1960 (11) TMI 111 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of turnover for license fee under section 5 of the Act.

Detailed Analysis:
The High Court of Madras addressed the issue of determining the turnover for the purpose of a license under section 5 of the Act in a revision petition filed by the State of Madras. The assessee, a dealer in yarn, had a disputed turnover for the assessment year 1955-56. The assessing authority had fixed the taxable turnover at different rates, and the licensable turnover was determined at Rs. 39,99,544 with a license fee of Rs. 2,000. The Tribunal, based on its previous decisions, held that the turnover subject to single point tax on the strength of the license should be considered for the license fee calculation, resulting in a turnover of Rs. 2,71,611. However, the State contended that the entire turnover of Rs. 39,90,544 should be the basis for the license fee payment, emphasizing that the turnover eligible for exemption or concessional tax rate due to the license should be considered.

The Court examined the provisions of section 5 of the Act, which allow for exemptions, reductions of tax, and levy of tax at a single point under certain conditions, subject to prescribed restrictions and conditions, including licenses and license fees. It was established that obtaining a license and complying with its conditions are essential to avail the concessions provided under section 5. The Court highlighted that section 6-A further clarifies that failure to obtain a license or violation of its conditions results in losing the right to concessional levy under section 5 and being liable for assessment under section 3. Therefore, the Court upheld the State's contention that the turnover eligible for exemptions or concessional rates due to the license is the turnover for computing the license fee.

Regarding the interpretation of turnover under the relevant rule, the Court scrutinized Rule 6 of the Madras General Sales Tax Rules and the different license fees for various commodities under section 5 of the Act. The Court rejected the State's argument that turnover should mean the total sales of the dealer, emphasizing that turnover for license fee computation should only include the part of the total turnover requiring a license under section 5. The Court emphasized that the differentiation in license fees for various goods under section 5 supports interpreting turnover in relation to the goods requiring a license. Consequently, the Court set aside the Tribunal's order and reinstated the Commercial Tax Officer's decision on turnover computation for the license fee.

Additionally, the Court acknowledged the precedent limiting the maximum license fee to Rs. 1,000 and allowed the department to determine the license fee based on the turnover indicated above. The petition was allowed with no order as to costs.