The Telegraph
Since 1st March, 1999
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Sales tax loophole plugged

New Delhi, March 25: There’s bad news for traders and transporters in West Bengal: they will have to disclose the names and addresses of the consignor or the consignee on all goods challans.

Traders in the state had drawn comfort till now from a ruling of the West Bengal Taxation Tribunal which had upheld the constitutional validity of Section 2(6) of the West Bengal Sales Tax Act, 1994, but added a rider that suspended the operation of the proviso till such time as the government devised a proper mechanism for furnishing such information.

The Supreme Court today closed that loophole when it upheld the state government’s appeal against the tribunal’s ruling.

While upholding the constitutional validity of the West Bengal Sales Tax Act and all the rules framed thereunder, a division bench of Justices Syed Shah Mohammad Quadri and Ashok Bhan said in a 33-page judgment that “no special proforma is necessary nor any machinery required to effectuate the section. It is, therefore, difficult to uphold the reasoning of the tribunal to justify suspension of the said provision for want of machinery provisions”.

The West Bengal Sales Tax Act of 1994 was framed to replace the Bengal Finance (Sales Tax) Act of 1941 and plug rampant sales tax evasion in the state. However, the suspension of the proviso meant that traders and transporters could continue to cock a snook at the sales tax authorities.

West Bengal collects Rs 5,000 crore as sales tax every year and this could rise susbstantially if the Act is rigorously enforced.

The apex court ruling means that the operation of Section 2(6) of the West Bengal Sales Tax Act will be immediately enforceable. Besides particulars relating to the names and addresses of the consignor or consignee, the transporter will also have to furnish details pertaining to invoice, transport receipt, consignment note, certificate of registration (in the cases of registered traders), etc.

The apex court said the state legislature had the “ancillary power” to enact provisions to prevent evasion of tax. Ever since the tribunal’s order, lakhs of transporters were going scotfree as they were not required to furnish these details to the authorities who stopped their vehicles for checking.

The apex court said the authority will have the powers to detain a vehicle of an unregistered or casual trader.

Vehicles carrying goods for or from registered traders will be allowed to proceed after the authorities note down the certificate of registration, name and address of a registered trader.

If a trader had failed to furnish the particulars needed, then the authorised officer “may seal such warehouse for a period ordinarily not exceeding 24-hours” from the time of inquiry. Likewise, the authorised officer “has the power to detain a vehicle for a period not exceeding 24 hours” for the purposes of determination and collection of tax.

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