1999 (8) TMI 761 - SC - VAT and Sales Tax

Sugarcane Act Prevails Over Finance Act: Court Rules on Purchase Tax

Gobind Sugar Mills Ltd. Versus State of Bihar and Others

Gobind Sugar Mills Ltd. Versus State of Bihar and Others - [1999] 115 STC 358 (SC), 1999 AIR 3097, 1999 (7) SCC 76, 1999 (6) JT 120, 1999 (5) SCALE 54 Issues Involved:1. Whether the two Acts (Bihar Finance Act, 1981 and Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981) operate in the same field.2. Whether the Sugarcane Act is a special enactment intended solely for the regulation of sugarcane.3. Whether the levy under the Sugarcane Act is a fee for services rendered or a tax.Issue-wise Detailed Analysis:1. Whether the two Acts operate in the same field:The appellants argued that the State of Bihar is levying and collecting purchase tax on sugarcane under both the Bihar Finance Act, 1981 (Finance Act) and the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981 (Sugarcane Act), thereby subjecting the same purchase to tax twice. They contended that the Sugarcane Act, being a special enactment for levying purchase tax exclusively on sugarcane, should override the general provisions of the Finance Act. The State, however, argued that the levies under the two Acts cover different aspects and operate in different fields.The Court found that both enactments are legislated under entry 54 of List II of the Seventh Schedule, which empowers the State Legislature to levy tax on the sale and purchase of goods. The Finance Act is a general Act relating to the levy of tax on the sale and purchase of goods in Bihar, while the Sugarcane Act specifically provides for the levy of purchase tax on sugarcane and regulates its production, supply, and distribution. Thus, both Acts operate in the same field concerning the levy of purchase tax on sugarcane.2. Whether the Sugarcane Act is a special enactment intended solely for the regulation of sugarcane:The Court noted that the object of the Sugarcane Act is to regulate the production, supply, and distribution of sugarcane intended for use in sugar factories and for taxation of sugarcane. Section 49(1)(b) of the Sugarcane Act imposes a tax on the purchase of sugarcane by or on behalf of the occupier of a factory. This section does not state that the levy of purchase tax is in addition to the levy under the Finance Act. Therefore, the Sugarcane Act is a special enactment specifically meant for the control of sugarcane activities, including the levy of purchase tax.The Court concluded that the Legislature intended the Sugarcane Act to be a special enactment for the purpose of levying purchase tax on sugarcane, to the exclusion of such levy under the Finance Act. Thus, the rule that 'general provision should yield to special provision' is applicable.3. Whether the levy under the Sugarcane Act is a fee for services rendered or a tax:The State contended that the levy under section 49 of the Sugarcane Act is in the nature of a fee for services rendered by the Sugarcane Board and Council. However, the Court found this argument unconvincing. The legislative history showed that the levy was initially intended as a fee but was later changed to a tax due to legal challenges. The Court noted that the State had not provided material to justify the levy as a fee by demonstrating a reasonable service rendered to the purchasers of sugarcane.The Court concluded that the levy under section 49(1)(b) of the Sugarcane Act is indeed a tax and not a fee. The tax collected under the Sugarcane Act is not exclusively earmarked for the Board and Council but also goes to the State exchequer/general fund.Conclusion:The appeals were allowed, setting aside the judgment and order of the High Court. The Court held that the Sugarcane Act, being a special enactment, overrides the general provisions of the Finance Act concerning the levy of purchase tax on sugarcane. The levy under the Sugarcane Act is a tax, not a fee, and the writ petitions were allowed with all consequential relief. Appeals allowed.