Chandi Charan Sarkar and Others v Commercial Tax Officer, Suri, and Others

Calcutta High Court

2 September 1977

C.R. No. 2613 (W) of 1973

The Judgment was delivered by SALIL KUMAR DATTA, J

SALIL KUMAR DATTA, J.

The petitioner is a registered dealer in pachwai under the Bengal Finance (Sales Tax) Act, 1941. Country liquor including pachwai was exempted from taxation under the said Act being included in its exemption list : item 25 of Schedule I. By the West Bengal Taxation Laws (Amendment) Act, 1972, section 3, sub-section (5), which came into force on 7th August, 1972, item No. 25 of Schedule I to the Bengal Finance (Sales Tax) Act, 1941, was deleted, as a result whereof sale of pachwai became liable to sales tax at the rate of 6 per cent and surcharge at 2 per cent on sales tax.

The petitioner was selling pachwai on the basis of a licence granted by the Collector, Birbhum, and cl. (9) thereof provided that they would sell pachwai in accordance with the price as would be fixed by the Excise Commissioner. In view of the imposition of sales tax on pachwai as aforesaid the petitioner became liable to pay sales tax on the sale of pachwai but he was not in a position to recover the same from his customers under the terms of his licence. The result was that he was made to pay sales tax and surcharge, according to him, out of his licence. The result was that he was made to pay sales tax and surcharge, according to him, out of his own pocket. This, he contended, was restraint in trade and was void. Reliance was placed on the decision of Calcutta Country Spirit Opium and Drug Association Ltd. v. State of West Bengal [ 1974 Indlaw CAL 83 ], in which A. K. Sen, J., was of the opinion that this imposition of tax at 6 per cent against profit varying from 5.7 to 7.8 per cent on country spirit directly restricted and impeded the free flow of trade and the requirement u/art. 304(b) was not complied with. It was accordingly held by his Lordship that s. 3(5) of the West Bengal Taxation Laws (Amendment) Act, 1972, which brought country spirit amongst other articles to the incidence of tax was ultra vires the Constitution. In the case before us, the sales tax was introduced on sale of pachwai by the same Act under the provisions of s. 3(5) of the West Bengal Taxation Laws (Amendment) Act, 1972, which was under consideration in the cited case.Mr. Dutt, the learned Advocate appearing for the respondents, has drawn my attention to the West Bengal Excise (Amendment) Ordinance, 1974 (4 of 1974), which provides to explanation to s. 86 for an additional explanation as explanation II in the said Bengal Excise Act, 1909. The explanation II is as follows :

“Explanation II. – This price of an intoxicant as fixed by rules made u/cl. (2) of this section, shall be deemed to have always been exclusive of any tax, surcharge, additional surcharge or any other impost on the sale or purchase of such intoxicant levied under any law for the time being in force.”

The Ordinance came into force on 6th June, 1974. The Ordinance thereafter was followed by the West Bengal Excise (Amendment) Act, 1974 (West Bengal Act 50 of 1974), whereby the provisions of the Ordinance as indicated above were incorporated in this Act. The Act received the assent of the Governor on 12th December, 1974, but the said explanation, as in the Ordinance, was given retrospective effect. As a result, there was no impediment on the pachwai dealers to impose and recover sales tax and surcharge from their customers with effect from 6th June, 1974, or any date earlier.

It cannot, therefore, be contended that the imposition or the incidence of sales tax and surcharge under the West Bengal Taxation Laws (Amendment) Act, 1972, is ultra vires art. 304(b) of the Constitution. Imposition of sales tax and surcharge under the West Bengal Taxation Laws (Amendment) Act, in view of the amendment to the Bengal Excise Act, 1909, with retrospective effect, did not put any restraint on the pachwai dealers to recover the same from their customers. There was thus no restriction on the freedom of trade by the aforesaid legislation.The petitioner, however, contends that for the period from 7th August, 1972, to 6th June, 1974, he was not in a position to recover the taxes as the goods had already been sold and it was not possible for him to trace the customers and to realise the sales tax from them. He, therefore, contends that there should be no demand for the sales tax at least for this period.

Mr. Dutt referred to the decision in Hira Lal Rattan Lal v. Sales Tax Officer, Section III, Kanpur [ 1972 Indlaw SC 65 (S.C.)]. In that case, the Court was considering the U.P. Sales Tax (Amendment and Validation) Act, whereby explanation II was added to section 3-D(1) providing split of processed foodgrains as different from unsplit or unprocessed foodgrains and validating the imposition, levy and collection of tax on first purchase of split or processed foodgrains notwithstanding earlier imposition of tax on first purchase of those foodgrains in unsplit or unprocessed form. S. 7 validated earlier levies and notifications under section 3-D as amended. The Supreme Court observed that the legislature has power to impose tax, which incudes within itself the power to tax retrospectively. It was further held that the fact that the retrospective levy did not afford any opportunity to the dealers to pass on the tax to the consumers had no relevance in considering the legislative competence of the levy. In view of the above proposition and in the context of the above legislation on the Excise Act, the second contention of the petitioner also fails.

The rule, accordingly, fails and is discharged. There will be no order as to costs.