Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1967 Supreme(SC) 139

SUPREME COURT OF INDIA
J.C. SHAH, S.M. SIKRI AND V. RAMASWAMI, JJ.
State of Madras, Appellant
Versus
R. Nandlal and Co., Respondent.
Civil Appeal No. 604 of 1966,
D/-14-4-1967.
Advocates appeared
M/s. G. Ramanujam and A. V. Rangam, Advocates, for Appellant; M/s. K. Srinivasan and R. Gopalakrishnan. Advocates, for Respondent.

Advocates:
A.V.RANGAM, G.RAMANUJAM, K.SRINIVASAN INDRAJEETH SHAH, R.GOPAL KRISHNAN

The main legal point established in the judgment is the inconsistency of the rules made by the State Government with the provisions of the Central Sales Tax Act and the rules made under sub-section (1) of Section 13.

Headnote:
Central Sales Tax Act - Assessment of Sales Tax - Section 8(1) - Form C - Rules 10(1) of Central Sales Tax (Madras) Rules, 1957 - Summary: The court discussed the application of Section 8(1) of the Central Sales Tax Act, the use of Form C, and the interpretation of Rule 10(1) of the Central Sales Tax (Madras) Rules, 1957. The court highlighted the requirement for a declaration duly filled and signed by the registered dealer, the obligations of the purchasing dealer, and the authority to make rules under the Act. The court emphasized the inconsistency of the rules made by the State Government with the provisions of the Act and the rules made under sub-section (1) of Section 13. The judgment affirmed the decision of the High Court and dismissed the appeal with costs.
Fact of the Case:

M/s. R. Nand Lal and Company, the assessee, were assessed to pay sales tax at a higher rate for turnover from sales to registered dealers in the State of Punjab. The assessing authority declined to assess the turnover at a lower rate as prescribed by Section 8(1) of the Central Sales Tax Act, citing non-compliance with Rule 10(1) of the Central Sales Tax (Madras) Rules, 1957. The High Court set aside the order of the Sales Tax Appellate Tribunal, declaring the assessees liable to pay tax at the lower rate. The State of Madras appealed to the Supreme Court.
Finding of the Court:

The court found that the declarations furnished by the assessees in Form C covered more transactions than allowed by Rule 10(1) of the Central Sales Tax (Madras) Rules, 1957. However, the court held that the rule imposed obligations only on dealers within the State of Madras and not on purchasing dealers outside the state. The court affirmed the decision of the High Court, emphasizing the inconsistency of the rules made by the State Government with the provisions of the Act and the rules made under sub-section (1) of Section 13.
Issues: The issues involved the application of Section 8(1) of the Central Sales Tax Act, the interpretation of Rule 10(1) of the Central Sales Tax (Madras) Rules, 1957, and the jurisdiction of the State Government to impose obligations on dealers outside the state.
Ratio Decidendi: The court held that the rules made by the State Government were inconsistent with the provisions of the Act and the rules made under sub-section (1) of Section 13. The court emphasized that the authority to prescribe such injunctions could only be derived from the Central Government under Section 13(1)(d) and that the situation could have been avoided if the Central Government had made the rules.
Final Decision: The appeal failed, and the court dismissed it with costs.

Judgment

SHAH, J. : M/s. R. Nand Lal and Company -hereinafter called the assessee - are dealers in wool at Vaniyambadi in North Arcot District in the State of Madras. In proceedings for assessment of sales-tax for the year 1959-60 the assessees were assessed to pay tax at the rate of sever, per cent, on a turnover of Rs. 2,08,343-05 from sales effected by them to certain registered dealers in the State of Punjab. The assessing authority declined to assess the turnover at one per cent. as prescribed by S. 8 (l) of the Central Sales-tax Act, 1956, because in his view the assessees had submitted declarations in Form C covering two or more transactions contrary to the first proviso to R. 10 (1) of the Central Sales Tax (Madras) Rules, 1957. The Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal, Madras confirmed the order of the assessing authority. The High Court of Madras, in exercise of its revisional jurisdiction, set aside the order of the Sales Tax Appellate Tribunal, and declared that the assessees were liable to pay tax on the turnover in dispute at the lower rate. The State of Madras has appealed to this Court with special leave.

2. Section 8 of the Central Sales Tax Act, 1956 (as amended by Act 31 of 1958) insofar as it is material provided:-

"(1) Every dealer, who in the course of inter-State trade or commerce-

(a) * * * * *

(b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3);

shall be liable to pay tax under this Act, which shall be one per cent, of his turnover.

(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1)-

(a) * * * * *

(b) in the case of goods other than declared goods, shall be calculated at the rate of seven per cent, or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher

(2-A) * * * * *

(3) * * * * *

(4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner-

(a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or

(b) * * * * *

(5) * * * * *"

3. It is common ground that the turnover was in respect of goods of the class specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or for use by him in the process of manufacture of goods for sale. A registered dealer selling goods in the course of inter-State trade or commerce of the description referred to in sub-s. (3) is liable under S. 8 (1) of the Central Sales Tax Act to pay tax only at the rate of one per cent on his turnover. But to qualify himself for that rate of tax, he has to furnish to the prescribed authority a declaration duly filled and signed by the registered dealer to whom the goods are sold. Such a declaration must contain the prescribed particulars in the prescribed form obtained from the prescribed authority. If the selling dealer fails to furnish the declaration in the prescribed form, he is liable to pay tax at the higher rate mentioned in sub-s. (2)(b) of S. 8.

4. The respondents did furnish declarations in Form C prescribed under the Rules framed by the Central Government in exercise of the powers vested by. 13 (l) (d) of the Central Tax Act. But each such declaration covered more transactions of sale than one and the aggregate value of the transactions recorded in each declaration exceeded Rs. 5,000/-. The sales-tax authorities and the Tribunal were of the view that these declarations contravened the express direction of the rule made by the Madras State in exercise of the powers under S. 13 (4) (e) of

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