1976 (7) TMI 143 - SC - VAT and Sales Tax

Court affirms proviso to Central Sales Tax Act, allows rectification under U.P. Sales Tax Act, no limitation bar.

Karam Chand Thapar and Bros. (Coal Sales) Limited Versus State of Uttar Pradesh and Another

The Court dismissed the appeals, affirming the applicability of the proviso to section 9(1) of the Central Sales Tax Act to declared goods. It upheld the ... Whether section 9(1) of the Central Act was applicable to the case enabling the State of Uttar Pradesh to levy and collect Central sales tax in respect of subsequent sales of coal effected by the company to consumers in Uttar Pradesh by endorsement of the documents of title? Whether this error in the original order of assessment can be called an apparent error within the meaning of section 22 of the U.P. Act.? Held that:- Appeal dismissed. In this case the company was not affected by the order under section 22 being communicated to it after the expiry of three years from the date of the order, because the limitation for an appeal from that order did not begin to run before the communication of the order. The provisions of section 9 of the U.P. Act make that clear. Issues Involved:1. Applicability of the proviso to section 9(1) of the Central Sales Tax Act to declared goods.2. Whether section 22 of the U.P. Sales Tax Act was applicable due to an apparent mistake on the face of the record.3. Whether the rectification order under section 22 of the U.P. Sales Tax Act was barred by limitation.Issue-wise Detailed Analysis:1. Applicability of the Proviso to Section 9(1) of the Central Sales Tax Act to Declared Goods:The appellant argued that the proviso to section 9(1) of the Central Sales Tax Act does not apply to goods declared to be of special importance in inter-State sales or commerce under section 14 of the Central Act. The appellant's contention was that sub-section (1)(b) and sub-section (2)(a) of section 8 of the Central Act deal with different types of goods, with sub-section (1)(b) referring to goods specified in the certificate of registration for resale, and sub-section (2) relating to declared goods. The appellant inferred that declared goods are outside the purview of sub-section (3) and, therefore, sub-section (1) of section 8, making the declaration under sub-section (4) unnecessary for declared goods.The Court rejected this argument, stating that there is no valid distinction between declared goods and other goods for the applicability of sub-section (1) of section 8. The omission of clause (a) from sub-section (3) of section 8 by the Central Sales Tax (Amendment) Act, 1963, was to avoid redundancy as clause (b) covered all goods. The Court held that the Act and Rules make no distinction between declared goods and other goods, except for the tax rate. Thus, the company could have obtained a declaration in form C as required by the proviso to section 9(1).2. Apparent Mistake on the Face of the Record under Section 22 of the U.P. Sales Tax Act:The appellant contended that section 22 of the U.P. Act was not applicable as there was no mistake apparent on the face of the record. The Court noted that an apparent error is a patent mistake that can be identified without elaborate argument. The original assessment order dated March 27, 1971, was based on an earlier judgment of the Allahabad High Court, which did not consider the proviso to section 9(1). Subsequent decisions of the High Court clarified that tax on a subsequent sale by a registered dealer in inter-State trade should be levied in the State where the dealer is registered. The Court concluded that the original assessment order was patently erroneous for not considering the proviso to section 9(1), and thus, the rectification under section 22 was justified.3. Limitation for Rectification under Section 22 of the U.P. Sales Tax Act:The appellant argued that the rectification order dated March 26, 1974, was barred by limitation as it was communicated to the appellant on March 31, 1974, beyond three years from the original assessment order. The Court referred to the principle of fair play that rights cannot be affected without notice. However, it clarified that the limitation for an appeal under section 9 of the U.P. Act begins from the date of service of the order. Since the rectification order was recorded within three years and the appellant's right to appeal was not affected by the delay in communication, the rectification was not barred by limitation.Conclusion:The appeals were dismissed, and the Court directed the parties to bear their own costs. The judgment clarified the applicability of the proviso to section 9(1) of the Central Sales Tax Act to declared goods, justified the rectification under section 22 of the U.P. Sales Tax Act due to an apparent error, and held that the rectification order was not barred by limitation.