1952 (8) TMI 16 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the Madras General Sales Tax Act (IX of 1939) and the Turnover and Assessment Rules, 1939.
2. Constitutionality of Section 16A of the Act.
3. Legislative competence of the Provincial Legislature under the Government of India Act, 1935.
4. Delegation of legislative functions to the executive.
5. Alleged violation of Article 14 of the Constitution.
6. Consistency of the Rules with the provisions of the Act.

Detailed Analysis:

1. Validity of the Madras General Sales Tax Act (IX of 1939) and the Turnover and Assessment Rules, 1939:
The petitioners challenged the validity of the Act and the Rules, arguing that they were void and the prosecution under them was illegal. The Court found that the petitioners had been duly served with notice under the Act, had ample opportunity to contest the assessment, and had not appealed against the order. Therefore, the assessment became final, and the only pleas open to the petitioners were those that could not have been urged before the Tribunals, such as the ultra vires nature of the Act.

2. Constitutionality of Section 16A of the Act:
The petitioners argued that Section 16A, which prevents questioning the validity of tax assessment in any criminal court, was opposed to natural justice. The Court rejected this contention, stating that the provision was analogous to rules in civil law that preclude judgment-debtors from raising defenses at the execution stage, which they could have raised during the trial. The Court cited American jurisprudence to support the view that due process requires an opportunity to be heard before liability is irrevocably fixed.

3. Legislative Competence of the Provincial Legislature under the Government of India Act, 1935:
The petitioners argued that the Provincial Legislature had no power to impose a tax on purchasers under Entry 48 of the Provincial List of the Government of India Act, 1935. The Court held that the power to tax sales includes the power to tax either the seller or the purchaser, as the transaction of sale is bilateral and involves both parties. The Court cited Gwyer, C.J., in Madras Province v. Boddu Paidanna & Sons, to support this view.

4. Delegation of Legislative Functions to the Executive:
The petitioners contended that the decision to tax either the seller or the purchaser was a legislative act and could not be delegated to the executive. The Court held that the delegation was valid, citing the Privy Council's decision in Powell v. Appollo Candle Company Limited, which upheld the delegation of power to the Governor to impose a tax. The Court also referred to American jurisprudence, which allows for the delegation of administrative functions to special bodies within the framework of the Act.

5. Alleged Violation of Article 14 of the Constitution:
The petitioners argued that the Act and the Rules were discriminatory, imposing tax on purchasers in some trades while taxing sellers in others, without any rational basis. The Court held that the classification was reasonable and based on differences germane to the purpose of the statute. The Court cited several American and Indian cases to support the view that legislative classification is permissible if it rests on a reasonable basis and is not arbitrary.

6. Consistency of the Rules with the Provisions of the Act:
The petitioners argued that the Rules were inconsistent with the provisions of the Act and therefore void. The Court found that the scheme of taxation adopted by the Rules was in accordance with the Act's provisions. However, the Court held that Rule 16(5), which provided for multiple taxation in certain cases, was repugnant to Section 5(vi) of the Act and therefore ultra vires. This did not bring relief to the petitioners as they were licensed tanners and not affected by this rule.

Conclusion:
The Court dismissed the petitions, holding that the Madras General Sales Tax Act and the Rules, except Rule 16(5), were intra vires and valid. The Court suggested that the Government consider making it compulsory for all tanners and dealers to take out licenses to avoid difficulties and anomalies in the Act's working.

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