is not consistent with the provisions of Article 286 of the Constitution and Section 15 of the Sales Tax Act, and, therefore, it was not open to the State authorities to levy a tax on the declared goods by virtue of the provisions of that rule. It may be also pointed out that by a notification dated the 24th February, 1961 this item 28A of Rule 3 was amended and the objectionable portion appearing in item 28A of Rule 3 was deleted.”
It has further been held :
“It is difficult to follow what is meant by the expression (the point raised is premature) but certainly it is no denial of the statement in paragraph 6 of the petition that cotton tape is a declared goods. Section 7 of the Additional Duties of Excise Act, 1957 and Section 14 of the Central Sales Tax Act, 1956 indicate that cotton fabrics are declared goods and coupled with the admissions made in the different letters to which I have already made reference and the allegations in paragraph 6 of the petition which are not specifically denied in the affidavit in opposition, it can be said that the petitioner has made out a prima facie case that cotton tapes are declared goods. The petitioner had confined the scope of this application, at the hearing, to cotton tapes only and contends that the general notices served on it to submit returns in so far as they relate to cotton tapes are illegal. It appears to me that the notice which is the subject-matter of this application is bad only in so far as it has any reference to cotton tapes and in so far as it relates to the period from 1st April, 1958 to the end of December, 1958.”
68. In State of Bihar v. Krishna Kumar Kabra , it has been held :
“Our attention has been drawn to two judgments of this Court that squarely cover the issue in favour of the appellant-State. They are the judgments in Commissioner, Sales Tax, U.P. v. Agra Belting Works and in Sales Tax Officer, Sector IX, Kanpur v. Darling Dairy Products . In the earlier case it was held that sections 3A and 4 of the U.P. Sales Tax Act, 1948 were parts of the taxing scheme incorporated in that Act, and, therefore, where a notification was issued under Section 3A prescribing the rate of tax on goods which had been exempted from tax by an earlier notification under Section 4, it had to be held that the intention was to withdraw the exemption and make the sale leviable to tax at the rate prescribed in the later notification. It was not necessary that a specific or separate notification withdrawing or revoking the notification should be issued. The latter judgment of this Court, on similar facts, followed the earlier judgment.”
69. For the reasons aforementioned the writ applications are allowed to the aforementioned extent and the writ application of the State bearing No. WPTT 123 of 2000 is dismissed. However, in the fact and circumstances of this case there will be no order as to costs.
Pratap Kr. Ray, J.
70. I agree.
