STATE OF WEST BENGAL AND ANR. versus E.I.T.A. INDIA LTD. AND ORS.

Citation: [2003] 2 S.C.R. 668 · Decided: 05-03-2003 · Supreme Court of India · Bench: S.S.M. QUADRI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
ST A TE OF WEST BENGAL AND ANR. 
V. 
E.l.T.A. INDIA LTD. AND ORS. 
MARCH 5, 2003 
[SYED SHAH MOHAMMED QUADRI AND ASHOK BHAN, JJ.] 
West Bengal Sales Tax Act, 1994/West Bengal Sales Tax Rules, 1995-
Sections 2(6), 11 (I) Explanation thereto, (5), (7), (8), (10), (11) and (I 2), 
C 14(4)/ Rules 173, 174, 188 and 189-Casual traders-Liability to pay tax on 
sale and purchase-Transporter and owner/lessee of warehouse deemed as 
casual trader--Disposal of goods by them deemed to be sale as per the Act, 
unless contra is proved-Constitutionality of the provisions challenged-Tax 
Tribunal held Section 2(6) as valid, but in view of lack of machinary provision 
suspended the same-All other provisions held unconstitutional-provisions 
D held to be beyond legislative colnpetence of the State-Plea that no State 
Legislature can create a fiction to treat any other transaction as sale except 
to the extent as provided under Article 366(29A) of the Constitution-On 
appeal held-Suspension of Section 6(2) not justified-Provisions of Section 
11 are enacted to prevent evasion of tax payable under the Act-State 
E Legislature has power to provide for measures for prevention of evasion of 
tax-Hence the provisions intended to prevent the evasion of tax are within 
the legislative competence of the State and are intra vires Entry 54 of List ll 
of the Seventh Schedule-It will be misconceived to treat the statutory 
presumption incorporated in the Explanation to sub-section (1) of Section I 1 
as extending the definition of 'sale' in clause (29-A) of Article 366 of the 
F Constitution-Constitution of India, 1950-Article 366(29A)-Seventh Schedule, 
List ll, Entry 54-Evidence Act, I872-Section 4-Bengal Finance (Sales 
Tax) Act, I94I. 
Constitution of India, I950-Article 14-Challenge to taxation statute 
on the ground of classification-Held: Legislature enjoys a greater latitude 
G for classification in the field of taxation-No legislation can be declared to be 
illegal on the ground of being unreasonable or on the anvil of Article 14, 
except when it fails to clear the test of arbitrariness and discrimination. 
Respondents challenged the constitutional validity of Section 2(6); 
H explanation to sub-section (1), sub-sections (5), (7), (8), (10), (11) and (12) of 
668 
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STATE v. E.l.T.A. INDIA LTD. 
669 
Section 11; Section 14(4) of West Bengal Sales Tax Act, 1994 and Rules 172, A 
173, 174, 188 and 189 of West Bengal Sales Tax Rules, 1995. Taxation 
Tribunal held Section 2(6) of the Act as valid and constitutional with a rider 
that until the manner of disclosure of name and address of the consigner or 
consignee was prescribed in terms of the judgment, the provision as to 
disclosure of those particulars shall remain suspended; that explanation to B 
sub-section (I) of Section 11 was declared to be ultra vires the Constitution; 
that parts of sub-section (5) of Section 11 and sub-section (4) of Section 14 
were declared as invalid and unconstitutional to the extent they applied to 
transporters; that sub-sections (7) and (8) of Section 11 and the words 'for 
the purpose of sub-section (7) and Sub-Section (8) in Clause (ii) of Section 
11(5) were struck down as invalid and unconstitutional and beyond the C 
legislative competence of the State; that sub-Sections (10), (11) and (12) of 
Section 11 were declared unconstitutional in so far as they were applicable 
to transporters; that Rules 172, 173 and 174 of the Rules were also struck 
down; Forms 28 and 31 prescribed under Rules were struck down in so far 
as they related to defence tax or security in lieu thereof with reference to a 
transporter; Form 32 prescribed under the Rules was declared valid; that D 
rules 188 and 189 were declared valid subject to observations in the judgment 
in respect of transporters. 
In appeal to this Court appellant-State contended that having upheld 
the constitutional validity of Section 2(6) which clearly provided the E 
particulars to be declared by the transporters, there was no valid reason for 
the Tribunal to suspend the operation of the Section; that the Tribunal erred 
in striking down the impugned provisions of the Act on the ground of lack of 
legislative competence ignoring the fact that the legislature had ancillary 
power to enact provisions to prevent evasion of tax. 
F 
Respondents contended that except to the extent the provision of Article 
366 (29A) of the Constitution of India provide for a deemed sale, no State 
Legislature 

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