1959 (10) TMI 26 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of revised rules 15 and 16 of the Turnover and Assessment Rules.
2. Interpretation and applicability of Article 286(3) of the Constitution.
3. Nature of rules 15 and 16 as taxing provisions or machinery provisions.
4. Impact of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, LII of 1952.
5. Validity of subordinate legislation under the Madras General Sales Tax Act, 1939.

Detailed Analysis:

1. Constitutional Validity of Revised Rules 15 and 16 of the Turnover and Assessment Rules:
The appellants, tanners and dealers in hides and skins, challenged the constitutional validity of the revised rules 15 and 16, arguing they were contrary to Article 286(3) of the Constitution. They contended that these rules, published on 7th September 1955, imposed a tax without being reserved for the President's consideration, as required for laws imposing taxes on essential goods.

2. Interpretation and Applicability of Article 286(3) of the Constitution:
Article 286(3) states, "No law made after the commencement of this Act by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any goods declared by this Act to be essential for the life of the community shall have effect, unless it has been reserved for the consideration of the President and has received his assent." The appellants argued that since hides and skins were declared essential, the rules required the President's assent. The court examined whether the rules constituted a "law imposing a tax" under Article 286(3).

3. Nature of Rules 15 and 16 as Taxing Provisions or Machinery Provisions:
The court analyzed whether rules 15 and 16 were taxing provisions or merely machinery provisions. The appellants argued that these rules were integral to the tax imposition process, thus falling under the purview of "law imposing a tax." The court referred to previous judgments, including Syed Mohamed and Co. v. State of Madras and Munuswami Mudaliar and Co. v. State of Madras, which held that the single point of taxation fixed by rules was essential for tax liability, making these rules part of the charging provisions.

4. Impact of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, LII of 1952:
The court noted that the Essential Goods Act, LII of 1952, declared hides and skins as essential goods and required state laws imposing taxes on such goods to be reserved for the President's assent. The court considered whether the revised rules, made under the Madras General Sales Tax Act, 1939, required such assent.

5. Validity of Subordinate Legislation under the Madras General Sales Tax Act, 1939:
The court concluded that the Madras General Sales Tax Act, 1939, was a composite legislation that authorized the imposition of tax through rules. Since the Act was enacted before the Constitution and the rules were deemed part of the Act under section 19(5), the rules did not require the President's assent. The court distinguished between laws directly imposing taxes and those authorizing the imposition of taxes, stating that the latter did not fall under the ban of Article 286(3).

Conclusion:
The court held that rules 15 and 16, being subordinate legislation, were valid without the President's assent. The appeals were dismissed with costs, confirming the validity of the revised rules under the Madras General Sales Tax Act, 1939. The court emphasized that the rules, though integral to tax imposition, did not constitute a "law imposing a tax" by the state legislature post-Constitution, thus not requiring presidential assent. Appeals dismissed with costs.