1957 (10) TMI 27 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Special Deputy Commercial Tax Officer to issue notice under Rule 9.
2. Jurisdiction of the Commercial Tax Officer to enhance taxable turnover without prior notice.
3. Validity of objections raised by the departmental authorities to deny exemption on commission agency turnover.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Special Deputy Commercial Tax Officer to issue notice under Rule 9:

The appellant contended that the Special Deputy Commercial Tax Officer had no jurisdiction to issue the notice (Ex. B-3) under Rule 9 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, as only the "assessing authority" defined in section 2(a-2) of the Act could issue such notice. The argument was based on the premise that a Special Deputy Commercial Tax Officer is not a Deputy Commercial Tax Officer within the meaning of the relevant Government Order.

The court found no merit in this argument, stating that the Special Deputy Commercial Tax Officer was initially appointed as a Deputy Commercial Tax Officer and later assigned special duties. The term "special" was merely descriptive of his departmental duties and did not alter his jurisdiction under the Act. The court emphasized that compliance with the notice and the opportunity to explain the return nullified any challenge to the resulting order. Thus, the assessment order was held valid.

2. Jurisdiction of the Commercial Tax Officer to enhance taxable turnover without prior notice:

The appellant argued that the Commercial Tax Officer enhanced the taxable turnover by Rs. 8,409-8-0 without issuing prior notice, which was required under Rule 14(1) of the Madras General Sales Tax Rules, 1939. The court noted that the appellant did not raise this issue at any stage before the departmental authorities and did not dispute the items making up the enhanced turnover. Consequently, the court held that the appellant could not complain of lack of notice regarding undisputed items, and this objection did not affect the validity of the original assessment order.

3. Validity of objections raised by the departmental authorities to deny exemption on commission agency turnover:

The court analyzed several objections raised by the departmental authorities to deny the exemption:

- Purchase of Ghee: The plaintiff purchased ghee on its own account and collected commission, which was included in the commission turnover by mistake. The court held that this mistake did not violate the terms of the licence and did not disqualify the plaintiff from claiming exemption.

- Pledging Goods: The plaintiff pledged goods of its principals in its own name. The court agreed with the lower appellate court that the plaintiff, as a mercantile agent, was entitled to pledge goods and this did not violate the licence terms.

- Borrowing from Banks: The plaintiff borrowed from banks at a lower interest rate and debited principals with a higher rate. The court found this objection to be based on suspicion without evidence and upheld the lower appellate court's view that it was unsubstantial.

- Sale of Gin Cotton: The sale was treated as a commission transaction, but the department objected due to the plaintiff's proprietary interest. The court held that while this transaction should be included in the independent business, it did not affect the exemption claim for other items.

- Purchase of Chillies: The plaintiff advanced money for the purchase of chillies in another's name, which was settled the next year. The court noted that this item was not relied on by the Commercial Tax Officer.

- Rusum and Dharmam Collections: These charges were collected and not passed on to the principal. The court referred to a Full Bench ruling that such charges were sanctioned by mercantile usage and thus were not improper under the terms of the licence.

The court concluded that only offending transactions could be excluded, and the plaintiff was entitled to exemption for transactions carried out in accordance with the licence terms. The case was remanded to the trial court to ascertain such transactions, with a decree to follow based on the exempt turnover.

Conclusion:

The court remanded the case to the trial court for further proceedings to determine the transactions entitled to exemption. The appeal was allowed in part, with costs to follow the result. Leave to appeal was refused.