1948 (9) TMI 8 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Consistency of Rule 36(1) of the Bihar Sales Tax Rules, 1944, with Sections 6 and 10 of the Bihar Sales Tax Act, 1944.
2. Mandatory nature of Rule 36(1) of the Bihar Sales Tax Rules, 1944.
3. Lawfulness of awarding costs by the Board of Revenue in sales tax cases.

Detailed Analysis:

1. Consistency of Rule 36(1) of the Bihar Sales Tax Rules, 1944, with Sections 6 and 10 of the Bihar Sales Tax Act, 1944:
The primary issue was whether Rule 36(1) of the Bihar Sales Tax Rules, 1944, framed by the Provincial Government under Section 26 of the Act, is consistent with the express provisions of Sections 6 and 10 of the Act. The court examined the scheme of the Act, noting that "turnover" is defined in Section 2(i) as the aggregate of sale prices received or receivable by a dealer, encompassing both taxable and non-taxable goods. Section 5 specifies that tax is levied on the "taxable turnover," which excludes sales of goods declared tax-free under Section 6. Section 10 outlines the assessment procedure, requiring the Commissioner to assess tax based on returns or evidence produced by the dealer.

The court found that Rule 36(1) is a rule of evidence specifying the type of evidence required to support a claim that a portion of the gross turnover represents sales of non-taxable goods. The rule does not make non-taxable goods taxable but simply mandates the production of specific evidence to claim exemptions. Therefore, Rule 36(1) was deemed consistent with Sections 6 and 10 of the Act.

2. Mandatory Nature of Rule 36(1) of the Bihar Sales Tax Rules, 1944:
The court addressed whether the provisions of Rule 36(1) are mandatory. Given the use of the word "shall" in Rule 36(1), the court concluded that the rule is indeed mandatory. The court emphasized that Rule 36(1) dictates the evidence required for claiming deductions from gross turnover, and compliance with this rule is obligatory for dealers seeking exemptions under the Act.

3. Lawfulness of Awarding Costs by the Board of Revenue in Sales Tax Cases:
The third issue was whether it is lawful for the Board of Revenue (and other courts) to award costs in sales tax cases. The court observed that the Sales Tax Act contains no express provision authorizing the award of costs by the sales tax authorities, except for Section 21(6), which pertains to costs in references made to the High Court. The court rejected the argument that the Board has inherent powers to award costs, stating that a statutory court of limited jurisdiction cannot assume such powers without explicit statutory authorization. Consequently, the court held that the award of costs by the Board and its subordinate officers was not lawful.

Conclusion:
The court answered the three referred questions as follows:
1. Rule 36(1) of the Bihar Sales Tax Rules, 1944, is consistent with the provisions of Sections 6 and 10 of the Bihar Sales Tax Act, 1944.
2. The provisions of Rule 36(1) are mandatory.
3. The award of costs by the Board of Revenue in sales tax cases is not lawful.

The court limited the hearing fee to Rs. 100 in deposit for each case, recognizing that these cases related to the first quarter after the introduction of the Act. The references were answered accordingly.