1962 (9) TMI 43 - SC - VAT and Sales Tax

Enhancement of tax - amendment of the Indian Coinage Act (Act 3 of 1906) by the Amending Act 31 of 1955 the rate of sales tax which was levied on the appellant s beedies was .02 Ps. per rupee and thus the appellant was called upon to pay ₹ 25,038 more than he would have paid if he had been charged at the rate of 3 pies per rupee. Held that - Appeal dismissed. The tax cannot be challenged on the ground that it is contrary to the provisions of the Constitution. Secondly, it was submitted that the Indian Coinage Act, being a Central Act dealing with coinage and legal tender under item 36 of List I, could not change the rate of tax under the Mysore Sales Tax Act. It is unnecessary to decide this question because if the Central Act, i.e., the Indian Coinage Act, has not the effect of changing 3 pies into .02 nPs. in the rate of tax leviable under the Mysore Sales Tax Act, the Mysore Existing Laws (Construction of References to Values) Act, 1957, which has been set out above has made a provision for charging the tax in terms of naya Paisas instead of pies. Therefore the levy of tax in terms of naya Paisas is not unconstitutional nor is it a taxing measure but it deals merely with the conversion of the old coinage into new coinage.

Summary

Issues:
- Validity of tax enhancement under Mysore Sales Tax Act due to change in coinage.
- Constitutionality of tax validity under Articles 197 to 199 and Article 202.
- Impact of Indian Coinage Act on tax rate under Mysore Sales Tax Act.
- Application of principle of res judicata based on prior High Court decision.

Analysis:
The case involved an appeal against the High Court's dismissal of a petition under Article 226 to quash an assessment order under the Mysore Sales Tax Act. The appellant, a registered firm, contested the tax imposition based on a change in coinage rates following the amendment of the Indian Coinage Act. The appellant argued that the tax increase was illegal and breached Article 265 of the Constitution. The amended Indian Coinage Act introduced naya Paisas, replacing annas, pice, and pies. The Mysore Legislature enacted the Mysore Existing Laws Act, converting references to old coinage into naya Paisas. The first issue raised was whether the tax enhancement was valid, considering the substitution of coinage. The Court held that the change in coinage did not constitute a tax increase, and procedural irregularities did not render the tax invalid under Articles 197 to 199 and Article 202 of the Constitution.

Regarding the impact of the Indian Coinage Act on the Mysore Sales Tax Act, the Court noted that the substitution of coinage by the Central Act did not directly alter the tax rate. However, the Mysore Existing Laws Act facilitated the conversion to naya Paisas for tax calculation, ensuring the constitutionality of the tax levy. The appellant also raised the issue of res judicata based on a prior High Court decision setting aside a provisional assessment. The Court rejected this argument, stating that the previous decision did not address the current issues and, therefore, did not establish res judicata. Ultimately, the appeal was dismissed, affirming the validity of the tax assessment under the Mysore Sales Tax Act.