1957 (11) TMI 20 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Article 286(3) of the Constitution.
2. Validity of the amended rules 15 and 16 of the Turnover and Assessment Rules under the Madras General Sales Tax Act, 1939.
3. Whether the amended rules constitute "a law imposing or authorising the imposition of a tax" under Article 286(3) and Section 3 of Act 52 of 1952.
4. Retrospective effect of the notification dated 3rd September, 1955.

Issue-Wise Detailed Analysis:

1. Interpretation of Article 286(3) of the Constitution:
Article 286(3) stipulates that no law made by the Legislature of a State imposing or authorising the imposition of a tax on the sale or purchase of goods declared essential for the life of the community by Parliament shall have effect unless it has been reserved for the consideration of the President and has received his assent. The court clarified that Article 286(3) addresses future laws and does not invalidate pre-Constitution laws. The prohibition under Article 286(3) depends on parliamentary legislation declaring a commodity essential before the restriction applies.

2. Validity of the Amended Rules 15 and 16 of the Turnover and Assessment Rules:
The amendments to rules 15 and 16 were made under the Madras General Sales Tax Act, 1939, and were notified on 3rd September 1955, with retrospective effect from 1st April 1955. The court examined whether these amendments constituted "a law made by the Legislature of a State imposing or authorising the imposition of a tax" on hides and skins, which were declared essential for the life of the community.

3. Whether the Amended Rules Constitute "a Law Imposing or Authorising the Imposition of a Tax":
The petitioner argued that the amended rules 15 and 16 were "a law imposing or authorising the imposition of a tax" under Article 286(3) and Section 3 of Act 52 of 1952. The court noted that subordinate legislation, such as rules made under an enactment, is considered a "law" within the meaning of Article 286(3). However, the court distinguished between laws that directly impose a tax and those that authorise the imposition of a tax, such as municipal taxes authorised by State legislation.

The court referred to Australian High Court decisions to explain that "laws imposing taxation" should be given a limited construction. The court concluded that the Madras General Sales Tax Act, 1939, was the law imposing the tax, and the rules made under it, including rules 15 and 16, were machinery provisions and not "laws imposing a tax." Therefore, the amended rules did not require the President's sanction under Article 286(3).

4. Retrospective Effect of the Notification Dated 3rd September 1955:
The court noted that the issue of the retrospective operation of the notification from 1st April 1955 had already been decided adversely to the petitioner in previous cases (W.P. Nos. 625 and 626 of 1956). Therefore, this point was not argued further in the current petitions.

Conclusion:
The court dismissed the petitions, holding that the amended rules 15 and 16 of the Turnover and Assessment Rules were not "laws imposing a tax" within the meaning of Article 286(3) or Section 3 of Act 52 of 1952. Consequently, the rules did not require the President's sanction, and the retrospective operation of the notification was upheld. The rules nisi were discharged, and there was no order as to costs.