1964 (9) TMI 51 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Vires of Rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939.
2. Validity of assessments made under Rule 16.
3. Effect of the Madras General Sales Tax (Turnover and Assessment) Rules Validation Act, 1959.
4. Effect of Ordinance 3 of 1963 and Act 11 of 1963 on assessments.
5. Allegation of illegality due to assessment made after rule nisi issuance.

Issue-wise Detailed Analysis:

1. Vires of Rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939:
The petitioners challenged the vires of Rule 16 on the grounds that the rule-making authority did not comply with the prescribed requirements under Section 19(4) of the Madras General Sales Tax Act, 1939, for publication of such notices. The single judge in Baluswami Naidu and Sons v. State of Madras held Rule 16 ultra vires. However, a Bench in Mohamed Abdul Khader v. State of Madras later upheld the validity of Rule 16, stating that Section 7(e) of the Madras General Clauses Act, 1891, rendered the rule valid despite any omission in pre-publication compliance.

2. Validity of assessments made under Rule 16:
The assessments for 1957-58 and 1958-59 were initially challenged, and the court originally ruled in favor of the petitioners. However, the subsequent enactment of the Madras General Sales Tax (Turnover and Assessment) Rules Validation Act, 1959, nullified the invalidation by declaring all taxes levied or collected under the pre-existing rules, including Rule 16, as valid. This validation applied notwithstanding any judgment, decree, or order of any court.

3. Effect of the Madras General Sales Tax (Turnover and Assessment) Rules Validation Act, 1959:
Section 2 of the Validation Act explicitly validated all taxes levied or collected under the pre-existing rules and all proceedings taken by the State Government or its officers. This provision rendered the assessments for 1957-58 and 1958-59 valid despite the earlier judgment in Baluswami Naidu and Sons v. State of Madras. The court noted that the Validation Act had been upheld in subsequent decisions and was not disputed by the petitioners.

4. Effect of Ordinance 3 of 1963 and Act 11 of 1963 on assessments:
Ordinance 3 of 1963, which came into force on 10th June 1963, substituted new sections for Rules 16(1) and 16(2) and applied to sales between 1st April 1955 and 31st March 1959. The court held that the Ordinance did not invalidate assessments made before its commencement. Sections 2(2) and 2(3) of the Ordinance allowed for reassessment but did not automatically invalidate prior assessments. Act 11 of 1963, which repealed the Ordinance, did not re-enact a provision corresponding to Rule 16(1), indicating that the earlier rule would be revived after the Ordinance expired.

5. Allegation of illegality due to assessment made after rule nisi issuance:
The petitioners argued that the assessment for 1957-58 was illegal as it was made after a rule nisi had been issued. However, the court noted that no stay order had been obtained to restrain the authorities from completing the assessment. The court distinguished the case from Joseph v. Assistant Excise Commissioner, where a refund was ordered due to illegal collection during the pendency of writ proceedings. In the present case, since the writ petition for quashing the assessment failed, there was no basis for restoring any benefit to the petitioners.

Conclusion:
The court dismissed all three writ petitions, upholding the validity of the assessments for 1957-58 and 1958-59. The Validation Act of 1959 and the subsequent legislative actions effectively validated the assessments and the proceedings taken under Rule 16. The court found no merit in the petitioners' arguments regarding the effect of Ordinance 3 of 1963, Act 11 of 1963, or the rule nisi issuance on the validity of the assessments. There was no order as to costs.