1960 (8) TMI 60 - SC - VAT and Sales Tax

Whether under section 5 clause (vi) of the Act the liability to pay sales tax in respect of hides and skins could only be at a single point Held that - The judgment of the High Court in regard to the ultra vires nature of rule 16(5) and the inapplicability of section 6-A of the Act was erroneous and the appeal must therefore be allowed the judgment and order of the High Court set aside and the respondent s petition dismissed. Appeal allowed.

Summary

Issues Involved:
1. Legality of the assessment of sales tax under the Madras General Sales Tax Act.
2. Ultra vires nature of Rule 16(5) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939.
3. Applicability of Section 6-A of the Madras General Sales Tax Act.
4. Violation of Article 14 of the Constitution.

Detailed Analysis:

1. Legality of the Assessment of Sales Tax:
The appeal concerns the legality of the assessment of sales tax by the Deputy Commercial Tax Officer under the Madras General Sales Tax Act (Act IX of 1939). The respondent, a partnership firm, did not renew its license for the assessment year 1952-53 and failed to make a return or object to the notice served. Consequently, it was assessed to sales tax of Rs. 10,584 on a turnover of Rs. 6,77,374-4-4. The High Court allowed the respondent's petition under Article 226, quashing the assessment on the grounds that it was illegal and unsupported by the authority of law. The Supreme Court examined whether the assessment was lawful under the provisions of the Act and the rules made thereunder.

2. Ultra Vires Nature of Rule 16(5):
The respondent contended that Rule 16(5) of the Turnover and Assessment Rules, which limited single-point taxation to licensed dealers, was ultra vires, contravening Section 5(vi) of the Act. The High Court held Rule 16(5) to be ultra vires, leading to the quashing of the assessment order. However, the Supreme Court found no inconsistency between Rule 16(5) and Section 5(vi). It was clarified that Section 5(vi) is a concessional provision subject to restrictions and conditions prescribed in the rules, including the requirement of obtaining a license. Rule 16(5) emphasized the consequences of non-compliance with these conditions, and thus, it was not ultra vires.

3. Applicability of Section 6-A:
Section 6-A of the Act states that if a dealer contravenes any prescribed conditions or fails to obtain or renew a license, the sales tax shall be levied under Section 3 as if the provisions of Section 5 did not apply. The High Court had found Section 6-A inapplicable to unlicensed dealers. However, the Supreme Court held that Section 6-A clearly applies, making single-point taxation conditional on obtaining a license. The Andhra Pradesh High Court and the Mysore High Court had similarly upheld the validity of Rule 16(5) and the applicability of Section 6-A.

4. Violation of Article 14:
The respondent also argued that the licensing and taxation provisions, which differentiate between licensed and unlicensed dealers, violated Article 14 of the Constitution. However, the Supreme Court did not entertain this argument as it was not raised in the High Court and was brought up for the first time in the Supreme Court.

Conclusion:
The Supreme Court concluded that the High Court's judgment regarding the ultra vires nature of Rule 16(5) and the inapplicability of Section 6-A was erroneous. The appeal was allowed, the judgment and order of the High Court were set aside, and the respondent's petition was dismissed. The respondent was ordered to pay the costs of the appellants in this Court and the Courts below.