1957 (5) TMI 30 - HC - VAT and Sales Tax

Issues Involved
1. Validity of the assessment order dated 14th September 1956.
2. Validity of the subsequent notice of demand dated 15th September 1956.
3. Legal authority of the Governor to issue Notification No. ST-905/X on 31st March 1956.
4. Application of Section 22 of the U.P. General Clauses Act.
5. Provisional assessment authority under Rule 41(3) of the U.P. Sales Tax Rules.
6. Retrospective operation of Section 22 of the U.P. General Clauses Act and its compliance with Article 14 of the Constitution.
7. Validity of the assessment proceedings and opportunity for the petitioner to substantiate his allegations.

Detailed Analysis

1. Validity of the Assessment Order Dated 14th September 1956
The petitioner challenged the assessment order on the grounds that the turnover on goods such as vegetable ghee, cloth, and sugar was not liable to tax. The respondent provisionally assessed the petitioner to a tax of Rs. 75,000 on an estimated turnover of Rs. 12 lakhs. The court found that the assessment order was invalid as the Sales Tax Authorities did not have the authority under Rule 41(3) to make a provisional assessment for the quarter ending 30th June 1956.

2. Validity of the Subsequent Notice of Demand Dated 15th September 1956
The notice of demand followed the invalid assessment order and was therefore also quashed. The court ruled that since the assessment order itself was invalid, the subsequent demand notice could not stand.

3. Legal Authority of the Governor to Issue Notification No. ST-905/X on 31st March 1956
The main contention was that the Governor had no power to issue the notification on 31st March 1956, as the amendments to Section 3-A(2) of the U.P. Sales Tax Act, which conferred such power, were to come into effect on 1st April 1956. The court concluded that the notification was issued under the unamended Section 3-A, which did not confer such power on the Governor, rendering the notification invalid.

4. Application of Section 22 of the U.P. General Clauses Act
The State argued that Section 22, as amended with retrospective effect, validated the Governor's declaration. However, the court held that Section 22 could only be applied if the notification was issued under an Act or Ordinance that had been published but had not come into force. Since the notification was issued under the unamended Section 3-A, Section 22 did not apply, and the notification remained invalid.

5. Provisional Assessment Authority Under Rule 41(3) of the U.P. Sales Tax Rules
The court found that Rule 41(3) did not empower the Sales Tax Authorities to make a provisional assessment for the quarter ending 30th June 1956. The rule required a treasury chalan or cheque to accompany the return, which was not provided by the petitioner. However, the rule itself was not applicable as it had become obsolete after the amendments made by U.P. Act VIII of 1954.

6. Retrospective Operation of Section 22 of the U.P. General Clauses Act and Its Compliance with Article 14 of the Constitution
The petitioner argued that the retrospective validation of the notification involved discrimination and violated Article 14 of the Constitution. The court rejected this argument, stating that a sales tax could be levied retrospectively and that there was no discrimination as all dealers in the commodities mentioned in the notification were treated equally.

7. Validity of the Assessment Proceedings and Opportunity for the Petitioner to Substantiate His Allegations
The petitioner contended that he was not given an opportunity to substantiate his allegations or to be heard during the assessment proceedings. The court noted that this complaint was not part of the original petition and was raised only in the rejoinder-affidavit. Therefore, the court did not entertain this complaint.

Conclusion
The petition was allowed, and a writ of certiorari was issued quashing the assessment order dated 14th September 1956 and the demand notice dated 15th September 1956. The petitioner was entitled to costs assessed at Rs. 300.

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