1964 (1) TMI 38 - HC - VAT and Sales Tax

Court upholds State Govt's power to require dealer's application for composition under section 7-E

MA & Company Versus Assistant Commissioner (Judicial) Sales Tax, Farrukhabad and Another

The court dismissed the petition, upholding the validity of the State Government's power to require a dealer to make an application for composition under ... - Issues Involved:1. Whether the State Government had the power under section 7-E to require a dealer to make an application for composition.2. Whether the State Government had the authority to prescribe a period for making such an application.3. Whether the period for making the application specified in the notification was unreasonable.4. Whether the petitioner was entitled to apply for permission to pay the composition amount even after an assessment order had been made.Issue-wise Detailed Analysis:1. Power to Require an Application for Composition:The petitioner contended that the State Government had no power under section 7-E to require a dealer to make an application for composition. The court rejected this contention, stating that section 7-E(2) expressly empowers the State Government to notify the manner in which the amount by way of composition shall be determined and paid. The court noted that the procedure for determining the amount includes the making of an application within a specified period. The court emphasized that section 7-E provides an alternative to the charging provisions of the Act, intended for the dealer's benefit, and the dealer must seek permission by making an application. Therefore, the State Government was entitled to require an application.2. Authority to Prescribe a Period for Application:The petitioner argued that the State Government had no authority to prescribe a period for making the application. The court held that the State Government was within its discretion to indicate the period within which the application must be made. The court noted that the notification provided a period which was not absolute in duration, as it could be extended by the Sales Tax Commissioner or an authorized officer. Thus, the court concluded that the State Government had the authority to prescribe a period for making the application.3. Reasonableness of the Period for Application:The petitioner contended that the period specified in the notification was unreasonable due to the uncertain state of the law relating to the true rate of tax applicable to the turnover. The court rejected this contention, stating that the notification included a provision empowering the Sales Tax Commissioner to extend the period. The court emphasized that the petitioner did not apply for an extension of time despite the peculiar circumstances. Therefore, the court concluded that the period specified in the notification was not unreasonable.4. Entitlement to Apply for Composition After Assessment:The petitioner argued that he was entitled to apply for permission to pay the composition amount even after an assessment order had been made. The court rejected this argument, stating that section 7-E provides for permission to pay a sum by way of composition in lieu of the tax payable under the Act. The court clarified that tax becomes payable when the liability arises, not when it is quantified by assessment. The court emphasized that the liability to pay tax arises by the charging section, and the assessment only quantifies the exact sum. Therefore, the court concluded that the petitioner was not entitled to seek permission to pay a sum by way of composition after the assessment proceedings had been completed.Conclusion:The court dismissed the petition, holding that the impugned provisions of Notification No. ST. 349/X dated 28th January, 1958, were not ultra vires and that the Sales Tax Officer acted within his jurisdiction. The court found no force in the petitioner's contentions and upheld the orders passed by the Sales Tax Officer and the proceedings to recover the assessed sales tax. The petition was dismissed with costs.