1962 (3) TMI 72 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of sales tax collection for the assessment years 1953-54 and 1954-55.
2. Applicability and enforcement of Government Order (G.O.) Ms. No. 2386 Revenue dated 13th June, 1956.
3. Jurisdiction and authority of the Deputy Commercial Tax Officer in demanding tax.
4. Role and binding nature of the Tribunal's findings.
5. Appropriateness of issuing a writ of prohibition versus mandamus.

Detailed Issue-Wise Analysis:

1. Legality of Sales Tax Collection for the Assessment Years 1953-54 and 1954-55:
The petitioners, a partnership firm dealing in silk yarn, challenged the collection of sales tax for the years 1953-54 and 1954-55 under the Madras General Sales Tax Act. They argued that their transactions were inter-State sales governed by Article 286 of the Constitution, thus immune from state sales tax. However, following the Supreme Court's decision in the United Motors case and the enactment of Central Act VII of 1956, inter-State sales, where deliveries were made for consumption, fell within the purview of the Madras General Sales Tax Act. Consequently, the petitioners were required to submit returns for the specified years.

2. Applicability and Enforcement of Government Order (G.O.) Ms. No. 2386 Revenue dated 13th June, 1956:
The G.O. provided relief for inter-State sales, stipulating that no tax should be collected for transactions where the non-resident dealer had not collected tax from customers. For the period from 1st October 1953 to 5th September 1955, tax was to be collected only if the dealer had collected or refunded the tax. The petitioners contended that they had not collected any sales tax but received amounts as "deposits," refundable to the purchasers, thus deserving relief under the G.O. The Tribunal found that these "deposits" did not represent tax under the Act, supporting the petitioners' claim.

3. Jurisdiction and Authority of the Deputy Commercial Tax Officer in Demanding Tax:
The Deputy Commercial Tax Officer assessed the petitioners based on the amounts alleged to have been collected as tax. The Tribunal, however, determined that the "deposits" were not taxes collected, thus invalidating the demand under section 8-B(2) of the Act. The Tribunal's finding was that the petitioners had not collected any sales tax, which should have precluded any tax demand.

4. Role and Binding Nature of the Tribunal's Findings:
The Tribunal's decision, which held that the petitioners did not collect sales tax, was binding on the department. The Tribunal's order should have been adhered to by the Deputy Commercial Tax Officer, who was required to conform to the Tribunal's findings. The department's failure to implement the Tribunal's decision constituted a contravention of statutory obligations.

5. Appropriateness of Issuing a Writ of Prohibition versus Mandamus:
The petitioners initially sought a writ of prohibition to restrain the Deputy Commercial Tax Officer from collecting the tax. However, the court determined that prohibition was not suitable as the Officer was acting within his jurisdiction. Instead, the court found that a writ of mandamus was appropriate to compel the Officer to comply with the Tribunal's findings and the G.O. The court emphasized that the form of the writ is secondary to ensuring justice and fairness, which necessitated issuing a mandamus to enforce the Tribunal's decision.

Conclusion:
The court concluded that the Deputy Commercial Tax Officer's demand for tax was unlawful as it contravened the Tribunal's findings that the petitioners had not collected any sales tax. The court issued a writ of mandamus, compelling the Officer to adhere to the Tribunal's decision and the G.O., thereby providing the petitioners with the relief sought. The petition was allowed, and the rule nisi was made absolute, substituting a mandamus for prohibition, with no order as to costs.

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