V BALUSWAMI NAIDU Vs. STATE OF MADRAS

JUDGEMENT

(1.) THIS batch of 13 writ petitions have been filed by several dealers in hides and skins questioning the levy of sales tax on their transactions for the assessment years 1956-57 and 1957-58. Some of them seek the issue of a writ of mandamus directing the assessing authority not to proceed with the assessment, whereas in the case of others (save W. P. No. 500 of 1958), the relief sought is the issue of a writ of certiorari to quash the order of assessment. W. P. No. 500 of 1958 seeks the issue of a writ of prohibition directing the assessing authority not to proceed further with the contemplated assessment. The basis on which the reliefs are sought is however identical. The dealers involved in these petitions have not taken out licences and on the provisions and the rules as they stood until the recent amendment to which I shall presently advert, unlicensed dealers in untanned hides and skins were held not liable to pay tax on their turnover. The sales tax on hides and skins was under section 5 of the Madras General Sales Tax Act, 1939, to be only at such single point as may be prescribed. The "prescription" was originally contained in rule 16 (2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, which fixed the single point at which the tax on hides and skins could be levied and which ran : " (2) No tax shall be levied on the sale of untanned hides and skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the State or are sold for export outside the State. " *

(2.) BASED on this provision and other relevant provisions of the Sales Tax Act and the rules a Bench of this Court in Noor Mohammed and Co. v. State of Madras held that an unlicensed dealer in untanned hides and skins was not liable to pay tax on the turnover under the provisions of the Madras general Sales Tax Act, 1939. The result of this decision was that while unlicensed dealers in hides and skins escaped sales tax, licensed dealers were liable to tax and the State Government undertook legislation to rectify this anomaly as it was the defect in the phrasing of the rules that led to this unintended escape from taxation. The relevant Sales Tax Rules were amended and two sets of provisions were introduced by amendments which were effected in June, 1955. The first was an amendment effected to the General Sales Tax Rules requiring every one dealing in hides and skins compulsorily to take out a licence and not leave it to their option as had been done under the previous rules. The second step taken was to amend rule 16 of the Turnover and Assessment Rules (a portion of which I have quoted earlier) in which the use of the expression "license dealer" had led this Court to hold that unlicensed dealers were outside the taxation provisions. By a Notification G. O. No. 2733, Revenue, dated 3rd september, 1955, rule 16 was amended eliminating the words "licensed dealer" and prescribing the single point at which the tax would be levied from dealers of untanned hides and skins. It is unnecessary to set out this rule because it is common ground that if the rule applied the transactions of the petitioners would fall within its scope and render them liable to taxation. As the Government desired to give retrospective effect to the rule from the commencement of the financial year 1955-56 a specific provision was inserted in the rule itself rendering it retrospective and to have effect from 1st April, 1955. The validity of this retrospective provision was challenged in Guruviah naidu v. State of Madras This objection was repelled primarily on account of the provisions contained in Madras Act I of 1957 confirming the retrospective operation of this rule. Guruviah Naidu v. State of Madras was concerned with the validity of the rule between 1st April, 1955, to 3rd September, 1955, on which the rule was promulgated. The petitions now before me however call in question the validity of the amendment by which rules 15 and 16 of the Turnover and Assessment Rules were amended by the Notification dated 3rd September, 1955, on the ground that the rules had not been validly made by conforming to the statutory requirements by which a rule under the Madras General Sales Tax act, 1939, could be framed. In other words, the attack now is on the ground that the procedural requirements by which the rules could be framed were not observed with the result that the amendment has not the force of a rule under the Madras General Sales Tax Act.

(3.) THE argument of the learned Advocate-General was based on the fact that the rule was published in the Official Gazette and that this publication attracted the terms of section 7 (e) of the General Clauses Act, which I have extracted earlier. In my judgment his argument is wholly without force. Whether or not the publication should purport to have been made in exercise of the power to make rules it cannot certainly apply to a case where the Government never intended to invoke or comply with the provisions of section 7 of the General Clauses Act. I have already drawn attention to the fact that in paragraph 3 of the counter-affidavit filed by the State in this case it is admitted that the Government proceeded on the basis that for a rule to be made under section 3 (4) of the Act, the only formality to be complied with was to have the resolution approved by the Legislative Assembly and that they did not consider it essential to conform to the requirements of section 19 (4) of the Act. In these circumstances, I consider that the second point raised by the learned Advocate-General should also be rejected. This however does not conclude the case in favour of the petitioners because the main argument of the learned Advocate-General was based on the validation of these rules by section 9 of the Madras General Sales Tax, Sales of Motor Spirit taxation and Entertainments (Amendment) Act, 1957. This section enacts :- "section 9. Tax may be assessed or collected and licence fees levied or collected for the year 1955-56 notwithstanding the retrospective operation of the amendments to the Madras General Sales Tax rules, 1939, and the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, and all assessments made, taxes collected and licence fees levied for the year 1955-56 shall be deemed to have been made, collected or levied, as the case may be, as if those rules as amended were in force at all relevant times : Provided that no act or omission on the part of any person shall be publishable as an offence which would not have been so punishable if this section had not been enacted. " *