1957 (3) TMI 81 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Suit transactions taking place outside the State of Madras and the legality of the sales tax levy.
2. Jurisdiction of the court to try the suits.
3. Compliance of the suits with the suit notices.
4. Limitation period for filing the suits.
5. Legislative competence of the Madras Legislature to enact and the validity of explanation (2) to S.2 (1) of the Madras General Sales Tax Act.

Detailed Analysis:

1. Suit Transactions and Sales Tax Levy:
The plaintiffs contended that the ownership of the goods continued with them until the actual payment by the buyers outside the Province of Madras. They argued that the sales tax imposed on such transactions by the State of Madras was illegal and ultra vires. The Subordinate Judge found that the sales outside the province amounted to Rs. 1,95,710-12-0 in O.S. No. 28 of 1949 and Rs. 9,26,775-2-6 in O.S. No. 100 of 1949, and accordingly granted relief. However, for transactions after 1-1-1948, the sales were considered within the Province due to explanation 2 to sub-s. (4) of S. 2 of the Madras General Sales Tax Act.

2. Jurisdiction of the Court:
The Subordinate Judge held that the plaintiffs had the right to file the suits and that the Civil Courts had jurisdiction to determine the questions arising under the Madras General Sales Tax Act. This was upheld, affirming that the jurisdiction of the ordinary Civil Courts was not ousted by the Act.

3. Compliance with Suit Notices:
The court examined whether the suits were in conformity with the suit notices issued under S.80 C.P.C. It was found that the suit in O.S. No. 28 of 1949 was not in accordance with the suit notice, while O.S. Nos. 100 of 1949 and 34 of 1950 were in conformity. The court emphasized that substantial compliance with the requirements of S.80 C.P.C. was sufficient.

4. Limitation Period:
The court discussed the applicability of S. 18 of the Madras General Sales Tax Act, which prescribes a six-month limitation period for filing suits. It was argued that this period should be reckoned from the date of the final revision order. The court concluded that S. 18 did not apply to suits for the recovery of illegally collected taxes, and instead, Art. 62 of the Limitation Act, which prescribes a three-year limitation period, was applicable. Consequently, the suit in O.S. No. 28 of 1949 was held to be within time.

5. Legislative Competence and Validity of Explanation (2) to S.2 (1):
The plaintiffs challenged the legislative competence of the Madras Legislature to enact explanation (2) to S.2 (1) of the Madras General Sales Tax Act, arguing it was ultra vires and repugnant to the Indian Sale of Goods Act. The court noted that similar contentions had been raised and dismissed in previous cases, affirming the validity of the explanation.

Conclusion:
- A.S. No. 481 of 1951: Partly allowed for the refund of tax on the turnover of Rs. 1,95,710-12-0 being sales outside the Province, with proportionate costs.
- A.S. Nos. 295 and 296 of 1952: Allowed with costs throughout. In A.S. No. 296 of 1952, a decree for declaration and injunction was granted for Rs. 37,632-2-9. In A.S. No. 295 of 1952, a decree for Rs. 3,400/- was granted.
- State Appeals Nos. 993 and 994 of 1952: Dismissed with costs.
- Interest Award: The judgment was amended to award interest at 6% per annum from the date of the plaint till the date of payment in A.S. Nos. 295 of 1952 and 481 of 1951.

The court also addressed certain administrative points raised post-judgment, including the award of interest and the scope for review of the judgment.