1. The assessees are dealers in cotton and cotton seeds. The total turnover exceeded Rs. 14,00,000, and after deducting the purchase turnover, the net turnover was fixed at Rs. 4,35,822. There was no dispute with regard to this turnover. But the claim of the assessees was that a turnover of Rs. 2,40,470 brought to tax was the estimated purchase value of cotton sold in the course of inter-State trade. Under Rule 20 of the Madras General Sales Tax (Turnover and Assessment) Rules refund of tax was claimed. The assessing authority held that such a refund provided for therein was available only on the submission of certain returns within a prescribed period. Such returns not having been filed, the refund of tax claimed was refused.
2. Against this order, an appeal was taken to the Appellate Assistant Commissioner. The appellate authority accepted the conclusion reached by the assessing authority that since the conditions prescribed under the relevant rule had not been complied with, the refund could not be granted and that on the facts established, the assessment proceedings could not be impeached.
3. A further appeal to the Tribunal was also rejected. It is against that order of the Appellate Tribunal that the present revision has been filed.
4. Section 5-A(5) of the Madras General Sales Tax Act was introduced by Act XXI of 1958. It is in these terms :-
Where a tax has been levied under this section in respect of the sale or purchase inside the State of any goods specified in this section and such goods 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.
5. The goods referred to in this section include cotton which is taxable under the State sales tax at the purchase point. If those goods had suffered tax under the State law, the above section provides that where the same goods are sold in the course of inter-State trade or commerce, the tax levied under the State law shall be refunded. The section however enables the State Legislature to prescribe such conditions as may be needed and it is not in dispute that such conditions were prescribed by Rule 20 of the Turnover and Assessment Rules. These provisions, the section and the rule, were made necessary by reason of Section 15 of the Central Sales Tax Act which deals with the restrictions and conditions in regard to tax on the sale or purchase of declared goods within a State. Cotton was declared to be goods of special importance in inter-State trade or commerce by Section 14 of the Central Sales Tax Act and among the restrictions imposed on the sales tax law of a State, in so far as the taxation of the sale or purchase of declared goods is concerned, Section 15(b) was enacted in these terms:
Where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods 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 provided in any law in force in that State.
6. The need for this provision is fairly clear. A sale of the declared goods in the course of inter-State trade or commerce attracts tax liability under the Central Sales Tax Act, and this provision therefore enacts that if such goods have been subject to tax under the State sales tax law, the tax levied [under that law shall be refunded. The corresponding Section 5-A(5) of the Madras General Sales Tax Act is almost identical in terms with Section 15(b) of the Central Sales Tax Act. Rule 20, which is the rule prescribed in this regard by the sales tax law, requires that every dealer who claims a refund under this rule shall submit to the assessing authority a statement in a prescribed form.
7. The time limit within which such a statement should be submitted is also prescribed and Sub-rule (3) requires that such a statement should be submitted not later than three months from the date on which the movement of the goods from the Madras State to another State commenced or not later than three months from the date on which the sale was effected by transfer of document of title to the goods. According to this rule, if the goods are sold in the course of inter-State trade, a statement has to be submitted within three months of the relevant point of time indicated, That no such statement was filed in this case is not in dispute. But, nevertheless, the claim to refund is based on the following arguments.
8. Mr. Swaminathan, learned counsel for the assessees, urges that Section 5-A(5) contemplates a case where a tax has been levied in respect of a sale or purchase inside the State and the goods in respect of which such tax has been levied are subsequently sold in the course of inter-State trade or commerce. He urges that the tax cannot be said to be levied till the actual assessment to tax is made at the end of the year. It is only at that time that it can be said that tax has been levied inside the State on the purchase of cotton. If that is so, it is only then that a claim to refund can properly be made. He also urges that to refuse the refund for such reasons as advanced by the department would amount to the unlawful levy of a tax in respect of a transaction which Parliament has declared shall not be taxable.
9. We are not disposed to agree that the State levy of tax becomes either illegal or at least improper solely for the reason that the goods have been sold in the course of inter-State trade. The State law provides for the taxation of the commodity on the purchase and its validity is beyond question. The Central sales tax law again taxes a sale in the course of inter-State trade. The section does not appear to require that there should be a levy of tax under the Central sales tax law before the claim for refund can be accepted. But the argument that the assessees could not apply for a refund before his assessment under the State sales tax law has been made is not one which can be accepted in the light of the section and the rule. An assessee, before he can succeed in his claim to refund, has to establish that the goods have in fact been sold in the course of inter-State trade or commerce and the conditions prescribed require a statement to be furnished within a stipulated time after the inter-State sale in order to enable the authorities to verify the factum of such sale, for it is only on that being established that the claim to refund becomes eligible. It is true that the expression used in Section 5-A(5) is 'where a tax has been levied'. But in the context of the provision, it seems to us that it must really be understood as 'where a tax has become leviable'. If a transaction inside the State has attracted the levy of tax and a subsequent inter-State transaction has entitled the assessee to the refund of the State sales tax, he has to furnish the necessary statement as prescribed, and unless the conditions prescribed are complied with, the claim to refund must fail.
10. We are therefore satisfied that it is not open to the assessees to claim that they can wait till an assessment is actually made under the State sales tax law before they need press the claim to refund. The petition accordingly fails and is dismissed with costs. Counsel's fee Rs. 100.