1968 (9) TMI 92 - SC - VAT and Sales Tax

Supreme Court Invalidates Sales Tax Provision, Allows Refunds

The Supreme Court held that section 8-A(4) of the U.P. Sales Tax Act, 1948 was ultra vires the State Legislature. The Court affirmed the High Court's ... Whether in the circumstances of the case the amount paid by the assessees and recovered by the assessees from April 1, 1949, to January 25, 1950, is liable to be deposited in the Government treasury under section 8-A(4) of the U.P. Sales Tax Act? Were the assessees, the tax chargeable on whom in respect of the assessment year 1950-51 on the basis of the turnover of the previous year 1949-50 was Rs. 14,621-9-4, entitled in the circumstances of the case to the refund of the deposit made by them as tax? Held that:- Section 8-A(4) of the Act being ultra vires, the answer given by the High Court to the second part of question No. 2 in the affirmative in favour of the assessee is affirmed. Issues:1. Interpretation of section 8-A(4) of the U.P. Sales Tax Act, 1948 regarding the deposit of sales tax amounts by the assessee.2. Determination of tax liability for the assessment year 1950-51 based on the turnover of the previous year 1949-50 and entitlement to refund of excess tax deposited.Detailed Analysis:1. The judgment by the Supreme Court involved two civil appeals and a writ petition stemming from the Allahabad High Court's decisions. The primary issue in Civil Appeal No. 711 of 1966 was the assessment of sales tax on the turnover of an assessee-company dealing in sugar and allied products for the year 1950-51. The Sales Tax Officer had assessed a specific amount as sales tax, and the assessee had deposited a portion of it. The dispute arose when the assessee sought a refund of the excess amount deposited, which the Sales Tax Officer refused on the grounds of the total amount realized by the assessee from customers as sales tax. The matter proceeded through appeals and revisions, ultimately leading to a reference to the High Court on the interpretation of section 8-A(4) of the Act.2. In Civil Appeal No. 1284 of 1966, a similar scenario unfolded concerning the assessment of sales tax for the same year. The vires of section 8-A(4) of the Act were specifically raised and decided upon, leading to a challenge in the Supreme Court. The Court referenced a previous decision to establish the legislative competence of the State Legislature in enacting tax provisions and emphasized the lawful realization of taxes by the assessee. The Court also highlighted the jurisdiction of the High Court to examine the constitutional validity of taxing provisions in sales tax references.3. The Supreme Court, after thorough analysis, held that section 8-A(4) of the Act was ultra vires the State Legislature. The Court affirmed the High Court's decisions in both civil appeals, upholding the assessee's entitlement to refunds and declaring the Act's provision unconstitutional. The writ petition was allowed, and the Court ordered the refund to be made to the petitioners. The Commissioner of Sales Tax was directed to pay costs to the respondents in the appeals, with no order as to costs in the writ petition. Ultimately, the appeals were dismissed, and the petition was allowed, bringing closure to the legal proceedings surrounding the interpretation and application of the sales tax provisions in question.