1961 (12) TMI 63 - SC - VAT and Sales Tax

Whether the exemption is effective from the commencement of the financial year or from the date of the notification? Held that - Appeal allowed. The divisions of the year and the taxable turnover into different parts are to make easy the collection of tax, and form part of the machinery sections. If the tax is yearly and is to be paid on the taxable turnover of a dealer, then the exemption, whenever it comes in, in the year for which the tax is payable, would exempt sales of those goods throughout the year, unless the Act said that the Notification was not to have this effect, or the Notification fixed the date for the commencement of the exemption. In the present case, the Notification did not fix the date from which the exemption was to operate, probably because the Act omitted to make such provision, enabling the State to do so, and the exemption must, therefore, operate for the whole year, during which it was granted.

Summary

Issues Involved:
1. Legality of the sales tax levy on manufactured tobacco up to September 26, 1954.
2. Refund of sales tax paid for the quarter ending June 30, 1954.
3. Prohibition against the proposed levy of sales tax till September 26, 1954.
4. Effectiveness of the exemption notification dated September 27, 1954.

Issue-wise Detailed Analysis:

1. Legality of the Sales Tax Levy on Manufactured Tobacco up to September 26, 1954:
The appellants argued that the Punjab Tobacco Vend Fees Act, 1954, had pro tanto repealed the East Punjab General Sales Tax Act, 1948, and thus, sales tax on manufactured tobacco could not be levied after April 1, 1954. The High Court rejected this argument, stating that there can be two taxes on the same commodity without one law repealing the other unless there is an express repeal or the two Acts cannot stand together. The Supreme Court agreed, affirming that no implied repeal occurred and the sales tax was legally levied until the exemption notification on September 27, 1954.

2. Refund of Sales Tax Paid for the Quarter Ending June 30, 1954:
The appellants sought a refund of the sales tax paid for the quarter ending June 30, 1954, based on the State Government's Press Note of August 2, 1954, which indicated that sales tax would not be charged during the current financial year and that any tax collected would be refunded. However, the State Government later reversed this policy in August 1955. The Supreme Court held that there can be no estoppel against a statute. If the law requires a tax to be collected, any assurance that it would not be collected would not bind the State Government. Therefore, the refund claim was not upheld.

3. Prohibition Against the Proposed Levy of Sales Tax till September 26, 1954:
The appellants sought an order prohibiting the levy of sales tax till September 26, 1954. The High Court and the Supreme Court both held that the sales tax on manufactured tobacco was payable from April 1, 1954, to September 26, 1954, as the exemption only took effect from September 27, 1954. Thus, the request for prohibition was denied.

4. Effectiveness of the Exemption Notification Dated September 27, 1954:
The critical issue was whether the exemption in the Notification issued on September 27, 1954, had effect from that date or from the beginning of the financial year. The Supreme Court examined the provisions of the East Punjab General Sales Tax Act and the Rules under it. The Court concluded that the tax is a yearly tax, and the exemption, whenever granted during the year, would exempt sales of those goods throughout the year unless the Act or the Notification specified otherwise. Since the Notification did not fix a date for the commencement of the exemption, it was held to operate for the whole year.

Separate Judgment by Kapur, J.:
Kapur, J., delivered a dissenting judgment, stating that the exemption should be effective from the date of the notification or such date as mentioned in the notification, and not from the beginning of the financial year. He emphasized that the scheme of the Act and the Rules indicated that the tax was exigible on the taxable turnover for the period for which the return was made, and it did not envisage reassessment for refunding tax assessed and paid on articles that became exempt later.

Conclusion:
The Supreme Court, by majority, allowed the appeal, holding that the exemption granted by the Notification dated September 27, 1954, operated for the whole financial year 1954-55. The appeal was allowed with costs.