1962 (10) TMI 41 - HC - VAT and Sales Tax

Summary

Issues:
- Whether the sales tax collected by the dealer should be considered part of his turnover as defined in the General Sales Tax Act, XI of 1125.
- Whether the amendment in the rules excluding sales tax collected by the dealer from the computation of net turnover applies retroactively.

Analysis:

1. The primary issue in this case revolves around whether the sales tax collected by the dealer should be included in his turnover as defined in the General Sales Tax Act. The plaintiff argued that the tax collected for remittance to the State should not be part of his turnover and, therefore, not assessable to tax. The State, on the other hand, contended that the sales tax collected should indeed be considered part of the turnover. The court examined the relevant provisions of the Act, specifically Section 2(k) which defines turnover, and Section 3(4) which directs the determination of turnover in accordance with prescribed rules.

2. The court also considered Rule 7 of the General Sales Tax Rules, which provided deductions from the gross turnover to ascertain the net turnover for levying sales tax. A notification dated 31st March, 1951, excluded "all amounts of sales tax collected by the dealer" from computation. Previous rulings by the Travancore-Cochin High Court supported the exclusion of sales tax collected by the dealer from turnover. However, the Supreme Court in a later case held that the sales tax collected by the dealer should be considered part of the turnover, as it forms part of the consideration for the goods sold. The court concluded that the previous rulings were impliedly overruled by the Supreme Court decision.

3. The second issue addressed in the judgment pertains to the retroactive application of an amendment in the rules excluding sales tax collected by the dealer from the computation of net turnover. The plaintiff argued that since the amendment came into force before the assessment order, he should benefit from the exclusion. However, the court held that rules are presumed to be prospective unless otherwise indicated, and the liability to tax for sales made before the amendment was complete before the exemption came into force. Therefore, the plaintiff could not claim the exclusion under the amendment.

4. Consequently, the court allowed the appeal by the State, dismissing the plaintiff's suit. The State was awarded costs for the appeal, and the cross-objection by the plaintiff regarding costs disallowed by the trial court was dismissed without costs. The judgment clarifies the treatment of sales tax collected by dealers in the turnover calculation and the application of amendments to tax rules.