1956 (4) TMI 43 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the deduction referred to in sub-rule (2) of rule 18 of the Turnover and Assessment Rules under the Madras General Sales Tax Act is conditional upon the assessee complying with the requirement contained in sub-rule (3) of that rule.

Detailed Analysis:

Construction of Relevant Provisions:
The judgment hinges on the interpretation of the relevant provisions of the Madras General Sales Tax Act and the associated rules. The Act defines key terms such as 'Dealer' (Section 2(b)) and 'Turnover' (Section 2(i)). Section 3 outlines how turnover should be determined and tax assessed, levied, and collected. Specific provisions, such as Section 5, allow for exemptions and reductions in tax, while Section 6 empowers the government to make such exemptions. Section 19 authorizes the State Government to make rules to carry out the purposes of the Act.

Relevant Rules:
The State Government, under Section 3(2) and Section 19, framed the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, and the Madras General Sales Tax Rules, 1939. Rule 4 specifies how the gross turnover of a dealer is calculated, particularly for certain goods like groundnuts. Rule 5(1)(k) allows deductions from the gross turnover for registered manufacturers of groundnut oil and cake, subject to conditions specified in Rule 18.

Rule 18 Provisions:
Rule 18(1) allows dealers who manufacture groundnut oil and cake to register as manufacturers. Rule 18(2) provides for deductions equal to the value of groundnut and/or kernel purchased and converted into oil and cake, provided the sale amount is included in the turnover. Rule 18(3) mandates that manufacturers submit a monthly statement in Form A-9 by the 25th of each month. Rule 18(3-A) allows the Commercial Tax Officer to condone delays or omissions in submitting Form A-9.

Assessee's Argument:
The assessee contended that the deduction under Rule 18(2) should be allowed even if they failed to submit Form A-9 as required by Rule 18(3). They argued that Rule 18(3) is directory, not mandatory, and that the right to deduction is absolute and not dependent on procedural compliance. This argument was supported by a decision in The State of Madras v. Hajee M.S.A. Meeran Sahib Co., where it was held that the language should explicitly state if the right to deduction is conditional upon procedural compliance.

Counter Argument and Precedents:
Contrary to the assessee's argument, a later decision in The State of Madras v. Nallam Jaggiah and an unreported decision in Boddu Pydanna Sons v. The State of Andhra held that deductions could only be allowed if all conditions in Rule 18 were satisfied. The Court emphasized that exemptions from tax should be strictly construed against the claimant, requiring clear compliance with the conditions for exemptions.

Interpretation of Mandatory vs. Directory Provisions:
The Court distinguished between mandatory and directory provisions, emphasizing that mandatory provisions must be strictly followed, while substantial compliance is sufficient for directory provisions. The Court cited Howard v. Bodington, which laid down principles for determining whether a provision is mandatory or directory.

Conclusion:
The Court concluded that the language of Rule 18(3) is peremptory and absolute, implying that the deduction under Rule 18(2) is conditional upon compliance with Rule 18(3). Therefore, the deduction cannot be claimed without submitting the required statement in Form A-9.

Final Order:
Following the Full Bench decision, the revision was allowed with costs, affirming that compliance with Rule 18(3) is a prerequisite for claiming the deduction under Rule 18(2). The Court ordered that the revision be allowed with an advocate's fee of Rs. 250.

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