1954 (2) TMI 9 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the assessment of sales tax.
2. Applicability of Article 286(1)(b) of the Constitution of India.
3. Validity of Section 16A of the Madras General Sales Tax Act.
4. Right to question the validity of the tax assessment in criminal proceedings.
5. Burden of proof in prosecutions under the Madras General Sales Tax Act.
6. Repugnancy of Section 16A with the Criminal Procedure Code and the Constitution.

Detailed Analysis:

1. Validity of the Assessment of Sales Tax:
The accused were merchants dealing in hides and skins and were assessed to sales tax for various periods. They were prosecuted under Section 15(b) of the Madras General Sales Tax Act for failing to pay the assessed tax. The prosecution contended that the accused could not question the validity of the assessment in a criminal proceeding due to Section 16A of the Act.

2. Applicability of Article 286(1)(b) of the Constitution of India:
The accused argued that their transactions were in the course of export out of India and thus exempt from sales tax under Article 286(1)(b) of the Constitution. The Magistrate did not address this contention, relying instead on Section 16A to preclude any challenge to the assessment's validity.

3. Validity of Section 16A of the Madras General Sales Tax Act:
Section 16A states that the validity of the assessment or the liability to pay any tax assessed under the Act cannot be questioned in any criminal court. The court examined whether this section was ultra vires the Constitution, particularly in light of Article 286(1)(b) and Section 22 of the Act, which exempts certain transactions from sales tax.

4. Right to Question the Validity of the Tax Assessment in Criminal Proceedings:
The court held that the accused should have been allowed to challenge the validity of the tax assessment, especially when constitutional provisions like Article 286(1)(b) were invoked. The Magistrate's refusal to consider these arguments was deemed improper.

5. Burden of Proof in Prosecutions under the Madras General Sales Tax Act:
The prosecution argued that proving the existence of an assessment order was sufficient to discharge its burden. However, the court emphasized that the accused should be allowed to challenge the validity of the assessment and the liability to pay the tax, as these are fundamental rights in a criminal trial.

6. Repugnancy of Section 16A with the Criminal Procedure Code and the Constitution:
The court found Section 16A to be repugnant to the Criminal Procedure Code and the Constitution. It deprived the accused of the right to challenge the validity of the assessment and the liability to pay the tax, which is contrary to the principles of natural justice and the rights guaranteed under Articles 14 and 20 of the Constitution.

Conclusion:
The court declared Section 16A of the Madras General Sales Tax Act ultra vires the Constitution and the Criminal Procedure Code. Consequently, the convictions and sentences of the petitioners were set aside. The court emphasized the necessity of allowing the accused to challenge the validity of the tax assessment in criminal proceedings to ensure justice and adherence to constitutional rights.