1967 (2) TMI 80 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of Rule 39-A added to the Mysore Sales Tax Rules in November 1962.
2. Interpretation of Section 15(b) of the Central Sales Tax Act.
3. Retrospective effect of the proviso to sub-rule (3) of Rule 39-A.
4. Validity of Form 4-A prescribed for application for refund.

Issue 1: Validity of Rule 39-A added to the Mysore Sales Tax Rules in November 1962

The court examined the validity of Rule 39-A, which prescribed conditions for refunding state tax paid on declared goods sold in inter-State trade. The petitioners argued that Rule 39-A imposed an additional condition precedent by requiring the payment of Central Sales Tax for claiming the refund, which was beyond the scope of Section 15(b) of the Central Sales Tax Act. The court agreed, noting that Section 15(b) does not mention the actual payment of Central Sales Tax as a condition for refund. The court held that the words "and has paid tax under the Central Sales Tax Act, 1956 (Central Act 74 of 1956), in respect of such sale" in sub-rule (1) of Rule 39-A were ultra vires and struck them down.

Issue 2: Interpretation of Section 15(b) of the Central Sales Tax Act

The court analyzed Section 15(b) of the Central Sales Tax Act, which mandates that any state tax paid on declared goods must be refunded if those goods are sold in inter-State trade. The court emphasized that the right to a refund is acquired once the goods are sold in inter-State trade, without the need for actual payment of Central Sales Tax. The court referred to the Supreme Court's ruling in The State of Mysore v. Yaddalam Lakshminarasimhiah Setty & Sons, which clarified that the charge under Section 6 of the Central Sales Tax Act is subject to other provisions, potentially reducing the tax payable to nil.

Issue 3: Retrospective effect of the proviso to sub-rule (3) of Rule 39-A

The court addressed the argument that the proviso to sub-rule (3) of Rule 39-A, which prescribed a period of limitation for submitting refund claims, purported to give retrospective effect to the rule. The court interpreted the proviso as procedural, applying to claims alive at the time the rule came into force, and not necessarily retrospective. The court noted that the proviso had already worked itself out and did not furnish a ground for attack by the petitioners.

Issue 4: Validity of Form 4-A prescribed for application for refund

The court examined the argument that Form 4-A, used for refund applications, assumed state tax had been paid and required details of both state and central tax paid. The petitioners contended that this was problematic as tax payments might not align with the refund application timeline. The court held that forms should be interpreted to effectuate the relevant rules and statutory provisions, and any discrepancies could be adjusted by the assessing authority.

Conclusion:

The court struck down the words "and has paid tax under the Central Sales Tax Act, 1956 (Central Act 74 of 1956), in respect of such sale" in sub-rule (1) of Rule 39-A as ultra vires. It also held that similar words in the proviso to sub-section (4) of Section 5 of the Mysore Sales Tax Act, as it stood before the amendment, were ineffective and inoperative for the period from January 1, 1959, to December 7, 1961. The demands for balance tax due under the Mysore Sales Tax Act in the writ petitions were quashed, and the assessing authorities were directed to re-examine the facts and refund the Central Sales Tax collected, if applicable. No costs were awarded in any of the petitions.

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