1965 (10) TMI 53 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement to refund of tax collected by mistake of law under the Central Sales Tax Act, 1956.
2. Deductibility of excise duty in the computation of chargeable turnover under the Central Sales Tax Act.
3. Applicability of the law of limitation and discretionary power under Article 226 of the Constitution.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Tax Collected by Mistake of Law:
The petitioners, comprising three different assessees, claimed entitlement to a refund of tax collected under a mistaken interpretation of the Central Sales Tax Act, 1956, based on the Supreme Court's judgment in State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231. The Supreme Court held that under section 9 of the Central Sales Tax Act, the provisions of the State Act regarding single-point taxation and other exemptions apply equally to Central sales tax assessments. Consequently, if the local Act mandates that assessments be made only on the first seller of particular goods, no tax should be levied under the Central Sales Tax Act on subsequent sellers.

The petitioners argued that they became aware of this mistake of law only after the Supreme Court judgment and despite demands, the respondents failed to refund the tax. However, the court noted that the Supreme Court's decision pertained to the Central Act as it stood before amendments in 1958. The relevant provisions of the Madras General Sales Tax Act, 1959, and section 15 of the Central Act, as amended, indicate that the Central tax on inter-State sales should prevail, and the State tax should be refunded if both taxes are levied on the same goods. Therefore, the court concluded that the charge under the Central Sales Tax Act is valid, and the tax paid is not liable to be refunded.

2. Deductibility of Excise Duty in the Computation of Chargeable Turnover:
The second and third batches of petitioners, who were dealers in matches, sought the benefit of excluding excise duty from the chargeable turnover under the Central Sales Tax Act, similar to the provision under the Madras Rules. The court examined whether the benefit of Rule 6(f) of the Madras General Sales Tax Rules, 1959, which allows for the deduction of excise duty in determining taxable turnover, could be extended to assessments under the Central Act.

The court held that "turnover" under the Central Act is defined as the aggregate of sale prices in respect of inter-State sales, as determined by the prescribed manner. The Central Government has the authority to make rules regarding deductions in the determination of turnover, and the Central Sales Tax (Registration and Turnover) Rules, 1957, do not provide for the deduction of excise duty. Hence, the court concluded that the assessees are not entitled to deduct excise duty in determining the aggregate turnover of inter-State sales.

3. Applicability of Law of Limitation and Discretionary Power under Article 226:
The respondents argued that the assessees, having collected the tax, are liable to make over the amounts to the State Government, irrespective of their liability to tax, citing section 9-A and rule 4-A(ii) of the Central Sales Tax (Madras) Rules, 1957. Additionally, they contended that the petitioners could not claim a mistake of law as they had consistently argued against their liability under the Central Act. The respondents also suggested that the court, in exercising its discretion under Article 226, should consider the law of limitation.

The court found it unnecessary to address these arguments in detail, as the primary contentions of the assessees were dismissed. Consequently, the petitions were dismissed with costs, and the court did not express any opinion on the applicability of the law of limitation or the discretionary power under Article 226.

Conclusion:
The court dismissed the petitions, holding that the tax levied under the Central Sales Tax Act is valid and not subject to refund, and the assessees are not entitled to deduct excise duty in the computation of chargeable turnover. The court did not delve into the arguments regarding the law of limitation and discretionary power under Article 226, as the assessees' primary claims failed. The petitions were dismissed with costs.

← Previous Next →