1964 (7) TMI 15 - SC - VAT and Sales Tax

Whether a certain payment in annas pice or pies discharges an ascertained liability? Held that - Appeal dismissed. In the present case by the notification issued on March 31 1956 the liability for payment of sales tax was to be computed at the rate of one anna in a rupee of the turnover. By virtue of section 14(3) of the Indian Coinage Act for an anna mentioned in the notification 6 1/4 new coins will be substituted but as the substituted rate involved a fraction by the process of rounding off at the rate specified in sub section (2). The fraction of new coins will be omitted and the nearest new coins i.e. six new coins will be deemed to be substituted in the statute. Liability for sales tax after the amendment of the Coinage Act will therefore be at the rate of 6 new coins for every rupee of sale price.

Issues Involved:

1. Validity of the U.P. Sales Tax Validation Act, 1958.
2. Correct calculation of sales tax rate: whether it should be 1 anna or 6 naye paise per rupee.

Issue-wise Detailed Analysis:

1. Validity of the U.P. Sales Tax Validation Act, 1958:

The appellants challenged the validity of the U.P. Sales Tax Validation Act, 1958, and sought the quashing of the assessment orders. The High Court dismissed the writ petition, referencing the Supreme Court's decision in J.K. Jute Mills Co., Ltd. v. State of Uttar Pradesh, which upheld the Validation Act. The appellants' contention about the calculation of tax was also dismissed based on earlier decisions of the Allahabad High Court. The Supreme Court did not allow the appellants to challenge the validity of the Validation Act again, as it had already been settled in the Jute Mills' case.

2. Correct Calculation of Sales Tax Rate:

The primary issue before the Supreme Court was whether the sales tax should be calculated at the rate of 6 naye paise per rupee or 1 anna per rupee. The appellants argued that, according to the Indian Coinage Act, 1906, as amended by Act 31 of 1955, the reference to 1 anna should be construed as 6 naye paise. They contended that the Sales Tax Authority's calculation at the rate of 1 anna per rupee resulted in over-assessment.

To understand this contention, the Court examined the relevant provisions of the Coinage Act. Section 14(1) divided the rupee into 100 units, and Section 14(2) specified the conversion rate of old coins (annas, pice, pies) to new coins (naye paise). Section 14(3) stated that references to values expressed in old coins in any enactment should be construed as references to values expressed in new coins at the rate specified in Section 14(2).

The Court clarified that Section 14(3) provided a rule for construing values expressed in old coins as values expressed in new coins, without involving the artificial calculation mode mentioned in Section 14(2). The conversion was meant to be a simple process of substituting old coin values with new coin values at the specified rate of 16 annas, 64 pice, or 192 pies to 100 naye paise.

The Court rejected the appellants' argument that the provisions of Section 14(3) referred to both the rate and the method of calculation mentioned in Section 14(2). It emphasized that the conversion process should not lead to significant variations in the actual amounts to be paid or received, as this would adversely affect the interests of the parties involved. The Court concluded that the High Court correctly interpreted Section 14(3) to mean that references to values in old coins should be construed as references to values in new coins by converting the old values at the specified rate.

Separate Judgment by Shah, J.:

Shah, J., disagreed with the majority view on the interpretation of Section 14 of the Coinage Act. He emphasized that Section 14(3) was an interpretation clause meant to substitute values expressed in old coins with equivalent values in new coins at the specified rate. He argued that the rounding-off process mentioned in Section 14(2) applied only when payment was made in old coins to discharge liability in a single transaction. Shah, J., cited the Supreme Court's decision in Mangalore Ganesh Beedi Works v. State of Mysore to support his view. He concluded that the liability for sales tax should be computed at the rate of 6 new coins for every rupee of sale price, as 1 anna should be substituted with 6.25 naye paise and rounded off to 6 naye paise.

Conclusion:

The Supreme Court, by majority, upheld the High Court's interpretation of Section 14(3) of the Coinage Act, dismissing the appeals with costs. The Court confirmed that the sales tax should be calculated at the rate of 1 anna per rupee, as expressed in the relevant provisions of the U.P. Sales Tax Act and the notification issued under its provisions.

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