2000 (9) TMI 88 - HC - Customs

State's Power to Tax Imported Sugar Upheld; Retrospective Taxation Invalid under Article 286(3)

PRIME IMPEX LIMITED Versus ASSISTANT COMMISSIONER OF COMMERCIAL TAXES

PRIME IMPEX LIMITED Versus ASSISTANT COMMISSIONER OF COMMERCIAL TAXES - 2002 (149) E.L.T. 13 (Cal.) , [2002] 127 STC 23 (Cal) Issues Involved:1. Jurisdiction of the State of West Bengal to impose Sales Tax on imported sugar.2. Constitutionality, legality, and validity of the circular dated 27th October 1997.3. Retrospective effect and retroactive operation of the tax.4. Discrimination between sugar manufactured in India and imported sugar.5. Applicability of Article 14 of the Constitution of India.6. Applicability of Article 286(3) of the Constitution of India.7. Legislative competence of the State to impose tax on declared goods.8. Validity of the retrospective amendment of the West Bengal Sales Tax Act, 1994.Issue-wise Detailed Analysis:1. Jurisdiction of the State of West Bengal to impose Sales Tax on imported sugar:The petitioners challenged the jurisdiction of the State of West Bengal to impose Sales Tax on imported sugar. They argued that the imposition of Sales Tax by the State was bad in law as the tax was already being paid under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The court held that the legislative competence of the State to impose tax was not taken away by the 1957 Act, and the State could levy tax subject to the restrictions under Article 286(3) of the Constitution of India.2. Constitutionality, legality, and validity of the circular dated 27th October 1997:The circular issued by the Directorate of Commercial Tax declared that imported sugar would be liable to Sales Tax under the West Bengal Sales Tax Act, 1994. The petitioners challenged the constitutionality of this circular. The West Bengal Taxation Tribunal had earlier declared the circular ultra vires. The court noted that the West Bengal Sales Tax Act, 1994, was subsequently amended to include imported sugar in the tax net.3. Retrospective effect and retroactive operation of the tax:The amendment to the West Bengal Sales Tax Act, 1994, had a retrospective effect from 1st May 1995, levying a 4% tax on imported sugar. The petitioners contended that the retrospective imposition of tax was violative of Article 14 of the Constitution of India. The court held that the retrospective operation of the tax was not permissible in law, as the rate of tax must be fixed by statute and not by delegated legislation.4. Discrimination between sugar manufactured in India and imported sugar:The petitioners argued that the imposition of tax on imported sugar, while exempting sugar manufactured in India, was discriminatory. The court held that the classification between imported sugar and sugar manufactured in India was reasonable and did not violate Article 14 of the Constitution of India. The differential treatment was justified to protect local industries.5. Applicability of Article 14 of the Constitution of India:The petitioners contended that the retrospective imposition of tax violated Article 14 of the Constitution of India as they had not realized the tax from customers. The court held that in the matter of taxation, the legislature has wide discretion, and the classification between imported and indigenous sugar was reasonable.6. Applicability of Article 286(3) of the Constitution of India:Article 286(3) of the Constitution of India imposes restrictions on the State's power to impose Sales Tax on declared goods. The court held that the State's power to impose tax on imported sugar was subject to the restrictions under Article 286(3) and Sections 14 and 15 of the Central Sales Tax Act, 1956.7. Legislative competence of the State to impose tax on declared goods:The court held that the legislative competence of the State to impose tax on goods declared to be of special importance in inter-State trade or commerce was not taken away by the 1957 Act. The State could levy tax subject to the restrictions under Article 286(3) of the Constitution of India.8. Validity of the retrospective amendment of the West Bengal Sales Tax Act, 1994:The court held that the retrospective amendment of the West Bengal Sales Tax Act, 1994, to impose tax on imported sugar from 1st May 1995 was not permissible in law. The rate of tax must be fixed by statute, and the retrospective imposition of tax by delegated legislation was not valid.Conclusion:The court allowed the writ applications to the extent that the retrospective imposition of tax on imported sugar was not permissible. The writ application of the State was dismissed. The court held that the State had the legislative competence to impose tax on imported sugar subject to the restrictions under Article 286(3) of the Constitution of India. The classification between imported sugar and sugar manufactured in India was reasonable and did not violate Article 14 of the Constitution of India.