JINDAL INDIA LTD Vs. STATE OF WEST BENGAL

JUDGEMENT

(1.) THIS is a writ petition under article 226 of the Constitution of India transferred to us from the High Court by virtue of section 15 of the West Bengal Taxation Tribunal Act, 1987. The vires of the provisions of sections 4 (6) (ii) and 5 (6) (b) of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as "the BFST Act"), as introduced by the West Bengal Act 23 of 1977 and as amended by the West Bengal Act 14 of 1978 and the West Bengal Act 8 of 1983, is challenged.

(2.) JINDAL (India) Ltd. , is a company under the Companies Act, 1956, having its registered office at New Delhi and other offices at Lillooch, Howrah, within our jurisdiction. Its shareholders including applicant No. 2 are Indian citizens. The company is a registered dealer under the BFST Act and also under the Central Sales Tax Act, 1956 (hereinafter called "the CST Act" ). It has branch offices at some places including Madras and Bhubaneswar. It purchases hot rolled strips ("hr strips", for short) for its own use directly in the manufacture in West Bengal of cast iron goods, such as M. S. pipes and galvanised pipes. HR strips are declared goods of special importance in inter-State trade and commerce under section 14 of the CST Act. The company pays concessional rate of 2 per cent sales tax when it purchases HR strips from registered dealers by issuing declarations in form XXIVA according to the proviso to section 5 (1) (bb) of the BFST Act. The applicant-company transfers its manufactured products to the branches outside West Bengal and also despatches consignments thereof the different places outside the State. Sub-section (6) was inserted in sections 4 and 6 of the BFST Act for the first time by the West Bengal Act 23 of 1977, for imposing with effect from 10th October, 1977, a purchase tax in respect of specified purchases at the rate of 4 per cent. The rate was reduced to 2 per cent by the West Bengal Act 14 of 1978 and again increased to 3 per cent with effect from April 1, 1983, by the West Bengal Act 8 of 1983.

(3.) THE company challenges imposition of purchase tax on HR strips on the ground that the provisions are ultra vires article 286 (3) of the Constitution and section 15 of the CST Act, on two grounds. The first ground is that sales tax is levied at 2 per cent at the stage of sale to the company and again a purchase tax is imposed on it on the same goods at the stage of purchase. The second ground is that under section 15 of the CST Act the maximum tax leviable at the material time is 4 per cent, whereas with effect from 1st April, 1983, a total of 5 per cent tax is levied, 2 per cent as sales tax and 3 per cent a purchase tax. Such levy is further alleged to be in violation of articles 19 (1) (g), 265 and 300-A of the Constitution. The company filed a supplementary affidavit dated 20th July, 1989, complaining that the impugned provisions of law imposing purchase tax is beyond the legislative competence of the State Legislature because it is in effect a tax on consignment or despatch of goods and because it is payable when the products are transferred outside West Bengal.