Court rules amendment to sales tax rules ultra vires Act; burden on dealer deemed excessive

The court found the challenged amendment to rule 27(3) of the Orissa Sales Tax Rules, 1947, to be ultra vires section 5(2)(A)(d)(i) of the Orissa Sales Tax Act, 1947. The court held that the imposition of an additional burden on the purchasing dealer to prove tax payment or liability of earlier purchasers was beyond the provisions of the Act. Consequently, the court quashed the proviso in question, ruling it ultra vires the Act. The judgment was in favor of the applicant, with no order as to costs, and was supported by both Chief Justice Misra and Justice Acharya.

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Issues:
Challenge to the amendment introduced into rule 27(3) of the Orissa Sales Tax Rules, 1947, on the grounds of being ultra vires section 5(2)(A)(d)(i) of the Orissa Sales Tax Act, 1947.

Detailed Analysis:

1. The writ application did not challenge the order refusing to give stay or any order of assessment. The only contention raised was regarding the amendment introduced into rule 27(3) of the Orissa Sales Tax Rules, 1947, being ultra vires section 5(2)(A)(d)(i) of the Orissa Sales Tax Act, 1947.

2. Section 5(2)(A)(d)(i) of the Act, in conjunction with section 3-B, mandates that a dealer deducts from the taxable turnover goods declared by the State Government under section 3-B, provided the dealer proves the purchase from a registered dealer. The disputed amendment to rule 27(3) imposes an additional burden on the purchasing dealer to establish that the selling registered dealer paid or was liable to pay purchase tax on the goods, which is beyond the provisions of the Act and hence, ultra vires.

3. The scheme of the Act follows single-point taxation, where the tax is typically realized from the first purchaser. The proviso in question places an onerous burden on the purchasing dealer to prove the tax payment or liability of earlier purchasers, a condition not intended by the Act. Such a burden could only be introduced through legislative amendment, as done by amending Act 15 of 1968. The court found the proviso ultra vires the Act and ordered its quashing.

4. The judgment concluded that the impugned proviso in rule 27(3) was ultra vires the Act and, therefore, issued a writ in favor of the applicant, allowing the application without any order as to costs. Both Chief Justice Misra and Justice Acharya concurred on the decision.

This judgment clarifies the limitations on rule-making authority concerning taxation provisions and emphasizes the necessity for adherence to statutory provisions without imposing additional burdens through rules beyond the scope of the parent Act.

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