1974 (10) TMI 70 - SC - VAT and Sales Tax

Whether the Parliament in not fixing the rate itself and in adopting the rate applicable to the sale or purchase of goods inside the appropriate State has not laid down any legislative policy and has abdicated its legislative function? Held that - Appeal dismissed. Since the very question whether such amendment of the law would make the transactions in question exigible to tax is one which is capable of giving rise to considerable argument, the mistake sought to be rectified ceases to be a mistake apparent on the record , thus making it unamenable to correction under rule 38 of the State Rules. We are unable to accept this argument. It is true that the impugned notice clearly indicates that it is issued pursuant to the amendments made in the law aforementioned. But the fact that elaborate arguments could be constructed as to the interpretation to be placed on a statutory provision, which in one sense renders an earlier rectification of a mistake, would not, in our judgment, make such a mistake one that is not apparent on the record.

Issues Involved:
1. Constitutionality of section 8(2)(a) and section 6(1A) of the Central Sales Tax Act.
2. Validity of rectification orders under rule 38 of the Mysore Sales Tax Rules.
3. Applicability of the rate of tax at the time of enactment of section 8(2)(a) versus subsequent variations.
4. Alleged violation of Article 14 by section 6(1A) read with section 10 of the Central Sales Tax (Amendment) Act, 1969.
5. Whether section 8(2)(a) impliedly repealed section 6(1A).
6. Timeliness of rectification orders under rule 38 of the Mysore Sales Tax Rules.

Detailed Analysis:

1. Constitutionality of Section 8(2)(a) and Section 6(1A) of the Central Sales Tax Act:
The appellants argued that section 8(2)(a) was unconstitutional based on excessive delegation of legislative power, referencing the decision in G. Rayon Silk Mfg. (Wvg.) Co. Ltd. v. Assistant Commissioner. The court found this argument unsubstantiated, holding that section 8(2)(a) was enacted to prevent tax evasion and did not constitute excessive delegation. The legislative policy was clear: the rate of Central sales tax should not be less than the local sales tax rate. The court emphasized that adopting state tax rates did not mean the Parliament abdicated its legislative function but rather effectuated its policy to prevent tax evasion and maintain parity between inter-State and intra-State sales.

2. Validity of Rectification Orders Under Rule 38 of the Mysore Sales Tax Rules:
The appellants contended that there was no mistake apparent on the face of the record to justify rectification under rule 38. The court rejected this, stating that the rectification orders were valid as they were made following the Central Sales Tax (Amendment) Act, 1969, which superseded the judgment in Yaddalam's case. The court held that the sales tax authorities were justified in rectifying their earlier orders in light of the amendment and subsequent Supreme Court decisions.

3. Applicability of the Rate of Tax at the Time of Enactment of Section 8(2)(a) Versus Subsequent Variations:
The appellants argued that the rate of tax applicable should be the rate prevalent when section 8(2)(a) was enacted, not subsequent variations. The court dismissed this argument, clarifying that the rate applicable is the rate at the relevant point of time, consistent with the legislative policy that inter-State trade should not be discriminated against. The Central Sales Tax Act's scheme was to adopt the machinery and rates from the State Sales Tax Acts for convenience and to avoid discrimination.

4. Alleged Violation of Article 14 by Section 6(1A) Read with Section 10 of the Central Sales Tax (Amendment) Act, 1969:
The appellants claimed that section 6(1A) violated Article 14 because it did not extend the same concession to transactions before November 10, 1964, as it did for transactions between November 10, 1964, and June 9, 1969. The court found this argument unconvincing, stating that a concession is not a matter of right. The legislature's decision to grant concessions to certain taxpayers did not render the law unconstitutional, nor could the court legislate to extend such concessions.

5. Whether Section 8(2)(a) Impliedly Repealed Section 6(1A):
The appellants argued that section 8(2)(a) impliedly repealed section 6(1A). The court disagreed, stating that both provisions should be read together to avoid nullifying each other. Section 6(1A) was enacted to override the decision in Yaddalam's case, and its inclusion in the non obstante clause of section 8(2)(a) did not obliterate its effect. The court concluded that both sections could coexist, with section 6(1A) ensuring that inter-State sales were taxable even if intra-State sales were not.

6. Timeliness of Rectification Orders Under Rule 38 of the Mysore Sales Tax Rules:
The appellants contended that the rectification orders were beyond the permitted period under rule 38. The court found this argument baseless, stating that the rectification orders were within time when calculated from the date of the original rectification order. Rule 38 allowed for rectification of "any order," including rectified orders, within five years from the date of the order sought to be rectified.

Conclusion:
The appeals were dismissed with costs, and the court upheld the validity of the Central Sales Tax (Amendment) Act, 1969, and the rectification orders made under rule 38 of the Mysore Sales Tax Rules. The court affirmed that the legislative policy was clear and consistent, ensuring that inter-State trade was not discriminated against and preventing tax evasion.

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