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Karnataka High Court
Judges : A.Narayana Pai,B.Venkataswami
MUNSHI ABDUL RAHIMAN AND BROS. - Appellant
Versus
COMMERCIAL TAX OFFICER, I CIRCLE, HUBLI - Respondent
Writ Petition 2466 Of 1966
Decided On : 02/14/1967
Advocates Appeared :
G.V.Shantha Raju, K.SRINIVASAN
Validity of rule 39-A - Mysore Sales Tax - Section 15 of the Central Sales Tax Act - 39-A. Refund of tax in the case of certain types of sales of declared goods - The court struck down the requirement that the assessee claiming refund must have paid tax under the Central Sales Tax Act as ultra vires. The court also directed the refund of Central sales tax paid by the petitioners and quashed the demands made for payment of Mysore sales tax.
Fact of the Case:
The petitioners dealt in hides and skins, which are declared goods subject to single point levy of tax under the Mysore Sales Tax Act. The validity of rule 39-A added to the Mysore Sales Tax Rules in November 1962 was challenged.
Finding of the Court:
The court found that the requirement for the assessee claiming refund to have paid tax under the Central Sales Tax Act was ultra vires. The court directed the refund of Central sales tax paid by the petitioners and quashed the demands made for payment of Mysore sales tax.
Issues: The main issue was the validity of rule 39-A and the requirement for the assessee claiming refund to have paid tax under the Central Sales Tax Act.
Ratio Decidendi: The court held that the requirement for the assessee claiming refund to have paid tax under the Central Sales Tax Act was beyond the scope of rule-making power traceable to section 15 (b) of the Central Sales Tax Act.
Final Decision: The court directed the refund of Central sales tax paid by the petitioners and quashed the demands made for payment of Mysore sales tax.
( 1 ) THE common question raised in all these writ petitions relates to the validity of rule 39-A added to the Mysore Sales Tax Rules in November 1962.
( 2 ) THE petitioners in all these cases deal in hides and skins. These are declared goods within the meaning of the Central Sales Tax Act and are liable to single point levy of tax under the Mysore sales Tax Act, in accordance with the provisions of sub-section (4) of section 5 of the said State act.
( 3 ) BECAUSE the goods are declared goods, as of importance from the point of view of inter-State trade, tax thereon payable under the Central Act as well as several State Acts is controlled by the provisions of section 15 of the Central Sales Tax Act. That section reads as follows :-
"15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a state.- Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of, a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :- (a) the tax payable under that law in respect of any sale or purchase of such goods inside the state shall not exceed two per cent. of the sale or purchase price thereof, and such tax shall not be levied at more than one stage; (b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State. "
( 4 ) IN the light of the provisions of clause (a) tax leviable at the point of first purchase in respect of these goods under section 5 (4) of the Mysore Act is limited to two per cent. The mandate of clause (b) of section 15 of the Central Act was given effect in the Mysore Sales Tax Act by the addition of a proviso to sub-section (4) of section 5 in the following terms :-
"provided that where tax has been paid in respect of sale or purchase of any of the declared goods under this sub-section and such goods are subsequently sold in the course of inter-State trade or commerce, the tax paid under this Act shall be refunded to the dealer on production of proof that the subsequent sale has been subjected to the tax under Central Sales Tax Act, 1956. "
This was done by the amending Act 32 of 1958 with effect from 1st January, 1959. We should have stated earlier that section 15 of the Central Sales Tax Act was for the first time brought into force as from 1st October, 1958.
( 5 ) THE said proviso was later substituted by a slightly differently worded proviso by the amending Act 29 of 1961 which came into force on 7th December, 1961. The altered proviso which is the one that is now in force is as follows :-
"provided that where tax has been paid in respect of sale or purchase of any of the declared goods under this sub-section and such goods are subsequently sold in the course of inter-State trade or commerce, the tax paid under this Act shall be refunded to such person in such manner and subject to such conditions as may be prescribed. "
( 6 ) THE prescription contemplated by the the proviso was made by rule 39-A. That rule reads as follows :-
"39-A. Refund of tax in the case of certain types of sales of declared goods.- (1) The tax levied under sub-section (4) of section 5 in respect of the sale or purchase inside the State of any goods specified therein shall, if such goods are sold in the course of inter-State trade or commerce, be refunded in the manner and subject to the conditions prescribed in this rule to the dealer who has made the inter-State sale and has paid tax under the Central Sales Tax Act, 1956 (Central Act 74 of 1956), in respect of such sale. (2) Every such dealer who claims a refund under the rule, shall, within the time allowed in sub-rule (3), submit to the assessing authority a statement in
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