1959 (10) TMI 21 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of sales tax on unlicensed dealers in hides and skins.
2. Validity of the retrospective amendment to the Sales Tax Rules.
3. Compliance with procedural requirements for rule-making under the Madras General Sales Tax Act.
4. Interpretation of section 3(4) and section 19(4) of the Madras General Sales Tax Act.
5. Impact of section 9 of the Madras General Sales Tax, Sales of Motor Spirit Taxation and Entertainments Tax (Amendment) Act, 1957.

Detailed Analysis:

1. Levy of Sales Tax on Unlicensed Dealers in Hides and Skins
The petitioners, several dealers in hides and skins, challenged the levy of sales tax on their transactions for the assessment years 1956-57 and 1957-58. The basis for relief was that unlicensed dealers in untanned hides and skins were not liable to pay tax on their turnover under the Madras General Sales Tax Act, 1939, as interpreted by a previous court decision (Noor Mohammed and Co. v. State of Madras).

2. Validity of the Retrospective Amendment to the Sales Tax Rules
The State Government amended the Sales Tax Rules to rectify the anomaly where unlicensed dealers escaped tax. The amendments required all dealers to take out a license and eliminated the term "licensed dealer" from Rule 16. The amendments were given retrospective effect from April 1, 1955. The validity of this retrospective provision was upheld in Guruviah Naidu v. State of Madras.

3. Compliance with Procedural Requirements for Rule-Making
The petitioners argued that the amendments to Rules 15 and 16 were invalid as they did not conform to the procedural requirements of section 19(4) of the Madras General Sales Tax Act, which mandates previous publication for a period of not less than four weeks. The rules were laid before and approved by the Legislative Assembly but were not previously published as required.

4. Interpretation of Section 3(4) and Section 19(4) of the Madras General Sales Tax Act
The court examined whether the rules under section 3(4) needed to comply with section 19(4). It concluded that both sections must be followed, as established in Rangaswami Chettiar and Co. v. Government of Madras and supported by a Full Bench of the Andhra Pradesh High Court in Sreeramulu Chetti v. State of Andhra. Therefore, the rules must conform to the double condition of section 19(4) and approval by the Legislative Assembly.

5. Impact of Section 9 of the Madras General Sales Tax, Sales of Motor Spirit Taxation and Entertainments Tax (Amendment) Act, 1957
The learned Advocate-General argued that section 9 validated the rules for the assessment year 1955-56 and should logically extend to subsequent years. However, the court rejected this argument, stating that section 9 explicitly confined the validation to the year 1955-56. The court also dismissed the argument that publication in the Fort St. George Gazette created an irrebuttable presumption of compliance with section 19(4).

Conclusion
The court concluded that the amendments to Rules 15 and 16 were invalid due to non-compliance with section 19(4). The validation under section 9 of the 1957 Act did not extend beyond the assessment year 1955-56. Consequently, the writ petitions were allowed, and the rule nisi was made absolute, with no order as to costs.

Petitions Allowed.