1957 (7) TMI 27 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of including the purchase price in the taxable turnover under the Sales Tax Rules.
2. Ultra vires nature of the rules in question.
3. Validity of Section 51 of the Bombay Sales Tax Act, 1953, as a validating provision.
4. Interpretation of fiscal statutes and rules.
5. Impact of rule deletion on validation.

Detailed Analysis:

1. Validity of Including the Purchase Price in the Taxable Turnover:
The petitioners, who are dealers under the sales tax law, challenged the inclusion of the purchase price of goods in their taxable turnover. This inclusion was due to their failure to produce a certificate in Form A3 or because their sales did not attract general tax. They argued that the relevant provisions in the Sales Tax Rules, specifically rule 5(1)(vii) and rule 5(xi)(II), were ultra vires the rule-making power.

2. Ultra Vires Nature of the Rules:
The court referred to a previous judgment which held a similar provision under special sales tax to be ultra vires. The court reiterated that the rules in question altered the incidence of taxation from the seller to the purchaser, effectively imposing a penalty for non-compliance with certain conditions. This was deemed beyond the scope of the rule-making power granted by the Act, which only allowed for deductions, not additions, to the turnover.

3. Validity of Section 51 of the Bombay Sales Tax Act, 1953:
Section 51 was introduced to retrospectively validate the rules that had been declared ultra vires. The court examined whether this section succeeded in its objective. The section aimed to validate rules that provided for the inclusion of the purchase price in the taxable turnover if certain conditions were breached. However, the court found that the section failed to validate the rules because it did not address all grounds of invalidity. Specifically, it did not validate the rules on the grounds that they imposed a penalty and extended the definition of turnover beyond what was provided in the Act.

4. Interpretation of Fiscal Statutes and Rules:
The court emphasized the principle that in fiscal statutes, the language used must be clear and unambiguous. The court referred to established legal principles which state that one must look at what is clearly stated in the law without any room for intendment or implication. The court rejected the Advocate-General's argument that the intention of the Legislature should override the precise language used in the statute.

5. Impact of Rule Deletion on Validation:
The court addressed the argument that rule 5 was deleted on December 1, 1953, and therefore could not be validated after its deletion. The court clarified that the attempted validation was for the period during which the rule was operative and not for any period subsequent to its deletion.

Conclusion:
The court concluded that the rules under which the tax was levied were ultra vires and invalid. Section 51 of the Act of 1953 failed to validate these rules effectively. Consequently, the orders made by the Sales Tax Officer for both periods in question were set aside. The petitions were allowed, and the rules were made absolute with costs.

Judgment:
Petitions allowed.