1984 (4) TMI 268 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of sub-rules (7) to (14) of rule 21 after the deletion of Section 18 from the Kerala General Sales Tax Act, 1963.
2. Interpretation of Section 5 of the K.G.S.T. Act concerning provisional assessments.
3. Authority of the rule-making body to prescribe rules for provisional assessments.
4. Practical implications and policy considerations regarding provisional assessments.
5. Legal precedents and their relevance to the case.

Detailed Analysis:

1. Validity of sub-rules (7) to (14) of rule 21 after the deletion of Section 18 from the Kerala General Sales Tax Act, 1963:
The petitioners contended that sub-rules (7) to (14) of rule 21 could not validly operate after the deletion of Section 18, arguing that these sub-rules are ultra vires the statute as it now stands. The court examined whether Section 18 was the sole repository of the power to prescribe rules for monthly assessments. It concluded that the power to frame rules for assessment and collection includes the power to make rules for provisional assessment and provisional collection, unless expressly denied by the statute. The court held that sub-rules (7) to (14) of rule 21 are valid even after the deletion of Section 18.

2. Interpretation of Section 5 of the K.G.S.T. Act concerning provisional assessments:
The court noted that Section 5 of the Act is the charging section, providing for a yearly tax on the taxable turnover. It discussed whether this provision precludes provisional assessments during the financial year. The court concluded that the method of assessment pertains to the realm of machinery and can be indicated either by the statute or by the rules framed under it. Section 5, when read along with Sections 16, 17, 23, and 44, supports the legislature's contemplation of provisional assessments and collections before the final settlement of accounts for a year.

3. Authority of the rule-making body to prescribe rules for provisional assessments:
The court emphasized that the legislature is competent to delegate part of its legislative functions to the executive. Section 16(1) provides that the tax under the Act shall be assessed, levied, and collected in such manner as may be prescribed, and Section 17(1) similarly provides for the submission of returns in the prescribed manner. These provisions, along with Section 57(1), which confers power on the executive to make rules to carry out the purposes of the Act, support the rule-making authority's power to prescribe rules for provisional assessments.

4. Practical implications and policy considerations regarding provisional assessments:
The petitioners argued that the system of monthly assessments imposes an unnecessary burden on assessees, especially if exemptions or rate reductions are granted during the financial year. The court acknowledged these practical difficulties but maintained that they do not affect the validity of the rules. It suggested that appeals against provisional assessments under rule 21 might still be possible, and provisions for adjustment after final assessments continue to exist.

5. Legal precedents and their relevance to the case:
The court referred to the decision of the Madras High Court in In re Kumaraswami Raja, which held that in the absence of a specific provision in the Act, rules for provisional assessments were ultra vires. However, it also considered the Travancore-Cochin High Court's decision in In re Hamsa Koya, which upheld the validity of provisional assessments under similar statutory provisions. The court found the latter reasoning more persuasive. Additionally, the Supreme Court's decision in Mathra Parshad and Sons v. State of Punjab supported the view that rules can provide for collection at intervals despite the tax being a yearly tax.

Conclusion:
The court concluded that sub-rules (7) to (14) of rule 21 are valid and dismissed the petitions. However, it directed that further steps for the collection of tax under these sub-rules be kept in abeyance until final assessments are made for the year, provided the petitioners complied with the terms of the stay orders.

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