1962 (12) TMI 38 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of the proviso to rule 39(1) of the Sales Tax Rules and legality of assessment based on it.
2. Validity of assessment based on the business duration during the assessment year.

Analysis:
The judgment by the Allahabad High Court addressed a reference under section 11(1) of the U.P. Sales Tax Act, 1948, regarding the validity of the proviso to rule 39(1) of the Sales Tax Rules and the legality of an assessment made on its basis. The respondent, a dealer in kirana and medicines, commenced business on November 6, 1953, in Baraut. The Sales Tax Officer assessed the respondent for the years 1953-54 and 1954-55, with the latter assessment being challenged through appeal and revision. The judge (Revisions) set aside the assessment order, stating that as the respondent did not elect under rule 39(1) to submit returns of the assessment year, the assessment could only be based on the previous year's turnover. The proviso to rule 39(1) was deemed ultra vires as it conflicted with the dealer's right to choose the basis of taxation between the previous and assessment years.

The Court analyzed the statutory provisions, emphasizing that section 3(1) charges a dealer to sales tax on the previous year's turnover, with an option under section 3(2) to pay tax on the assessment year's turnover. Rule 39(1) allows a dealer to elect the assessment year's turnover but mandates that a dealer not conducting business throughout the previous year must submit returns of the assessment year. The proviso, although inartistic, was deemed necessary to address cases where business commenced during an assessment year, with no entire previous year for assessment. The Court concluded that the proviso was not ultra vires, as it filled a gap in the statutory framework, ensuring a basis for assessment in unique situations.

Accordingly, the Court answered both questions affirmatively, upholding the validity of the proviso to rule 39(1) and the assessment based on it. The second question, concerning the assessment validity based on business duration, was also answered in the affirmative. The judgment directed the dissemination of the decision to relevant tax authorities without awarding costs to any party, resolving the reference comprehensively and decisively.