1972 (10) TMI 94 - SC - VAT and Sales Tax

Whether the Commercial Tax Officer could have refused the refund on the ground that no application was presented by the petitioners before us within the time allowed by rule 39-A(3)? Held that - Appeal dismissed. This is not a fit case where we should interfere in exercise of our powers under article 136 of the Constitution. Under rule 18 framed under the Mysore Sales Tax Act, 1957, we are informed that a dealer will have to submit his annual return within 30 days of the end of the financial year. That means even if a sale in the course of inter- State trade has been made on the 31st March of a year, the refund application will have to be made within 30 days from that date. The position will be worse still if the dealer is required to submit quarterly returns. The learned counsel for the State was not in a position to tell us whether in the Mysore State the dealers have to file quarterly returns. Thus the impugned rule is merely an attempt to deny the dealers the refund to which they are entitled under the law or at any rate to make the enforcement of that right unduly difficult.

Summary

Issues Involved:
1. Ultra vires nature of Rule 39-A under the Mysore Sales Tax Act, 1957.
2. Entitlement to refund under Section 5(4) of the Mysore Sales Tax Act.
3. Validity of the time limitation and form requirements for refund applications.

Issue-wise Detailed Analysis:

1. Ultra vires Nature of Rule 39-A:
The primary issue in these appeals was whether Rule 39-A of the Rules framed under the Mysore Sales Tax Act, 1957, was ultra vires the rule-making power. Section 15(b) of the Central Sales Tax Act, 1956, mandates that any tax levied on declared goods inside a state, if sold in the course of inter-State trade or commerce, must be refunded to the seller. Similarly, Section 5(4) of the Mysore Sales Tax Act, 1957, provides for a refund of tax on declared goods sold in inter-State trade. The rule in question, Rule 39-A, stipulated the manner and conditions for such refunds, including time limits and specific forms.

2. Entitlement to Refund:
The petitioners, dealers in hides, skins, copra, and coconuts, claimed refunds on the grounds that they had paid sales tax on these declared goods, which were later sold in inter-State trade. The Commercial Tax Officer denied these refunds due to non-compliance with Rule 39-A, specifically the failure to submit applications within the prescribed time and in the required form. The High Court ruled that the right to a refund under Section 5(4) of the Mysore Sales Tax Act was absolute and could not be negated by procedural rules.

3. Validity of Time Limitation and Form Requirements:
The High Court found that the time limitation and form requirements imposed by Rule 39-A were beyond the government's rule-making authority. The proviso to Section 5(4) of the Mysore Sales Tax Act does not authorize the imposition of a period of limitation for refund claims. The High Court emphasized that the conditions prescribed should regulate the refund process and not extinguish the right to a refund. The Supreme Court concurred with this view, stating that sub-rules (2) and (3) of Rule 39-A were unreasonable. The requirement to submit refund applications within the time frame for sales tax returns, often within 30 days, was deemed impractical and an undue burden on dealers.

Conclusion:
The Supreme Court upheld the High Court's decision, quashing the orders of the Commercial Tax Officer and directing the refunds to be made. It emphasized that the procedural requirements should not nullify the absolute right to a refund created by the statute. The appeals were dismissed, and no costs were awarded as the respondents were not represented.