1969 (12) TMI 116 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956, as amended by the 1969 Act.
2. Validation of assessments made prior to June 9, 1969, by the 1969 Ordinance.
3. Limitation period for rectification under Rule 38 of the Mysore Sales Tax Rules, 1957.
4. Taxability of inter-State sales of cotton under the amended Central Sales Tax Act, 1956.

Detailed Analysis:

1. Constitutionality of Sections 8 and 9 of the Central Sales Tax Act, 1956, as amended by the 1969 Act:
The petitioners contended that Sections 8 and 9 of the Central Act, as amended by the 1969 Act, were unconstitutional because they adopted the sales tax laws of various States, including future amendments, for determining tax rates, exemptions, assessment, and collection. This, they argued, amounted to the Parliament abdicating its essential legislative function.

The court referred to a similar contention raised in W.P. No. 2109 of 1968 (Mysore Electrical Industries Ltd. v. Commercial Tax Officer [1971] 27 S.T.C. 559), where it was held that the adoption of State tax rates and procedures did not amount to abdication of essential legislative functions. The court noted that the policy of the law was clearly laid down in the Act, and the adoption of State laws from time to time was necessary to serve its purpose. The court concluded that the Parliament was competent to adopt both existing and future State laws concerning tax rates and procedural laws for assessment and collection. Thus, the contention was rejected, and the constitutionality of Sections 8 and 9 was upheld.

2. Validation of Assessments Made Prior to June 9, 1969, by the 1969 Ordinance:
The petitioners argued that the rectification of assessments made on June 26, 1967, stood validated by Clause 9 of the Ordinance, and therefore, the Commercial Tax Officer could not institute proceedings for rectification of such a valid assessment.

The court referred to its earlier decision in S.T.R.P. Nos. 30, 31, 32, and 39 of 1968 (A. Misrimal Jain & Co. v. State of Mysore [1971] 28 S.T.C. 137), where it was held that validation of assessments by the amending Act did not preclude rectification or revision of those assessments under the Act's provisions. The court noted that Section 9(2) of the amending Act preserved the right to question any assessment, reassessment, levy, or collection of tax and to claim refunds. Therefore, the contention that the refund made earlier stood validated was rejected.

3. Limitation Period for Rectification under Rule 38 of the Mysore Sales Tax Rules, 1957:
The petitioners contended that the present proceeding under Rule 38 was barred by limitation as it was beyond five years from the date of the original assessment order. They argued that every rectification of an assessment order should be within five years from the date of the original assessment order.

The court held that Rule 38 allowed rectification of any mistake apparent on the record within five years from the date of the order sought to be rectified. The court rejected the argument that the rule was inconsistent with the relevant rule-making power and noted that the words "any order" in Rule 38 were wide enough to include any order made in the course of assessment proceedings. The court concluded that the period of limitation should be computed from the time when the mistake sought to be rectified crept into the record. Therefore, the rectification in question was within time.

4. Taxability of Inter-State Sales of Cotton under the Amended Central Sales Tax Act, 1956:
The petitioners argued that cotton was taxable at the point of purchase under the Central Act and was therefore unconditionally exempt under Section 8(2A) of the Central Act, as amended. They contended that inter-State sales of cotton were exempt from liability to tax under the Central Act.

The court noted that the amendments made by the 1969 Act, particularly Section 6(1A), made inter-State sales chargeable to tax with retrospective operation. The court rejected the argument that the non obstante clause in Section 8(2A) nullified the effect of Section 6(1A). The court held that Section 6(1A) referred to the liability of sale transactions to tax, while Section 8(2A) referred to exemptions and concessional rates in specified circumstances. The court concluded that they were complementary and not conflicting, and the non obstante clause did not override the provisions of Section 6(1A). Thus, the contention that inter-State sales of cotton were exempt from tax was rejected.

Conclusion:
The court dismissed the petition, holding that the contentions raised by the petitioners were untenable. The constitutionality of Sections 8 and 9 of the Central Act was upheld, the validation of assessments did not preclude rectification, the rectification proceedings were within the limitation period, and inter-State sales of cotton were chargeable to tax under the amended Central Act.