A public duty exists on the part of the Deputy Commercial Tax Officer to conform to the findings of the Appellant Tribunal and to give effect to, and implement, such findings.

Headnote:
SALES TAX - Inter-State Sales - Collection of Tax - G.O. Ms. No. 2386 Revenue dated 13th June, 1956 - Applicability - Tribunal's finding that no tax was collected - Effect - Writ of Mandamus issued to enforce the finding of the Tribunal and to restrain the collection of tax.
Fact of the Case:

The petitioners, a firm of partnership carrying on business in silk yarn at Avenue Road, Bangalore, effected sales of consignments of silk yarn in Tamil Nadu during the years 1953 to 1955. They claimed immunity from sales tax on the grounds that their transactions were inter-State sales governed by Article 286 of the Constitution. After the decision of the Supreme Court in the United Motors case and as a result of Central Act VI of 1956 (the Sales Tax Laws Validation Act), and section 22 of the Madras General Sales Tax Act, the inter-State sales effected by the petitioners in Tamil Nadu, in which the deliveries of goods sold were made for purposes of consumption, came within the ambit and purview of the Madras General Sales Tax Act. The petitioners were, therefore, called upon to submit returns of their turnover for the years 1st April, 1953, to 6th September, 1955. The petitioners collected amounts from their purchasers in Tamil Nadu, not purporting to be sales tax due and payable to the State of Tamil Nadu, but alleged to be by way of "deposits", possibly by way of abundant caution to save themselves from pecuniary liability in the event of Tamil Nadu taxing them. The Government of Tamil Nadu passed a G.O., Ms. No. 2386 Revenue dated 13th June, 1956, which provided that action should be taken to assess and collect sales tax on inter-State transactions validated by the Ordinance in all cases except those in which the non-resident dealers had not collected the tax or had collected and refunded it. The Deputy Commercial Tax Officer assessed the petitioners to tax for the years 1953-54, 1954-55 and 1955-56. The petitioners preferred appeals to the Commercial Tax Officer, Special Circle, Non-resident, Madras City, against the said orders, but these appeals were dismissed. Further appeals were preferred by the petitioners to the Sales Tax Appellate Tribunal, Madras. The Tribunal held that the petitioners had not collected any sales tax during the relevant years and that the deposits received cannot be correlated or equated to the tax. The Tribunal dismissed the appeals subject to the modification in deleting the demand under section 8-B(2) of the Act. The petitioners applied to the Board of Revenue for directions not to collect any sales tax from them for all the three assessment years, but the Board rejected their application. The Deputy Commercial Tax Officer, Special Circle, called upon the petitioners to pay the sums of Rs. 734-15 for 1953-54 and Rs. 401-23 for 1954-55, which were claimed to be arrears of tax due by the petitioners arising out of assessment orders already passed. The petitioners filed a writ petition in the Madras High Court for the issue of a writ of prohibition to prevent further action being taken by way of collection of the tax said to be due.
Finding of the Court:

The Madras High Court held that the petitioners had not collected any sales tax during the relevant years and that the deposits received cannot be correlated or equated to the tax. The Tribunal dismissed the appeals subject to the modification in deleting the demand under section 8-B(2) of the Act. The Court held that the petitioners had a legal right to claim that the G.O. applies to them as well as it does apply to others similarly placed. On the finding of Tribunal that they had not collected tax on their inter-State sales, they obtained the benefit of the G.O. This adjudication of the Tribunal, undoubtedly, conferred a legal right on the petitioners, securing them from being adversely affected contrary to such adjudication. There is certainly a public duty on the part of the Deputy Commercial Tax Officer to conform himself and give effect to, and implement, the findings of the Appellate Tribunal.
Issues: Whether the tax demand against the petitioners is lawful and whether the Court can issue a writ of prohibition or other appropriate writ restraining the department from collecting the amounts demanded.
Ratio Decidendi: The Court held that the petitioners had a legal right to claim that the G.O. applies to them as well as it does apply to others similarly placed. On the finding of Tribunal that they had not collected tax on their inter-State sales, they obtained the benefit of the G.O. This adjudication of the Tribunal, undoubtedly, conferred a legal right on the petitioners, securing them from being adversely affected contrary to such adjudication. There is certainly a public duty on the part of the Deputy Commercial Tax Officer to conform himself and give effect to, and implement, the findings of the Appellate Tribunal.
Final Decision: The Court issued a writ of mandamus to the Deputy Commercial Tax Officer to conform to the finding of the Appellant Tribunal and to restrain the collection of tax.

Judgment :-

JAGADISAN, J.

This is petition under Article 226 of the Constitution for the issue of a writ of prohibition against the Deputy Commercial Tax Officer, Special Circle, Non-resident, Madras, restraining him from proceeding with the collection of sales tax as per his communication No. S.10/39/BLR dated 8th May, 1959, in respect of the assessment year 1954-55 under the Madras General Sales Tax Act.

The petitioners constitute a firm of partnership carrying on business in silk yarn at Avenue Road, Bangalore. They are residents of the Mysore State. During the years 1953 to 1955, they effected sales of consignments of silk yarn in this State. They claimed to be immune from the levy of sales tax either in the State of Mysore or in this State, on the grounds that their transactions of sales referred to were inter-State sales governed by Article 286 of the Constitution. After the decision of the Supreme Court of India in the United Motors case and as a result of Central Act VI of 1956 (the Sales Tax Laws Validation Act), and section 22 of the Madras General Sales Tax Act, the inter-State sales effected by the petitioners in this State, in which the deliveries of goods sold were made for purposes of consumption, came within the ambit and purview of the Madras General Sales Tax Act. The petitioners were, therefore, called upon to submit returns of their turnover for the years 1st April, 1953, to 6th September, 1955. It must be mentioned that the petitioners collected amounts from their purchasers in this State, not purporting to be sales tax due and payable to the State of Madras, but alleged to be by way of "deposits", possibly by way of abundant caution to save themselves from pecuniary liability in the event of this State taxing them. Having regard to the uncertain legal position regarding the "State" jurisdiction to levy sales tax on purchases and sells relating to inter-State transactions, and in order to save dealers from paying tax, which they failed to collect from their purchasers in the bona fide belief that the transactions were immune from tax, the Government of Madras passed a G.O., Ms. No. 2386 Revenue dated 13th June, 1956, the effect of which was thus promulgated by the Board of Revenue in these terms :-

"ORDER

The Government have decided that action in pursuance of the Sales Tax Laws Validation Ordinance, 1956, should be taken on the following lines :-

1. As this Government had already agreed not to collect sales tax on inter-State transactions upto 31st March, 1953, no action should be taken to collect the tax on these transactions.

2. In regard to the period from 1st April, 1953 to 30th September, 1953, as this Government had already agreed not to collect sales tax on inter-State transactions where the non-resident dealer had not collected tax from his customers action should be taken to collect the tax only in cases where the non-resident dealer had collected in from his customers.

3. As regards the period from 1st October, 1953 to 5th September, 1955, action should be taken to assess and collect sales tax on inter-State transactions validated by the Ordinance in all cases except those in which the non-resident dealers had not collected the tax or had collected and refunded it.

Action should be taken not only to finalise the assessment proceedings now pending, but also to initiate fresh assessment proceedings, in these cases.

The Board is requested to submit proposals very urgently for the employment of additional staff, if any, that are required for attending to this work.

Copy of Board's Ref. A.766/56-a dated 18th June, 1956." *

The Deputy Commercial Tax Officer assessed the petitioners to tax as per details set out hereunder :

------------ Year of Net turnover Tax due Tax collected Tax demanded assessment determined by appellants by the department

1953-54 Rs. 86, 946 Rs. 1, 358-8-0 Rs. 978-14-0 Rs. 978-14-0

1954-55 Rs. 40, 682 Rs. 635-10-5 Rs. 692-4-0 Rs. 692-4-0 [inclusive of Rs. 50-9-7 under section 8-B(2)]1955-56

Click Here to Read the rest of this document