TaxTMI 
TaxTMI 
1989 (5) TMI 56
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....to provide additional resources for the promotion of employment in rural areas and for implementing rural production programmes. The additional resources are sought to be raised from two sources, a surcharge on land revenue under section 3 of the Act and a rural employment cess under section 4 of the Act. We are concerned here with the levy of the rural employment cess. Originally, section 4 of the West Bengal Act provided as follows : "4. (1) On and from the commencement of this Act, all immovable properties on which road and public work cesses are assessed according to the provisions of the Cess Act, 1880, shall be liable to the payment of rural employment cess : Provided that no raiyat who is exempted from paying revenue in respect of his holding under clause (a) of sub-section (1) of section 23B of the West Bengal Land Reforms Act, 1955, shall be liable to pay rural employment cess. (2) The rural employment cess shall be levied annually (a) in respect of lands, at the rate of six paise on each rupee of development value thereof; (b) in respect of coal mines, at the rate of fifty paise on each tonne of coal on the annual despatches therefrom ; (c) in respect of mines other....
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....t in 1981 and 1982, various notifications were issued by the State Government, which, for our purpose, broadly cover three different periods : (a) First period : April 1, 1981, to September 30, 1982 Rural employment cess was levied at the rate of Rs. 5 per kg. on all despatches of tea, but in respect of despatches to two tea auction centres within West Bengal, the rate of duty was nil, and in respect of tea sold in West Bengal through registered dealers otherwise than through the two tea auction centres, the rate of tax was Rs. 2.50 per kg. (b) Second period : October 1, 1982, to March 28, 1984 Rural employment cess was levied at the rate of Rs. 1.50 per kg. on all despatches of tea except that for despatches to the said two tea auction centres, the rate of levy was 30 paise per kg. (c) Third period: March 29, 1984, onwards - Rural employment cess was levied at the rate of Rs. 3 per kg, on all despatches of tea except that for despatches to the said two tea auction centres in West Bengal, the rate of tax was only 30 paise per kg. Learned counsel for the petitioners contend that the levy of the cess under section 4 ( 1 ) read with section 4 (2) (aa) of the West Bengal Act as am....
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....unless the procedure provided in article 304 is followed. That was also the view taken in State of Mysore v. H. Sanjeeviah [1967] 2 SCR 361 ; [1967] AIR 1967 SC 1189 and Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 1 SCR 705 ; [1968] 21 STC 212 (SC). In other words, if the Legislature of a State enacts a law which imposes such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest and further that the Bill or amendment for the purposes of clause (b) has been introduced or moved in the Legislature of a State with the previous sanction of the President, such enactment will not offend article 301. The question then is whether the impugned levy impedes the free flow of trade and commerce throughout the territory of India, and if it does, whether it falls within the exception carved out in article 304(b). If the levy imposes a cess in respect of tea estates, it may well be said that even though the free flow of tea is impeded in its movement throughout the territory of India, it is in consequence of an indirect or remote effect of the levy and that it cannot be said that article 301 is contrav....
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....t seems to us that although the impugned provisions speak of a levy of cess in respect of tea estates, what is really contemplated is a levy on despatches of tea instead. The entire structure of the levy points to that conclusion. If the levy is regarded as one in respect of tea estates and the measure of the liability is defined in terms of the weight of tea despatched from the tea estate, there must be a nexus between the two indicating a relationship between the levy on the tea estate and the criteria for determining the measure of liability. If there is no nexus at all, it can conceivably be inferred that the levy is not what it purports to be. The statutory provisions for measuring the liability on account of the levy throws light on the general character of the tax as observed by the Privy Council in In re A Reference under the Government of Ireland Act, 1920, section 51 and section 3 of the Finance Act (Northern Ireland), 1934, [1936] 2 All ER 111 ; [1936] AC 352. In R. R. Engineering Co. v. Zila Parishad, Bareilly [1980] 3 SCR [1980] AIR 1980 SC 1088, this court observed that the standard on which the tax is levied was a relevant consideration for determining the nature of ....
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....e from that levy or relieving it from part of the normal levy. When the provisions before us are examined in their totality, we find no such relationship or nexus between the tea estate and the varied treatment accorded in respect of despatches of different kinds of tea. It seems to us that having regard to all the relevant provisions of the statute, including section 4(2)(aa) and section 4(4), in substance, the impugned levy is a levy in respect of despatches of tea and not in respect of tea estates. Treating it as a levy on despatches of tea, it is evident that the levy must be regarded as constituting a direct and immediate restriction on the flow of trade and commerce in tea throughout the territory of India, and the levy can avoid the injunction declared in article 301 only if it satisfies the provisions of article 304(b) and the proviso thereto. For bringing the legislation within the saving provisions of article 304(b), it is necessary that the Bill or amendment should have been introduced or moved in the Legislature of the State with the previous sanction of the President. It is not disputed that the amendments to the West Bengal Act made in 1981 and 1982, did not satisfy ....