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TMI Blog1984 (4) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... lso geared to the taxable turnover for a year. "Turnover" means the aggregate amount for which goods are either bought or sold; and "taxable turnover " means the turnover on which tax is payable, after permissible deductions. Section 16(1) in Chapter V, dealing with "assessment, collection and penalty", provides that "The tax under this Act shall be assessed, levied and collected in such manner as may be prescribed." Section 17(1) obliges every dealer who is liable to pay tax under the Act to submit "such return or returns relating to his turnover in such manner and within such period as may be prescribed". Section 17(3) provides for best judgment assessments, where returns are not filed or where those filed are found to be incorrect or incomplete. The relevant provisions of section 18, when the section was part of the enactment, were as follows: "18. Provisional assessment.-(1) The tax for each year payable under any of the provisions of this Act may be assessed and levied in advance during the year and for that purpose a dealer may be required to furnish within the prescribed period either an advance estimate of his turnover for the year or such periodical returns of the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turns" required a dealer to submit, on or before the 1st May of the year, a return in form 10 "showing his estimated total turnover and taxable turnover for the year". Rules 13 to 15 dealt with acceptance of returns and best of judgment assessments where returns were not submitted or where those submitted were incorrect or incomplete. In substance, these rules provided for provisional fixation of the "annual tax" payable. Rule 16 provided for issue of demand notices on the basis of assessments made under rules 13 to 15; the dealer was to pay "the tax provisionally fixed for the year" in monthly instalments. Rule 18(1) required a dealer to submit, on or before the 1st May of every year, an annual return (i.e., a final return) in form 8, showing the total turnover and taxable turnover for the preceding year; and sub-rules (4) and (5) provided for final annual assessment. Rule 20 provided for adjustment on the basis of the final assessment. Rule 21(1) provided that "In lieu of the method of assessment described in the foregoing rules, the method described in sub-rules (2) to (12) of this rule may, on application, be permitted to be adopted by a dealer whose taxable turnover exceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act them for the purpose, because the contention is that such rules providing for periodical provisional assessments during the course of the year, could not have survived the deletion of section 18. 5.. The argument is developed like this. Section 5 of the Act is the charging section, and it provides for a yearly or annual tax. It contemplates only one assessment, after the end of the financial year. Without anything more in the Act itself, the rules could not have provided for periodical or advance assessments during the currency of the year. Section 18 however specifically provided for such assessments, and under the rules, these assessments were of two kinds. One, a provisional annual assessment under rules 12 to 16, and two, monthly provisional assessments in lieu thereof, under rule 21. Inasmuch as both were provisional assessments, and had to be related to the power conferred by section 18 of the Act, the rule-making authority should have scrapped both the methods consequent on the deletion of the section. What they did however was to scrap only one of the methods, i.e., the one under rules 12 to 16, while retaining and perpetuating the other, under rule 21, making it appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. The statute in this case contains a separate chapter dealing with this subject, namely, "assessment and collection". As noticed earlier section 16(1) provides that the tax payable under the Act is to be assessed, levied and collected in such manner as may be prescribed; and section 17(1) similarly provides that returns relating to turnover are also to be submitted in the manner and within the period prescribed by the Rules. This power to prescribe the manner of assessment and collection carries with it the power to provide for periodical provisional assessments also, subject of course to the stipulation in section 5 that the final assessment or ascertainment shall be with reference to the financial year. The power to frame rules for assessment and collection includes the power to make rules for provisional assessment and provisional collection, unless the statute denies such power expressly or by necessary implication If the provisions of section 5 are to be construed as authorising only one assessment and one collection, the provisions of section 23 permitting payment of tax "in such manner and in such instalments as may be specified in the notice of demand" will become meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by section 18A of the Indian Income-tax Act. But in the absence of any such provision in the Act itself, a rule cannot go beyond the Act and make the dealer pay a tax provisionally calculated on an estimated turnover. The objection is not met by reference to the provision in the rules for final adjustment." The Travancore-Cochin High Court, however, took a different view of the matter in In re Hamsa Koya [1957] 8 STC 18 wherein Kumara Pillai, J., said: "The scheme of the Sales Tax Act is entirely different. Sales tax is levied not in respect of the turnover for the previous year but in respect of the turnover of the year for which the tax is levied. The argument that since the tax for the year is on the turnover for that year the taxing authority should in all cases wait till the close of the year and is not competent to make in any case an assessment before the close of the year because the turnover of the year cannot be ascertained before the close of the year also appears to us to be far-fetched. To take an illustration about which there can be no dispute, if a dealer winds up his business long before the close of the year and his turnover for that year can thereby be ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 17 and 57(1) of the K.G.S.T. Act, a similar conclusion can safely be reached, and that the above provisions of the statute are more than sufficient to support sub-rules (7) to (14) of rule 21 as they now stand. 8.. The decision of the Supreme Court in Mathra Parshad and Sons v. State of Punjab [1962] 13 STC 180 (SC); AIR 1962 SC 745 is also of some assistance. On 27th September, 1954 the Punjab Government issued a notification under the East Punjab General Sales Tax Act, 1948 exempting manufactured tobacco from sales tax, and the question was whether the exemption could operate only from the date of the notification, or from the beginning of the financial year. The assessees contended that sales tax was a yearly tax and that the exemption should enure from the beginning of the year. The stand of the State was that the exemption could be claimed only from the date of the notification. The majority of the Constitution Bench accepted the case of the assessees, while Kapur, J., alone dissented. Section 5 of the Act required a dealer to pay tax on the "taxable turnover every year". Section 10 provided that the tax payable under the Act was to be paid "in the manner hereinafter provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the State may grant exemptions or reduce the rate of tax in exercise of power under section 10 of the K.G.S.T. Act during the middle or just before the end of a financial year, and that the system of monthly assessment and collection would impose an unnecessary and heavy burden on some of the assessees for a major part of the year. Reference is also made to the amendment to section 34 taking away the right of appeal against provisional assessments under section 18. These practical difficulties cannot affect the validity of the Rules. It is possible that despite the amendment to section 34, appeals could still lie against provisional assessments under rule 21, as they are assessments or orders within the meaning of section 17. In any event, the remedy by way of revision will be available. It is also to be mentioned that provisions for adjustment after the final assessments, and for appeals against such assessments, still continue to be there. 10.. The question is then posed as to why section 18 was placed in the statute book and retained there all the time, if the rule-making authority had power under the other provisions of the Act to prescribe rules for provisional asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessing authorities could devote their full time for final assessments, and that the Finance Minister had made a policy statement in this regard in the budget speech. The retention of sub-rule (9) of rule 21 at least, it was urged, was inconsistent with this policy. All that we need say is that if at all there was such a policy, the amendments made to the Act and the Rules fall short of giving effect to it; such policy considerations can also have no place in examining the vires of the rules as they now stand. 12.. Another approach which the counsel wanted us to adopt is that section 18 had provided for both provisional annual assessments and provisional periodical assessments, and that rule 21 was intended as the machinery for the latter. That may or may not be so; but the question now for decision is whether subrules (7) to (14) of rule 21 could stand in the absence of section 18. And on that, we have already expressed ourselves. 13.. Even Rajamannar, C.J., was prepared to agree, in In re Kumaraswami [1955] 6 STC 113, that once the tax had accrued under the charging section, the Rules could provide for assessment, levy and collection in such manner as was found expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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