(1.) THE appellant, the State of Madras represented by the Secretary, Revenue Department, Madras, has preferred this appeal against the judgment and decree of the learned Second Additional City Civil Judge, Madras, decreeing the suit brought by the respondent-company for a declaration that the order passed by the Commercial Tax Officer levying commercial tax on the respondent-company was illegal and that the tax demanded by the Commercial Tax Officer was not payable.
(2.) THE respondent-company are dealers in groundnut oil and cakes and they manufacture groundnut oil and cake. In November, 1946, the respondent-company started a new oil expeller at Melwarampet, Karunguzhi, Chingleput District. An application was made by the respondent-company to the Deputy Commercial Tax Officer, Mount Road, Madras, on 11th November, 1946, to be registered as manufacturers of groundnut oil and cake under rule 18(1) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, and they were accordingly registered as such manufacturers. For the year 1946-47 the respondent submitted a return showing their net sales for the period ending with 31st March, 1947, and also produced the accounts as directed by the Deputy Commercial Tax Officer. After allowing the necessary deductions and exemptions, the Deputy Commercial Tax Officer duly assessed the respondent-company to sales tax for the year 1946-47 in the sum of Rs. 37, 151-14-9 and the tax due thereon was paid. For the year 1947-48, the respondent-company did not file the monthly returns as required by the rules and, in consequence thereof, a provisional assessment notice was issued to the respondent-company on the basis of the net turnover for 1946-47. THE respondent-company were thereafter called upon by the Deputy Commercial Tax Officer to submit a return in Form "A" and the same was submitted on the 30th April, 1948. In that return, the respondent-company showed their turnover to be Rs. 2, 68, 716-8-10 for oil only. While submitting this return, the respondents claimed deduction of the value of groundnut crushed in the sum of Rs. 2, 62, 046-11-9 under rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules. THE Deputy Commercial Tax Officer made a provisional assessment on 1st May, 1948, on the basis of the turnover submitted by the respondents. Subsequently, on 11th March, 1949, the Deputy Commercial Tax officer issued a notice to the respondents intimating that the proposed to tax the respondents on their gross turnover of Rs. 4, 74, 890-15-1 on the ground that they were not registered dealers and therefore not entitled to deduction of the purchase value of groundnut. When it was pointed out to the Deputy Commercial Tax Officer that the respondents were already registered manufactures in groundnut oil and cakes, the Deputy Commercial Tax Officer disallowed the deduction of the purchase of groundnuts on a new ground, viz., that the monthly returns had not been submitted by the respondents for 1947-48 as required by rule 18(3) of the Madras General Sales Tax (Turnover and Assessment) Rules and thereupon confirmed the assessment on the gross turnover of Rs. 4, 82, 572-4-6 by his order dated the 20th March, 1949, Ex. B. 2, in the case. THE total amount of sales tax payable on this turnover was Rs. 4, 848-14-11 out of which after deducting a sum of Rs. 421-8-0 paid by the respondents till then, a balance of Rs. 4, 447-6-11 was demanded from the respondents. THE respondents paid the admitted sales tax payable by them and defaulted in the payment of the balance of Rs. 2, 131-3-11. By notice dated 13th August, 1949, the Deputy Commercial Tax Officer demanded this sum from the respondents. THEreupon, the respondents filed the suit for a declaration that they were entitled to the deduction of the value of the groundnut purchased, that the order of the Deputy Commercial Tax Officer refusing to allow this deduction was unjust and illegal and that the respondents were entitled as of right, being registered dealers, to the said exemption of tax on the value of the groundnut purchased under rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules. Various other averments were made in the plaint by the respondents but it is not necessary for me to go into them at present.In the written statement filed on behalf of the State of Madras, the State of Madras contested the suit on various grounds, the important of them being that the Civil Court had no jurisdiction to entertain in suit for the reason that the Madras General Sales Tax Act, 1939, itself provided a complete code of remedies by way of appeal and revision to the aggrieved party, that, as the respondents did not submit the monthly returns as required by rule 18(3) of the Madras General Sales Tax (Turnover and Assessment) Rules for any of the months during the assessment year 1947-48 and did not also furnish the particulars in Form A9, the respondents were not eligible for any of the reliefs claimed by them, that rule 18(3) of the Madras General Sales Tax (Turnover and Assessment) Rules under which monthly statements had to be submitted was mandatory, that, under rule 5(1)(k), any claim for exemption was subject to the conditions specified in rule 18 and that therefore the respondents were not entitled to question the legality of the order of the Deputy Commercial Tax Officer, in his having disallowed the deduction claimed by the respondents.
On these pleadings, the learned Second Additional City Civil Judge framed three issues for determination and they are : (1) Whether the Civil Court had jurisdiction to try the suit (2) Whether the right claimed by the respondents under rule 18(2) for exemption for the value of the groundnut purchased by them was an absolute right without being dependent upon their complying with the conditions prescribed in rule 18(3) and (3) whether the assessment order dated 20th March, 1949, was illegal and unjust.
(3.) THE learned Second Additional City Civil Judge, after considering the documentary evidence adduced in the case and hearing the arguments advanced by both the parties on the question of law involved in the suit, accepted the case of the respondents and gave a decree declaring that the levy of sales tax to the extent of Rs. 2, 313-3-11 was illegal and outside the provisions of the Madras General Sales Tax Act, 1939, and that the respondents were not liable to pay the same to the Government. Against this decree and judgment, the State of madras has now preferred this appeal.When this appeal was taken up for hearing, the issue as to the jurisdiction of the Civil Court to entertain the suit brought by the respondents was not pressed by the learned counsel Mr. Veeraswami appearing for the State of Madras. THE main question argued by the learned counsel on both sides was whether or not the respondents were entitled to the exemption claimed by them which was not granted by the Deputy Commercial Tax Officer. Mr. Veeraswami has invited my attention to the various rules framed by the Government under the Madras General Sales Tax Act which govern the turnover and assessment under the said Act and which arise for consideration in this case. THE first rule is rule 5(1)(k). Rule 5(1) is in the following terms :-
"THE tax or taxes under Section 3 or 5 or the notification or notifications under Section 6(1) shall be levied on the net turnover of a dealer. In determining the net turnover the amounts specified in clauses (a) to (k) shall, subject to the conditions specified therein, be deducted from the gross turnover of a dealer." *;