1966 (5) TMI 64 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Competence of the Sales Tax Officer to issue notices.
2. Whether the respondents were dealers subject to sales tax.

Detailed Analysis:

1. Competence of the Sales Tax Officer to Issue Notices
First Argument: Ineffectiveness of the Notification
The respondents contended that the notification appointing Sri Musharraf Husain as an assessing authority was ineffective because it was issued under the Sales Tax Laws Validation Ordinance, 1956, which had been repealed by the Sales Tax Laws Validation Act, 1956. The Court noted that the notification, issued on 6th February 1957, referred to the extinct Ordinance instead of the Act. However, the Court interpreted this as a common draftsman's slip and concluded that the State Government intended to appoint Sri Musharraf Husain under the Act. The Court applied the maxim *ut res magis valeat quam pereat* to give effect to this intention, thus validating the notification.

Second Argument: Contravention of Sales Tax Rules
The respondents argued that the notification violated rules 3, 3A, and 6 of the Sales Tax Rules under the U.P. Sales Tax Act, which define the jurisdiction of Sales Tax Officers. The Court held that Section 2(a) of the Sales Tax Act impliedly gives the State Government unrestricted power to appoint any person as an assessing authority over any area in the State. The rules did not exhaust this statutory power, and even if there was inconsistency, the Act would prevail over the rules. Therefore, the notification was not invalid.

Flaw in the First Notice
The Court acknowledged that the first notice dated 26th December 1956 was flawed as there was no notification appointing Sri Musharraf Husain as an assessing authority at that time. However, there was no such flaw in the second notice dated 2nd March 1957.

2. Whether the Respondents Were Dealers Subject to Sales Tax
Respondents' Argument
The respondents claimed they were not dealers but commission agents with their principal place of business in Calcutta. They purchased goods on behalf of U.P. businessmen without disclosing their principals' names and only charged a commission. This was supported by affidavits.

Court's Analysis
The Court noted that the respondents were registered as dealers under section 8A of the U.P. Sales Tax Act for the years 1953-54 and 1954-55, and had declared an estimated turnover not less than Rs. 15,000. They had also made payments towards sales tax, albeit under protest. These admissions indicated that they were dealers.

Prohibition Writ
The respondents sought a writ of prohibition to prevent Sri Musharraf Husain from proceeding under the Sales Tax Act. The Court explained that such a writ is issued to restrain a quasi-judicial authority from exceeding its jurisdiction. However, if the jurisdiction depends on certain facts, the Court should generally not interfere until the authority has decided on its jurisdiction. Since there was prima facie evidence indicating jurisdiction, the Court declined to issue the writ at the threshold. The Court suggested that if the respondents were not dealers, they could file a return showing nil turnover and produce their account books to satisfy the assessing authority.

Precedent
The Court referenced a similar case, *Sri Chander Bhan Agarwal v. Sales Tax Officer, Agra*, where a writ of prohibition was declined under similar circumstances. The Court noted that the decision relied upon by the learned Judge, *Panna Lal Babu Lal v. Commissioner of Sales Tax, U.P.*, was not applicable after the commencement of the Sales Tax Laws Validation Act.

Conclusion:
The appeals were allowed, the order of the learned Judge was set aside, and the writ petitions were dismissed. Each respondent was ordered to pay costs of Rs. 300 to the appellant.