1. This is an application under Article 226 of the Constitution, for an appropriate Writ for cancellation of the demands made by the respondent Nos. 1 and 2 under Notification dated 8-11-1950, asking for a sum of Rs. 9, 401/10/6 to be paid by the petitioner and for direction on the said respondents to forbear from giving effect to that Notification.
2. The facts are that by a contract entered into with the Government of India, Ministry of Industry and Supply, dated 1st September 1948, the petitioner agreed to supply some hessian cloth to the Government of India. The contract provided inter alia that the prices shown in that contract were exclusive of the Bengal sales Tax and the Government of India would arrange direct payment of sales tax to the Government of West Bengal if it is found ultimately that sales tax is payable in respect of the said contract.
3. Pursuant to the said contract, the petitioner supplied goods to the Government of India and charged the Government of India the prices payable in respect of such supplies which were exclusive of the sales tax. The petitioner also entered into two other similar contracts with the Government of India for sale of hessian goods and supplied goods under the said contracts.
4. The Commercial Tax Officer came to the conclusion that the petitioner was liable to pay sales tax in respect of the said contracts and he purported to demand sales tax from the petitioner, and it appears that by a Notification No. 6767 dated 8-11-1950, the Commercial, Tax Officer made a demand from the petitioner of a sum of Rs. 9,401/10/6 as sales tax in respect of the goods supplied. The petitioner challenges this demand of the Commercial Tax Officer as illegal. In the circumstances he has moved this Court for the reliefs stated above.
5. The Sales Tax Act, Section 5(2)(iii) provides as follows:
'In this Act, expression 'taxable turn-over' means that part of a dealer's gross turn-over during any period which remains after deducting therefrom (iii) sales to the Indian Stores Department, the Supply Department of the Government of India and any Railway or Water Transport Administration.'
6. It is contended by the learned Counsel for the petitioner that in respect of the supplies under the contracts mentioned in the petition, he is entitled to the benefit of this exemption inasmuch as the supplies were to the Department of Supply as mentioned in the said Sub-clause (iii) of Section 5(2). One Mr. M.P. Pai who is Joint Secretary in the Ministry of Works, Production and Supply of the Government of India, has affirmed an affidavit in connection with these proceedings. It is stated in the said affidavit that the Department of Supply came into existence in September 1939. Before 7-1-1946, the said Department of Supply was charged with the procurement of stores from all places in India including Bengal, but by a Notification dated 31-12-1945, the Governor General in Council was pleased to announce the creation with effect from 7-1-1946 of the Department of Industries and Supplies in place of the existing departments of Supply and of Industries and Civil Supply. A copy of this Notification is annexed to the said affidavit, and it appears from such Notification that this newly created department was charged with the work of procurement of stores for Government and with certain additional works. It further appears from Annexure 'B' to that affidavit that subsequently by another Notification dated 2-9-1947, the designation of 'Industries and Supplies Department' was changed to 'Ministry of Industry and Supply'. It thus appears that the powers and functions of the Department of Industries and Civil Supply in the matter of procurement of stores were continued and they remained the same after 7-1-1946. Although there was change in the designation of the Indian Stores Department or the Supply Department of the Government of India in the manner which I have stated before, Section 5(2)(iii) was not amended in any way and the names of Indian Stores Department and the Supply Department were continued.
7. Mr. Banerjee appearing for the respondents Nos. 1 and 2 has contended that since this Indian Stores Department and the Supply Department of the Government of India had become merged into the Departments of Industries and Supplies by the Notification of the 31st December, the exemption granted by Section 5(2)(iii) is not available to the petitioner. It may be further pointed out that in 1949 an Act was passed by the West Bengal Legislature, being West Bengal Act 10 of 1949, which withdrew this exemption granted under Section 5(2) (iii), but the supplies in respect of the contracts mentioned in the petition were effected before that date, and therefore the amendment does not affect the question before me. I am unable to accede to the contention of Mr. Banerjee that by change of the designation which appears in the exemption section and by means of a simple merger of the functions of these departments with the newly designated department, the petitioner can be deprived of the benefit of the exemption claimed. As I have pointed out before, although the Notification in question created this new department and conferred on this new department these functions which were being performed by the Indian Stores Department and the Department of Supply, there was no amendment effected in Sub-clause (iii) of Clause 5(2).
8. I am of the view, therefore, that the petitioner is not liable to pay sales tax in respect of the supplies in question.
9. In the circumstances this Rule must be made absolute, the Notification dated 8-11-1950 is cancelled and respondents Nos. 1 and 2 are directed to forbear from giving effect to the said Notification.
10. The West Bengal Government will pay one set of costs to be divided between the petitioner and the Union of India.