1969 (3) TMI 78 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether Rule 23(1) of the Andhra Pradesh General Sales Tax Rules, 1957, is ultra vires Section 39(2)(o) of the Andhra Pradesh General Sales Tax Act, 1957.
2. Whether the legal heir of a deceased dealer is liable for the penalty under Section 14(2) of the Andhra Pradesh General Sales Tax Act, 1957.

Issue-wise Detailed Analysis:

1. Ultra Vires of Rule 23(1):
The primary issue was whether Rule 23(1) of the Andhra Pradesh General Sales Tax Rules, 1957, which imposes penalties on the legal representatives of a deceased dealer, is ultra vires Section 39(2)(o) of the Andhra Pradesh General Sales Tax Act, 1957. Section 39(2)(o) authorizes the State Government to make rules for "the assessment and recovery of tax" in respect of a business of a deceased person but does not explicitly mention penalties. The respondent's counsel argued that Rule 23(1) exceeded the scope of Section 39(2)(o) by including penalties, thus making it ultra vires. The court examined the distinction between tax and penalty within the Act and found that the Act maintains a clear dichotomy between the two, as evidenced by various sections such as Sections 11, 14, 16, 17, 18, 21(4)(a)(i) and (ii), and 30(1)(a). The court concluded that penalty is not merely incidental to assessment proceedings and that the word "tax" does not include "penalty."

2. Liability of Legal Heir for Penalty:
The second issue was whether the legal heir, who submitted the return, is liable for the penalty. The court noted that the legal representative is required to submit returns under Rule 23(1) and is not personally liable for penalties; rather, penalties are to be paid out of the estate of the deceased dealer. The court rejected the argument that the legal heir should be personally liable for the penalty, emphasizing that the return was based on the accounts maintained by the deceased dealer, and the legal representative was merely fulfilling a legal obligation.

General Power of Rule-Making:
The court also addressed the argument that Rule 23(1) could be sustained under the general rule-making power conferred by Section 39(1). Section 39(1) allows the State Government to make rules to carry out the purposes of the Act, and the specific instances in Section 39(2) are illustrative, not exhaustive. The court cited precedents, including decisions from the Privy Council and the Supreme Court of India, to support the view that the general rule-making power under Section 39(1) encompasses the authority to include penalties in Rule 23(1).

Conclusion:
The court held that Rule 23(1) is not ultra vires the powers of the rule-making authority and is valid and enforceable. Consequently, the levy of penalty in this case was deemed valid and in accordance with law. The tax revision case was allowed with costs, and the petition was granted.