1967 (10) TMI 55 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of section 9A and rule 4-A of the Central Sales Tax Act regarding the collection of amounts by registered dealers.
2. Vires of rule 4-A(iv) of the Central Sales Tax (Madras) Rules, 1957.
3. Comparison with previous court decisions on similar provisions.

Detailed Analysis:
The judgment by the Madras High Court, delivered by Veeraswami, J., concerned a tax case challenging an order of the Madras Sales Tax Appellate Tribunal. The issue revolved around the demand for payment of excess sales tax collections, totaling Rs. 5,257.72, by the department. The assessee had sold waterproof cloth and beltings, exempt from sales tax under the Madras General Sales Tax Act, but had collected Central sales tax on the sales. The department relied on rule 4-A(iv) of the Central Sales Tax (Madras) Rules, 1957, which the Tribunal deemed within the State Government's competency under section 13(3) of the Central Sales Tax Act.

The primary issue was the interpretation of section 9A and rule 4-A regarding the collection of amounts by registered dealers. Section 9A prohibits the collection of any amount by way of tax under the Act by unregistered dealers and restricts registered dealers to collect in accordance with the Act and rules. Rule 4-A outlines conditions for registered dealers to collect tax amounts, emphasizing payment to the government and scrutiny by the assessing authority. The Court analyzed the language of section 9A, emphasizing that the collection must be in relation to a liability to pay tax under the Act, not for amounts not legally payable as tax.

The Court referred to previous decisions, notably Tata Iron and Steel Co. Ltd. v. State of Madras, which interpreted a similar provision under the Madras General Sales Tax Act. The Court adopted the interpretation from the Tata Iron and Steel case, emphasizing that the scope of section 9A is limited to tax lawfully leviable under the Act. The Court rejected the argument that legislative power differences between State and Parliament affect the interpretation, asserting that the focus should be on the section's language and intent.

Regarding the vires of rule 4-A(iv), the Court found that the rule's scope aligns with section 9A and does not authorize the collection of amounts beyond what is legally payable as tax under the Act. The Court emphasized that the purpose of section 9A is to permit registered dealers to collect tax amounts subject to compliance with the Act and rules. Consequently, the demand for excess collection from the assessee was deemed unsupported, leading to the allowance of the tax case with costs.

In conclusion, the judgment delved into the interpretation of tax collection provisions under the Central Sales Tax Act, emphasizing the necessity for collected amounts to align with liabilities under the Act. The Court's analysis of section 9A and rule 4-A clarified the permissible scope of collection by registered dealers, ultimately ruling in favor of the assessee due to the lack of legal basis for the excess tax demand.