1954 (7) TMI 19 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of sales tax under the Madras General Sales Tax Act.
2. Interpretation of the nature of sales transactions involving wholesalers and retailers.
3. Jurisdiction of the Court to issue a writ of certiorari in tax assessment matters under Article 226 of the Constitution.

Detailed Analysis:

1. The judgment concerns an application for a writ of certiorari to challenge an assessment order imposing sales tax on the petitioners under the Madras General Sales Tax Act. The petitioners, wholesale consignees and dealers in piece-goods, were assessed by the Deputy Commercial Tax Officer for their turnover, including sales to retailers. The assessment methodology involved treating certain sales as notional sales to wholesalers followed by actual sales to retailers, resulting in duplication of tax liability on a portion of the turnover. The petitioners contested this assessment through various levels of appeal without success, leading them to seek relief through a writ petition.

2. The Court analyzed the sales transactions in question and determined that there was only one actual sale by the petitioners to the retailers, contrary to the Deputy Commercial Tax Officer's interpretation of two separate sales. The Court emphasized that the assessment could not be sustained on its merits as subsequent cases before the Appellate Tribunal established that only one sale should be subject to taxation under the Sales Tax Act. The Deputy Commercial Tax Officer's approach of double taxation on the same transaction was deemed improper and illegal.

3. The Court addressed the jurisdictional aspect of issuing a writ of certiorari in tax matters under Article 226 of the Constitution. The Government Pleader contended that the Court lacked the power to issue a writ when no fundamental right was involved or no question of vires of a specific section was raised. However, referencing relevant case law, the Court clarified that a petitioner challenging an illegal tax imposition could invoke Article 226 to protect their fundamental right to property. In this case, where no sale to wholesalers existed, the tax liability was deemed ultra vires, impacting the petitioners' property rights. Therefore, the Court asserted its authority to quash the improper assessment order, noting that the petitioners had exhausted all available remedies under the Sales Tax Act.

In conclusion, the Court allowed the petition, granting the writ of certiorari to quash the assessment order that levied double tax on a portion of the petitioners' turnover. The petitioners were also awarded costs for the petition.