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Sri Venkateswara Groundnut Factory Vs. Commercial Tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case Number Writ Petition No. 3275 of 1969
Judge
Reported in[1973]30STC185(AP)
AppellantSri Venkateswara Groundnut Factory
RespondentCommercial Tax Officer and anr.
Appellant Advocate S. Dasaratharama Reddy, Adv.
Respondent Advocate The Government Pleader for Sales Tax Cases
DispositionPetition dismissed
Excerpt:
.....is in pursuance of this power to make rules prescribing the manner and conditions of refund of tax that rule 27-a is framed by the state government. the two terms bear distinctly separate meanings. what is overlooked is that in this case all the taxes were paid and, therefore, the petition to refund could well have been filed within three months of the inter-state sales. the refund thus can be had only after the tax is paid and if the conditions in that behalf are satisfied. there may be some difficulties in detail or in cases of some exceptional transactions or the rule may appear to be severe in some cases or may sound queer in certain respects. but we fail to sec how on that account rule 27-a can be said to be ultra vires of the act or can be said to be bad and ineffective......four years tax totalling to rs. 13,597.12. for the said four years the petitioner effected inter-state sales to a large extent. the central sales tax, however, was not levied on the said turnover. the inter-state sales were conducted in the same assessment years. 4. the petitioner was entitled to the refund of the sales tax which he has paid as above, because of the inter-state sales in the same assessment years.5. the petitioner originally asked for a writ of mandamus directing the respondent to refund the tax paid. he, however, subsequently filed an application under rule 27-a for the refund of the tax. since the petition was filed after a considerably long lapse of time, the petitioner filed a petition to condone the delay on the ground that it was not wilful but bona fide. the said.....
Judgment:

Gopal Rao Ekbote, J.

1. The petition is for the issue of a writ of certiorari to quash the order refusing to refund the sales tax paid, passed on 12th January, 1970 and served on the petitioner on 3rd February, 1970.

2. The petitioner is a dealer in groundnuts. It purchases groundut and after decorticating sells the kernel. These transactions of sale are both intra-State as well as inter-State.

3. For the assessment years 1964-65 to 1967-68 both inclusive, the petitioner was assessed to the purchase tax to certain amounts. On appeal the tax relating to the year 1964-65 was reduced, so also for the year 1965-66. The petitioner paid for the said four years tax totalling to Rs. 13,597.12. For the said four years the petitioner effected inter-State sales to a large extent. The Central sales tax, however, was not levied on the said turnover. The inter-State sales were conducted in the same assessment years.

4. The petitioner was entitled to the refund of the sales tax which he has paid as above, because of the inter-State sales in the same assessment years.

5. The petitioner originally asked for a writ of mandamus directing the respondent to refund the tax paid. He, however, subsequently filed an application under Rule 27-A for the refund of the tax. Since the petition was filed after a considerably long lapse of time, the petitioner filed a petition to condone the delay on the ground that it was not wilful but bona fide. The said petition was disposed of by the impugned order. The Commercial Tax Officer, Cuddapah, was not satisfied with the reason shown. Holding that the petition was time-barred, he dismissed it.

6. The petitioner thereafter filed an application to amend the writ petition and asked for a writ of certiorari instead of mandamus. We allowed the petition to be amended as prayed for.

7. The learned Advocate for the petitioner made a faint attempt to argue that the reason assigned for condoning the delay was sufficient. The petition to amend did not refer to any ground of attack on the finding relating to sufficiency of the reason to condone the delay. It cannot, therefore, be canvassed in this case. Even otherwise the reason shown by the petitioner is a question of fact and it is not expected of this court to revise the order in that behalf. Moreover, we agree with the Commercial Tax Officer that the reason shown is not at all correct, nor it is sufficient to condone the enormous delay caused in presenting the petition under Rule 27-A.

8. The principal contention of Sri Dasaratharama Reddy, the learned counsel for the petitioner, was that Rule 27-A prescribing the period of three months for filing an application for refund from the end of the month in which the goods were sold is ultra vires of the proviso to Section 6 of the Andhra Pradesh General Sales Tax Act, 1957, hereinafter called 'the Act'.

9. Now, it is a common ground that groundnuts are declared goods. Consequently, under Section 15(b) of the Central Sales Tax Act, where a tax has been levied under the State law in respect of the sale or purchase inside the State of any declared goods and such goods arc sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in the State.

10. Section 6 of the Act relates to tax in respect of declared goods. It enjoins that notwithstanding anything contained in Section 5, the sales or purchases of declared goods by a dealer shall be liable to tax at the rate and only at the point of sale or purchase, specified against each in the Third Schedule on his turnover of such sales or purchases for each year irrespective of the quantum of his turnover in such goods; and the tax shall be assessed, levied and collected in such manner as may be prescribed.

11. The proviso being more important we would read it fully.

Provided that where any such goods on which a tax has been so . levied are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be prescribed.

12. What is plain is that Section 6 is in full accord with Section 15 of the Central Sales Tax Act. It is not disputed that both under the proviso to Section 6 of the Act as well as under Clause (b) of Section 15 of the Central Sales Tax Act, the tax must be refunded 'in such manner and subject to such conditions as may be prescribed'.

13. It is in pursuance of this power to make rules prescribing the manner and conditions of refund of tax that Rule 27-A is framed by the State Government. The term 'prescribed' according to Section 2(1) means prescribed by rules made under the Act. Rule 27-A, in so far as it is relevant, reads as below :

(3) Every application for refund under this rule shall be filed by the dealer claiming refund before the assessing authority having jurisdiction over his place of business within a period of three months from the end of the month in which he sold the goods :

Provided that the assessing authority may condone for reasons to be recorded in writing, any delay in the filing of such application. * * *

14. The first contention of Sri Dasaratharama Reddy was that under Section 39(2)(n) the State Government was competent to make rules for generally regulating the procedure to be followed in proceedings under the Act and since prescribing limitation is not regulating the procedure, the impugned rule was made without the State Government having any power to make such a rule.

15. We are unable to accede to this argument. What is overlooked in advancing the argument is that the impugned rule is not made in exercise of the powers conferred on the State Government under Section 39(2)(n). It is a power entrusted to the State Government by the proviso to Section 6 of the Act and recognised in Section 15(b) of the Central Sales Tax Act. The manner of the refund and the conditions on which the refund can be directed, can be prescribed. And we have seen that the term 'prescribed', means prescribed by rules made under the Act. The said power is also recognised in Section 39(2)(a) of the Act. It reads:

all matters expressly required or allowed by this Act to be prescribed.

16. What follows is that the impugned rule is made in exercise of the powers under the proviso to Section 6 of the Act read with Section 39(2)(n). We have already noted that the manner and conditions are expressly required or allowed by the proviso to Section 6 of the Act to be prescribed.

17. We, therefore, feel no hesitation in rejecting the first contention that Rule 27-A(3) is ultra vires of Section 39(2)(n). That provision, in our view, is not the source of power to make the impugned rule.

18. The next contention then was that prescribing limitation for application for refund is not permitted by the proviso to Section 6 inasmuch as it neither relates to the manner in which the tax is to be refunded nor it can form a condition for refund of the tax. He relied upon the following decisions : P. Thirumurthi Chettiar v. State of Madras [1968] 21 S.T.C. 489, Sales Tax Officer v. Abraham [1967] 20 S.T.C. 367 (S.C.) and E. S. I. Corporation v. A. P. S. E. Board (1970) 1 A.L.T. 20.

19. In P. Thirumurthi Chettiar v. State of Madras [1968] 21 S.T.C. 489, Venkatadri, J., held :

Where an Act does not provide for limitation with reference to a particular matter and the delegation of the power to make rules is conferred by a section of the Act, which does not, expressly or impliedly, relate to the power of prescribing time, the authority to which the power is delegated cannot make a rule prescribing limitation.

20. There can be very little doubt about the soundness of this proposition. The wording of the proviso to Section 4 of the Madras General Sales Tax Act was 'the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be prescribed'. Rule 23(3)(i) provided that an application for refund should not be made more than three months from the date on which the movement of the goods from this State to any other State commenced. The learned Judge said :

There is much force in the contention of the learned counsel for the petitioner that prescribing period of limitation for refund under Rule 23(3)(i) is not valid and should be declared ultra vires, because the main Act does not prescribe any period of limitation. The words used are 'shall be refunded' and there is no period of limitation prescribed.

21. What is evident from the abovesaid conclusion drawn by the learned Judge is that he did not consider as to whether Rule 23(3)(i) could have been made under the delegated power of legislation. In other words, is it a valid rule made in pursuance of the proviso to Section 4 with particular reference to the words 'in such manner and subject to such conditions as may be prescribed' The Act, it is true, did not provide any period of limitation. But it cannot be doubted that the Act can leave the matter of making such rule to the Government. And the learned Judge, in our opinion, with due respect to him, was not quite right when he said :

There is no period of limitation prescribed.

22. Rule 23(3)(i) was such a rule 'prescribed'. It is true that earlier reference was made to Solar Works v. Employees' State Insurance Corporation (1964) 2 M.L.J. 223, in which the following observation was made:

No doubt limitation is procedural but it is also substantive. A rule covering those matters cannot, therefore, be made unless it be in the exercise of specific conferment of enabling rule-making power.

23. But the real question nevertheless was whether the proviso to Section 4 of the Madras Act conferred such an enabling power to make rules. It is to this quite relevant aspect attention of the learned Judge was not diverted to. We consider that if this is an authority for the proposition that in spite of delegation of power to make rules relating to the manner and the conditions subject to which refund can be made, no rule can be made by the delegated authority, then we must express our disagreement. If the learned Judge is said to have held that the rule-making authority could not have prescribed limitation when the power conferred related to only regulating procedure, then the decision would be effective only to the extent of holding that limitation cannot be prescribed by a delegatee when it is empowered to make rules relating to the 'manner' in which the tax should be refunded. We are trying to take a liberal view of the Madras decision because it followed the earlier Bench decision referred to above. In that case, it was held that under the power to prescribe 'procedure' no rule prescribing limitation can validly be made. But both these decisions are not authorities for the proposition that where the rule-making authority is empowered to prescribe 'conditions' subject to which refund can be made, it cannot prescribe limitation for filing application for refund.

24. In E. S. I. Corporation v. A. P. S. E. Board (1970) 1 A.L.T. 20, a Bench of this court, to which one of us (Ekbote, J.) was a party, held:

In framing Rule 17, the State Government has exceeded its power to frame it both under Section 96(1 )(b) and under Section 78 of the E.S.I. Act. No such power to prescribe limitation under these provisions can be said to have been delegated to the State Governments. The rules, it is evident, cannot widen the scope of the word 'procedure' appearing both in Section 78(2) and Section 96(1)(b) of the Act.

25. The said decision has followed Solar Works v. Employees' State Insurance Corporation (1964) 2 M.L.J. 223.

26. In Sales Tax Officer v. Abraham [1967] 20 S.T.C. 367 (S.C.), the Supreme Court held:

The expression 'in the prescribed manner' occurring in Section 8(4) of the Central Sales Tax Act, 1956, only confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they are sold and to which authority the form is to be furnished, But it does not take in the time element. In other words, the section does not authorise the rule-making authority to prescribe a time-limit within which the declaration is to be filed by the registered dealer.

27. All these decisions go to show that when power to make rule is conferred relating to 'procedure', 'manner' or 'mode' or words to that effect, the rule-making authority cannot prescribe limitation. Since the proviso to Section 6 of the Act uses the word 'manner', we may hold, following the abovesaid decisions, that the rule-making authority could not have prescribed limitation in exercising the powers to make rules as to in what 'manner' the tax should be refunded.

28. But that does not conclude the matter. The proviso to Section 6 of the Act also empowers the rule-making authority to prescribe 'conditions' subject to which the tax shall be refunded. It is upon this source of power that the vires of Rule 27-A is sought to be supported by Sri D. V. Sastry, the learned Government Pleader.

29. Now the term 'condition' can only mean a 'thing on whose fulfilment another thing or act is made to depend'. 'Condition is a restraint or bridle annexed and joined to a thing, so that by the non-performance or not doing thereof the party to the condition shall receive prejudice and loose; and by the performance and doing of the same, profit and advantage' : (Termes de la ley).

All conditions are (a) conditions precedent, i.e., the sine qua non to getting the thing ; or (b) conditions subsequent, which keep and continue the thing : (Stroud's Judicial Dictionary, 3rd edition, Vol. I, page 564).

30. What is manifest is that the State Government is empowered to make rules making certain things as conditions precedent on the fulfilment of which the tax shall be refunded. Therefore, a rule can provide as a condition precedent for the refund of a tax that an application for such refund shall be made within a prescribed time. The period thus prescribed in reality and truth is not a period of limitation but is a condition subject to which the tax shall be refunded. The argument that the term 'condition' also means 'manner' or 'procedure' is without any substance. Therefore, Rule 27-A(3) is valid. The two terms bear distinctly separate meanings. 11 the two words carried the same meaning, the Parliament or the State Legislature would not have used them both in Section 15(b) of the Central Sales Tax Act and the proviso to Section 6 of the Act.

31. We are fortified in our view by a Full Bench decision of the Madras High Court in Chenchuramana v. Arunachalam (1935) I.L.R. 58 Mad. 794 (F.B.). It is held :

that the period of three months fixed in Section 9(1)(c) of the Provincial Insolvency Act is not a period of limitation but is a condition to an adjudication, and accordingly an act of insolvency which has occurred more than three months prior to the presentation of the petition is not available as a ground of adjudication.

32. In that case, Beasley, C.J., observed :

On the other hand, I am of the view that Section 9(1)(c) is a condition precedent to the filing of the petition, that is to say, the petitioning creditor must, on the day when he presents his petition, have in view some act of insolvency which the debtor has committed within the preceding three months.

33. Similarly in a Full decision of this court in Deputy Commissioner of Commercial Taxes v. Lakshmana Swamy [1956] 7 S.T.C. 560, it is said :

Construing Rules 5(1)(k) and 18(2)'and (3) in the light of the foregoing principles and having regard to the peremptory and absolute language in which these rules are couched, it is manifest that the deduction referred to in Sub-rule (2) of Rule 18 is conditional upon the assessee complying with the conditions prescribed under Sub-rule (3) of that rule.

34. The arguments before us travelled over a wide field in which many circumstances were considered which do not arise in this case and persuasive arguments were used on both sides as to the difficulties and doubts which might arise in other cases if the view canvassed by the respondent is accepted of the interpretation put forward of Rule 27-A. It is said by the petitioner that if question of refund can arise only after payment of tax, then there is no meaning in making an application for refund within three months of the inter-State sale if the tax for the transaction within the State has not been paid to the State. What is overlooked is that in this case all the taxes were paid and, therefore, the petition to refund could well have been filed within three months of the inter-State sales. In any case, no material is placed before us showing that any such difficulty in fact arose in the present case. It must be remembered that the tax becomes exigible upon the completion of the transaction within the State and the tax has to be paid although upon an assessment. In certain cases advance payment of tax also has to be made. If after such a tax becomes due but before it is paid inter-State sales take place, there can be no difficulty in making an application for refund which in such a case may amount to registering the claim of refund and at the same time ensuring that refund shall be made on such an application as and when the tax is paid. Admittedly, the Central tax cannot be adjusted with the State tax. Both have to be paid separately. The refund thus can be had only after the tax is paid and if the conditions in that behalf are satisfied. It is a mistake to think that this would be a common feature of the refund of the tax that the applications shall have to be made before the State tax is paid. It could not be doubted that a large number of cases of refund would arise only after the taxes are paid. In such cases, it is a common ground that the difficulty sought to be shown would not arise at all. There may be some difficulties in detail or in cases of some exceptional transactions or the rule may appear to be severe in some cases or may sound queer in certain respects. But we fail to sec how on that account Rule 27-A can be said to be ultra vires of the Act or can be said to be bad and ineffective.

35. In this connection, the difference in the language of Sub-rules (1) and (3) must be borne in mind. While Sub-rule (1) says 'shall be refunded', Sub-rule (3) states 'every application... shall be filed'. Incases where, as here, tax is paid and an application can be made within three months of the inter-State sale, such application must be made. Even in a case before the State tax is paid, inter-State sale takes place, an application for refund must still be made as the tax has in any case to be paid. It will ensure refund. The refund will be effected on such an application as and when the tax is paid. Merely because from the language point of view in such cases filing of an application of refund even before tax is paid may sound somewhat strange but on that account Rule 27-A cannot be declared as ultra vires. In all such cases, the intention in prescribing the short time is to keep track of the inter-State transactions. If a longer period is allowed to lapse it would be difficult to keep vigil on such transactions. The Central tax is levied on such inter-State sale of declared goods and it is only because such a transaction is exigible to the Central sales tax that the refund of the State tax is directed. If the evidence of inter-State sale in the form of an application for refund filed within three months of such inter-State transaction is not preserved, it cannot be doubted that the levy and collection of the Central sales tax would be difficult. The result would be that the assessee, as here, may not pay the Central sales tax and yet claim refund on the ground that in the same assessment year the goods were sold under an inter-State sale. If the interrelationship of the Central sales tax with the State sales tax regarding declared goods is borne in mind, then the understanding of Rule 27-A would not provide any difficulty.

36. Moreover, we are not inclined to exercise the discretionary jurisdiction under Article 226 of the Constitution in favour of the petitioner who deliberately seems to have waited till he found himself free from being assessed under the Central Sales Tax Act and it is only then that he started claiming the refund of the State sales tax which he had paid. His conduct is such that we do not think that we should exercise our discretion in his favour, the result of which would be to encourage the evasion of payment of legitimate taxes.

37. We, accordingly, dismiss the writ petition with costs. Advocate's fee Rs. 250.


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