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Poornachenna Basavayya and Sons Vs. the State of Andhra Pradesh - Court Judgment

LegalCrystal Citation
Subject Sales Tax
CourtAndhra Pradesh High Court
Decided On
Case Number Tax Revision Case No. 4 of 1960
Judge
Reported in[1961]12STC634(AP)
AppellantPoornachenna Basavayya and Sons
RespondentThe State of Andhra Pradesh
Appellant Advocate K. Ranganathachary, Adv.
Respondent Advocate M.S. Ramachandra Rao, Second Government Pleader
Excerpt:
- - but the appeal failed substantially. it is well settled that the legislature can pass an enactment giving it retrospective effect......which is the authority to make rules under section 19 of the act, was not competent to make the rule retrospective in operation. therefore, it was argued before the appellate tribunal that the said rule 4-a is inoperative. but the tribunal negatived those two contentions and remanded the case for the purpose of determining whether or not the outside dealer is exempt from taxation under section 3(3) of the act, when alone the petitioner is liable to be taxed as the first seller in the state after the import of the said goods into the state of andhra pradesh.2. in this revision petition, it is again argued that rule 4-a of the madras general sales tax (turnover and assessment) rules, 1939, is ultra vires from 1st november, 1955. the first proviso to rule 4-a is as follows:provided that.....
Judgment:
ORDER

Chandrasekhara Sastry, J.

1. This is a revision under Section 22(1) of the Andhra Pradesh General Sales Tax Act (VI of 1957). The petitioner is an assessee under the Madras General Sales Tax Act. The assessment year is 1955-56. The assessee is a dealer in mill yarn and had obtained a licence for the year 1955-56 to deal in cotton yarn other than hand-spun yarn. He returned a gross turnover of Rs. 2,71,635-14-0, but was assessed on a net turnover of Rs. 2,78,389-0-0. Exemption was claimed in respect of Rs. 2,71,635-14-0 on the ground that the assessee was not the first dealer after the import of goods into the State of Andhra liable to tax, and non-resident dealer being the first seller. The assessing authority, while disallowing the exemption, determined the net taxable turnover at Rs. 2,78,389-0-0 and the assessee was finally assessed to a tax of Rs. 1,460-8-6. An appeal was preferred to the Deputy Commissioner of Commercial Taxes, Guntur. But the appeal failed substantially. There was a further appeal to the Sales Tax Appellate Tribunal, Hyderabad. There it was contended that rule 4-A of the Madras General Sales Tax (Turnover and Assessment) Rules may be struck down as being unconstitutional for the reasons-firstly, that there was no pre-publication of the rule in a draft as laid down in Section 19(4) of the Madras General Sales Tax (Andhra Amendment) Act and secondly, that the said rule was published in the Gazette dated 21st March, 1956, but was given retrospective effect from 1st November, 1955, and the Government, which is the authority to make rules under Section 19 of the Act, was not competent to make the rule retrospective in operation. Therefore, it was argued before the Appellate Tribunal that the said rule 4-A is inoperative. But the Tribunal negatived those two contentions and remanded the case for the purpose of determining whether or not the outside dealer is exempt from taxation under Section 3(3) of the Act, when alone the petitioner is liable to be taxed as the first seller in the State after the import of the said goods into the State of Andhra Pradesh.

2. In this revision petition, it is again argued that rule 4-A of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, is ultra vires from 1st November, 1955. The first proviso to rule 4-A is as follows:

Provided that in the case of goods imported into the State of Andhra either from outside the territory of India or from any other State in India, the tax shall be levied on the first sale effected in the State of Andhra by a seller who is not exempt from taxation under Section 3(3) after the import of the said goods into the State of Andhra.

3. These rules were framed in exercise of the power conferred by Sub-sections (4) and (5) of Section 3 of the Madras General Sales Tax Act and Section 19 of the said Act. This rule 4-A was introduced by G.O. Ms. 220, Finance (Commercial Taxes), dated 21st March, 1956. By para. 3 of Part 1 of the said G.O., it was: provided that the amendments made in that part shall be deemed to have come into force on 1st November, 1955. The learned counsel for the petitioner-assessee conceded that he is the first seller in the State of Andhra after import of the goods into this State and that he is not exempt under Section 3(3). Therefore, if Rule 4-A in so far as it is made operative from 1st November, 1955, is valid, the assessee is liable to pay the sales tax on the sales effected by him from 1st November, 1955, in this State, and the order of remand passed by the Sales Tax Appellate Tribunal for the determination of the question whether the outside seller is exempt or not will have to be set aside. The argument is that the rules were framed by His Excellency the Governor of Madras under the authority delegated to him by Section 19 of the General Sales Tax Act and unless an express power is conferred by the said section to make the rules so as to be operative retrospectively, the rules in so far as it is sought to be made retrospective is invalid and inoperative. The learned counsel's contention is that the rule-making authority is not the Legislature and that, though a Legislature can enact Jaws so as to operate retrospectively, an authority to whom rule-making power is delegated has no such power, unless the Legislature itself confers on him such a power. In support of this the learned counsel relied upon the decision of the Allahabad High Court in Modi Food Products v. Commissioner of Sales Tax U.P. A.I.R. 1956 All. 35. wherein it was held that though the Legislature can certainly give retrospective effect to a piece of legislation passed by it, an executive Government exercising subordinate and delegated legislative powers cannot make legislation retrospective in effect unless that power is expressly conferred. In that case, a notification was issued by the Governor on 8th June, 1948, under Section 3-A of the U.P. Sales Tax Act declaring that with effect from 9th June, 1948, the proceeds of sale of goods entered in column 2 of the Schedule annexed thereto shall not be included in the turnover of any dealer except at the point in the series of sales by successive dealers mentioned in column 4 thereof under the circumstances shown in column 3 thereof. It was also further declared that as and from 9th June, 1948, the rate of tax in respect of the turnover of the aforesaid goods shall be as entered in column 5 of the schedule. Then there followed the schedule. The question was whether the provision made in Section 3-A of the Act and the orders passed by the Provincial Government in the notification dated 8th June, 1948, had to be construed to mean only that the actual sales of non-edible oils, which a dealer makes on or after 9th June, 1948, were the sales covered by the said notification or whether the sales of non-edible oils which had been made even in the previous year were affected by the rate laid down in the notification. Thus, it is clear that the notification itself does not purport to be retrospective from any prior date, and therefore, it was not necessary for the learned Judges to consider the question whether a rule could be made making it operative from a prior date. Thus, the observation of the learned Judges that an Executive Government exercising subordinate and delegated legislative powers cannot make legislation retrospective in effect unless that power is expressly conferred, is only an obiter. It may also be noted that Section 3-A of the U.P. Sales Tax Act itself was introduced by an Amending Act and was not retrospective, whereas the contention for the department was that the rule in question operated retrospectively even from the date of the coming into force of the U.P. Sales Tax Act as originally enacted. This contention was rejected by the learned Judges. The learned counsel for the petitioner referred also to a decision of the High Court of Hyderabad in M.L. Bagga v. C. Murhar Rao A.I.R. 1956 Hyd. 35. In that decision it has been observed at page 38 that the rule-making power conferred upon any other body or authority is a form of delegated legislation and that such rule-making authority does not possess plenary power to give the subordinate delegated legislation retrospective operation unless and until that power is expressly conferred by the parent enactment.

4. The amendment effected in Sub-rule (3) of Rule 11-B of the Evacuee Interest (Separation) Rules, 1951, which was the rule in question in that case did not express that it was retrospective in effect. Therefore, the observation in the judgment of the learned Judges in this case also is only an obiter. The question which has to be decided now did not at all arise for consideration in that case.

5. In this case, rule 4-A which is the rule in question, is framed under the power conferred by Section 19 of the Madras General Sales Tax Act. Clause 5 of Section 19 is as follows :

All rules made under this section shall be published in the Fort St. George Gazette, and upon such publication shall have effect as if enacted in this Act.

6. Thus the rules framed under the said section are made part of the Act itself and are deemed to have been enacted by the Legislature itself. It is well settled that the Legislature can pass an enactment giving it retrospective effect. Rule-making power conferred upon any other body or authority is a form of delegated legislation and it is stated in Maxwell's Interpretation of Statutes, 10th Edn., page 30, that-

Instruments made under an Act which prescribes that they shall be laid before Parliament for a prescribed number of days during which period they may be annulled by a resolution of either house, but that if not so annulled they are to be of the same effect as if contained in the Act, and are to be judicially noticed must be treated for all purposes of construction or obigatiori or otherwise, exactly as if they were in the Act.

7. Under Section 3(4) of the Act, it is provided :-

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 :

Provided that no such rules shall come into force unless they are approved by a resolution of the Legislative Assembly.

8. As already stated, by reason of Clause (5) of Section 19, 'all rules... shall have effect as if enacted in this Act.' This particular rule 4-A is framed under the power conferred by Clause 2(a) of Section 19 which supports the State Government to make rules with respect to 'all matters expressly required or allowed by this Act to be prescribed.' Therefore, in our view, the State Government has power to make rule 4-A to operate retrospectively from 1st November, 1955.

9. Further, Section 3(4) provides that the turnover shall be determined in accordance with such rules as maybe 'prescribed'. So, the question is what is the meaning of the word 'prescribed' Does it impose a restriction on the rule-making authority confining its power to make a rule only for the future This question has been considered by the Madras High Court in Guruviah Naidu v. State of Madras [1958] 9 S.T.C. 145. In that case, the validity of the amendment to Rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules introduced by G. 0. No. 2733, Revenue, dated 3rd September, 1955, and which was made retrospective and to have effect as and from 1st April, 1955, was challenged. There also, the argument was that the word 'prescribed' indicated that the 'prescription' could operate only for the future and that there was thus compelling etymology which ought to be sufficient to force the court to the view that a retrospective rule prescribing the points at which tax should be levied was prohibited. Rajagopala Ayyangar, J., who decided the case, pointed out that the word 'prescribed' is denned in Section 2(f) as 'prescribed by rules made under this Act' and that the power to make rules is conferred by Section 19 of the Act and that 'prescription' in the Act merely means 'all rules made under the Act' and that it is wholly unconcerned with the content of the rule in relation to the time from which it shall operate which is determined by other considerations. The learned Judge, therefore, held that the use of the word 'prescribed' does not impose a restriction on the rule-making authority and does not confine its power to make a rule to operate only for the future. We are in respectful agreement with the view thus expressed by Rajagopala Ayyangar, J., and hold that Rule 4-A of the Madras General Sales Tax (Turnover and Assessment) Rules is valid and is operative from 1st November, 1955.

10. We already pointed out that it is conceded by Sri Ranganathachari, learned counsel for the petitioner, that the petitioner is the first seller after the import of the goods into the State of Andhra and that he is not exempt from taxation under Section 3(3) of the Act. It therefore follows that the petitioner is liable to pay the tax as assessed by the Commercial Tax Officer which was substantially confirmed by the Deputy Commissioner of Commercial Taxes, Guntur. The order of remand passed by the Sales Tax Appellate Tribunal for an enquiry into the question whether the outside dealer is exempt from taxation under Section 3(3) is therefore unnecessary. We set aside the order of remand passed by the Sales Tax Appellate Tribunal in Tax Appeal No. 617 of 1957 on its file and confirm the order of assessment made by the Deputy Commissioner of Commercial Taxes, Guntur. The petitioner shall pay to the respondent the costs of this T.R.C., Advocate's fee Rs. 50.


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