1963 (4) TMI 32 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the assessee to pay sales tax on the sale of crystal sugar as an "importer" under rule 2(d-1) of the Sales Tax Rules.
2. Whether the definition of "importer" in rule 2(d-1) is ultra vires the rule-making power of the Government.

Issue-wise Detailed Analysis:

1. Liability of the Assessee to Pay Sales Tax:
The assessee, a dealer in sugar at Lucknow, was selected by the Regional Director of Food, Government of India, to sell sugar imported from Java. The sugar was sent from Bombay to Lucknow, and the assessee took delivery after paying the price to the State Bank. The Sales Tax Officer assessed the assessee, applying clause (b) of rule 2(d-1), which defines an importer as a dealer who makes the first sale after the import. The Judge (Revisions) found that the sugar was not imported as a direct result of a sale, thus excluding clauses (a) and (b) and applying clause (c). The Regional Director, not being a dealer, did not make the first sale by a dealer. The first sale by a dealer was made by the assessee, making it the importer under the artificial definition in rule 2(d-1). The Judge (Revisions) rejected the assessee's contention that the dictionary meaning of "importer" should apply, stating that the artificial definition in rule 2(d-1) was applicable. Consequently, the assessee was liable to pay sales tax on the turnover of the sale of sugar.

2. Ultra Vires Challenge to Rule 2(d-1):
The assessee contended that the definition of "importer" in rule 2(d-1) was ultra vires as it was inconsistent with the provisions of the Act. The Judge (Revisions) found no conflict between the definition and the Act, stating that section 3-A empowered the State Government to specify the point at which sales tax would be payable, including the power to define terms used in the notification. The court held that the definition in rule 2(d-1) was within the rule-making power of the State Government under section 24 of the Act. Section 24(4) states that rules made under this section shall have the effect as if enacted in the Act, creating a legal fiction that the definition in rule 2(d-1) applies to the notification. The court concluded that the definition was not ultra vires, as the State Government had the authority to define terms used in the rules and notifications under the Act.

Conclusion:
The court answered question No. 1 in the affirmative, holding that the assessee was liable to pay sales tax as an importer under rule 2(d-1). Question No. 2 was answered in the negative, affirming that the definition of "importer" in rule 2(d-1) was within the rule-making power of the State Government and not ultra vires. The court directed that copies of the judgment be sent to the Judge (Revisions) and the Commissioner, Sales Tax, U.P., and ordered the assessee to pay the costs of the reference assessed at Rs. 100.

Reference answered accordingly.