Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Order No. 16978 (W) of 1985

Judges

Suhas Chandra Sen, J.

Acts

sub-clause (vi) of clause (a) of sub-section (2) of section 5;(f) sales referred to in sub-clause (v) of clause (a) of sub-section (2) of section 5
clause (b) of section 2 of the West Bengal Motor Spirit Sales Tax Act, 1974 (West Ben. Act XI of 1974);(d) sales
West Bengal Sales Tax Act, 1954, the Bengal Finance (Sales Tax) Act, 1941
SECTION 14 CENTRAL SALES TAX ACT 1956
section of the Bengal Finance (Sales Tax) Act, 1941 is section 4
West Bengal Sales Tax Act, 1954 (West Ben. Act IV of 1954)
sub-section (2), if the provisions of clause (a)
Bengal Finance (Sales Tax) Act, 1941
West Bengal Sales Tax Act, 1954
Bengal Finance (Sales Tax) Act
CENTRAL SALES TAX ACT 1956
sub-section.4. Section 6(1)
sub-section (2);(c) (d) (2)
Act.10. Section 5(2)
section 6;(e) sales
sub-section (2);(b)
West Bengal Act

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Smart Summary

Structured Summary of the Judgment delivered by Suhas Chandra Sen, J.

Factual and Procedural Background

The petitioners are Jadunath Saha and Shyamendralal Saha, carrying on business in partnership as M/s. Nityananda Bhandar. They are registered dealers under the West Bengal Sales Tax Act, 1954, the Bengal Finance (Sales Tax) Act, 1941 and the Central Sales Tax Act, 1956. The petitioners trade in various notified commodities (flour, suji, atta, soap, sugar, detergent powder, turmeric, fertiliser, etc.) which are liable to sales tax, and also trade in kerosene oil, high speed diesel oil, mobil oil and vegetable oil, transactions in respect of which the petitioners contend are not to be included in their taxable turnover.

The central dispute in the writ petition was whether transactions in respect of kerosene oil, high speed diesel oil, mobil oil and vegetable oil (commodities expressly kept out of the purview of the Bengal Finance (Sales Tax) Act, 1941 by the Schedule annexed to that Act read with section 6) should be included in the petitioners' turnover for the purpose of calculating liability to turnover tax introduced by section 6B of the Bengal Finance (Sales Tax) Act, 1941.

Result in the proceedings (procedural disposition): The writ petition was dismissed; the interim order was vacated; there was no order as to costs.

Legal Issues Presented

Whether, for the purpose of imposing turnover tax under section 6B of the Bengal Finance (Sales Tax) Act, 1941, the computation of a dealer's "gross turnover" may include sales of goods that have been declared tax-free under section 6 and listed in the Schedule to the Act (specifically, whether sales of kerosene oil, high speed diesel oil, mobil oil and vegetable oil are includible in gross turnover for that purpose).
Whether the phrase "gross turnover" in the Act should be equated with "taxable turnover" (as defined in section 5(2) / section 4) for the purpose of the turnover tax levy under section 6B.

Arguments of the Parties

Petitioners' Arguments

The petitioners argued that turnovers in respect of certain commodities (kerosene oil, high speed diesel oil, mobil oil and vegetable oil) are not to be included in their taxable turnover because these items have been kept out of the purview of the Bengal Finance (Sales Tax) Act, 1941 by the Schedule annexed to the Act read with section 6.
They contended that turnover tax should therefore not be calculated by taking into consideration these items which have been specifically kept out of the purview of the Bengal Finance (Sales Tax) Act, 1941.
It was further contended that a construction excluding such sales from the computation would be equitable — the petitioners gave the example that a dealer with Rs. 49 lakhs of export sales and Rs. 1 lakh of taxable sales would be treated differently (and arguably unfairly) compared to a dealer with Rs. 49 lakhs of sales within West Bengal.

The opinion does not contain a detailed account of any specific arguments advanced on behalf of the Revenue or other respondents.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Scoble v. Secretary for State of India, 4 TC 618	Illustration that a tax (here referenced as income-tax) need not conform to absolute logical symmetry; inequitable tax is not necessarily unlawful.	The court relied on the authority to reject the petitioners' contention that perceived inequities in the statute render the turnover tax unlawful; the court held that inequity alone does not invalidate the levy.
State of Karnataka v. Ranganatha Reddy, (1977) 4 SCC 471 : AIR 1978 SC 215	Principle that reading down of statutory provisions is permissible where necessary to avoid unconstitutionality.	The court observed that the Supreme Court's approach in that case (reading down to avoid unconstitutionality) was not applicable here because constitutional validity was not challenged and the statute could be given its plain meaning without raising constitutional doubts.

Court's Reasoning and Analysis

The court's analysis proceeded by close textual examination of the relevant provisions of the Bengal Finance (Sales Tax) Act, 1941:

The court identified the relevant provisions:
- Section 4 — charging section specifying who is liable to pay tax under the Act and the concept of "taxable quantum".
- Section 2(1) — definition of "turnover" (aggregate of sale prices or parts thereof receivable during any given period); "gross turnover" is not separately defined.
- Section 5(2) — definition of "taxable turnover" as that part of gross turnover remaining after enumerated deductions, including sales declared tax-free under section 6.
- Section 6(1) — declares that no tax shall be payable under the Act on the sale of goods specified in Schedule I (subject to stated conditions and exceptions).
- Section 6B — creates liability to pay turnover tax, prescribes rates, and specifies that turnover tax is levied on that part of the gross turnover remaining after specified deductions, including sales of goods declared tax-free under section 6.
The court emphasized the plain language of the statutes:
- Section 6 relieves specified sales from "tax payable under this Act" but does not expressly state that such sales shall not be included in the computation of "gross turnover".
- The definition of "turnover" in section 2(1) is broad; there is no textual basis to exclude sales of goods specified in Schedule I from "gross turnover".
The court explained the statutory scheme and interplay between gross turnover and taxable turnover:
- "Gross turnover" must be understood in its ordinary, expansive sense — the aggregate of sale prices — and is not synonymous with "taxable turnover".
- "Taxable turnover" is derived from gross turnover by making statutory deductions listed in section 5(2), one of which explicitly is sales of goods declared tax-free under section 6.
- Section 6B(2) confirms that turnover tax is to be levied on the part of a dealer's gross turnover after deducting specified categories, including sales of goods declared tax-free under section 6, thereby reinforcing that tax-free sales are included in gross turnover but are then excluded by express deduction for turnover tax computation.
The court rejected the petitioners' alternative constructions:
- The petitioners' contention that "gross turnover" for the purpose of section 6B should be read as "taxable turnover" was not accepted because the statutory text supports a wider meaning of gross turnover and a system of deductions to reach taxable or turnover-taxable amounts.
- The equitable argument (pointing to perceived unfairness between different types of dealers) was addressed and dismissed — the court noted that inequitable taxation is not necessarily unlawful and relied on the precedent Scoble v. Secretary for State of India.
- The court observed that though reading down of provisions may be used to avoid unconstitutionality (citing State of Karnataka v. Ranganatha Reddy), there was no constitutional challenge here and no necessity to depart from the statute's plain meaning.
Conclusion of analysis:
- Sales of goods declared tax-free under section 6 are includible within "gross turnover" (as that term is ordinarily understood), and subsequently such sales are specifically deductible where the statute provides for deduction (for example, in computing taxable turnover under section 5(2) or the part of gross turnover subject to turnover tax under section 6B(2)).

Holding and Implications

Holding: The writ petition is dismissed. The court held that "gross turnover" for the purpose of imposing turnover tax under section 6B includes sales of goods declared tax-free under section 6 (such sales are part of gross turnover and are excluded only where the statute explicitly provides for a deduction). The interim order is vacated and there will be no order as to costs.

Implications

Immediate effect on the parties: The petitioners' challenge to the inclusion of sales of certain goods (kerosene oil, high speed diesel oil, mobil oil, vegetable oil) within gross turnover for purposes of turnover tax fails; the petition is dismissed and the interim protection is withdrawn.
Statutory interpretation consequence: The judgment interprets "gross turnover" in its broad sense and confirms that goods declared tax-free under section 6 may nevertheless be part of gross turnover, while recognizing that the statute provides express deductions (in section 5(2) and section 6B(2)) where appropriate.
Broader precedent: The court noted that no constitutional question was raised and did not find it necessary to "read down" statutory provisions; the decision is an application of plain-meaning statutory interpretation rather than a declaration of new constitutional principles. The opinion did not purport to set new wide-ranging precedent beyond the interpretation applied to the statutory provisions in issue.

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Jadunath Saha And Another v. Commissioner Of Commercial Taxes

The Judgment of the Court was delivered by

Suhas Chandra Sen, J.:— The petitioners, Jadunath Saha and Shyamendralal Saha, carry on business in partnership under the name and style of M/s. Nityananda Bhandar. The petitioners are registered dealers under the West Bengal Sales Tax Act, 1954, the Bengal Finance (Sales Tax) Act, 1941 and also under the Central Sales Tax Act, 1956. There is no dispute that the petitioners are dealers in various notified commodities, like flour, suji, atta, soap, sugar, detergent powder, turmeric, fertiliser, etc., for which the petitioners are liable to pay sales tax. The petitioners also carry on business of purchase and sale of various commodities like kerosene oil, high speed diesel oil, mobil oil and vegetable oil which are not liable to be included in the “taxable turnover” of the petitioners for the purpose of computation of sales tax liability. The dispute, in the case, is about the includibility of the transactions relating to kerosene oil, high speed diesel oil, mobil oil and vegetable oil in the turnover of the petitioners for the purpose of levy of turnover tax. It has been contended on behalf of the petitioners that since the turnovers in respect of these commodities are not to be included in the taxable turnover of the petitioners, turnover tax should not be calculated by taking into consideration these items which have been specifically kept out of the purview of the Bengal Finance (Sales Tax) Act, 1941 by the Schedule annexed to the Act read with section 6 of the Act.

2. The charging section of the Bengal Finance (Sales Tax) Act, 1941 is section 4 which lays down that every dealer whose gross turnover in a given year exceeded the taxable quantum shall be liable to pay tax under that Act on all sales effected during the year. “Taxable quantum” has been defined in section 4(5) to mean, in relation to any dealer who imports for sale any goods into West Bengal, Rs. 20,000, in relation to any dealer who manufactures or produces any goods for sale, Rs. 50,000 and in relation to any other dealer, Rs. 1,00,000. “Gross turnover” has not been defined in the Act. “Turnover” has, however, been defined by section 2(1) to mean the aggregate of sale prices or parts of sale prices receivable during any given period. There are some special cases also mentioned in that definition which are not material for the purpose of this case.

3. Section 5 lays down the rate of tax and provides that the tax payable by a dealer shall be levied on his “taxable turnover” at the rates specified therein. Section 5(2) defines, “taxable turnover”—In the case of a dealer who is liable to pay tax under section 4 or under section 8(3), that part of his gross turnover during any period which remains after deducting therefrom various categories of turnover enumerated in that sub-section.

4. Section 6(1) is important for the purpose of this case and it lays down “no tax shall be payable under this Act on the sale of goods specified in the first column of Schedule I, subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof.”

5. The scheme of the Bengal Finance (Sales Tax) Act is to levy tax on “all sales effected” of all commodities except which have been specified as tax-free in the first column of Schedule I to the Act subject to the conditions and exceptions set out therein. Entry 17 of the Schedule deals with inferior grade of kerosene oil and entry 50 refers to kerosene oil other than the inferior grade of kerosene oil referred to in entry 17.

6. Section 6B creates the liability to pay turnover tax and lays down the rates thereof. Section 6B provides:

“6B. Liability to payment of turnover tax and rate thereof.— (1) Notwith-standing anything contained elsewhere in this Act,—

(a) every dealer, whose aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 (West Ben. Act IV of 1954) during the last year ending on or before the 31st day of March, 1979, exceeds rupees fifty lakhs, shall, in addition to the tax payable by him under section 5 and section 6C, if any, be liable to pay from the 1st day of April, 1979, a turnover tax at the rate specified in sub-section (3) of such part of his turnover as specified in sub-section (2);

(b) every dealer, other than those referred to in clause (a), whose aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 during any year ending on or after the 1st day of April, 1979, exceeds rupees fifty lakhs, shall, in addition to the tax payable by him under section 5 and section 6C, if any, be liable to pay from the first day of the year immediately following such year a turnover tax at the rate specified in sub-section (3) of such part of his turnover as specified in sub-section (2);

(d) ……………

(2) The turnover tax shall be levied on that part of the gross turn-over of a dealer during any period which remains after deducting there-from his turnover during that period on—

(a) sales of goods referred to in section 14 of the Central Sales Tax Act, 1956 (74 of 1956);

(b) sales of electrical energy and newspapers;

(c) sales of ‘motor spirit’ as defined in clause (b) of section 2 of the West Bengal Motor Spirit Sales Tax Act, 1974 (West Ben. Act XI of 1974);

(d) sales of goods declared tax-free under section 6;

(e) sales of goods which are generally exempt from tax under sub-clause (vi) of clause (a) of sub-section (2) of section 5;

(f) sales referred to in sub-clause (v) of clause (a) of sub-section (2) of section 5 of goods, other than those specified in clauses (a), (b), (c), (d) and (e);

(g) such other sales as may be prescribed.

(3) The turnover tax shall be levied at the rate of—

(a) one per centum of such part of the turnover as specified in sub-section (2), if the aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 (West Ben. Act IV of 1954); of the dealer liable to pay such tax exceeds rupees one crore during the year in respect of which or part of which the turnover tax is levied;

(b) one-half of one per centum of such part of the turnover as specified in sub-section (2), if the provisions of clause (a) do not apply:.

Provided that the tax payable by a dealer under clause (a) shall not exceed a sum equivalent to the aggregate of one-half of the tax payable by him in accordance with the said clause and ten per centum of the amount by which his aforesaid gross turnover exceeds rupees one crore.

(4) No dealer shall realise from his purchaser the turnover tax payable by him under this section.”

7. Section 6B was inserted in the Bengal Finance (Sales Tax) Act, 1941 by an amendment with effect from 1st April, 1979. Section 6B makes it clear that it is a tax payable by a dealer “in addition to the tax payable by him under section 5 and section 6C”. Although the tax is designated as turnover tax, it is nothing but an additional levy on a special category of dealers. Under section 6B(a) and (b) the dealers who are liable to pay this tax are only those “whose aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 …. exceeds Rs. 50,00,000”. The tax, however, has not been levied on the aggregate gross turnover. But tax is on “such part of his turnover as specified in sub-section (2)”.

8. Therefore, for imposition of turnover tax, the first step is to find out the dealers who are liable to pay this tax. For this purpose, aggregation of gross turnovers is necessary. The goods specified in the first column of Schedule I of the Act which have been declared to be tax-free are not to be kept out for the purpose of calculation of gross turnover. Section 6 merely says that “no tax shall be payable under this Act” on such goods. Section 6B does not seek to impose any tax on the goods which have been declared tax-free by section 6. Section 6B, however, seeks to impose an additional burden of tax on big dealers whose aggregate gross turnover exceeds Rs. 50,00,000.

9. The only question, therefore, is whether in computation of gross turnover, the goods that have been declared tax-free under section 6 can be taken into consideration. Section 6 does not say that the goods specified in the first column of Schedule I shall not be included in the turnover of a dealer. ‘The definition of “turnover” in section 2(i) is very wide and it means aggregate of sale prices or parts of such sale prices receivable during any given period. There is no reason to hold that the “turnover” will not include sale price of goods included in the column 1 of Schedule I to the Act.

10. Section 5(2) has defined “taxable turnover” to mean that part of gross turnover during any period which remains after deducting therefrom various categories of turnover enumerated in that section.

11. Therefore, the words “gross turnover” has to be understood in general sense and not in any special sense. In general sense, gross turnover will include the entire turnover of a dealer without any deduction. The taxable turnover is computed after making various deductions from the gross turnover. One of the deductions in section 5(2)(a)(i) is “sale of goods declared tax-free under section 6”. This makes it clear that one of the categories of sales which have to be excluded from gross turnover “is the sale of goods declared tax-free under section 6”. In other words, sales of tax-free goods which are includible in gross turnover has to be deducted for the purpose of calculation of taxable turnover under section 5(2) of, the Act.

12. Therefore, there is nothing in the Act to indicate that for the purpose of computation of gross turnover, the sales of tax-free goods should not be included. The position is made abundantly clear by section 6B(2) by which it is provided that “turnover tax shall be levied on that part of the gross turnover of a dealer which remains after deducting therefrom his turnover” on, inter alia, “sales of goods declared tax-free under section 6”.

13. For the reasons aforesaid, I am unable to uphold the argument advanced by Mr. S.C Bose, on behalf of the petitioner, that “gross turnover” must mean taxable turnover as defined in section 4 of the Act, for the purpose of levy of turnover tax.

14. On behalf of the petitioners, it was further contended that the construction suggested by the petitioners would be equitable, otherwise a person who has a turnover of rupees forty-nine lakhs of export sales and one lakh of taxable sales under the West Bengal Act will have to pay turnover tax, whereas a person who deals in rupees forty-nine lakhs worth the goods in West Bengal will not pay any turnover tax at all.

15. If a tax Act is analysed deeply, many illogical situations may be found, but that will not make the levy unlawful. Every inequitable tax is not unlawful. Lord Halsbury in the case of Scoble v. Secretary for State of India, 4 TC 618, that incometax is not and cannot be cast upon absolutely logical lines.

16. I was referred to a judgment of the Supreme Court in the case of State of Karnataka v. Ranganatha Reddy, (1977) 4 SCC 471 : AIR 1978 SC 215, in particular paragraph 36. There, the Supreme Court observed that reading down of some provisions of law is permissible. It was argued on behalf of the petitioners that the Supreme Court found it necessary to do so because, otherwise, the Act under review was liable to be declared unconstitutional.

17. But that is not the situation here. The constitutional validity of the Act has not been challenged. Morever, I fail to see how the Act becomes unconstitutional if in this case plain meaning is given to the words of the statute. It is laid down that if a dealer's aggregate gross turnover exceeds a certain limit, he will have to pay an additional tax designated “turnover tax”. I fail to see how this can be called unconstitutional.

18. In view of the aforesaid, this writ petition must fail and is dismissed. The interim order is vacated. There will be no order as to costs.

19. Writ petition dismissed.

Jadunath Saha And Another v. Commissioner Of Commercial Taxes

Structured Summary of the Judgment delivered by Suhas Chandra Sen, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Implications

Jadunath Saha And Another v. Commissioner Of Commercial Taxes

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