1957 (11) TMI 19 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of the Commercial Tax Officer to assess for the year 1953-54 on 6th September 1955.
2. Validity of the assessment under the invalidated rule 13 of the Madras General Sales Tax (Turnover and Assessment) Rules.
3. Whether the turnover in question was an escaped assessment.
4. Whether the sales were effected in the course of inter-State trade and thus exempt under Article 286 of the Constitution.
5. Whether the petitioner's firm and the purchasing firm are the same entity, thus invalidating the sales transactions.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commercial Tax Officer:
The petitioners argued that the Commercial Tax Officer lacked jurisdiction to make the assessment for the year 1953-54 on 6th September 1955. The court examined the provisions of the Madras General Sales Tax Act and the Rules framed thereunder. Section 3 mandates every dealer to pay tax on their total turnover for each year, and Section 9 outlines the submission of returns and the assessment process. The court noted that neither the Act nor the Rules specify a period within which the assessment must be completed. The Rules provide for monthly provisional assessments and a final assessment after the year's close. The court concluded that the phrase "for the preceding year" in Rule 13(5) does not imply a strict limitation period but rather an expectation that assessments be completed in the succeeding year. Therefore, the final assessment made on 6th September 1955 was deemed valid.

2. Validity of the Assessment under Invalidated Rule 13:
The petitioners contended that the assessment was invalid because a Full Bench of the High Court had declared Rule 13, as amended, invalid due to non-compliance with prepublication requirements. The court allowed this argument despite it not being raised before the Tribunal. The court noted that the invalidity of the amendments to Rule 13 did not affect the original Rule 13, under which the assessment was made. Under the original Rule 13, monthly assessments were final, and the turnover in question, which escaped assessment, could be addressed under Rule 17, which allows for the determination of escaped turnover within three years. The court found that the assessment was made within this period, thus validating the assessment.

3. Escaped Assessment:
The court examined whether the turnover in question constituted an escaped assessment. Citing a Full Bench decision of the Madras High Court, the court defined "escaped turnover" as turnover not noticed by the assessing officer due to inadvertence, omission, or deliberate concealment by the assessee, or due to the officer's lack of care. The court found that the turnover in question met this definition and thus fell within the scope of Rule 17, allowing the assessing authority to determine the escaped turnover within three years. The assessment made on 6th September 1955 was within this period, confirming its validity.

4. Inter-State Trade and Article 286:
The petitioners argued that the sales were part of inter-State trade and thus exempt under Article 286 of the Constitution. The court found no merit in this contention, noting that the sales were completed at Hindupur, with the Mysore Starch Manufacturing Company booking the goods as both consignor and consignee. Thus, the transactions were not considered inter-State trade and were not exempt under Article 286.

5. Identity of the Petitioner's Firm and the Purchasing Firm:
The petitioners claimed that their firm and the Mysore Starch Manufacturing Company were the same entity, making the sales transactions invalid. The court found that the petitioner's firm had three partners, while the Mysore firm had four, and each maintained separate accounts and was independently assessed for income tax. The petitioners did not provide sufficient documentation to support their claim. The Tribunal's finding that the two firms were separate entities was upheld as a finding of fact.

Conclusion:
The court dismissed the revision petition and upheld the assessment order. The petitioners were ordered to pay costs, including an advocate's fee of Rs. 150. The petition was dismissed.

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