1967 (4) TMI 175 - SC - VAT and Sales Tax

Whether section 18(4) takes away the right of election of the assessment year conferred on every dealer by the first proviso to section 7 read with rule 39(1)? Whether tax is to be imposed on a new dealer on his turnover computed in accordance with section 18(4) in spite of his election of the assessment year by filing quarterly returns? Held that - Appeal dismissed. Rule 41(5) cannot be read so as to modify an express provision of the Act. The statutory obligation imposed upon the authority to tax the dealer under sub-section (4) of section 18 remains absolute for the year following immediately the year in which the business was commenced by the dealer, and the method prescribed for determination of the turnover must be applied.

Summary

Issues:
Interpretation of section 18(4) of the U.P. Sales Tax Act, 1948 in relation to the right of election of the assessment year by a dealer.

Analysis:
The case involved a dispute regarding the computation of taxable turnover under the U.P. Sales Tax Act, 1948. The respondents, who commenced business in cotton textiles, were assessed for the years 1949-50 and 1950-51. The assessing authority initially calculated the turnover under section 18(3) for 1949-50 and under section 7(2) with rule 41(5) for 1950-51. However, the Judge (Revisions) directed the turnover to be calculated under section 18(4) for 1950-51, which was upheld by the High Court.

The main contention raised in the appeal was whether section 18(4) overrides the right of election of the assessment year by a dealer. Section 18(4) mandates the assessing authority to fix the turnover for the next year based on the average monthly turnover of a new dealer. The State argued that this provision is subject to an implied exception when a dealer elects to submit returns for the assessment year under section 7(1) read with rules 40 and 41.

The Supreme Court analyzed the statutory provisions and held that the scheme of the Act originally intended sales tax to be levied on a dealer's turnover of the previous year. However, with the addition of the proviso to section 7(1) allowing an option to submit the turnover of the current year, the significance of section 18(4) was overlooked. The Court emphasized that while the legislative intent might have been to prevent double taxation for a new dealer, the statute's language must be strictly construed.

The Court concluded that the obligation under section 18(4) to compute turnover for the next year based on the monthly average remains absolute, irrespective of the dealer's election to submit returns for the assessment year. Rule 41(5) cannot modify the express provision of section 18(4), and the method prescribed for turnover determination must be followed. Therefore, the High Court's decision affirming the application of section 18(4) for the assessment year 1950-51 was upheld, and the appeal was dismissed with costs.