2015 (8) TMI 1238 - HC - VAT and Sales Tax

State Rule Declared Invalid for Exceeding Authority

Siemens Limited Versus Assistant Commissioner (Audit Assmt.) II, Commercial Taxes, Ernakulam and others

The court declared rule 11B(2)(c) of the Central Sales Tax (Kerala) Rules, 1957 invalid and ultra vires, as it conflicted with the Central Sales Tax Act ... Rule 11B(2)(c) – Constitutional Validity – Invalid and Ultra Vires – Petitioner seeking declaration that rule 11B(2)(c) of Central Sales Tax (Kerala) Rules,1957 as invalid and ultra vires being in consistent with Central Sales Tax (Registration and Turnover) Rules framed by Central Government and beyond power conferred on State Government – Held that:- rule-making authority cannot legislate law which has effect of amending provisions of statute – State's power to make rules under Central Act, extends only to extent provided for under Central Act – Therefore, it was submitted that State Government has no authority under section 13(3) to frame rule 11B(2)(c) requiring production of additional documents than documents prescribed under section 6(2) to treat subsequent sale as exempt – Only condition to attract statutory mandate contained in section 6(2) was submission of documents prescribed in proviso to section – Therefore, once documents prescribed under proviso was submitted in respect of subsequent sale, provision will operate and exemption provided under provision will come into effect with its full scope and amplitude and State had no authority to whittle down effect of exemption provided under statute by framing any rules or otherwise – Therefore rule 11B(2)(c) was invalid and ultra vires – Decided in afavour of Assesse. Issues:Challenge to constitutional validity of rule 11B(2)(c) of Central Sales Tax (Kerala) Rules, 1957.Analysis:The petitioner, a limited company, challenged the constitutional validity of rule 11B(2)(c) of the Central Sales Tax (Kerala) Rules, 1957, seeking a declaration of its invalidity. The petitioner contended that the rule was inconsistent with the Central Sales Tax Act and beyond the State Government's conferred powers. The respondent argued that the rule aimed to prevent misuse of statutory forms without actual movement of goods and was within the State's authority under the Act. The main argument was whether the State could legislate a law amending statutory provisions.The petitioner's counsel argued that the rule-making authority cannot enact a law amending the provisions of the statute, as the exemption conditions were specified in the statute itself. Section 13 of the Act grants power to make rules, but only to carry out the Act's purpose without inconsistency. Referring to a Supreme Court case, it was contended that the State's rule-making power extends only as provided under the Central Act. The State's authority to require additional documents for exemption was questioned.The court considered the statutory provision under section 6(2) and emphasized that the exemption's condition was submission of prescribed documents, not additional ones. The court held that the State's rule, requiring additional documents for exemption, was beyond its power and inconsistent with the Act. The court disposed of the writ petition by declaring rule 11B(2)(c) as invalid and ultra vires, as it conflicted with the Central Sales Tax Rules and exceeded the State Government's authority under the Central Sales Tax Act.This detailed analysis of the judgment highlights the legal arguments, statutory provisions, and the court's decision regarding the constitutional validity of rule 11B(2)(c) of the Central Sales Tax (Kerala) Rules, 1957.