1958 (11) TMI 22 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Ultra vires of Rule 17
2. Inconsistency between Rule 17 and Section 19(2)(f)
3. Arbitrary power vested by Rule 17
4. Contravention of statutory provisions regarding assessment authority
5. Limitation period for reassessment under Rule 17

Detailed Analysis:

1. Ultra vires of Rule 17
The main contention of the assessee was that Rule 17, which vests jurisdiction in the assessing authority to re-assess the escaped turnover, is ultra vires. The argument was based on two points:
1. The power to assess escaped turnover is essentially a legislative function and cannot be delegated to the rule-making authority.
2. The rule confers power on the delegated authority inconsistent with the provisions enacted in the body of the Act.

The court referred to Section 19(2)(f) of the Madras General Sales Tax Act, which specifically vests in the State Government the power to make rules regarding the assessment of any turnover that has escaped assessment. The court found that the Legislature had merely authorized the rule-making authority to carry out the policies enunciated in the statute and to fill up the details. Thus, there was no unconstitutional delegation of legislative power.

2. Inconsistency between Rule 17 and Section 19(2)(f)
The assessee argued that Rule 17 was inconsistent with Section 19(2)(f) of the Act. The court clarified that the escaped turnover is part of the total turnover of a dealer, all of which is liable to tax under the charging section. The court held that even escaped turnover would have to be determined according to the Madras General Sales Tax (Turnover and Assessment) Rules, and after adding the escaped turnover to the disclosed turnover, the total turnover would be re-fixed and assessed to tax. Therefore, there was no inconsistency between the section and the rule.

3. Arbitrary power vested by Rule 17
The assessee contended that Rule 17 vested arbitrary power in the assessing authority as it did not provide for a reasonable opportunity to be afforded to the assessee. The court noted that Rule 17 prescribes that the determination of the escaped turnover should be made after notice to the dealer, which is for the purpose of enabling the assessee to state his objections. The court found that the petitioner had ample opportunity to put forward all contentions before the Tribunals, and no objection was taken at the earlier stage. Therefore, the contention lacked substance.

4. Contravention of statutory provisions regarding assessment authority
The assessee argued that while the earlier assessment was made by the Deputy Commercial Tax Officer, the assessment under Rule 17(1) was made by the Commercial Tax Officer, thus contravening statutory provisions. The court noted that a notification on 13th July 1954 revised the powers of the assessing authorities, transferring all assessments of a turnover exceeding two lakhs of rupees to Commercial Tax Officers. The court found no contravention of any statutory provision.

5. Limitation period for reassessment under Rule 17
The assessee submitted that the assessments for the years 1951-52 and 1952-53 were revised after the expiry of the time prescribed by Rule 17(1). The court pointed out that Rule 17 was amended on 11th June 1953, prescribing a period of three years. The court referred to a Division Bench decision of the Madras High Court, which held that the amended rule applied to causes of action that arose before the amendment. Consequently, the assessment of the escaped turnover was not barred by limitation.

Conclusion:
All the contentions raised by the petitioner failed. The court dismissed the writ petitions with costs, consolidating the advocate's fee to Rs. 250.