1973 (1) TMI 91 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Ultra vires of sub-rule (5) of rule 25-A of the U.P. Sales Tax Rules.
2. Conflict with section 4-B of the U.P. Sales Tax Act.
3. Effective date of the recognition certificate.

Issue-wise Detailed Analysis:

1. Ultra vires of sub-rule (5) of rule 25-A of the U.P. Sales Tax Rules:

The petitioner contended that sub-rule (5) of rule 25-A, which states that the recognition certificate shall take effect from the date of its issue, is ultra vires the rule-making power of the State Government. The court examined section 4-B of the U.P. Sales Tax Act, which provides special relief to certain manufacturers, and concluded that the rule-making authority could only lay down conditions that the applicant is required to satisfy. The court found that the last sentence of sub-rule (5) of rule 25-A, stating "such certificate shall take effect from the date of its issue," did not carry out the object of section 4-B and was beyond the rule-making power of the State Government. Therefore, it was declared ultra vires.

2. Conflict with section 4-B of the U.P. Sales Tax Act:

The petitioner argued that sub-rule (5) of rule 25-A conflicts with section 4-B of the U.P. Sales Tax Act, which provides for a concessional rate or exemption from tax for dealers holding a recognition certificate. The court analyzed the language of section 4-B, which confers an option on the manufacturer or dealer to apply for a recognition certificate to avail of the relief. The court held that the recognition certificate should be deemed effective from the date of application, provided the dealer has fulfilled all the requirements and conditions prescribed. The court concluded that the last sentence of sub-rule (5) of rule 25-A, making the certificate effective from the date of its issue, contravenes the provisions of section 4-B and is invalid.

3. Effective date of the recognition certificate:

The court addressed the issue of the effective date of the recognition certificate. The petitioner argued that the benefit of the concessional rate should be available from the date of application for the recognition certificate. The court noted that section 4-B does not require the dealer to commence manufacture or purchase of notified goods only after the issuance of the certificate. The court emphasized that the delay in the issuance of the certificate by the Sales Tax Officer should not nullify the relief intended by section 4-B. The court held that the dealer should be deemed to hold the recognition certificate from the date of application, even if the certificate is issued later. Consequently, the court directed the Sales Tax Officer to rectify the recognition certificate by inserting the date of the application in column No. 1 thereof.

Separate Judgments:

Satish Chandra, J.: The judgment declared the last sentence of sub-rule (5) of rule 25-A ultra vires and directed the modification of the assessment order dated 31st May, 1971, reducing the tax demand by Rs. 32,848.61. The Sales Tax Officer was further directed to rectify the recognition certificate by inserting the date of the application.

Gulati, J.: Agreed with the judgment of Satish Chandra, J.

Ojha, J.: Dissented from the majority opinion, arguing that the word "conditions" in section 4-B(2) included the effective date of the certificate and that the rule-making power of the State Government was not exceeded. He found no ambiguity in the language of section 4-B and concluded that the certificate should take effect from the date of its issue.

Conclusion:

The writ petition was allowed, and the last sentence of sub-rule (5) of rule 25-A of the U.P. Sales Tax Rules was declared ultra vires. The assessment order was modified, and the Sales Tax Officer was directed to rectify the recognition certificate to reflect the date of the application. The petitioner was entitled to costs.