1969 (8) TMI 72 - SC - VAT and Sales Tax

Whether the trade discount was a permissible deduction in assessments under the Central Sales Tax Act? Held that - Appeal allowed. Use of the expression in the same manner in section 8(2) of the Central Act has not the effect of assimilating the procedural and the substantive provisions relating to the imposition levy and collection of tax as are provided by the State law in the matter of collection of tax under the Central Act. Under sub-sections (1) and (2) of section 9 of the Central Act the power conferred upon the authority competent to assess the tax in the same manner as the tax on the sale or purchase of goods under the general sales tax law does not include the power to admit to exemptions provided by the State law inter-State sales taxable under the Central Act. The legal position has however been changed as a result of the issue of the Central Sales Tax (Amendment) Ordinance 1969 (No. 4 of 1969) which was promulgated on June 9 1969.

Issues Involved:
1. Deductibility of trade discounts from gross turnover.
2. Limitation period for revising assessment orders.
3. Constitutional validity of the Central Sales Tax (Amendment) Ordinance, 1969.

Detailed Analysis:

1. Deductibility of Trade Discounts from Gross Turnover:
The primary issue in these appeals was whether the trade discounts allowed by the respondent to its customers could be deducted from its gross turnover while determining the taxable turnover under the Central Sales Tax Act, 1956. The Sales Tax Officer initially allowed this deduction, but the Deputy Commissioner of Agricultural Income-tax and Sales Tax disallowed it, leading to revisions and appeals.

The High Court, in its judgment, examined the provisions of Section 9(3) of the Central Sales Tax Act read with Rule 7(1)(a) of the General Sales Tax Rules, 1950. It concluded that "all deductions allowed under the State law to be made from the gross turnover in determining the net turnover shall be liable to deduction in determining the taxable turnover under the Central Sales Tax Act, 1956." Consequently, the High Court upheld the deductibility of the trade discounts.

2. Limitation Period for Revising Assessment Orders:
The Appellate Tribunal addressed the issue of whether the Deputy Commissioner's action to revise the assessment orders was barred by limitation. The Tribunal found that the irregularity sought to be rectified pertained to escaped turnover and that the Deputy Commissioner's order dated June 23, 1966, was beyond the four-year limitation period from the assessment year 1960-61.

However, the High Court did not decide on the limitation issue and instead focused on the merits of whether the trade discount was a permissible deduction. The Supreme Court, therefore, did not address the limitation issue directly but allowed the appeals, setting aside the orders of the lower authorities and remanding the matter to the Sales Tax Officer for reassessment.

3. Constitutional Validity of the Central Sales Tax (Amendment) Ordinance, 1969:
The interveners raised a constitutional objection, arguing that the retrospective effect of the Central Sales Tax (Amendment) Ordinance, 1969, was violative of Articles 19 and 14 of the Constitution. However, the Supreme Court noted that it was not open to the parties in this case to challenge the constitutional validity of the Ordinance, citing the decision in K.S. Venkataraman & Co. v. State of Madras. The Court held that the Appellate Tribunal, being a creature of the statute, could only decide disputes in terms of the statute's provisions, and questions of ultra vires were beyond its jurisdiction.

Conclusion:
The Supreme Court allowed the appeals, set aside the judgment of the Kerala High Court, and remanded the matter to the Sales Tax Officer for reassessment in accordance with the law. The Court did not impose any order regarding costs in these appeals. The judgment emphasizes the procedural and substantive alignment required between State and Central Sales Tax laws, particularly concerning allowable deductions and the jurisdictional limits of statutory bodies in constitutional matters.

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