TMI Blog1956 (7) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... ned a certificate of registration from the Superintendent of Taxes, Gauhati. The application appears to have originally contained the words "with head office at Dibrugarh". But these words have been penned through, and it is said in the statement of case sub- mitted by the Board that this was done with the consent of the petitioners because of the fact that their Dibrugarh office was started long after the opening of their office at Gauhati. It is also stated by the Board that this Dibrugarh office existed only for a short period and it does not appear that the petitioners had at any stage thereafter object- ed to their being registered at Gauhati. It appears that later on they, in fact, got themselves registered separately for their business at Dibrugarh. It is admitted on all hands that there was no written requisition by the Superintendent of Taxes requiring the petitioners to get themselves registered. After registration, the Superintendent of Taxes, Gauhati, issued a notice on 31st January, 1950, under section 16(2) of the Act, directing the petitioners to submit returns of their total turn- over for the return period ending with September, 1949. Pursuant to that notice, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners to establish their claim for deduction under section 15(1)(b) of the Act for the assessment period ending with 31st March, 1950. For the earlier period ending with 30th September, 1949, the Assistant Commissioner was of opinion that, in view of the fact that the books of the petitioners had been virtually accepted, they should be accepted in respect of the turnover for other goods also, and a fresh assessment should be made for that period after ascertaining the turnover of other goods during the period as per account books of the petitioners. The questions substantially raised by the petitioners in appeal before that officer were: (1) that the Superintendent of Taxes, Gauhati, had no jurisdiction to assess the petitioners; and (2) that the petitioners having started business only in April, 1949, and their taxable turnover having reached the taxable quantum only in 1949-50, they were liable to pay tax under section 3(2) of the Act with effect from 1st July, 1950, and not earlier. These grounds did not appeal to the Assistant Commissioner. The petitioners then applied for revision of the order, under section 31 of the Act, by the Commissioner of Taxes, but without any succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the jurisdiction of the Civil Court is expressly excluded, the question of the vires of any particular provision bearing on the assessment, must be decided by the machinery constituted by the statute itself. This position cannot be doubted in view of the decision of the Privy Council in Raleigh Investment Co., Ltd. v. Governor-General in Council[1947] 15 I.T.R. 332; A.I.R. 1947 P.C. 78. . Lord Uthwatt there observed: "Jurisdiction to question the assessment otherwise than by use of the machinery expressly provided by the Act, would appear to be inconsistent with the statutory obligation to pay arising by virtue of the assessment." Therefore, where the scheme of the Act is to set up a particular machinery, by the use of which alone the total income assessable to tax is to be ascertained, it is that particular machinery which should also consider whether the assessment is founded upon some ultra vires provision of the Act, or is otherwise valid. There was thus nothing to prevent the taxing officers or the Sales Tax Board, who are creatures of the Act, from deciding the question now before us, namely, whether section 29 of the Act is ultra vires. The Board, however, has decided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinarily liable to registration under the provisions of this Act, sells goods which he has obtained form outside the Province, he shall, when so required by the Commissioner, be liable to registration, and after such registration, he shall also be liable to be taxed on all sales as if he were a registered dealer: Provided that such dealer shall not be liable to be taxed on sales which occurred prior to the year during which he becomes liable to registration." It is clear that this provision enables the Commissioner to require a dealer not ordinarily liable to registration under the Act, who sells goods which he has obtained form outside the State, to get himself registered, and after such registration, to pay tax on sales as any registered dealer. It applies, therefore, to dealers (i) who sell goods obtained from outside the State, and (ii) who are not ordinarily liable to registration under the Act. Let us, therefore, examine in what cases a dealer is ordinarily liable to registration or payment of tax under the Act. The liability to tax arises under section 3 of the Act. Section 3 of the Act, it should be stated at the outset, was amended in 1954, but the assessment orders in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess admittedly in April, 1949, would ordinarily fall under the class of dealers contemplated by sub-section (2) of section 3; and if they were liable to be taxed at all, their liability to taxation would arise three months after the commencement of the year 1950-51, following immediately the year 1949-50, during which their gross turnover admittedly amounted to or exceeded the taxable quantum. In other words, if the year preceding is taken as the calendar year, then their liability to taxation under sub-section (2) of section 3 would arise only form 1st April, 1950. But if it is taken to be the financial year, as the Department contends, or as it has been found by the Board, then their liability to taxation would arise, under this provision, form July, 1950. That is to say, under section 3(2) of the Act, they would not be liable for any assessment during the periods for which they have been assessed. The Department, therefore, falls back upon section 29 of the Act to support the orders of assessment made against the petitioners. It is not disputed that the petitioners sell goods which they obtain from outside the State and, as such, section 29 of the Act would govern dealers of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of tax under section 3 of the Act is a liability which is common to all dealers-dealers who obtain goods for sale form outside or dealers who obtain goods for sale produced or manufactured within the State-and the law in that respect has placed them all on the same footing. But even if such a hardship exists, it was not for the Provincial Legislature to usurp the function of taxing goods brought for sale from outside the State, by incorporating the offending and discriminatory provision of the Act, but to leave the matter to the discretion of the Parliament or of the President, as provided by Article 304 of the Constitution. S.R. Das, C.J., when dealing with a similar contention in Bengal Immunity Co., Ltd. v. State of Bihar[1955] 6 S.T.C. 446; A.I.R. 1955 S.C. 661., scuttled the argument thus: "If there is any real hardship of the kind referred to, there is Parliament which is expressly invested with the power of lifting the ban under clause [1939] 1 S.T.C. 1; A.I.R. 1939 F.C. 1 at p. 7. , either wholly or to the extent it thinks fit to do. Why should the Court be called upon to discard the cardinal rule of interpretation for mitigating a hardship, which after all may be entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns selling in a similar way goods which were the growth, produce or manufacture of the State, was held to be in conflict with the power vested in Congress to regulate commerce with foreign nations and among the several States. The learned Judges observed that the power was vested in Congress to insure uniformity of commercial regulation against discriminating State legislation. It covered property which was transported, as an article of commerce, from foreign countries or amongst the States, from hostile or interfering State legislation until it has mingled with and become a part of the general property of the country, and protected it, even after it had entered a State, from any burdens imposed by reason of its foreign origin. The inaction of Congress in prescribing rules to govern inter- State commerce is equivalent to its declaration that such commerce shall be free from any restriction. The above observations appear to be quite apposite in their application to the present case. The tax, therefore, which purports to be levied on the dealer who sells goods obtained from outside the State, under section 29 of the Act is, in sub- stance, a tax on those goods, and directly attracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any such obligation. The section arms the officer indeed with such naked and arbitrary power that he can, by the exercise of an unjust discrimination, act to the serious prejudice of one dealer in preference to another. There is no principle or policy indicated in the body of the section, or indeed anywhere else in the law, on which the Commissioner is to act. All that it says is that a dealer of the class indicated above, who is not ordinarily liable to registration under the Act, can, within the provisions of the section be made so liable, if required by the Commissioner to get himself registered, and, after registration, to be taxed on all sales as a dealer. The only safeguard is the proviso to the section, but even the proviso does not affect the situation in regard to an arbitrary victimisation by the officer of an individual dealer for purposes of registration and taxation. It has been often recognised that the Legislature can confer upon a person or body of persons large powers for the purpose of administering an Act; but it must prescribe the principles according to which these powers are to be exercised. If there is complete absence of rules guiding and con- trolling t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther requisition by the Commissioner under section 29 of the Act. Even if it be assumed that there was a verbal requisition by the Commissioner, it is for us to consider whether that would meet the requirements of section 29. On the clear words of section 29 itself, it is not possible for the dealer to assume when or how he becomes liable to registration; for obvious reasons, he cannot make any such assumption because the section gives a wide discretion to the Commissioner to call upon any such dealer to be registered. Why the Commissioner calls upon him to do so is not for the dealer to determine or to anticipate beforehand. Therefore, there could be no question of any dealer voluntarily seeking registration within the meaning of section 29 of the Act. There is provision for voluntary registration under section 11 of the Act, but I am unable to see how a dealer can assume, for himself, that, though he is not ordinarily liable for registration under the pro- visions of the Act, yet he should apply for registration. In fact, under section 29, the Commissioner may call upon a dealer to be registered and pay tax even though his gross turnover is below the taxable quantum. That bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the dealer to payment of tax. As at present advised, it appears to me in view of the proviso to the section, that the liability to tax under the section depends upon the year during which he "becomes liable to registration"; and when he "becomes liable to registration" again, in its turn, depends upon the stage "when he is so required by the Commissioner". The written requisition, therefore, is the sine qua non of his liability for taxation, as otherwise, he has no such liability ordinarily under the Act. The omission, therefore, to serve a written requisition under the law would amount to an illegality affecting both registration and taxation. In the present case, although the Board appears to imply that the registration of the dealer was under section 29 of the Act and that he suo motu applied for registration under the said section, yet we find nothing, either in the registration application or in the registration certificate, to support that finding. The petitioners, on the contrary, assert that they applied for registration under section 3(2) of the Act and they were ordered to be so registered. The Board also suggests that "a notice under section 16(2) was redundant" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vires-whether, even in that case, the petitioners were liable to be assessed to tax, and, if so, for what period? In this context, several subsidiary questions emerge: (i) whether the dealers are protected under the proviso to section 29 of the Act; if so, to what extent? (ii) whether they follow the calendar year for purposes of accounting, or they follow the financial year, and (iii) whether their case falls under section 3(2) of the Act, and, therefore, is beyond the purview of section 29? All these points require careful examination, and I propose to deal with them in their order. The second point is incidentally involved in the other two, and must, of necessity, be dealt with along with them. I may here reproduce the proviso to section 29, which runs thus: "Provided that such dealer shall not be liable to be taxed on sales which occurred prior to the year during which he becomes liable to registration." The dealer's liability to tax, therefore, arises only from the year during which he becomes liable to registration. As discussed earlier, the dealer becomes "liable to registration" only when so required by the Commissioner under the earlier part of section 29. In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, stated in his application for registration that, for purposes of accounting, his year ran from 1st January to 31st December." The Board, however, erroneously assumed that the liability to assessment and liability to registration were practically co-extensive and, therefore, the dealers must be deemed to have been liable for registration under section 29 from that date which it takes to be the date on which the dealers started business. This assumption was clearly unfounded, and completely ignored the effect and import of the proviso to section 29. If, therefore, the choice lay with the dealers to choose the accounting year other than the financial year prior to 1952, I see no reason why, under the law the statement in their registration certificate should not have been adopted as conclusive on the point. It has not been shown or stated that the accounts actually showed a different basis of accounting, namely, the financial, and not the calendar year. Judged on that basis, under the said proviso to section 29, the dealers were not liable to be taxed on sales which occurred prior to January, 1950, but could be assessed only on sales subsequent thereto. The petitioners, however, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction, under the law, of those Superintendents within whose jurisdiction he has his place or places of business. The Board appears to be right in observing that the rule is directory and not mandatory, and was framed for the convenience of both the taxing officer and the assessees. Section 49 of the Act, on which the petitioners rely for their contention, does not held them. The relevant facts on this point have been clearly set out in the judgment of the Assistant Commissioner of Taxes. When the petitioners objected to assessment proceedings being started by the Sales Tax Superintendent at Gauhati on the ground that their head office was situated at Dibrugarh, the Superintendent of Taxes, Gauhati, directed the petitioners on 20th October, 1950, to submit returns etc., to the Superintendent of Taxes, Dibrugarh. The officer also requisitioned back the certificate of registration issued from his office for cancellation and asked the petitioners to obtain a certificate of registration from Dibrugarh in respect of their branch there. But on 24th October, 1952, the petitioners informed the Superintendent at Gauhati that their Dibrugarh office had been closed, and the registration c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner had, in fact, directed that the petitioners should be assessed afresh in the light of the orders passed by him. Therefore, the orders of assessment had not become final, and the petition for revision before the Commissioner was, in sub- stance, against an order of remand. Such an order does not fall strictly under clause (a) of rule 74. The clause refers specifically to "a petition for revision of an order of assessment". There being no order of assessment passed by the Appellate Assistant Commissioner in this case, the petition for revision before the Commissioner, in my opinion, fell under the residuary clause (d) of the Rule which refers to "a petition for revision of any other order........", and the fee should have been levied accordingly. Even if two interpretations were possible, in the context, the one in favour of the assessee should be adopted. The Board is, therefore, not justified in holding that the case was rightly assessed to fee under clause (a) of rule 74, even if it is right in assuming that clause (a) of the Rule must be deemed to include both original and appellate assessment orders. The net result, therefore, is that questions 1, 2, 3 and 6 are answered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taxable quantum. It would appear that for purposes of determining liability to tax dealers were divided into two aforesaid classes. Clause (1-A) was added by Amending Act IV of 1951. This clause has no bearing on the question before us. In 1954 section 3 was amended by the Assam Sales Tax (Amendment) Act, 1954. Under section 3(1) every dealer, whose gross turnover from sales which have taken place either wholly in Assam or both in and outside Assam during the twelve months immediately preceding the date of the commencement of the Amending Act exceeded Rs. 12,000, shall be liable to pay tax on sales which have taken place or deemed to have taken place in Assam on and from the date of such commencement. Clause (1-A) was re- numbered as clause (2) of the section with which we are concerned. Clause (3) deals with the second category of dealers. It lays down that, "Every dealer to whom sub-section (1) does not apply shall be liable to pay tax under this Act with effect from the first of April of the year during which his gross turnover form sales which have taken place either wholly in Assam or both in and outside Assam first amounts to or exceeds the 'taxable quantum': Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 3. By limiting the applicability of section 29 to dealers who sell goods obtained from outside the Province, exemption has been conferred on dealers who purchase goods inside the State but are otherwise not subject to tax under section 3. Both section 3 and section 29 deal with dealers who deal in goods which are liable to tax under the Act. They make no distinction between goods manufactured or produced inside the State and those produced or manufactured outside the State. The liability to registration under section 29 arises when a dealer is required by the Commissioner to get himself registered. The liability to tax arises after he gets himself registered. The language of the section does not impose any obligation on the Commissioner to require every dealer who sells goods received from outside to get himself registered. He may create the liability to registration which leads to liability to taxation by requiring any one or some of the dealers who sell goods obtained from outside the Province. In picking and choosing some he would not be contravening the provisions of the section. His acts would be in conformity with it. The provision therefore gives him unrestri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, it is plainly a case of naked and arbitrary power. " These observations aptly apply to the case of the Commissioner under section 29 of the Act. It is therefore both desirable and necessary that some objective standard or test should be laid down which should govern the exercise of discretion vested in the Commissioner. In Joseph v. Assistant Excise Commissioner, ErnakulamA.I.R. 1953 T.C. 146., the decision in Balakrishnan v. The State of MadrasA.I.R. 1952 Mad. 565. was followed and it was held that where power given to the officer is naked and arbitrary and has the potentiality of being exercised with unjust discrimination in the absence of any principle or standard guiding or regulating its exercise, the power or authority would be void and inoperative by reason of its repugnance to Article 14. As indicated above dealers whose cases fall under section 3 are not all persons who sell goods obtained from inside the State. Most of them sell goods obtained from outside. Certain privileges are given to dealers under that section even though they are selling goods obtained from outside. The dealers under section 29 do not get any of those rights or privileges. There is an eleme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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