1968 (2) TMI 97 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Yearly levy of tax under the Central Sales Tax Act, 1956, and the Bombay Sales Tax Act, 1953.
2. Financial year applicability for Central sales tax.
3. Retrospective operation of sub-rule (2) of rule 11 of the Central Sales Tax (Registration and Turnover) Rules, 1957.
4. Levy of tax on tax under section 9(1) of the Central Sales Tax Act, 1956.
5. Levy of tax on tax under section 8(2) of the Central Sales Tax Act, 1956.

Detailed Analysis:

1. Yearly Levy of Tax:
The court examined whether the levy of tax under the Central Sales Tax Act, 1956, and the Bombay Sales Tax Act, 1953, is yearly. It was highlighted that section 6 of the Central Sales Tax Act, 1956, imposes a yearly liability on dealers for tax on all sales effected in the course of inter-State trade or commerce "during any year." The court concluded that both the liability to tax and the assessment under the Central Act are yearly. This interpretation was supported by the Supreme Court's decision in Mathra Parshad & Sons v. The State of Punjab, where it was held that tax under the Act was yearly and exemptions applied throughout the year unless specified otherwise.

2. Financial Year Applicability:
The court addressed whether Central sales tax is levied for the financial year. The judgment clarified that the term "year" under section 2(k) of the Central Sales Tax Act, 1956, means the financial year applicable under the general sales tax law of the appropriate State. The assessment under the Central Act follows the pattern laid down in section 14 of the Bombay Sales Tax Act, 1953, which mandates yearly assessment. Thus, the court affirmed that Central sales tax is levied for the financial year.

3. Retrospective Operation of Rule 11(2):
The court analyzed whether sub-rule (2) of rule 11 of the Central Sales Tax (Registration and Turnover) Rules, 1957, has retrospective operation from 1st July, 1957. The respondents argued that they are entitled to deductions from 1st July, 1957, based on a notification dated 6th November, 1957. The court noted that the assessment year is the unit for chargeability and assessment proceedings. Consequently, any notification coming into force during that year must be given effect from the beginning of that assessment year. Therefore, the court held that the rule had retrospective operation from 1st July, 1957.

4. Levy of Tax on Tax under Section 9(1):
The issue of whether tax on tax is leviable under section 9(1) of the Central Sales Tax Act, 1956, was raised. However, the court noted that Mr. Banaji did not press this question, and no arguments were addressed. Hence, the court did not answer this issue.

5. Levy of Tax on Tax under Section 8(2):
Similarly, the issue of whether tax on tax is leviable under section 8(2) of the Central Sales Tax Act, 1956, was not pressed by Mr. Banaji, and no arguments were presented. The court, therefore, did not address this issue.

Conclusion:
The court answered questions (1) and (3) in the affirmative, confirming the yearly levy of tax and the retrospective operation of the rule. Questions (2), (4), and (5) were not pressed, and thus, the court did not address them. The applicant was ordered to pay the respondents' costs of the reference, fixed at Rs. 250. The reference was answered accordingly.