1955 (1) TMI 30 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the rules under the Madras General Sales Tax Act.
2. Provisional assessment and levy of sales tax.
3. Delegation of legislative power.

Detailed Analysis:

1. Validity of the rules under the Madras General Sales Tax Act:
The petitioner was convicted under section 15(b) of the Madras General Sales Tax Act for failing to pay the provisional sales tax. The primary question raised was whether the rules under which the provisional tax was assessed were valid. The Act's section 3(1) mandates that every dealer shall pay a tax on their total turnover for the year. Sections 3(4) and 3(5) provide for the determination and collection of the turnover and tax in accordance with prescribed rules. However, the petitioner argued that these rules were ultra vires, as they required the payment of tax before the annual turnover was determined.

2. Provisional assessment and levy of sales tax:
The court scrutinized the rules under the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, particularly rules 6 to 11, which allowed for the provisional assessment and monthly payment of tax based on estimated turnover. The court found that these rules were inconsistent with section 3(1) of the Act, which stipulates that the tax is to be paid on the total turnover for the year. The court noted that while the legislature could have included a provision for advance tax, similar to section 18A of the Indian Income-tax Act, it did not do so in this Act. Therefore, the rules requiring advance payment based on an estimated turnover were beyond the scope of the Act.

3. Delegation of legislative power:
The petitioner's counsel argued that if the rules were considered valid despite being inconsistent with the Act, it would imply an unconstitutional delegation of legislative power to the Government. The court examined section 19(5) of the Act, which states that rules published in the Fort St. George Gazette shall have effect as if enacted in the Act. The court referred to the precedent set by the House of Lords in Minister of Health v. The King (on the prosecution of Yaffee), which held that rules conflicting with the parent Act would have to give way to the Act. The court concluded that the rules in question were open to judicial review and could be invalidated if found inconsistent with the Act.

Conclusion:
The court held that the rules requiring the provisional assessment and advance payment of sales tax were ultra vires of the Madras General Sales Tax Act. Consequently, the demand for provisional tax from the petitioner was invalid, and the petitioner was not guilty of the offence under section 15(b) of the Act. The court allowed the revision petition, set aside the conviction and sentence, and ordered the refund of the fine paid by the petitioner.