Decided on December 22,1969



Venkataswami, J. - (1.)This writ petition is directed against a notice dated 23rd July, 1969, issued under rule 38 of the Mysore Sales Tax Rules, 1957 (to be hereinafter referred to as the State Rules), read with section 9 of the Central Sales Tax Act, 1956 (to be hereinafter referred to as the Central Act). The notice in question is one whereunder the petitioners herein were called upon to show cause why the proposed rectification of the assessment should not be effected. The circumstances under which the notice came to be issued are as follows : The petitioners are dealers in cotton within the State of Mysore. In respect of their turnover for the year ended on 31st July, 1959, in regard to their inter-State sales of cotton, they were assessed to tax under the Central Act. But, subsequently, in view of the decision of the Supreme Court in the case of State of Mysore v. Yaddalam Lakshminarasimhiah Setty & Sons AIR1965 SC 1510 , [1965 ]2 SCR129 , [1965 ]16 STC231 (SC ), the petitioners moved the Commercial Tax Officer under rule 38 of the State Rules seeking for the rectification of the mistake as regards assessment to tax of the inter-State sales of cotton made by the petitioners. Accordingly, such sales were exempted from liability to tax under the Mysore Sales Tax Act, 1957, and the necessary refund was also made. The Central Act was amended by the Central Sales Tax (Second Amendment) Act, 1958 (Act 31 of 1958), with effect from 1st October, 1958. One of the amendments was in regard to section 8 of the Central Act, whose sub-sections (1) to (4) were completely substituted by virtue of section 5 of that amending Act. We need refer to only one more amendment to the Central Act by the Central Sales Tax (Amendment) Ordinance, 1969 (No. 4 of 1969) hereinafter referred to as the Ordinance. It may, however, be mentioned that this Ordinance was later replaced by the Central Sales Tax (Amendment) Act, 1969, hereinafter referred to as the amending Act. By virtue of the Ordinance section 6 of the Central Act was amended, among others, by the additional of a clause (1A), which provided for levy of sales tax on dealers in respect of sales of goods effected by them in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable whether on the seller or the purchaser under the State law of the appropriate State if that sale had taken place inside that State. This section was given retrospective operation. In view of this amendment the first respondent initiated proceedings once again under rule 38 of the State Rules, with a view to rectify the earlier order of rectification made at the instance of the petitioners. It is at this stage the petitioners have approached this court in the present petition.
(2.)No counter has been filed on behalf of the respondents and it is conceded by Sri K. Srinivasan, the learned counsel appearing on behalf of the petitioners, that it would not be necessary, having regard to the contentions that he proposed to raise. Although a question relating to infringement of article 14 of the Constitution of India has been raised in the affidavit filed in support of the petition, that question was neither raised nor argued in the course of hearing. Indeed the only contentions formulated by the learned counsel for the petitioners may be stated thus :
(1) Sections 8 and 9 of the Central Act as amended by the amending Act of 1969 are unconstitutional and void for the reason that they have adopted the sales tax laws of the various States not only as they stood at the time when the Central Act was passed but also the sales tax laws as in force from time to time subsequent thereto, including those that might be made in future, in the matter of fixation of rate of taxation, grant of exemptions, assessment and collection of tax and imposition of penalty, and that such a provision would be indicative of the fact that the Parliament had abdicated its essential legislative function. It is also urged that the Central Act must be deemed to have adopted only the "sales tax law" in force at the time that Act came into force, which was on 21st December, 1956. In support of this contention, he invited attention to a decision of the Supreme Court in B. Shama Rao v. Union Territory of Pondicherry AIR1967 SC 1480 , [1967 ]2 SCR650 , [1967 ]20 STC215 (SC ), and of the Madras High Court in Shah & Co. v. State of Madras ([1967] 20 S.T.C. 146), in addition to placing reliance on the definition of "sales tax law" in section 2(i) of the Central Act.

(2) In view of clause 9 of the Ordinance, all assessments made prior to 9th June, 1969, stood validated and therefore should be deemed to have been made in accordance with law. That being so, the rectification of assessment made on 26th June, 1967, at the instance of the petitioners under rule 38 of the State Rules also stood validated. It is not, therefore, open to the Commercial Tax Officer to institute proceedings for rectification of such a valid assessment.

(3) The present proceeding under rule 38 of the State Rules is barred by limitation, as it is beyond 5 years of the date of the assessment order. Since, every rectification of an order of assessment gets merged in the original assessment order, the period of limitation prescribed under rule 38 ought to be reckoned from the date of assessment order and not from the date of the passing of the order of rectification. In other words, rectification of the assessment order can be made more than once, but every such rectification should be within 5 years from the date of the assessment order.

(4) Under the Central Act, cotton is taxable at the point of purchase and, therefore, such goods are unconditionally exempt within the meaning of section 8(2A) of the Central Act, as amended by the Ordinance and subsequently by the amending Act. This will be so, notwithstanding the amendment of section 6(1A). It, therefore, follows that inter-State sales of cotton are exempt from liability to tax under the Central Act as amended till now.

(3.)On behalf of the respondents, Sri E. S. Venkataramiah, the learned Government Advocate, contends that the petition is not maintainable as the petitioner has adequate alternative remedies under the statute for questioning any rectification that may eventually be made. In this connection he invited reference to clause 8(2) of the Ordinance. It is further submitted by him that the plea of bar of limitation raised in the petition has not been founded on rule 38 of the State Rules. In fact the plea is clearly based on an assumption that section 35 of the Bombay Sales Tax Act, 1953, was applicable to the facts and circumstances of the case, and that the Commercial Tax Officer can, therefore, institute proceedings for rectification only within 2 years from the date of passing of the order sought to be rectified. He further submits that the contention advanced on behalf of the petitioners that, notwithstanding section 6(1A) and section 8(2A) of the Central Act as amended, the law as settled in Yaddalam Lakshminarasimhiah's case ([1962] 13 S.T.C. 583.), as pronounced by this court, was still good is unsustainable, in view of the decisions of the Supreme Court in Civil Appeals Nos. 1228 and 1229 of 1969 (State of Kerala v. P. P. Joseph and Co. ([1970] 25 S.T.C. 483 (S.C.)) and 1230 and 1231 of 1969 (Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Aluminium Industries Ltd. ([1970] 25 S.T.C. 476 (S.C.))) decided on 14th August, 1969, and 11th August, 1969, respectively. His further argument is that section 8(2A) clearly refers to categories of goods and not to transactions of sales and purchases. He also draws attention to the explanation to section 8(2A) and submits that the scope and effect of the explanation had not been considered in any of the earlier decisions, including Yaddalam Lakshminarasimhiah Setty's case AIR1965 SC 1510 , [1965 ]2 SCR129 , [1965 ]16 STC231 (SC ).

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