TaxTMI 
TaxTMI 
1960 (8) TMI 60
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....Act. The respondent was a partnership firm carrying on tannery business at Chromepet near the City of Madras. Before the year of assessment, i.e., 1952-53, it was taking out licences under the relevant provisions of the Act but it did not renew the licence for the assessment year. When called upon to make a return it did not do so nor did it raise any objection to the notice served on it on February 28, 1954. It was assessed to sales tax of Rs. 10,584 on a turnover of Rs. 6,77,374-4-4. It filed a petition under Article 226 to quash the assessment order on the ground that the order was illegal and not sup- ported by the authority of law. This contention was accepted by the High Court and the petition was allowed with costs. The consequence of the judgment is that the respondent-firm which is not a licensed dealer under the Act is not liable to any sales tax in respect of its dealings in hides and skins. Against this judgment and order the appellants have come to this Court by special leave. The contention of the respondent-firm in the High Court was that under section 5, clause (vi) of the Act, the liability to pay sales tax in respect of hides and skins could only b....
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....ction 3(1) and section 5(vi) it was of the opinion that rule 5 of the Sales Tax Rules and rule 16(5) of the Turnover and Assessment Rules were ultra vires and section 6-A was inapplicable to a person who had not taken out a licence. As a con- sequence it quashed the order of assessment of the respondent-firm. In order to decide this appeal it is necessary to refer to and consider the relevant provisions of the Act and the two sets of rules made thereunder. They are as follows: Section 3. "(1) Subject to the provisions of this Act,- (a) every dealer shall pay for each year a tax on his total turnover for such year; and ................................................................................................... (3) A dealer whose total turnover in any year is less than ten thousand repees shall not be liable to pay and tax for that year under sub-section (1) or sub-section (2). (4) For the purposes of this section and the other provisions of this Act, turnover shall be determined in accordance with such rules as may be prescribed: (5) The taxes under sub-sections (1) and (2) shall be assessed, levied and collected in such manner ....
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.... hides and skins, the tax payable under section 3(1) shall be levied in accordance with the provisions of this rule. (2) No tax shall be levied on the sale of untanned hides or skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the State or are sold for export outside the State; (i) In the case of all untanned hides or skins sold to a tanner in the State, the tax shall be levied from the tanner on the amount for which the hides or skins are bought by him; (ii) In the case of all untanned hides or skins which are not sold to a tanner in the State but are exported outside the State, the tax shall be levied from the dealer who was the last dealer not exempt from taxation under section 3(3), who buys them in the State on the amount for which they were bought by him. ................................................................................................... (5) Sale of hides or skins by dealers other than licensed dealers in hides or skins shall, subject to the provisions of section 3, be liable to taxation on each occasion of sale." Rule 5(1) of the Sales Tax Rules provid....
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....o such sales. This, therefore, is a clear provision which makes the single point imposition of sales tax on hides and skins to be conditional on observing the condition of taking a licence. The argument of inconsistency between rule 16(5) of the Turnover and Assessment Rules and section 5(vi) of the Act which was accepted in the High Court receives no support from the language of that section which is a concessional provision for making the sales of hides and skins liable to taxation at a single point; but that, as the opening words of the section show, is subject to restrictions and conditions prescribed in the rules and one of these conditions is the taking of a licence. All that rule 16(5) does is to emphasise the consequences of non-observance of the conditions which sections 5(vi) and 6-A have in clear terms prescribed. We find no inconsistency between the section and the Act. But it was submitted that this Court on appeal from a judgment of the Madras High Court had held rule 16(5) to be ultra vires the Act. That contention is based on the judgment of the Madras High Court in V.M. Syed Mohamed & Company v. The State of Madras [1952] 3 S.T.C. 367, which on appeal was a....
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....was repugnant to section 5(vi). That sub-rule, however, affects only unlicensed dealers and the appellants who are admittedly licensed dealers are not affected by that sub-rule". This judgment does not show that the repugnancy of the rule was in controversy or the court pronounced its opinion upon the merits or it was necessary to do so. The learned Solicitor-General then contended before us that in their counter-affidavit filed in the High Court the appellants had accepted the position that rule 16(5) of the Turnover and Assessment Rules was ultra vires. But that will not carry the matter any further, because on a construction of the provisions of the Act this argument of repugnancy is not sustainable. The Andhra Pradesh High Court rightly did not accept the view that rule 16(5) was ultra vires of the rule-making authority: V.M. Syed Mohamed & Company v. State of Andhra [1956] 7 S.T.C. 465 at p. 472.. The same view was taken by the Mysore High Court in the State of Mysore v. Sarvatulla & Co. [1958] 9 S.T.C. 593. A consideration of the relevant provisions of the Act and the rules made thereunder shows that the charging section is section 3(1) and the general rule i....