1962 (8) TMI 62 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the validity of item 31-B in the Fifth Schedule of the Mysore Sales Tax Act, 1957 and the assessment order passed based on it. Interpretation of the Central Act 58 of 1957 in relation to the State Legislature's power to levy sales tax on "sugar candy." Examination of the legislative competence of the State Legislature in imposing sales tax on "sugar candy" post-acceptance of the scheme under Central Act 58 of 1957.

Analysis:
The petitioners sought to invalidate item 31-B in the Fifth Schedule of the Mysore Sales Tax Act, 1957, contending that the amendment separating "sugar candy" from "sugar" exceeded the Mysore Legislature's competence. The argument was based on the provisions of the Central Act 58 of 1957, protecting "sugar candy" as a purer form of "sugar." The Court acknowledged that the Central Act did not explicitly mention "sugar candy," but opined that "sugar candy" is inherently included in the term "sugar." The State Legislature's power to levy sales tax on "sugar candy" was explored within the framework of Entry 54 of List II of the Constitution, which empowered State Legislatures to enact sales tax laws.

The judgment delved into the background of Central Act 58 of 1957, which aimed to replace sales tax on certain goods with additional excise duties. The State of Mysore, by enacting the Mysore Sales Tax (Amendment) Act, 1958, signified acceptance of the scheme under the Central Act. The Court clarified that the State Legislature's acceptance of the Central Act did not diminish its inherent power to levy sales tax, as conferred by the Constitution. The addition of Entry 31-B in the Fifth Schedule was analyzed in light of the exemption provisions under the Mysore Sales Tax Act, emphasizing the distinction between "sugar" and "sugar candy" for tax purposes.

The Court scrutinized the legislative intent behind the inclusion of Entry 31-B and concluded that the ambiguity in the provision should favor the assessee. Ultimately, the Court held that the tax imposed on the petitioner was not authorized by the provisions of the Act. Consequently, the assessment order was quashed through a writ of certiorari. Notably, the petitioner succeeded on an unpleaded ground, leading to a decision against awarding costs. The judgment was concurred by both judges, resulting in the allowance of the petition.