1974 (4) TMI 90 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of Sales Tax Officer, Chhindwara.
2. Applicability of Section 78 of the States Reorganisation Act.
3. Limitation under Section 11(5) of the Central Provinces Sales Tax Act.
4. Validity of composite assessment covering periods within and beyond the limitation period.

Detailed Analysis:

1. Jurisdiction of Sales Tax Officer, Chhindwara:
The petitioner argued that the Sales Tax Officer, Chhindwara, had no jurisdiction to assess tax for the period prior to the States Reorganisation Act (1st November 1956). It was contended that the appropriate Sales Tax Officer should be from Nagpur, as the principal place of business was situated there before the reorganization. The court, however, found no clear evidence or specific allegations proving that the petitioner's principal place of business was in Nagpur on 31st October 1956. As the petitioner did not challenge the jurisdiction during the assessment proceedings, the court held that the burden was on the petitioner to prove the necessary facts, which he failed to do. Consequently, the challenge to the jurisdiction of the Sales Tax Officer, Chhindwara, was dismissed.

2. Applicability of Section 78 of the States Reorganisation Act:
Section 78 deals with the right to recover arrears of taxes. The Supreme Court had previously interpreted "arrears" to include taxes due from sales made before 1st November 1956, even if not assessed by that date. The court agreed with this interpretation and concluded that the right to recover these arrears belonged to the successor State where the place of assessment was included. The court found that without clear evidence of the principal place of business being in Nagpur, the State of Madhya Pradesh was the successor State with jurisdiction to recover the arrears.

3. Limitation under Section 11(5) of the Central Provinces Sales Tax Act:
The petitioner contended that the assessment was barred by limitation under Section 11(5), which allows assessment within three calendar years from the expiry of the period for which the dealer was liable to pay tax. The court examined the definition of "turnover" and "taxable turnover" and determined that a quarter is the unit of assessment under the Act. The notice issued on 18th July 1959 covered the period from 1st October 1953 to 26th December 1958, which included quarters beyond the three-year limitation period. The court held that the limitation must be reckoned for each quarter separately, meaning the assessment for quarters beyond three years from the notice date was barred.

4. Validity of Composite Assessment:
The court found that the composite assessment, which did not separately show the assessment for each quarter within and beyond the limitation period, was invalid. Following the precedent set by the Supreme Court in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, the court quashed the entire assessment and allowed the respondents to reassess the tax separately for the quarters not barred by limitation.

Conclusion:
The petition was allowed, and the assessment order was quashed. The respondents were granted liberty to reassess the tax for the quarters within the limitation period. No costs were awarded, and the security deposit was ordered to be refunded to the petitioner.