1972 (10) TMI 94 - SC - VAT and Sales Tax

Supreme Court: Rule 39-A of Mysore Sales Tax Act, 1957, Ultra Vires

The Supreme Court upheld the High Court's decision, ruling that Rule 39-A under the Mysore Sales Tax Act, 1957, was ultra vires and that the time ... Refund under the proviso to section 5(4) of the Mysore Sales Tax Act - refund in respect of declared goods sold in the course of inter-State trade and commerce - rule making power and ultra vires review of subordinate legislation - prescribed period of limitation for refund claims - requirement of submission in prescribed form (Form 4 A) - mandatory or directory - directory versus mandatory procedural requirement - burden of proof on the dealer for refund claims - section 15 of the Central Sales Tax Act, 1956 - refund subject to manner and conditionsPrescribed period of limitation for refund claims - rule making power and ultra vires review of subordinate legislation - refund under the proviso to section 5(4) of the Mysore Sales Tax Act - Validity of sub rule (3) of rule 39 A which prescribes a time limit for making refund applications - HELD THAT: - The Court held that the proviso to section 5(4) creates an absolute entitlement to refund where declared goods are subsequently sold in inter State trade and commerce, and authorises rules prescribing the manner and conditions of making that refund but does not empower the Executive to place fetters that extinguish or effectively deny the statutory right. A rule prescribing a period of limitation which would operate to deny or unduly obstruct the statutory refund is beyond the competence of the Government. Sub rule (3) of rule 39 A, which conditions entitlement to refund on filing the statement by the date the return is due, was held to be wholly unreasonable and an attempt to make enforcement of the statutory right unduly difficult; accordingly it could not be sustained.Sub rule (3) of rule 39 A is ultra vires/unreasonable and invalid; refund cannot be refused for want of filing within the prescribed period.Requirement of submission in prescribed form (Form 4 A) - mandatory or directory - directory versus mandatory procedural requirement - refund under the proviso to section 5(4) of the Mysore Sales Tax Act - Whether the requirement that refund claims be made only in Form 4 A displaces the dealer's statutory right to refund - HELD THAT: - The Court examined Form 4 A and found that the particulars sought are generally either already known to the assessing authority or obtainable by it. While the form is a convenient self contained statement for expeditious disposal, the prescription of that particular form was held to be directory and not mandatory. Failure to present the claim in the prescribed form does not extinguish the absolute statutory right to a refund; the assessing authority may call for any necessary information but cannot refuse refund solely because the information was not furnished in the prescribed form.The requirement of filing in Form 4 A is directory; omission to use that form does not disentitle a dealer to the refund.Refund in respect of declared goods sold in the course of inter-State trade and commerce - burden of proof on the dealer for refund claims - Whether the Commercial Tax Officer could refuse refund on the grounds relied upon by him in the cases before the Court - HELD THAT: - Applying the conclusions that the time limit in sub rule (3) is invalid and that the form requirement is directory, the Court found that the only grounds on which the assessing officer refused refunds in these cases - non filing within the prescribed period and non submission in Form 4 A - were not legally tenable. There was no contention that any material information necessary for adjudication of the claim was withheld; the existence of the right to refund being otherwise established, the officer could not refuse refund for the formal defects relied upon.The Commercial Tax Officer's refusals on the stated grounds are quashed and the refunds must be allowed.Final Conclusion: The appeals are dismissed. Sub rule (3) of rule 39 A is unreasonable and invalid; the prescribed Form 4 A is directory only; refunds claimed under the proviso to section 5(4) (and section 15 of the Central Sales Tax Act, 1956) could not be refused for non compliance with the impugned time limit or solely for not using the prescribed form, and the assessing authority was directed to make the refunds. Appeals dismissed; no order as to costs. Issues Involved:1. Ultra vires nature of Rule 39-A under the Mysore Sales Tax Act, 1957.2. Entitlement to refund under Section 5(4) of the Mysore Sales Tax Act.3. Validity of the time limitation and form requirements for refund applications.Issue-wise Detailed Analysis:1. Ultra vires Nature of Rule 39-A:The primary issue in these appeals was whether Rule 39-A of the Rules framed under the Mysore Sales Tax Act, 1957, was ultra vires the rule-making power. Section 15(b) of the Central Sales Tax Act, 1956, mandates that any tax levied on declared goods inside a state, if sold in the course of inter-State trade or commerce, must be refunded to the seller. Similarly, Section 5(4) of the Mysore Sales Tax Act, 1957, provides for a refund of tax on declared goods sold in inter-State trade. The rule in question, Rule 39-A, stipulated the manner and conditions for such refunds, including time limits and specific forms.2. Entitlement to Refund:The petitioners, dealers in hides, skins, copra, and coconuts, claimed refunds on the grounds that they had paid sales tax on these declared goods, which were later sold in inter-State trade. The Commercial Tax Officer denied these refunds due to non-compliance with Rule 39-A, specifically the failure to submit applications within the prescribed time and in the required form. The High Court ruled that the right to a refund under Section 5(4) of the Mysore Sales Tax Act was absolute and could not be negated by procedural rules.3. Validity of Time Limitation and Form Requirements:The High Court found that the time limitation and form requirements imposed by Rule 39-A were beyond the government's rule-making authority. The proviso to Section 5(4) of the Mysore Sales Tax Act does not authorize the imposition of a period of limitation for refund claims. The High Court emphasized that the conditions prescribed should regulate the refund process and not extinguish the right to a refund. The Supreme Court concurred with this view, stating that sub-rules (2) and (3) of Rule 39-A were unreasonable. The requirement to submit refund applications within the time frame for sales tax returns, often within 30 days, was deemed impractical and an undue burden on dealers.Conclusion:The Supreme Court upheld the High Court's decision, quashing the orders of the Commercial Tax Officer and directing the refunds to be made. It emphasized that the procedural requirements should not nullify the absolute right to a refund created by the statute. The appeals were dismissed, and no costs were awarded as the respondents were not represented.