1960 (2) TMI 39 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay sales tax on sales tax collected.
2. Validity of refund orders and notices under the Madras General Sales Tax Act.
3. Application of the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1954.
4. Authority and procedure for recovering refunded amounts.

Issue-wise Detailed Analysis:

1. Liability to Pay Sales Tax on Sales Tax Collected:
The petitioners, dealers in automobiles, were assessed sales tax on their turnover for the years 1948-49 and 1949-50, which included the sales tax collected from customers. This inclusion was disputed by the petitioners but upheld by the Deputy Commercial Tax Officer and the Commercial Tax Officer. However, the Sales Tax Appellate Tribunal ruled in favor of the petitioners, stating they were not liable to pay sales tax on the collected sales tax. The High Court affirmed this decision, aligning with the precedent set in Deputy Commissioner of Commercial Taxes v. Krishnaswami, which held that amounts collected as sales tax should not be included in the turnover of a registered dealer.

2. Validity of Refund Orders and Notices Under the Madras General Sales Tax Act:
Following the Tribunal's decision, the petitioners received refunds for the excess amounts collected. However, the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1954, was enacted, which retroactively included amounts collected as sales tax in the dealer's turnover, thereby nullifying any contrary court or tribunal orders. Consequently, the Deputy Commercial Tax Officer issued notices demanding repayment of the refunded amounts.

3. Application of the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1954:
The Act, effective from 1st April 1954, declared that amounts collected as sales tax before this date formed part of the dealer's turnover. Section 3(1) of the Act rendered all contrary judgments, decrees, or orders void. This legislative change meant that the original assessments, which included sales tax collected in the turnover, stood valid despite previous appellate and High Court decisions.

4. Authority and Procedure for Recovering Refunded Amounts:
The critical issue was whether the refunded amounts could be reclaimed by the Government under the existing statutory machinery. Rule 12 of the Turnover and Assessment Rules, which governed the issuance of notices for provisional and final assessments, did not provide for reclaiming amounts already refunded. The rule applied only to initial assessments and did not cover scenarios where assessments were altered by appellate or revisional authorities. The court noted that neither Rule 14-A nor Rule 15(2) of the Madras General Sales Tax Rules, which dealt with modifications by appellate or revisional authorities, were applicable in this case. The court concluded that there was no statutory provision or machinery under the Act or rules to facilitate the recovery of refunded amounts using Rule 12.

Conclusion:
The court held that the notices issued under Rule 12 to reclaim the refunded amounts were invalid. While the legislative amendment validated the inclusion of collected sales tax in the turnover, it did not provide a mechanism for the Government to recover the refunded amounts. Therefore, the court allowed the petitions, prohibiting the enforcement of the repayment notices. An appropriate writ was issued to this effect, with no order as to costs.