L.N.RAY - (1.) THE Constitutional validity of sub-clause (vd) of clause (a) of sub-section (2) of section 5 of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the BFST Act"), has been challenged in these three revision cases arising respectively out of matter Nos. 3481 and 4821 of 1988 of the original side, and C. O. No. 9312 (W) of 1986 of the appellate side of the High Court, Calcutta. These cases were received on transfer in accordance with section 15 of the West Bengal Taxation Tribunal Act, 1987. For the sake of brevity we shall hereinafter mention the Central Sales Tax Act, 1956, as "the CST Act", the Bengal Sales Tax Rules, 1941, as "bst Rules", and the Constitution of India as "the Constitution".
(2.) THESE three cases have been analogously heard, since the aforesaid common question falls for our determination in all these matters. In RN-125 (T) of 1989 and RN-370 (T) of 1989, the applicant No. 1, Tata Iisco Dealers' Association of Eastern India is a registered company which was established with the object of catering to the commercial needs of its members who are dealers in iron and steel. In RN-144 (T) of 1989, the applicant No. 1, is the Calcutta Iron Merchants' Association, which is a registered association of iron merchants looking after the commercial interest of its members who are dealers in iron and steel. In RN-129 (T) of 1989, of course, the applicants are themselves dealers in iron and steel. The cases of the applicants in the three matters being almost identical, may be briefly put as follows : Prior to amendment of the BFST Act by section 4 of the West Bengal Taxation Laws (Amendment) Act, 1985, introducing sub-clause (vd) of section 5 (2) (a), the tax on the sale of iron and steel was levied on the last point of sale. By the said amendment the point of taxation was changed to the first point of sale inside the State of West Bengal. In view of the provisions of the BFST Act, 1941, only the first point of sale in iron and steel in West Bengal was exigible to tax and subsequent sales thereof would not be subjected to any tax, provided the dealer at the second or subsequent points of sale is able to prove to the satisfaction of the Commissioner of Commercial Taxes that the concerned iron and steel were purchased by him in the same form in West Bengal on or after 1st April, 1985, from a registered dealer and provided that a declaration in form XXIVC obtainable in the prescribed manner and duly signed by the selling registered dealer is furnished. [the text of section 5 (2) (a) (vd) and the relevant portion of rule 27a (1b) will be reproduced hereafter for the sake of due appreciation of the points of dispute. ] The said amendment of the BFST Act, however, provided that the manufacturing dealers purchasing iron and steel for use in manufacturing goods for sale in West Bengal would continue to enjoy the benefit of concessional rate of 2 per cent tax under section 5 (1) (aaa) and section 5 (1) (bb ). The impugned sub-clause (vd) of section 5 (2) (a) of the BFST Act is alleged to be ultra vires the Constitution, as it seeks to impose unreasonable restriction on the free-flow of trade in iron and steel. The said provision runs counter to the object sought to be achieved by enacting the same. The State Legislature has no power to enact the provision. It is their case that sales tax is an indirect tax, intended to be passed on to the buyers. But the said sub-clause (vd) prohibits such recovery. This is an unreasonable restriction and fetter on the trade and is violative of articles 14 and 19 (1) (g) of the Constitution. The said sub-clause (vd) is also violative of article 19 (1) (g) of the Constitution, because it casts an additional obligation on the second or subsequent selling dealer to furnish a declaration in form XXIVC. It will be sufficient for the satisfaction of the Revenue to ask such a dealer to prove that the same goods had in fact suffered tax at the first point of sale.
(3.) THE applicants have also stated in their writ petitions that the obligation to furnish declaration under the sub-clause (vd) of section 5 (2) (a) of the BFST Act is peculiar to the dealers in iron and steel, whereas dealers in other goods have no such obligation to perform. Hence this is a discriminatory legislation. This provision tends to work differently upon different dealers. Moreover, the discrimination is alleged to be patent vis-a-vis manufacturing dealers in iron and steel, who continue to enjoy the concessional rate of taxation. The result is that the first purchasing dealer of iron and steel will incur loss at the rate of 2 per cent, when he sells such goods to a manufacturing dealer. The point of taxation having been fixed at the first point of sale, it was sufficient if the second selling dealer could show that he had purchased from the first seller who was identifiable. The point of taxation could shift from the first point of sale to the second or any subsequent point of sale for non-production of declaration in form XXIVC. Sub-clause (vd), therefore, compels the first purchasing dealer to be submissive and to remain at the mercy of the first selling registered dealer till he received the declaration from the latter. This is an impediment and restriction on the free-flow of trade in iron and steel. Representations have been made to the Government against the effect of introduction of sub-clause (vd) of section 5 (2) (a ). But no action has been taken thereon. The impugned sub-clause (vd) is in conflict with section 15 of the CST Act, 1956. A copy of the representation to the Government has been made an annexure to each of the writ petitions. Sub-clause (vd) is, thus, challenged as violative of articles 14, 19 (1) (g), 245, 254, 265, 276, 286 and 301 of the Constitution.;