1953 (11) TMI 16 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Civil Court to try the suit.
2. Whether the right to exemption under Rule 18(2) is absolute or conditional upon compliance with Rule 18(3).
3. Legality and justice of the assessment order dated 20th March, 1949.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Civil Court:
The learned counsel for the State of Madras did not press the issue regarding the jurisdiction of the Civil Court to entertain the suit. Hence, the court did not delve into this matter further.

2. Right to Exemption under Rule 18(2):
The main question argued was whether the respondents were entitled to the exemption claimed under Rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, despite not complying with Rule 18(3). Rule 5(1)(k) states that deductions from the gross turnover of a dealer are subject to conditions specified in Rule 18. The respondents, being registered manufacturers of groundnut oil and cake, were entitled to deductions under Rule 18(2), provided the sale amount of the oil was included in their turnover. The respondents complied with Rule 18(1) and Rule 18(2), but failed to submit monthly statements in Form A9 as required by Rule 18(3).

The court examined Rule 18(3A), which allows the Commercial Tax Officer to condone delays or omissions in submitting the required statements. The Deputy Commercial Tax Officer initially accepted the respondents' deductions and made a provisional assessment. The court inferred that the Officer's initial acceptance and subsequent actions indicated a condonation of the respondents' failure to comply with Rule 18(3).

The court emphasized that the conditions in Rule 18 are procedural and directory, not conditions precedent. The rule-making authority did not intend to deprive the assessee of their right to deductions for failing to comply with procedural requirements. The court held that the substantial right to claim deductions under Rule 18(2) should not be defeated by non-compliance with Rule 18(3), especially when the Commercial Tax Officer has the discretion to condone such failures.

3. Legality and Justice of the Assessment Order:
The assessment order dated 20th March, 1949, was challenged as illegal and unjust. The Deputy Commercial Tax Officer initially accepted the respondents' deductions in the provisional assessment but later disallowed them due to non-compliance with Rule 18(3). The court found that the Deputy Commercial Tax Officer's actions were inconsistent and that his initial acceptance of the deductions indicated a condonation of the respondents' procedural failures. The court ruled that the respondents were entitled to the deductions claimed under Rule 18(2) and that the assessment order was unjust and outside the provisions of the Madras General Sales Tax Act, 1939.

Conclusion:
The court upheld the decision of the learned Second Additional City Civil Judge, declaring the levy of sales tax to the extent of Rs. 2,313-3-11 as illegal and outside the provisions of the Madras General Sales Tax Act, 1939. The appeal by the State of Madras was dismissed with costs.