1967 (1) TMI 71 - HC - VAT and Sales Tax

Summary

Issues:
- Validity of notice for prosecution under section 45(2)(a) of the Madras General Sales Tax Act
- Application of section 48(2) of the Madras General Sales Tax Act, 1959
- Determination of composition fee under sections 46(1)(a) and 46(1)(b) of the Act

Validity of notice for prosecution under section 45(2)(a) of the Madras General Sales Tax Act:
The petitioner, a financier of hire-purchase transactions, challenged a notice issued by the Deputy Commercial Tax Officer for failure to submit a return under the Madras General Sales Tax Act. The petitioner argued that the notice was illegal and ultra vires as more than five years had elapsed from the relevant transactions. The petitioner contended that the notice was based on a wrong provision of law and sought a writ of prohibition to restrain further proceedings. The court analyzed previous decisions and held that the notice proposing a composition fee exceeding the statutory limit was illegal. The court found the notice to be prejudicial to the petitioner and ruled in favor of the petitioner, restraining the respondent from proceeding with the notice.

Application of section 48(2) of the Madras General Sales Tax Act, 1959:
The court considered the application of section 48(2) of the Madras General Sales Tax Act, which prohibits questioning the validity of assessments or levies in criminal proceedings. The petitioner argued that the criminal court would be precluded from considering defenses related to his liability to be assessed to tax. The government pleader contended that this provision applies to completed assessments and not to cases where no assessment has been made due to the lapse of time. The court noted conflicting interpretations of previous decisions but ultimately did not decide on the issue due to the nature of the present case.

Determination of composition fee under sections 46(1)(a) and 46(1)(b) of the Act:
The court examined the determination of the composition fee under sections 46(1)(a) and 46(1)(b) of the Madras General Sales Tax Act. It was found that the notice incorrectly proposed a composition fee based on section 46(1)(a) despite no completed assessment being made. The court ruled that the appropriate provision for fixing the composition fee should have been section 46(1)(b), which sets a maximum of Rs. 1,000. The court held that the notice, containing an illegal proposal for a composition fee, must be struck down as illegal. The petitioner was granted relief through a writ of prohibition to prevent further proceedings based on the erroneous notice.

In conclusion, the court allowed the petition, restrained the respondent from proceeding with the notice, and did not express an opinion on the question of maintaining a prosecution without a completed assessment. The judgment emphasized the importance of adhering to statutory provisions in determining composition fees and ensuring legality in enforcement actions under the Sales Tax Act.