1968 (8) TMI 160 - SC - VAT and Sales Tax

Supreme Court rules press notes not exempt from sales tax, upholds assessments & denies tax refunds.

The Supreme Court dismissed the appeals, holding that the second and third press notes had no statutory effect and did not exempt the appellant from ... Whether the second press note issued by the Orissa Government on November 2, 1955, must be deemed to be an order of the State Government exempting non-resident dealers from liability to tax on inter-State trans- actions for the period from April 1, 1951, to September 6, 1955? Held that:- Appeal dismissed. The argument put forward on behalf of the appellant is not warranted. In the first place, it is obvious that after the decision of this court in the Bengal Immunity case [1955 (9) TMI 37 - SUPREME COURT OF INDIA] the Orissa Government could not have lawfully levied any sales tax on the 'explanation sales' and, therefore, the issue of the press note dated November 2, 1955, suspending the levy of sales tax on such sales with effect from that date could not be reasonably construed as an order of exemption contemplated by section 7 of the Act since no such exemption was necessary in view of the law declared by this court in the Bengal Immunity case. The second press note must therefore be treated to be merely an administrative direction and it was not intended to be an order of exemption made under the provisions of section 7 of the Act. Issues Involved:1. Statutory effect of press notes.2. Legality of assessments during the interim period between press notes.3. Entitlement to refund of tax paid before assessment.4. Limitation on assessments for certain periods.5. Restriction of assessments to actual collections under the terms of the third press note.Issue-wise Detailed Analysis:1. Statutory Effect of Press Notes:The appellant contended that the second press note issued by the Orissa Government on November 2, 1955, should be deemed to have statutory effect, thereby exempting non-resident dealers from liability to tax on inter-State transactions for the period from April 1, 1951, to September 6, 1955. The court rejected this argument, stating that the second press note was merely an administrative direction and not an order of exemption under section 7 of the Orissa Sales Tax Act. The court emphasized that the word 'exemption' did not appear in the second press note, which merely stated that the levy of sales tax was 'suspended.'2. Legality of Assessments During Interim Period:The appellant argued that the assessments for the relevant quarters initiated and completed within the interim period between the second and third press notes were illegal. The court held that the second and third press notes had no statutory force and did not affect the validity of the assessment orders made after the coming into force of the Sales Tax Laws Validation Act, 1956. The High Court had earlier held that the first press note dated June 5, 1954, had statutory effect, but the second and third did not.3. Entitlement to Refund of Tax Paid Before Assessment:The appellant claimed entitlement to a refund of the tax paid before assessment in excess of the collections actually made from purchasers. The court referred to section 9-B(3) of the Orissa Sales Tax Act, which mandates the deposit of amounts realized by way of tax into a Government treasury. The court upheld the High Court's decision that the appellant was not entitled to such refunds under the provisions of both the Constitution and the Act itself.4. Limitation on Assessments for Certain Periods:The appellant argued that any valid assessment for the quarters ending December 31, 1953, was barred by limitation under the provisions of the Orissa Sales Tax Act as it stood at the material period. The court did not find merit in this argument, as the High Court had already addressed the issue, stating that the third press note published on January 2, 1957, did not affect the validity of assessments made within the statutory period.5. Restriction of Assessments to Actual Collections:The appellant contended that assessments for the quarters ending March 31, 1954, to June 30, 1955, should be restricted to the actual collections only, under the terms of the third press note. The court found that the third press note did not have statutory force and therefore did not restrict the assessments to actual collections. The Sales Tax Laws Validation Act, 1956, validated the levy and collection of sales tax on inter-State transactions for the relevant period.Conclusion:The Supreme Court dismissed the appeals, holding that the second and third press notes had no statutory effect and did not exempt the appellant from liability to sales tax. The assessments made during the interim period were deemed valid, and the appellant was not entitled to refunds of tax paid before assessment. The court upheld the High Court's decision and dismissed the appeals with costs.