1966 (7) TMI 60 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of sub-rule (7) of rule 5 of the Central Sales Tax (Madras) Rules, 1957.
2. Validity of sub-section (3) of section 9 of the Central Sales Tax Act, 1956.
3. Jurisdiction of the Deputy Commercial Tax Officer to assess alleged escaped turnover.
4. Constitutionality of sub-section (3) of section 9 of the Central Sales Tax Act, 1956.

Issue-wise Detailed Analysis:

1. Validity of sub-rule (7) of rule 5 of the Central Sales Tax (Madras) Rules, 1957:

The petitioner challenged the validity of sub-rule (7) of rule 5, which deals with the assessment of escaped turnover, the period of limitation for such assessment (five years), and the determination of escaped turnover by best judgment. The court held that sub-rule (7) was ultra vires the power of the State Government as section 13(4) of the Central Sales Tax Act does not specifically confer the power to make such a rule. The court noted that the legislative practice in the State's sales tax law typically includes express and specific conferment of power to make rules for the assessment of escaped turnover, limitation for the exercise of this power, and the manner of assessment, including best judgment. Since section 13(4) of the Central Sales Tax Act lacks such specific enabling provision, sub-rule (7) was deemed unauthorized and invalid.

2. Validity of sub-section (3) of section 9 of the Central Sales Tax Act, 1956:

The court examined whether sub-section (3) of section 9, which allows State authorities to assess, collect, and enforce payment of Central sales tax using their powers under the State sales tax law, was constitutional. The petitioner argued that this sub-section was unconstitutional as it amounted to the Parliament abdicating its legislative powers by adopting State law provisions by reference. However, the court found that sub-section (3) was constitutional, as it merely adopted existing provisions of the State law, which is permissible. The court noted that section 16 of the Madras General Sales Tax Act, 1959, substantially re-enacted the provisions of the 1939 Act, and thus, the substance of the law remained the same.

3. Jurisdiction of the Deputy Commercial Tax Officer to assess alleged escaped turnover:

The petitioner contended that the Deputy Commercial Tax Officer lacked jurisdiction to assess the alleged escaped turnover. The court held that even in the absence of sub-rule (7), the respondent had the power and jurisdiction to take action under section 9(3) of the Central Sales Tax Act. This section assimilates and attracts the provisions of the State sales tax law for the assessment, collection, and enforcement of Central sales tax. The court referred to the Supreme Court's decision in State of Mysore v. Lakshminarasimhiah Setty & Sons, which supported the view that section 9(3) allows State authorities to exercise their powers under the State law for the purposes of the Central Act.

4. Constitutionality of sub-section (3) of section 9 of the Central Sales Tax Act, 1956:

The petitioner argued that sub-section (3) of section 9 was unconstitutional as it allowed the adoption of future amendments to the State law, which the Parliament had not applied its mind to. The court rejected this argument, stating that the principle of adopting existing provisions of a local law by reference is permissible. The court emphasized that section 16 of the Madras General Sales Tax Act, 1959, substantially re-enacted the provisions of the 1939 Act, and thus, the substance of the law remained consistent with what the Parliament had intended when enacting section 9(3). Therefore, the court concluded that sub-section (3) of section 9 was constitutional.

Conclusion:

The court dismissed the petitions, holding that sub-rule (7) of rule 5 of the Central Sales Tax (Madras) Rules, 1957, was invalid, but sub-section (3) of section 9 of the Central Sales Tax Act, 1956, was constitutional. The Deputy Commercial Tax Officer had jurisdiction to assess the alleged escaped turnover under the Central Sales Tax Act. The petitions were dismissed with costs, and counsel's fees were set at Rs. 250.

← Previous Next →