1960 (2) TMI 46 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of actions under the repealed Hyderabad Sales of Motor Spirit Taxation Regulation.
2. Validity of assessment without monthly returns under the Regulation.

Detailed Analysis:

1. Legality of Actions under the Repealed Hyderabad Sales of Motor Spirit Taxation Regulation:
The petitioner challenged the legality of the notices issued by the Commercial Tax Officers under the Hyderabad Sales of Motor Spirit Taxation Regulation, which was repealed by Section 13 of the Madras Sales of Motor Spirit Taxation (Andhra Pradesh Extension and Amendment) Act, 1958. The petitioner argued that since no assessment was made prior to the repeal, no liability was incurred under the repealed Regulation, and thus, no action could be taken against him.

The court examined Section 13 of the Act, which states that the repeal of the Hyderabad Regulation does not affect any "right, title, obligation or liability already acquired, accrued or incurred" under it. The court clarified that the liability to pay tax arises from the charging provision of the statute, not from the assessment. The court cited the Federal Court's decision in Chatturam v. Commissioner of Income-tax, which held that liability to pay tax is founded on the charging sections, and assessment merely quantifies the liability.

The court disagreed with the Orissa High Court's decision in Chakoo Bhai Ghelabhai v. State of Orissa, which distinguished between 'liability to be assessed' and 'liability to pay'. The court held that the expression "liability already incurred" refers to the liability to pay tax as declared in the charging section of the Regulation, which is saved under the proviso to Section 13(1) of Act V of 1958. Thus, the actions of the Commercial Tax Officers were deemed legal.

2. Validity of Assessment without Monthly Returns under the Regulation:
The petitioner contended that since no monthly returns were filed as required under Section 6(b) of the Regulation, no assessment could be made. The court rejected this argument, stating that the failure to submit returns does not absolve the liability to pay tax. The court cited the Madras High Court's decision in Gopalaswami v. Secretary of State, which held that where there is a liability and no express provision limiting its realization, it may be realized at any time after it arises.

The court emphasized that the obligation to submit returns and pay tax exists independently of the assessment process. The court noted that the scheme of the Sales Tax Act differs from the Income-tax Act, as the former requires the assessee to pay tax along with the return, making the payment obligatory even before the assessment order is passed.

The court concluded that the petitioner's non-compliance with the return submission requirement does not preclude the tax authorities from assessing the liability. The petitioner's arguments were found to be unsubstantial, and the petition was dismissed with costs.

Conclusion:
The court upheld the legality of the actions taken under the repealed Hyderabad Sales of Motor Spirit Taxation Regulation, affirming that the liability to pay tax arises from the charging provision and is saved under the proviso to Section 13(1) of Act V of 1958. Additionally, the court dismissed the contention that assessment could not be made without monthly returns, reinforcing that the obligation to pay tax exists independently of the assessment process. The petition was dismissed with costs.