1962 (11) TMI 24 - SC - VAT and Sales Tax

Validity of rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939 questioned Held that - Allow this petition with costs holding the impugned rule 16(2) invalid and order the issue of a writ of mandamus to the State of Madras and the Sales Tax Authorities under the Act to refrain from enforcing any of the provisions of rule 16(2) and direct them to refund the tax illegally collected from the petitioner.

Issues Involved:
1. Validity of Rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939.
2. Discriminatory taxation under Article 304(a) of the Constitution.
3. Jurisdiction of the Deputy Commercial Tax Officer in assessing the tax.
4. Revival of the old Rule 16 upon invalidation of the new rule.
5. Maintainability of the petition under Article 32 of the Constitution.

Issue-wise Detailed Analysis:

1. Validity of Rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939:
The petitioner, a dealer in hides and skins, challenged the validity of Rule 16, which was substituted in 1955. The rule was alleged to impose discriminatory taxation on hides and skins tanned outside the State of Madras compared to those tanned within the State. The Court examined whether Rule 16 violated the provisions of the Constitution, particularly Article 304(a).

2. Discriminatory Taxation under Article 304(a) of the Constitution:
The petitioner contended that Rule 16 resulted in higher taxation on imported tanned hides and skins than on those tanned within the State, violating Article 304(a). The Court noted that Article 304(a) enables the Legislature of a State to impose taxes on goods from other States if similar goods in the State are subjected to similar taxes, ensuring no discrimination. The Court found that Rule 16(2) discriminated against imported hides and skins, as the tax on these goods was based on their sale price, while the tax on locally tanned hides and skins was effectively on their purchase price in raw condition, which was substantially lower. This disparity in taxation was deemed discriminatory and unconstitutional.

3. Jurisdiction of the Deputy Commercial Tax Officer in Assessing the Tax:
The Court addressed whether the Deputy Commercial Tax Officer had jurisdiction to assess the tax under the invalid Rule 16. It was concluded that the taxing officer had no jurisdiction to assess the tax due to the invalidity of the rule under which the tax was assessed. This was not a case of misconstruing provisions of a valid Act but rather one where the rule itself was invalid.

4. Revival of the Old Rule 16 upon Invalidation of the New Rule:
The respondents argued that if the new Rule 16 was held invalid, the old rule would automatically revive. The Court disagreed, stating that once the old rule was substituted by the new rule, it ceased to exist and did not automatically revive upon the invalidation of the new rule.

5. Maintainability of the Petition under Article 32 of the Constitution:
A preliminary objection was raised regarding the maintainability of the petition in light of the decision in Ujjam Bai v. State of Uttar Pradesh. The Court clarified that this petition did not fall within that decision as it was not a case of misconstruing provisions of a valid Act but one where the taxing officer lacked jurisdiction due to the invalidity of the rule.

Conclusion:
The Supreme Court allowed the petition, holding Rule 16(2) invalid for contravening Article 304(a) of the Constitution. The Court issued a writ of mandamus to the State of Madras and the Sales Tax Authorities to refrain from enforcing Rule 16(2) and directed them to refund the tax illegally collected from the petitioner. The petition was allowed with costs.

← Previous Next →