1956 (4) TMI 50 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the assessment under the Madras General Sales Tax Act.
2. Liability of an unlicensed dealer in untanned hides and skins to pay tax on sale turnover.
3. Validity of Rule 16(5) of the Turnover and Assessment Rules.
4. Validity of Rule 5 of the General Sales Tax Rules.
5. Applicability of Section 6-A to unlicensed dealers.
6. Jurisdiction of the Court to entertain the petition despite available alternative remedies.

Issue-wise Detailed Analysis:

1. Legality of the Assessment under the Madras General Sales Tax Act:
The petitioners, who were unlicensed dealers in untanned hides and skins, challenged the legality of the assessment made against them under the Madras General Sales Tax Act. They argued that the assessment was not warranted by the provisions of the Act. The Court examined whether the assessment was legally valid, considering the statutory provisions and relevant rules.

2. Liability of an Unlicensed Dealer in Untanned Hides and Skins to Pay Tax on Sale Turnover:
The Court analyzed whether an unlicensed dealer in untanned hides and skins is liable to pay tax on his sale turnover. The Full Bench decision in Hajee Abdul Shukoor and Co. v. State of Madras was referenced, which excluded the consideration of unlicensed dealers' tax liability but laid down the basis of tax liability for hides and skins. The Court concluded that unlicensed dealers were not liable to tax under the specific provisions applicable to licensed dealers.

3. Validity of Rule 16(5) of the Turnover and Assessment Rules:
Rule 16(5) of the Turnover and Assessment Rules, which imposed tax on each occasion of sale by unlicensed dealers, was declared ultra vires by the Court in Syed Mohamed and Co. v. State of Madras. This decision was affirmed by the Supreme Court, rendering Rule 16(5) invalid as it contravened Section 5(vi) of the General Sales Tax Act, which mandates single-point taxation.

4. Validity of Rule 5 of the General Sales Tax Rules:
The Court examined the validity of Rule 5, which restricted the benefit of single-point taxation to licensed dealers. The Court found that this rule was inconsistent with Section 5(vi) of the Act, which does not contemplate such a restrictive condition. The restriction imposed by Rule 5 was deemed contrary to the legislative intent of providing single-point taxation for hides and skins.

5. Applicability of Section 6-A to Unlicensed Dealers:
Section 6-A, which prescribes penalties for contravening conditions or failing to observe restrictions under Section 5, was found inapplicable to the case of a dealer who did not take out a license. The Court noted that licensing was not compulsory under the rules, and therefore, Section 6-A could not be invoked against unlicensed dealers.

6. Jurisdiction of the Court to Entertain the Petition Despite Available Alternative Remedies:
The Government Pleader objected that the petitioners should have resorted to the usual remedies by way of appeal. However, the Court exercised its discretion to entertain the petition, considering the complexity and importance of the issues raised, which included the potential invalidity of Rule 5. The Court held that the petitioners were entitled to approach the Court for relief.

Conclusion:
The Court allowed the writ petition, set aside the assessment made by the Deputy Commercial Tax Officer, and awarded costs to the petitioners. The assessment was deemed invalid due to the ultra vires nature of Rule 16(5) and the inconsistency of Rule 5 with Section 5(vi) of the Madras General Sales Tax Act.