Case Note & Summary
The present appeals by special leave arose from writ petitions filed by dealers assessed to sales tax under the Central Sales Tax Act, 1956. The dispute concerned the effect of the Central Sales Tax (Amendment) Act, 1969, which retrospectively superseded the decision of the Supreme Court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons. The Revenue sought to reopen assessments made in accordance with that earlier decision, while the dealers resisted on jurisdictional grounds. After the High Court of Mysore held that under the unamended Section 8(2) of the Central Sales Tax Act, 1956, inter-State sales were taxable only in a certain manner and without taking into account the minimum turnover fixed by the State law, the Supreme Court affirmed that decision. Thereafter, on June 9, 1969, the President promulgated the Central Sales Tax (Amendment) Ordinance, 1969, which was later replaced by the Central Sales Tax (Amendment) Act, 1969, giving retrospective effect to amendments that made such sales taxable irrespective of State law exemptions. Section 10(1) of the Amendment Act provided relief to dealers who had not collected tax during the period between November 10, 1964 and June 9, 1969 on the ground that no tax could have been levied under the unamended Act; Section 10(2) placed the burden of proving non-collection on the dealer. After the Amendment Act came into force, several Sales Tax Officers issued notices under Rule 38 of the Mysore Sales Tax Rules, 1957, proposing to rectify the earlier assessments as mistakes apparent on the record. The dealers challenged these notices before the High Court of Mysore under Article 226 of the Constitution on the grounds that there was no mistake apparent on the record and that the officers had erred in finding that they had collected tax on the exempted turnovers. The High Court accepted the first contention and held that the Sales Tax Officer had no jurisdiction to reassess because it was impermissible to receive any additional evidence to decide whether the assessees had collected sales tax, and consequently rule 38 could not be invoked. The Revenue appealed. The Supreme Court held that when a subsequent legislation is given retrospective effect and is deemed to have been in force at the time when the order to be rectified was made, the law to be applied is the amended law. The High Court had accepted this principle but erred in ruling that no evidence whatsoever could be taken. Section 10 of the Amendment Act must be read with Rule 38. But for Section 10, every dealer would have had to pay tax on the turnovers in question whether he had collected tax or not. Section 10 gives an exemption only if the dealer proves non-collection, and Section 10(2) places the burden on the dealer. Therefore, the assessing authorities before reassessing the dealers should afford them a reasonable opportunity to satisfy them that they had not collected tax. The finding of the assessing officers that the assessees failed to discharge their burden was a finding of fact and was not open to review by the High Court under Article 226. Accordingly, the Supreme Court allowed the appeals, set aside the orders of the High Court, and dismissed the writ petitions with costs. In the case of Malnad Arecanut Syndicate (P) Ltd., where rectification proceedings were still pending, the assessing authority was directed to dispose of the same according to law. The respondents were ordered to pay the costs of the appellant in these appeals one hearing fee.
Headnote
A) Retrospective Legislation - Mistake Apparent on Record - Amended Law Applies - Central Sales Tax (Amendment) Act, 1969, Section 10 read with Mysore Sales Tax Rules, 1957, Rule 38 - High Court correctly held that to rectify a mistake under Rule 38 the mistake must be apparent on the record, but it wrongly excluded application of the amended law. Since the 1969 Amendment Act was retrospective, the assessing authority had to look to the amended law to determine whether there was a mistake apparent on the record. Held that the authority could reopen assessments as mistakes became apparent under the retrospective amended law. (Paras 743-746) B) Tax Law - Central Sales Tax - Burden of Proof - Central Sales Tax (Amendment) Act, 1969, Section 10(1), 10(2) - Section 10(1) relieved dealers from liability if they had not collected tax during the relevant period on the ground that no tax was leviable under unamended law; Section 10(2) placed the burden of proving non-collection on the dealer. The High Court erred by ignoring the impact of Section 10 and holding that no additional evidence could be received. Held that a dealer cannot claim exemption under Section 10(1) without discharging the burden under Section 10(2), and the assessing authority must afford a reasonable opportunity to the dealer to prove non-collection before reassessment. (Paras 745-746) C) Constitutional Law - Writ Jurisdiction - Finding of Fact - Constitution of India, Article 226 - In all cases except one, assessing officers had given assessees an opportunity to show non-collection and had found that the assessees failed to discharge their burden. Held that such finding of fact was not open to review by the High Court under Article 226. The Supreme Court allowed the revenue's appeals and set aside the High Court orders. (Para 745)
Issue of Consideration
Scope and effect of the Central Sales Tax (Amendment) Act, 1969, particularly whether sales tax authorities could reopen assessments under Rule 38 of Mysore Sales Tax Rules, 1957 on the ground of mistake apparent on record and whether additional evidence could be received to determine tax collection
Final Decision
Appeals allowed; orders of High Court set aside; writ petitions dismissed with costs; respondents to pay costs of appellant one hearing fee. In Malnad Arecanut Syndicate case, rectification proceedings still pending, assessing authority directed to dispose of same according to law.
Law Points
- If a subsequent legislation is given retrospective effect and deemed to be in force at the time when the order to be rectified was made
- the amended law applies for determining mistake apparent on record
- Rule 38 of Mysore Sales Tax Rules must be read with Section 10 of the Central Sales Tax (Amendment) Act
- 1969
- assessees cannot claim benefit of Section 10(1) without discharging burden under Section 10(2)
- assessing authorities must afford reasonable opportunity to show no tax was collected
- finding of fact by assessing officer not open to review under Article 226
