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1971 (11) TMI 142 - SC - VAT and Sales TaxWhether the turnover of Rs. 3,87,200 estimated to be the value of the stock of mill cloth held by the appellant on December 14, 1957, was exigible to tax? Held that - Appeal dismissed. The limitation on the power of the Legislature of Mysore in 1964 when it enacted Act No. 9 of 1964 was that on the sale of declared goods it could not have imposed sales tax at a rate higher than that specified in section 15 of the Central Sales Tax Act as it stood then. There was no limitation on its power to impose tax on the turnover of sales of textiles before April 1, 1958, when they were not declared goods.
Issues Involved:
1. Exigibility of turnover to sales tax. 2. Validity of sub-section (5A) of section 5 of the Mysore General Sales Tax Act, 1957. 3. Competency of the Mysore Legislature to levy tax retrospectively. 4. Application of section 15 of the Central Sales Tax Act, 1956, to declared goods. Issue-wise Detailed Analysis: 1. Exigibility of Turnover to Sales Tax: The appellant, a dealer in textiles, was assessed to sales tax on its turnover for the period from October 1, 1957, to March 31, 1958. The dispute centered on whether the turnover of Rs. 3,87,200, representing the value of mill cloth stock held on December 14, 1957, was taxable. The appellant contended that the turnover related to mill cloth on which additional excise duty was not payable and therefore should be exempt from sales tax. This contention was rejected by the assessing authority, the Deputy Commissioner of Commercial Taxes, and the Sales Tax Appellate Tribunal. 2. Validity of Sub-section (5A) of Section 5 of the Mysore General Sales Tax Act, 1957: The appellant challenged the validity of sub-section (5A) introduced in section 5 by Act No. 9 of 1964, arguing that it purported to levy tax on fictitious or deemed sales, which was beyond the legislative power under entry 54 of the State List of the Seventh Schedule to the Constitution. The High Court dismissed this contention, holding that the tax imposed was on actual sales and not on deemed or fictitious ones. The High Court emphasized that the amendment simplified the tax imposition by stating that tax would be levied on sales or purchases related to stock held by the dealer on December 14, 1957, with specific provisions for manufacturers. 3. Competency of the Mysore Legislature to Levy Tax Retrospectively: The appellant argued that the Mysore Legislature, on February 27, 1964, lacked the power to impose tax on sales of textiles at rates higher than those specified in section 15 of the Central Sales Tax Act, 1956, as textiles had become declared goods by then. The Supreme Court rejected this argument, stating that the Legislature's power to levy tax retrospectively depended on its present legislative power, not on its power at the time the enactment was to have operation. The Court held that the Mysore Legislature had the power to impose tax on the turnover of undeclared goods during the assessment period at the rates specified in the Second Schedule to the Act. 4. Application of Section 15 of the Central Sales Tax Act, 1956, to Declared Goods: The appellant contended that the Mysore Legislature was restricted by section 15 of the Central Sales Tax Act, 1956, which limited the tax rate on declared goods to 2%. The Supreme Court clarified that this restriction applied only after textiles became declared goods on April 1, 1958. Before this date, the Mysore Legislature had the power to impose tax at higher rates. The Court also noted that the substituted sub-section (5A) was deemed to have always been part of the Mysore General Sales Tax Act, and there was no limitation on the Legislature's power to impose tax on the turnover of sales of textiles before they became declared goods. Conclusion: The Supreme Court upheld the validity of the tax imposed on the appellant's turnover of mill cloth stock held on December 14, 1957, and dismissed the appeals with costs, affirming the competency of the Mysore Legislature to retrospectively levy tax on the turnover of undeclared goods at the rates specified in the Second Schedule to the Act.
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