1955 (4) TMI 29 - HC - VAT and Sales Tax

Issues Involved:
1. Applicability of the amended tax rate to the turnover of the previous year.
2. Interpretation of Section 3-A of the U.P. Sales Tax Act.
3. Retrospective application of tax rates.
4. Discrimination between different methods of assessment.
5. Application of Section 7-B(2) of the U.P. Sales Tax Act.

Detailed Analysis:

1. Applicability of the Amended Tax Rate to the Turnover of the Previous Year:
The primary issue was whether the manufacturer of non-edible oils, who elected the previous year as the basis for assessment, should pay tax at the flat rate of 3 pies per rupee for the whole year or at the rate of 3 pies per rupee from 1st April 1947 to 8th June 1947, and 6 pies per rupee from 9th June 1947 to 31st March 1948. The court re-framed the question to correspond to the actual previous year, which was from 1st June 1946 to 31st May 1947.

2. Interpretation of Section 3-A of the U.P. Sales Tax Act:
Section 3-A allowed the State Government to declare that the proceeds of sale of certain goods would not be included in the turnover except at a single point in the series of sales by successive dealers. The court held that this section and the notification issued under it were intended to apply only to sales carried out after the notification came into effect. The language of section 3-A indicated that the power of the Provincial Government was to be exercised prospectively, affecting only future sales and not those that had already occurred.

3. Retrospective Application of Tax Rates:
The court emphasized that the principal charging section (Section 3) prescribed a uniform rate of 3 pies per rupee on the turnover of the previous year. The power granted to the Provincial Government under Section 3-A to alter the method of taxation was not explicitly retrospective. The court concluded that the rates laid down in the notification dated 8th June 1948 could only be applied to sales actually carried out subsequent to that notification.

4. Discrimination Between Different Methods of Assessment:
The court addressed the argument that interpreting the law to apply the new rates prospectively would result in discrimination between dealers choosing different methods of assessment. The court held that the law provided a choice to the assessee, and if one method was more advantageous, it was up to the assessee to choose it. The court also noted that all sales effected after the enforcement of the notification would eventually be taxed at the higher rate, regardless of the chosen method.

5. Application of Section 7-B(2) of the U.P. Sales Tax Act:
The court examined the applicability of Section 7-B(2), introduced by the U.P. Sales Tax (Amendment) Act, 1954, which allowed re-opening of assessments if the rate of tax was varied during the assessment year. The court concluded that Section 7-B(2) did not apply retrospectively to variations made before its enactment. The language of the section indicated that it applied only to variations occurring after the provision came into force.

Conclusion:
The court answered the re-framed question by stating that the applicant company was liable to pay tax for the assessment year 1948-49 on the turnover of the previous year at the flat rate of 3 pies per rupee. The court awarded costs of Rs. 500 to the applicant company from the Department. The reference was answered accordingly.

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