1950 (10) TMI 8 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the transfer of property in the goods did not take place within the Province of Madras?
2. Whether the Commercial Tax Officer had no jurisdiction or power to act under rule 14(2) in assessing the alleged escaped turnover?
3. Whether the assessment is illegal and ultra vires for any of the reasons mentioned in the plaint?
4. Is the plaintiff entitled to a refund of the plaint amount?
5. To what relief is the plaintiff entitled?

Detailed Analysis:

1. Transfer of Property in Goods:
The primary issue was whether the transfer of property in the goods took place within the State of Madras. The plaintiffs argued that the sales transactions were conducted by their Bombay office, and the property in the goods passed outside Madras. The contracts stipulated that the delivery was to be completed at Marmagoa, and the plaintiffs reserved the right to reject the goods upon inspection at Marmagoa. The court found that the property in the goods did not pass to the plaintiffs until the final approval at Marmagoa, thus the transfer did not occur within Madras State.

2. Jurisdiction of Commercial Tax Officer:
The plaintiffs contended that the Commercial Tax Officer had no jurisdiction under Rule 14(2) to assess the escaped turnover. The court examined the scope of Rule 14(2) and found that it only allowed the Commercial Tax Officer to examine the record of any order for legality or propriety, but not to assess escaped turnover based on new evidence or information. The assessment should have been done under Rule 17, which had a specific time limit. Therefore, the Commercial Tax Officer acted beyond his jurisdiction, making the assessment illegal.

3. Legality and Ultra Vires Nature of Assessment:
The court determined that the assessment was illegal and ultra vires because it was made beyond the period allowed under Rule 17 for assessing escaped turnover. The Commercial Tax Officer's action of using Rule 14(2) to circumvent the time limitation was found to be improper and without jurisdiction.

4. Entitlement to Refund:
Given the findings on the above issues, the court concluded that the plaintiffs were entitled to a refund of the amount collected as tax. The assessment being illegal and ultra vires, the plaintiffs were rightfully entitled to recover the sum of Rs. 26,933-0-5.

5. Relief to Plaintiff:
The court granted a decree in favor of the plaintiffs for the recovery of the amount collected as tax, along with costs. The judgment emphasized that the Commercial Tax Officer's actions were not bona fide and were contrary to the statutory provisions governing the assessment of escaped turnover.

Conclusion:
The court concluded that the transfer of property in the goods did not take place within the State of Madras, the Commercial Tax Officer had no jurisdiction under Rule 14(2) to assess the escaped turnover, and the assessment was illegal and ultra vires. Consequently, the plaintiffs were entitled to a refund of the tax amount collected. The court decreed in favor of the plaintiffs and awarded costs against the defendant.