1955 (10) TMI 25 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the tax assessment under the Madras General Sales Tax Act.
2. Applicability of Section 5(vi) and Section 3 of the Act.
3. Ultra vires status of Rule 16(5) of the Turnover and Assessment Rules.
4. Classification under Article 14 of the Constitution.
5. Impact of Supreme Court and Madras High Court decisions on Rule 16(5).

Detailed Analysis:

1. Validity of the tax assessment under the Madras General Sales Tax Act:
The appellants, a tannery firm, did not renew their license for the year 1952-53 and failed to submit a turnover return. The Commercial Tax Officer assessed their turnover and levied a tax, which the appellants contested. The court held that the appellants were liable to tax under Section 3(1) of the Act due to non-renewal of the license, thus losing the concession under Section 5.

2. Applicability of Section 5(vi) and Section 3 of the Act:
The appellants argued that Section 5(vi) supersedes Section 3 and that hides and skins are taxable only at a single point. The court clarified that Section 5 provides a concession subject to conditions, including obtaining a license. Non-compliance with these conditions invokes Section 6-A, making Section 3 applicable as if Section 5 did not exist. Thus, Section 3 remains the charging section, and the appellants, having not renewed their license, were liable under Section 3.

3. Ultra vires status of Rule 16(5) of the Turnover and Assessment Rules:
The appellants claimed Rule 16(5) was ultra vires, as it was inconsistent with Section 5(vi). The court held that even if Rule 16(5) were ultra vires, the appellants would still be liable under Section 3 due to the withdrawal of the concession. The court further stated that Rule 16(5) is not ultra vires as it merely enforces the legal effect of non-compliance with licensing requirements, consistent with Section 6-A and the overall scheme of the Act.

4. Classification under Article 14 of the Constitution:
The appellants contended that the classification between licensed and unlicensed dealers violated Article 14. The court referenced established judicial principles, stating that reasonable classification is permissible if it is based on an intelligible differentia with a rational relation to the legislative objective. The differentiation aimed to ensure tax compliance and prevent tax evasion, thus serving a legitimate state interest. The classification was deemed reasonable and did not violate Article 14.

5. Impact of Supreme Court and Madras High Court decisions on Rule 16(5):
The court examined the Supreme Court's decision in Syed Mohammad & Co. v. The State of Andhra and the Madras High Court's decision in Syed Mohamed & Co. v. The State of Madras. It noted that the Supreme Court did not directly rule on the validity of Rule 16(5) but recorded a concession made by the Advocate-General. The Madras High Court's observations were considered obiter dicta and not binding. The court concluded that it was not precluded from expressing its view and held that Rule 16(5) was not ultra vires.

Conclusion:
The court upheld the tax assessment under Section 3(1) of the Act, dismissed the contention that Rule 16(5) was ultra vires, and found the classification under Article 14 to be reasonable. The appeal was dismissed with costs fixed at Rs. 200.