TaxTMI 
TaxTMI 
1995 (9) TMI 330
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....on certificate. This petition relates to the period of assessment from January 1, 1979 to December 31, 1979. The petitioner deals in manufacturing of wheat flour, maida, suji and rava. The respondent No. 1, Additional Assistant Commissioner of Sales Tax, Jabalpur, assessed the petitioner by his order dated May 31, 1982. During the assessment year, the turnover of the petitioner was determined at Rs. 1,25,25,309 and the tax was assessed at Rs. 3,30,989. The petitioner in the course of his manufacturing activities, purchases raw material, namely wheat, after paying sales tax. In accordance with the provisions of section 8(1)(a) of the Act, he claimed setoff of the sales tax paid by him on purchases of tax paid on raw material under the notifications dated October 8, 1978 and March 31, 1979 at the rate of 0.5 per cent up to March 31, 1979 and of 2.5 per cent after April 1, 1979. This claim was disallowed by the respondent No. 1 on the ground that he was not entitled to such set-off on the purchases of raw materials as the corresponding sales of manufactured goods were effected outside the State of Madhya Pradesh through commission agents. It is alleged that the sales of manufacture....
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....not permissible on sale which was made outside the State, of those manufactured goods. 8.. In order to appreciate the rival contentions, it would be necessary to refer to section 8 of the Act, which reads as under: "Section 8: Set-off or refund of tax in respect of tax-paid goods in certain circumstances.-(1) Subject to such restrictions and conditions as may be prescribed a set-off, as provided in this section shall be granted in such manner as may be prescribed, to a registered dealer in respect of tax-paid goods in the circumstances specified below: (a) When a registered dealer purchases any tax-paid goods, other than tendu leaves and whole pulses which have borne tax under sub-section (1) of section 6 at full rate exceeding the concessional rate of 4 per cent or exceeding such other concessional rate as may be notified by the State Government in respect of use of such goods as raw material or incidental goods and subsequently consumes or uses such goods as raw material or incidental goods in the manufacture or in the processing of any goods or in the mining of any goods specified in Schedule II which have not been exempted under section 12, he shall be entitled to a se....
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....the registered dealer in the State of Madhya Pradesh or in the course of inter-State trade or commerce or in the course of export out of the territory of India; and (iii) the registered dealer claiming the set-off shall, at the time of his assessment produce copies of the relevant bills or cash memoranda obtained from the registered dealer in support of the fact that goods purchased by him and consumed or used as raw material or used as incidental goods have borne tax at full rate under sub-section (1) of section 6." 9.. Shri B.L. Nema, learned counsel for the petitioner, submitted that in fact rule 20-C(1)(ii) of the Rules, 1959, is ultra vires of section 8 of the Act because section 8 gives a power to grant a set-off and rule 20-C(1) which is a subordinate legislation cannot restrict the operation of section 8; therefore, rule 20-C(1)(ii) is beyond the power of the rule-making authority and, therefore, it is ultra vires of section 8 of the Act and contrary to section 8; therefore, it should be struck down. 10.. Shri R.P. Agrawal with Shri P.D. Gupta, learned counsel for the respondents, submitted that the set-off has been given only on such terms and conditions as may be....
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....and circumstances under which the set-off is to be granted and the Rules has circumscribed that grant of set-off then perhaps this argument would have been opened to the learned counsel. But when the Act itself is a silent and it confers a power on a subordinate authority to legislate for the conditions on which set-off is to be granted and the subordinate legislative authority frames the rules for grant of such set-off under section 51(2)(c) then in these circumstances, it is not correct to contend that the rule has gone beyond the provisions of the Act. The rule can only be declared to be ultra vires the Act, if the sebordinate legislative authority has over-shaped its limits or has laid down the rules contratry to the provisions of the Act then of course such subordinate legislation can be declared to be ultra vires of the provisions of the Act. But when the Act itself gives a power to the subordinate authority to legislate that under what circumstances and conditions, the set-off is to be granted then such legislation cannot be said to have gone beyond the provisions of the Act. Shri B.L. Nema, learned counsel for the petitioner, has invited our attention to the judgments of th....
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....ealer has to show the sale within State. It may be that in export outside the territory of India sale may not be exigible to tax by virtue of certain conditions or exemption granted by the State, but nonetheless sale has to be shown in State for export outside India. But for all practical purposes, sale has to be shown in the State. Therefore, in these circumstances, there appears to be a rationale behind confining the benefit of the set-off to these three contingencies of sale and it cannot be said that it is without any rational basis. 14.. Before we refer to the cases cited by Shri B.L. Nema, learned counsel for the petitioner, in support of his contentions that rule 20-C(1)(ii) of the Rules is contrary to section 8 of the Act and it should be struck down as ultra vires we may refer the decision of the honourable Supreme Court which is nearer to the present case as cited by Shri R.P. Agrawal, learned counsel for the respondent. In the case of Balakrishna Chetty & Sons & Co. v. State of Madras [1961] 12 STC 114 (SC); AIR 1961 SC 1152, a similar question arose under the Madras General Sales Tax Act that what is the correct interpretation of section 5 which deals with ....
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.... by Act No. 24 of 1987 and in the amended provision this was left to the discretion of the rule-making authority for providing the benefit of the set-off and in that two sales were common, i.e., sale in the State of M.P. or sale in the course of inter-State trade and commerce and third the export outside of India, was added. Therefore, it gives us a clue to the intention of the Legislature that they have given this discretion to the subordinate legislative authority because on account of opening of the Indian economy and free market perhaps all kinds of contingencies of sale cannot be put in the Act itself. Therefore, they have given this latitude to the subordinate legislative authority so that it can easily amend the rule by incorporating certain sales entitling the benefit of the set-off in a given situation in the altered circumstances from time to time. 15.. Somewhat in identical situation, a recent case from Gujarat State on a purchase tax was also brought to the notice of the honourable Supreme Court in the case of Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98; AIR 1993 SC 1048. In that case, additional purchase tax was levied under section 15-B and it was held....
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....at it is subject to such restrictions and conditions as may be prescribed that means the provision of Act will only come into effect if such conditions are laid down and the conditions have been laid down by the State by prescribing the rule, i.e., rule 20-C(1)(ii). Therefore, in these circumstances, we are of the opinion that the rule does not travel beyond section 8 and it is not ultra vires. 17.. In the case of Deputy Commercial Tax Officer, Madras v. Sha Sukraj Peerajee [1968] 21 STC 5 (SC); AIR 1968 SC 67 is a case where it was not a question that whether the validity of rule is ultra vires of the Act or not. In this case, the validity of rule 21-A of the Madras General Sales Tax Rules came up for consideration that whether this is ultra vires of section 19(1) or section 19(2)(c) of the Act or not. Section 19 of the Madras General Sales Tax Act reads as under: "Section 19(1): The State Government may make rules to carry out the purposes of this Act." Therefore, it was a general provision providing that the rule for carrying out the purposes of this Act, but it was not subject to such conditions and restrictions to be prescribed. Therefore, this case does not provide u....
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....t entry is in specific terms in List I, the entry in List I takes effect notwithstanding the entry in List II. This is also on the principle that the 'special' excludes the 'general' and the general entry in List II is subject to the special entry in List I." This case also does not provide any assistance so far as this case in hand is concerned. 21.. In Utah Construction & Engineering Pvt. Ltd. v. Pataky [1965] 3 All ER 650, the validity of regulation 98 came up for challenge and it was held that regulation 98 is ultra vires and invalid because it could not be as being within the power to make regulations conferred by section 22(1) of the Scaffolding and Lifts Act, 1912. In that, the expression came up for consideration was "manner of carrying out" appearing in section 22(2)(g)(iv) which only envisages a system of working and did not justify a regulation imposing an absolute duty of protecting the drive and tunnel or an absolute duty of ensuring the safety of persons employed in the drive or tunnel. Therefore, it was held that regulation 98 was beyond the scope of the Act. But, in the present case, we have already held above that rule 20-C(1)(ii) is not beyond section....