1967 (7) TMI 124 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Deputy Commercial Tax Officer to reassess turnovers under Rule 5(7) of the Central Sales Tax (Madras) Rules.
2. Validity of Rule 5(7) of the Central Sales Tax (Madras) Rules.
3. Entitlement of the petitioner to approach the court under Article 226 of the Constitution.
4. Adjustment and refund of tax paid under different tax acts.

Detailed Analysis:

1. Jurisdiction of the Deputy Commercial Tax Officer to Reassess Turnovers:
The core issue was whether the Deputy Commercial Tax Officer had the jurisdiction to reassess turnovers initially assessed under the Madras General Sales Tax Act as escaped turnovers under the Central Sales Tax Act. The petitioner argued that the reassessment constituted an appeal over the previous assessments, which should be the function of higher appellate authorities. The court noted that Rule 5(7) of the Central Sales Tax (Madras) Rules allows reassessment if "for any reason" turnover has escaped assessment. This rule is broader than Section 34(1) of the Indian Income-tax Act, which requires "definite information" leading to the discovery of escaped assessment. The court concluded that the Deputy Commercial Tax Officer had jurisdiction to reassess the turnovers under Rule 5(7), even if it involved a change of opinion from the previous assessments.

2. Validity of Rule 5(7) of the Central Sales Tax (Madras) Rules:
The petitioner challenged the validity of Rule 5(7), citing a previous judgment (Haji J.A. Kareem Sait v. Deputy Commercial Tax Officer) that struck down the rule as ultra vires. However, the court observed that even if Rule 5(7) was invalid, Section 9(3) of the Central Sales Tax Act, read with Section 16(1) of the Madras General Sales Tax Act, would still confer jurisdiction to reassess escaped turnovers. Thus, the reassessment could be sustained on this statutory basis, rendering the challenge to Rule 5(7) ineffective.

3. Entitlement to Approach the Court under Article 226:
The respondent argued that the petitioner should have pursued remedies through the appellate hierarchy under the General Sales Tax Act. However, the petitioner contended that the jurisdictional challenge and the argument about the vires of Rule 5(7) warranted direct recourse to the High Court under Article 226 of the Constitution. The court accepted this argument, acknowledging that the petitioner was entitled to approach the court directly due to the nature of the issues raised.

4. Adjustment and Refund of Tax Paid:
The petitioner expressed concern about being reassessed at a higher rate under the Central Sales Tax Act without assurance of refund or adjustment for amounts already paid under the Madras General Sales Tax Act. The court noted the department's vague commitment to "suitable revision" of the Madras General Sales Tax assessments. The court suggested that the assessing authorities should ensure that the petitioner is not compelled to pay any part of the sum twice. It recommended giving credit for amounts already paid under the Madras General Sales Tax Act when making demands under the Central Sales Tax Act and making necessary adjustments between the accounts.

Conclusion:
The court dismissed the writ petitions, upholding the jurisdiction of the Deputy Commercial Tax Officer to reassess the turnovers under the Central Sales Tax Act and finding no grounds to quash the reassessments based on the arguments presented. The court also highlighted the need for clear and fair adjustments to avoid double payment by the petitioner. No order as to costs was made.