1957 (9) TMI 39 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the assessment order Ex. A-2(a) due to improper notice under rule 9.
2. Validity of the reasons given by the Commercial Tax Officer for rejecting the appellant's exemption claim.
3. Validity of the revised assessment order Ex. A-3(a) under rule 17.

Issue-wise Detailed Analysis:

1. Validity of the assessment order Ex. A-2(a) due to improper notice under rule 9:
The appellant contended that he was not served with the notice prescribed by rule 9 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. Rule 9 mandates that if a return appears incorrect or incomplete, the assessing authority must issue a notice to the dealer to produce accounts and prove the correctness of the return. The notice Ex. B-4, served on the same day as the final assessment order Ex. A-2(a), did not use the language of rule 9. The court found that the appellant was informed about the incomplete return and asked to explain why he should not be taxed. Despite the technical non-conformity, the court held that the order could not be invalidated on this ground alone, especially since the appellant did not show any material that could have influenced the judgment of the Deputy Commercial Tax Officer. The appellant's failure to complain about the notice in his appeal further weakened his case. Hence, this contention was rejected.

2. Validity of the reasons given by the Commercial Tax Officer for rejecting the appellant's exemption claim:
The Commercial Tax Officer's reasons for rejecting the exemption claim included the appellant's maintenance of a common daybook and ledger for both personal and commission business, allegedly violating rule 12(3). However, the court noted that separate ledgers were maintained, and the requirement of separate accounts was not violated merely by having a common daybook. The second reason was the appellant's extra collections (rusum, dharmam, kolagaram) not passed to the principals. The court referred to a Full Bench decision recognizing these extra charges as part of the commission, sanctioned by mercantile usage. The court found that these collections did not violate the terms of the licence. The court also addressed the appellant's failure to clearly separate his commission business from his personal business in the accounts. However, it held that the assessing authorities should have asked for a tabular statement to separate the transactions entitled to exemption. Thus, the matter was remanded to the trial court for determining the exempted turnover.

3. Validity of the revised assessment order Ex. A-3(a) under rule 17:
The appellant contested the revised order Ex. A-3(a) on the ground that the original assessing authority had no power to revise its own order under rule 17. Rule 17 allows reassessment if any turnover has escaped assessment. The court agreed with the appellant, citing a Full Bench decision that rule 17 is limited to escaped turnover, not escaped assessment. Since the turnover was dealt with in the original order, the revised order was beyond the authority's power and thus void. The court also noted procedural irregularities, as the revision order Ex. A-3(a) was dated the same day as the notice, suggesting it was passed before the appellant could show cause. Consequently, the revised assessment was set aside.

Conclusion:
The case was remanded to the trial court to ascertain the transactions entitled to exemption under the terms of the licence. The appellant was awarded costs for the second appeal, with costs in the lower courts to follow the result.