1955 (4) TMI 28 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of Rule 14 of the Madras General Sales Tax Rules.
2. Applicability of Rule 14's revision powers in cases where Rule 17 relating to escaped assessment is applicable.

Detailed Analysis:

1. Validity of Rule 14 of the Madras General Sales Tax Rules:

The primary legal question referred to the Full Bench was whether Rule 14 of the Madras General Sales Tax Rules is valid. The assessees challenged the validity of Rule 14(2) on two grounds:

a. Contrary to Express Provision in the Act:
The assessees argued that Rule 14(2) was contrary to Section 11(4) of the Act, which states that every order passed in appeal shall, subject to the powers of revision conferred by Section 12, be final. They contended that this finality could not be impaired by the action of another revisional authority, such as the Commercial Tax Officer under Rule 14(2).

However, the court found that this argument did not apply to the cases at hand. In O.S.A. No. 62 of 1951, the order revised by the Commercial Tax Officer was an order of the Deputy Commercial Tax Officer from which no appeal had been brought, and thus, the finality posited by Section 11(4) was not attracted. In C.C.C.A. No. 137 of 1951, although the assessee had preferred an appeal, Section 12 had been amended to confer revisional powers not only on the Board of Revenue but also on the Commercial Tax Officer, making the objection invalid.

b. Not Authorized by Rule-Making Power:
The second head of argument was that Rule 14(2) was not authorized by the rule-making power under Section 19 of the Act. The court examined the rule-making power under Section 19, particularly Section 19(2)(j) and Section 19(2)(1), which allow the Provincial Government to make rules prescribing the duties and powers of officers and for any other matter necessary for giving effect to the purposes of the Act. The court found that these provisions were broad enough to authorize the framing of Rule 14(2), thus rejecting the contention that Rule 14(2) was ultra vires.

2. Applicability of Rule 14's Revision Powers in Cases Where Rule 17 Relating to Escaped Assessment is Applicable:

The court then considered whether the powers of revision under Rule 14(2) could be exercised in cases where Rule 17, relating to escaped assessment, was applicable. The court concluded that the two rules are mutually exclusive. Rule 17 applies to cases of escaped turnover, where the turnover has not been noticed by the assessing authority due to inadvertence, omission, or deliberate concealment by the assessee. In contrast, Rule 14(2) deals with improper or illegal assessment orders where the turnover has been considered but treated as non-taxable or granted an exemption erroneously.

The court emphasized that Rule 17(1) is concerned with escaped turnover, not escaped assessment. The turnover escapes when it is not noticed by the officer due to various reasons, while Rule 14(2) is directed at correcting improper or illegal assessment orders. The court held that Rule 14(2) and Rule 17(1) should be read together to define the precise content of each, ensuring that the two provisions are reconcilable and each jurisdiction is assigned to the proper authority.

Conclusion:

1. Rule 14(2) is intra vires the rule-making power of the Provincial Government under Section 19 of the Act.
2. Revisional powers under Rule 14(2) cannot be exercised in cases to which Rule 17 applies.
3. Rule 17 applies only to cases of escaped turnover as described in the judgment.

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