1970 (8) TMI 66 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the levy for the year 1962-63.
2. Validity of the levy for the year 1963-64.
3. Impact of the Kerala General Sales Tax (Amendment) Act, 1969, on dissolved firms.
4. Refund of sales tax collected from a dissolved firm.

Detailed Analysis:

1. Validity of the Levy for the Year 1962-63:
The court examined whether the levy for the year 1962-63 was valid under the General Sales Tax Act, 1125. The firm in question was dissolved on 21st April 1964, and the final assessment for 1962-63 was made in September 1965, after the firm had ceased to exist. The court noted that the liability to pay tax for the year 1962-63 was incurred by the close of 31st March 1963, under the General Sales Tax Act, 1125, which was repealed by the Kerala General Sales Tax Act, 1963, effective from 1st April 1963. The court emphasized that the repeal of the 1125 Act did not affect liabilities already incurred under it, but proceedings for assessment had to be initiated under the 1125 Act itself. Since the 1125 Act did not provide for a levy on a dissolved firm, the assessment for 1962-63 was deemed invalid, following the precedent set in State of Punjab v. Jullundur Vegetables Syndicate.

2. Validity of the Levy for the Year 1963-64:
For the year 1963-64, the assessment was governed by the Kerala General Sales Tax Act, 1963. The court analyzed the impact of the new Section 21A introduced by the Kerala General Sales Tax (Amendment) Act, 1969, which allowed assessments on dissolved firms retrospectively from 1st April 1963. The assessment for 1963-64 was made on 6th October 1965, when Section 21A was deemed to be in force. Despite the assessment being set aside in appeal, Section 7 of the Amendment Act validated the assessment retrospectively, neutralizing the appellate decision. The court cited the Supreme Court's ruling in Shri P.C. Mills v. Broach Municipality, which supported the legislative competence to validate past transactions by removing defects found in the existing law. Consequently, the levy for 1963-64 was deemed valid.

3. Impact of the Kerala General Sales Tax (Amendment) Act, 1969, on Dissolved Firms:
The Amendment Act introduced Section 21A to the Kerala General Sales Tax Act, 1963, allowing assessments on dissolved firms as if no dissolution had occurred. Section 7 of the Amendment Act validated previous assessments on dissolved firms, deeming them as legally effective despite any court judgments to the contrary. This legislative change aimed to save levies made on dissolved firms and prevent refunds of collected taxes. The court found that the Amendment Act effectively validated the levy for the year 1963-64 but could not validate the levy for 1962-63, which was governed by the repealed 1125 Act.

4. Refund of Sales Tax Collected from a Dissolved Firm:
The court addressed the respondent writ petitioner's claim for a refund of sales tax collected for the years 1962-63 and 1963-64. Given that the levy for 1962-63 was invalid and not validated by the Amendment Act, the court upheld the order for a refund of Rs. 22,147.96 collected for that year. However, the levy for 1963-64 was validated by the Amendment Act, and thus, the court set aside the order for a refund of Rs. 16,416.35 collected for that year. The court directed the revenue to pay the costs of the respondent writ petitioner due to the revenue's failure to argue the basis of the Amendment Act before the learned Single Judge.

Conclusion:
The appeal was partly allowed. The order directing a refund for the year 1963-64 was set aside, while the order for a refund for the year 1962-63 was affirmed. The revenue was directed to pay the costs of the respondent writ petitioner. The court's decision hinged on the applicability and retrospective effect of the Kerala General Sales Tax (Amendment) Act, 1969, validating assessments on dissolved firms.

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