Dulal Chandra Bhar & Ors. v. Commercial Tax Officer, Shyambazar Charge & Ors.

- This appeal is against the judgment and order dated 3rd May, 1965, passed by Banerjee, J., Whereby the connected rule nisi obtained by the petitioner-appellants was discharged.

2. The petitioners were served by respondent No. 1, the Commercial Tax Officer, Shyambazar Charge, with three notices section 9 (3) of the West Bengal Sales Tax Act, 1954 (West Bengal Act 4 of 1954), hereinafter referred to as the 1954 Act, stating that the appellants, though liable to pay tax under the said Act, failed to get themselves registered and it was thought necessary to make an assessment under sec. 9(3) to the best of judgment. The appellants were given an opportunity of being heard on 26th July, 1961, for periods 1362 B.S., 1363 B.S. and 1364 B.S. After hearing, the appellants were assessed to tax under the 1954 Act by the said respondent by three separate orders on 26th February, 1962, at Rs. 5,515.02, Rs. 12,487.11 and Rs. 10,861.35 for the said years respectively totalling Rs. 28,863.48 and the appellants were directed to pay the amount by 9th April, 1962. The tax was for their sales of cane sugar-candy and palm sugar-candy, which are the commodities manufactured and sold by the appellants.

3. The appellants moved applications under section 12 (2) of the 1954 Act for review of the orders of assessment, but the applications were summarily rejected as, it was said, they were not in conformity with rules 38 and 44(1) of the West Bengal Sales Tax Rules, 1954. The appellants were thereafter served with three certificates for the said total amount of Rs. 28,863.48 in respect of the aforesaid periods. The appellants thereupon, on service of notice of demand, moved this court by an application under articles 226(1) of the Constitution and rule nisi was issued on 5th September, 1962, calling upon the respondents, the Commercial Tax Officer, Shyam Bazar Charge, as also the Certificate Officer, 24-Parganas, to show cause why appropriate writs should not issue quashing the certificates and also directing the respondents to cancel or forbear from giving effect to the same. The appellants contended, inter alia, that the assessment at the rate of 3 per cent. in excess of 2 per cent was in violation of section 15 of the Central Sales Tax Act, 1956, and sugar being one of the declared goods was not liable to tax at least from 14th December, 1957; the applications for review, it was contended, were rejected without giving any opportunity to the appellants to rectify the defects, if any. It was further stated that the appellants duly filed returns showing sales of cane sugar-candy and palm sugar-candy as non-taxable commodities and the sales of the said commodities were not liable to tax in law.

4. Respondent No. 1, the Commercial Tax Officer, filed an affidavit-in-opposition affirmed on 23rd November, 1962, stating that the appellants are dealers in sugar-candy and not sugar and the contentions raised are in respect of sugar and thus not applicable to the commodities in which the appellants dealt. Respondent No. 2 also filed an affidavit contending that the certificates are legal and valid.

5. By his judgment under appeal, the learned Judge relying on his own decision in Gopal Chandra Panda vs. Commercial Tax Officer (1963 67 C.W.N. 1102), held that sugar and sugar-candy are different commercial commodities and, as such, the notification of 3rd March, 1958, exempting sugar from the operation of the 1954 Act did not exempt sugar-candy from the operation of the said West Bengal Sales Tax Act, 1954. Accordingly, the appellants as dealers in sugar-candy were liable to pay sales tax under the 1954 Act. It was further held that the applications for review were not in form and were rightly rejected. The appeal before us is against this decision.

6. By a supplementary affidavit, for which leave was granted by this court, the respondents filed copies of the three impugned assessment orders which, it appears, were made under section 9(3) (iii) of the 1954 Act. The learned officer therein held that sugar-candy i.e. cane sugar-candy and palm sugar-candy, were exempted from tax under the Bengal Finance (Sales Tax) Act, 1941, hereinafter also referred to as the 1941 Act, as it was treated "as nothing but sugar". Sugar, which was thus originally exempted from tax, was brought under the purview of the 1954 Act with effect from 26th September, 1955, on it deletion from the Schedule of the 1941 Act, when sugar-candy became a notified commodity under the 1954 Act and thereby became liable to tax.

7. Mr. Bikash Chandra Sen, the learned Advocate appearing for the petitioner appellants, submitted that the learned Judge committed an error in holding that the appellants were liable to sales tax even though it was held that sugar and sugar-candy are different mercantile commodities. He submitted that by the subsequent legislation sugar was brought within the ambit of taxation under the 1954 Act, but sugar-candy was kept outside its ambit. Accordingly, the learned Judge should have held that sales of sugar-candy could not be subject to taxation. He further submitted that no opportunity was given to the appellants to rectify the defects before their applications for review were rejected. He further submitted that under the Central Sales Tax Act after 1st October, 1958, tax not more than 2 per cent. on sugar could be imposed even if sugar-candy is accepted to be sugar. Accordingly, the assessment of sales tax at 3 per cent. was unsustainable. These contentions have been disputed by Mr. Chakravarty, the learned Advocate appearing for the respondents. In the affidavit affirmed on behalf of the tax authorities inconsistent position appears to have been taken in view of the judgment in Gopal Chandras case (1963 67 C.W.N. 1002). We shall, therefore, refer to the original assessment orders to consider if the orders could be sustained on the position in law as revealed in the said orders.

8. Under section 6 of the 1941 act no tax shall be payable under the said Act on the sale of goods specified in the first column of Schedule I. In Schedule I, item No. 8 originally included "sugar", which meant that "sugar" was exempted from tax under the 1941 Act. Be section 13(a) of the Bengal Finance (Sales Tax) (Second Amendment) Act, 1955 (West Bengal Act 22 of 1955), "sugar" was omitted from Schedule I of the 1941 Act thereby "sugar" became subject to taxation under the said 1941 Act.

9. The West Bengal Sales Tax Act, 1954, provided in section 25, at the relevant period, as follows :

"If the State Government is at any time of opinion that it would be in the public interest that any commodity which is liable to taxation under the Bengal Finance (Sales Tax) Act, 1941, should be taxed under this Act, it may by notification in the official Gazette specify such commodity; and on and from the date of such notification, the Bengal Finance (Sales Tax) Act, 1941, shall cease to apply to such commodity and this Act shall apply to such commodity."

10. By Notification No. 2053-F.T. dated 26th September, 1955, as the Government was of opinion that "sugar" should be taxed in public interest under the 1954 Act, "sugar" was accordingly specified under section 25 of the said Act,

11. By reason of the aforesaid notification, there is no dispute that sugar became liable to tax under the 1954 Act from 26th September, 1955. The question now is whether cane sugar-candy and palm sugar-candy, the commodities which were sold by the appellants during the relevant years were subject to tax under the 1954 Act. Similar question came up for consideration in the case of State of Gujarat vs. Sakarwala Bros. (1967 19 S.T.C 24 S.C.), was exempted from the Bombay Sales Tax Act. The authorities wanted to assess tax on sales of patasha, harda and alchidana dealt by the dealers. The revenue authorities took the position that the said commodities were different from sugar being in a different form while the definition referred only to all varieties of sugar and the words did not mean sugar in any form. It may be mentioned here that in the Bombay Act "sugar" was defined as "sugar as defined in item No. 8 of the First Schedule to the Central Excises and Salt Act, 1944". Item 8 of the First Schedule to the said Act defined "sugar" as follows :

"Sugar means any form of sugar containing more than 90 per cent sucrose." The Gujarat High Court held :

"The legislature, by using the words any form of sugar has intended to cover sugar of any variety in whatever form it may be found and by whatever name it may be called."

12. It was accordingly held in patasha, harda and alchidana sugar is manifest and the said commodities accordingly were exempted from sales tax. On appeal, the Supreme Court affirmed the decision of the Gujarat High Court and both the cases have been reported in 19 Sales Tax Cases 24. The Supreme Court observed :

"It is, therefore, manifest that patasha, harda and alchidana are only different forms of refined sugar with requisite sucrose contents."

13. The court further observed :

"We are accordingly of the opinion that the word sugar in item No. 47 (of the Bombay Act) is intended to include within its ambit all forms of sugar, that is to say, sugar of any shape or texture, colour or density and by whatever name it is called. The qualifying words are that it must contain more than 90 per cent of sucrose,"

14. In a subsequent decision in Paro & Co. vs. State of A.P. (1970 25 S.T.C. 34), it held by the Andhra High Court that the term "sugar" used in item 6 of Schedule V of the Andhra Pradesh General Sales Tax Act, 1957, includes "sugar-candy", which is but a purer form of sugar and contains no other ingredients but sugar. The court also took into consideration the Central Excise and Salt Act, 1944, whereby excise duty was imposed on sugar with effect from 14th December, 1975, and thereupon sugar was exempted from State levy, so that the term "sugar" in the Central Act could not be dissociated from "sugar" in the State Act. The court observed :

"If sugar tables are to be included in the expression sugar - and we do not see any reason why they should not be included therein - there is no reason why sugar-candy should be excluded therefrom."

15. In Mangoo Mal Ram Kishore vs. H. K. Sharma (1974 33 S.T.C. 182), the Delhi High Court in interpreting bura held that it was covered by the word "sugar" as understood in common parlance in the trade as bura chini. Since the Bengal Sales Tax Act, 1941, which is applicable in Delhi, has not defined the word "sugar", the court felt that it would be appropriate to consider the definition of the word "sugar" as given in other Central Acts to see the meaning attributed to it by the authorities. In the Central Excises and Salt Act, 1944, "sugar" means any form of sugar in which the sucrose content is above 90 per cent. In the Prevention of Food Adulteration Rules, 1955, cane sugar is sugar with not less than 96.5 per cent sucrose and bura contains the same percentage. This clearly indicated that the word "sugar" included bura sugar as well.

16. "Sugar", according to Oxford Dictionary, means a sweet crystalline substance, white when pure, obtained from a great variety of plant juices, but chiefly from those of sugar-cane and sugar-beet. "Sugar-candy", according to the said dictionary, means sugar clarified and crystallised by slow evaporation. It is clear that sugar-candy thus is nothing but sugar as it has no other basic and predominant ingredient than sugar. It may be that sugar and sugar-candy are sold as different commercial commodities; even so it does not alter the basic composition of sugar-candy, be it cane sugar-candy or palm sugar-candy, which is but a different form of sugar, with sugar as its predominant if not the only ingredient. Further the historical background of the legislation leading to the exemption of sugar from sales tax for purposes of avoidance of double taxation from 14th December, 1957, and the definition of "sugar" in the Central Excises and Salt Act 1944, all these facts need be considered in interpreting "sugar" in the sales tax law. These legislations lay down the above minimum content of ninety per cent sucrose, while the case of "candy", which is before us, there is no other ingredient except sugar. There can therefore be little doubt that sugar-candy is sugar merely in another form though they may be different commercial commodities when put to sale. We are, accordingly, unable to agree with the decision in Gopal Chandras case (supra) that "sugar" as defined in the 1941 Act or in the 1954 Act does not include "sugar-candy". This was also the position adopted by the Commercial Tax Officer when he treated sugar-candy in his assessment orders both cane sugar-candy and palm sugar-candy - as nothing but sugar.

17. A distinction was sought to be made by Mr. Sen contending that palm-candy was something different from sugar and, as such, not assessable to sales tax under the 1954 Act. Palm-candy is processed from sugar (95 per cent) and palm gur (5 per cent), which is thickened palm juice, by slow evaporation. Accordingly, in essence, palm candy, also called palm sugar-candy, is nothing but sugar as its basic predominant and only ingredient. The contention so raised is thus without substance and is unacceptable.

18. Mr. Sen has further submitted that in view of section 15 of Central Sales Tax Act, 1956, the tax in any event could not be higher than 2 per cent while the appellants were charged 3 per cent. This contention over-looks that item (viii), sugar, was inserted in section 14 by the Central Sales Tax (Second Amendment) Act, 1958, with effect from 1st October, 1958, while the assessment years of the appellant were for the periods up to 1364 B.S., which ended on 13th April, 1958.

19. Mr. Sen next contended that the review applications should not have been dismissed without affording an opportunity to the appellants to rectify the defects. There is no dispute that no fees, far less the requisite fees to accompany the review applications under rules 38 and 44(1) were paid when the applications were filed. Accordingly, there were no valid applications in the eye of law before the authorities and there was no legal obligation on the part of authorities to afford the appellants any opportunity to "rectify the defects", as there were not really defects in the applications but the conditions preceding or accompanying such applications. Further, as we shall presently see, the grounds for review even if tenable are being considered by us so that there is no scope for any prejudice to the appellants.

20. Mr. Sen contended that there could be no assessment under section 9(3)(iii) of the 1954 Act as the appellants were registered dealers under the Act. This contention has no substance as the appellants admittedly were not registered under the 1954 Act, which was a mandatory obligation upon them as dealer selling notified commodities manufactureed by them in West Bengal. The appellants were registered dealers under the 1941 Act, but such registration did not absolve them from registration under the 1954 Act.

21. The next point urged by Mr. Sen centres round Notification No. 506-F.T. dated 3rd March, 1958. By that notification, under powers conferred by sec. 26 of the 1954 Act, the Government exempted from the operation of the said Act with effect from 14th December, 1957, "sugar", being a notified commodity within the meaning of clause (i) of that section. Under the said clause (i), "sugar" is a notified commodity in respect whereof duties of excise are leviable under sub-section (1) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. This Act of 1957 was intended top provide for levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net proceeds thereof among the States, according to the principle of distribution recommended by the Finance Commission. "Sugar" in the said Act has the same meaning assigned to it by item No. 1 (formerly 8) of the Central Excises and Salt Act, 1944, as having more than 90% sucrose content at 105 degree centigrade. These provisions indicate, as we have already seen, the necessity of associating the definition of sugar in Central Act with the State Acts.

22. Thus "sugar" was exempted from payment of tax with effect from 14th December, 1957, so that for sales of sugar-candy by the appellants during the period from 14th December, 1957, till Chaitra 30, 1364 B.S. (13th April, 1958) no sales tax under the 1954 Act was leviable or payable by the appellants. As the assessment order for 1364 B.S. includes the sales during the said period, the assessment order requires a modification, excluding from computation the sales of sugar-candy effected by the appellants during the period. There is, however, no infirmity in respect of the assessment orders for 1363 B.S. and for 1362 B.S.; the assessment has rightly been made from 26th September, 1955, when "sugar" became liable to tax.

23. Mr. Chakravarty submitted that the application under article 226(1) is not maintainable as the appellants had an elaborate and complete machinery in the 1954 Act to remedy their grievances, if any, but the statutory remedy was not availed of by the appellants. This contention has no force as the appellants challenged the competency and jurisdiction of the Commercial Tax Officer to make assessment on sale of sugar, which according to the appellants was not allowed in law.

24. In the premises, the challenge to the assessment order of 1362 and 1363 B.S. cannot be sustained and the appeal in respect thereof is dismissed. The assessment order for 1364 B.S. and the certificate therefor quashed as it includes sales for a period when sugar was exempted from tax under the 1954 Act. The Commercial Tax Officer however will proceed to pass orders of assessment in respect of sales of cane sugar-candy and palm sugar-candy for the year 1364 B.S., up to 13th December, 1957, on notice to the appellants, who will be afforded suitable opportunity to produce their books and papers for the purpose. If, however, the appellants fail to produce necessary papers for any reason, the Commercial Tax Officer will proceed in accordance with law to assess the tax payable to the best of his judgment and to recover the tax as may be found due.

25. The appeal accordingly is allowed in part as indicated above. Let appropriate writ issue accordingly in respect of the assessment order for 1364 B.S. There will be no order for costs and all interim orders are vacated.

Bankim Chandra Roy, J. - I agree.