R M P R M P VALLIAPPA CHETTIAR Vs. STATE OF MADRAS

JUDGEMENT

(1.) THIS is a petition under Art. 228 of the Constitution for the issue of a writ of certiorari or other appropriate writ, order or direction for quashing the order of the additional Joint Commercial tax Officer (Assessments ). Madurai-South dated 28-31959 passed under the Madras General Sales-tax Act.

(2.) THE petitioner is a dealer in textiles in Madurai. In respect of the assessment year 1-4-1957 to 31-3-1958 he submitted a return or his business turnover under the Madras General Sales-tax Act declaring a net, assessable turnover of Rs. 4,78,058--10np. The assessing authority, the respondent herein, issued the notice dated 20th March 1959 to the petitioner pointing out inter alia, that he will have to pay an additional duty under S. 3 (2) of the Act in respect of sale of cloth purchased by him from outside the State and in respect of the stock of goods held by him on 31-12-1957 and sold in the year of assessment. The respondent proposed to determine the net turnover of the petitioner in the sum of Rs. 5,85,716-02np and called for objections, if any, from the petitioner to the proposed assessment within three days from the date of receipt of the notice. The petitioner was further informed by that notice that if he desired to be heard in person, he should present himself ore the respondent with all relevant records at 11 a. m. on 24-3-1959 at his office at Madurai. The petitioner wrote a letter to the respondent on 24-3-1959 requesting that time may be granted to file objections and to submit, oral explanation, till 11 a. m. on the 28th March 1959. The respondent granted time as prayed for on 24-3-1959 itself and informed the petitioner that if no objections were filed before the 28th orders will be passed as proposed. The petitioner having thus obtained time to prefer she objections till the 28th march 1959 filed the above writ petition in this court an 26-3-1959 praying for the issue of a writ of prohibition or such other appropriate writ, order or direction as this court may deem fit calling for the records relating to the assessment of sales-tax payable by the petitioner for the year 1957-58 and to prohibit the respondent from taking any steps to levy an additional tax of 8 per cent on the sale of cloth from 1-4-1957 to 31a-1958. According to the petitioner, This court adjourned the writ petition for three weeks from 26-3-1959 directing him to comply with the respondent's nonce calling for objections to the proposed assessment. The petitioner had therefore necessarily to file a statement of objections before the respondent, and this he did on 27-3-1959. The petitioner submitted in his statement of objections that he was not liable to pay an, additional tax of 8 Per cent for sale of cloth effected between 1-4-1957 and 13-12-1957 as he had not collected the tax from the purchasers. He claimed that he was entitled the benefit of waiver of tax on the part of the State as per the Government Order in Memo no. 98975/m/57 dated 7-1-1959. He drew the attention of the respondent to tie fact that he had already submitted his accounts and sale bills to prove that he had not collected the additional tax during the said period and Submitted that his accounts and sale bills conclusively established the fact of his not having collected tax from his purchasers. The petitioner also disputed his liability to pay the additional tax in regard to the sale or stocks sold by him on 13-12-1957 on the ground that the Central Act 58 of 1957 levying excise duty would not apply to his stocks as it was not stock held by the mills on the date when that Act came into, force B his order dated 28-2-1959 the respondent disbelieved the petitioner's version that he did not collect the additional duty from his purchasers, between 1-4-1957 and 13-12-1957 on a scrutiny of the account books and bills produced by the petitioner. The respondent took the view that the petitioner had collected the additional tax in a disguised form from the purchasers without, including the tax collected as a specific item in the bill but by adding the tax to the price of the goods sold. The respondent also overruled the objection of the petitioner that there can be no, tax on the sale of cloth held by him on 13-12-1957 holding that the petitioner tailed to avail himself of the benefit of "compounding" presumably under Ordinance 4 of 1957. On 6-41959, the petitioner filed C. M. P. No. 2391 of 1959 in this court praying for, the amendment of the original writ of prohibition into one for the writ of certiorari and this petition was ordered on 21-4-1959. On that date rule nisi was issued by this court in the amended writ petition, which is one for the issue of a writ of certiorari as pointed out already.

(3.) FOR a proper appreciation of the contentions raised on behalf of the petitioner in this writ petition it is necessary to refer to the genesis of 'the Government Order the Protection of which is said to have been denied to the petitioner. in respect of cloth other than handloom the Legislature introduced an additional levy under the madras General Sale-tax in 1954 on the first sale in the State of mill cloth of several varieties, "fine" and "super-fine" Madras Act XX of 1954 which commenced to operate on and from 23-8-1954 brought in an additional charge in respect of the, said commodities at the role of one anna and three pies in the rupee. Madras act I of 1957 modified the rate into one of 8 per cent on the sales effected from 11-1957. The taxable event which attracted the additional levy was the "first sale" in the State and the statute did not specify whether the first sale should be a sale by a dealer in the, State or whether it can include a sale by a nonresident outside the State. In or about March 1956, the Sales-tax appellate Tribunal interpreted the word "first sale" attracting additional levy as, including a sale by a non-resident dealer to a dealer in the state. This meant that a sale by a dealer in the State of, cloth purchased non-resident outside the State became "second sales" not within, the purview of the additional levy. As the interpretation placed by the Tribunal on the words of the statute. was quite just and proper, the State amended the Act by Act xxiii of 1957 substituting the words "by a dealer who is residing in the, State of madras for the words "by a dealer" formerly occurring the Statute. On this amendment of the statute, it became plain that a sale by a dealer in the State of goods purchased by him from outside the State from a non-resident dealer was the first sale subject to the additional levy, of, eight per This amendment was given retrospective effect from 23rd August 1954. Section 4 of the Act, Act XXIII of 1957, validated the levy and collection of all taxes made before the Act not withstanding any judgment or order of the court to the contrary. The result of this drastic legislation was to place the dealers in textiles in a quandary and in an unenviable position. Acting on the interpretation placed by the appellate Tribunal on the unamended statute as, it obtained prior to 1957 the dealers could not collect the additional levy of 8 per cent from their purchasers. By retrospective operation given to the amended legislation of the year 1957, the dealers because liable to pay the additional tax in respect of, sales in which they did not collect the tax from their purchasers. The dealers therefore became subject to the additional levy without their having had opportunity to pass on be tax-to their any purchasers and collect it from them. it is at this juncture when loud protests were made on behalf o f the textile merchants against the inequities caused to them by retrospective tax legislation that the Government passed the Government Order which is in these terms: