1957 (3) TMI 53 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Suit transactions taking place outside the State of Madras and the legality of the sales tax levy.
2. Jurisdiction of the court to try the suits.
3. Compliance of the suits with the suit notices.
4. Limitation period for filing the suit.
5. Legislative competence of the Madras Legislature regarding the explanation to section 2(h) of the Madras General Sales Tax Act.

Issue-wise Detailed Analysis:

1. Suit Transactions Taking Place Outside the State of Madras and the Legality of the Sales Tax Levy:
The plaintiffs contended that the goods were sent by railway to places outside the Province of Madras, and the ownership of the goods continued to be with the plaintiff-firm until the actual payment by the buyers outside the Province. Therefore, they argued that the respondent-defendant had no right to impose sales tax on such transactions. The Subordinate Judge found that in cases where the plaintiff was both consignor and consignee or where a third party was shown as consignor and either that party or the plaintiff was shown as the consignee, the sales were outside the Province. The total sales outside the Province amounted to Rs. 1,95,710-12-0 in O.S. No. 28/49 and Rs. 9,26,775-2-6 in O.S. No. 100/49. The High Court upheld that the sales where the consignor and consignee is the seller and the consignor is miller and consignee plaintiff took place outside the Province and no sales tax is leviable on those transactions. However, in cases where the consignor is seller and consignee buyer, and where the consignee and consignor is buyer, the sales took place inside the Province and are liable to sales tax under the Act.

2. Jurisdiction of the Court to Try the Suits:
The Subordinate Judge held that the plaintiff had a right to file a suit and therefore the Civil Courts had jurisdiction to determine the questions arising under the Madras General Sales Tax Act. The High Court affirmed this, stating that civil courts have jurisdiction to entertain such suits and also the fact that section 18 of the Act does not apply to such suits, thus the only applicable Article is Article 62 of the Limitation Act which prescribes three years.

3. Compliance of the Suits with the Suit Notices:
The Subordinate Judge found that O.S. No. 28/49 was not in accordance with the suit notice while O.S. Nos. 100/49 and 34/50 were in conformity with the suit notice. The High Court disagreed, stating that the cause of action set out in the suit notice and the plaint with respect to which objection has been taken by the Subordinate Judge has been clearly stated in both to be illegal levy and collection of tax and the relief which the plaintiff claims both in the suit notice and the plaint is the refund thereof. The main requirements of section 80, Civil Procedure Code, having been complied with, it does not make the suit defective because of the different words used by the plaintiff to describe the manner or the circumstances under which tax was paid by him or collected from him in the suit notice and in the plaint.

4. Limitation Period for Filing the Suit:
The Subordinate Judge dismissed O.S. No. 28 of 1949 on the ground that it was barred by limitation. The High Court held that the suit O.S. No. 28 of 49 is within time, stating that section 18 of the Act does not apply to suits for illegal levy, assessment and collection of taxes, and the period of limitation is not that prescribed under section 18 of the Act, but under Article 62 of the Limitation Act which prescribes three years.

5. Legislative Competence of the Madras Legislature Regarding the Explanation to Section 2(h) of the Madras General Sales Tax Act:
The High Court found it unnecessary to decide on the legislative competence of the Madras Legislature to enact and the validity of explanation (2) to section 2(h) of the Act. The submission was that the explanation enables sales tax to be levied not on the sale of goods but only on contracts of sale by reason of the goods being in the State, and that it is ultra vires the Madras Legislature to enact the statute having an extra-territorial operation. The High Court noted that similar contentions were raised before two Benches of the Madras High Court, which had held that the provision of the impugned explanation is not repugnant to the provisions of the Indian Sale of Goods Act and hence the assent of the Governor-General was not necessary.

Judgment:
- A.S. No. 481 of 1952 was allowed partly to the extent of refund of tax on the turnover of Rs. 1,95,710-12-0 being sales outside the Province. There was a decree for the refund of the tax on the above turnover with proportionate costs.
- Appeals Nos. 295 and 296 of 1952 were allowed with costs throughout. In A.S. No. 296 of 1952, there was a decree for declaration and injunction as prayed for with respect to Rs. 37,632-2-9 being tax sought to be collected. In A.S. No. 295 of 1952, there was a decree for Rs. 3,400.
- Appeals of the State Nos. 993 and 994 of 1952 were dismissed with costs.
- Interest at 6 percent per annum from the date of the plaint till the date of payment was awarded in Appeals Nos. 295 of 1952 and 481 of 1951.

Ordered accordingly.