1959 (10) TMI 27 - HC - VAT and Sales Tax

Issues Involved:
1. Right to assess a dissolved firm.
2. Timeliness of the assessment.
3. Validity of the rules under which the notice was issued.
4. Exemption of goods from sales tax under Article 286(3) of the Constitution.
5. Legality of imposing tax at the purchase point.
6. Delegation of legislative power to the Government.

Detailed Analysis:

1. Right to Assess a Dissolved Firm:
The petitioner challenged the validity of the proceedings initiated by the notice, asserting that a dissolved firm cannot be assessed. The firm in question was dissolved on 18th May, 1956, and the petitioner argued that there is no provision under the Hyderabad General Sales Tax Act (XIV of 1950) for assessing a dissolved firm. The court held that the liability imposed by the Act on a firm continues unless the dissolution is notified to the authorities. The assessment can proceed on the basis that the firm continues to exist unless the department is informed of its dissolution. Thus, the petitioner, as a partner, can be issued a notice representing the firm.

2. Timeliness of the Assessment:
The petitioner argued that the assessment for the years 1954-55 and 1955-56 was barred by time, referring to rule 32 of the Hyderabad General Sales Tax Rules, 1950. Rule 32(1) allows the assessing authority to assess the tax within three years from the end of the year to which the tax relates. The court found that the language of the rule is clear, enabling the assessment within the specified period, thus rejecting the petitioner's contention.

3. Validity of the Rules Under Which the Notice Was Issued:
The petitioner contended that the notice under rule 56 of the Andhra Pradesh General Sales Tax Rules, 1957, was invalid as the rules were framed before the Andhra Pradesh General Sales Tax Act came into effect on 15th June, 1957. The court held that the rules, although framed on 10th June, 1957, became effective upon publication and could come into effect simultaneously with the Act. Therefore, the notice was valid.

4. Exemption of Goods from Sales Tax Under Article 286(3) of the Constitution:
The petitioner argued that cereals and pulses, being essential goods, were exempt from sales tax under Article 286(3) of the Constitution as it stood before amendment. The court clarified that this constitutional provision applied only to laws passed after the Constitution came into effect and did not affect previous laws. The Hyderabad General Sales Tax Act provided for the imposition of tax on cereals and pulses after the necessary amendments and notifications, which received the President's assent. Thus, the imposition of tax was not contrary to Article 286(3).

5. Legality of Imposing Tax at the Purchase Point:
The petitioner contended that the Act provided for the imposition of tax only on sales, and the notification directing the levy at the purchase point was ultra vires. The court referred to a similar argument rejected in previous cases, noting that the definition of "turnover" included purchase transactions and that the rules made under the Act were not repugnant to its provisions. Therefore, the notification was valid.

6. Delegation of Legislative Power to the Government:
The petitioner argued that delegating the power to the Government to fix the point of tax levy was an improper delegation of legislative power. The court held that the Legislature imposed the tax, and the notification merely specified the point of levy, which is a permissible delegation. Hence, this argument was also rejected.

Conclusion:
The court dismissed the petition, holding that the assessment proceedings were valid and that the petitioner, as a partner of the dissolved firm, could be issued a notice. The court also upheld the timeliness of the assessment, the validity of the rules, the imposition of tax on cereals and pulses, the legality of the tax at the purchase point, and the delegation of legislative power to the Government. The petition was dismissed with costs.

← Previous Next →