Case Note & Summary
The appeal before the Supreme Court arose from a sales tax reference under Section 11 of the U.P. Sales Tax Act, 1948. The assessee, Modi Sugar Mills Ltd., had been assessed for the assessment years 1948-49, 1949-50 and 1950-51 on the basis of returns filed showing the turnover of the relevant previous year, which was the normal position under Section 7(1) of the Act. For the assessment year 1951-52, the assessee purported to exercise an election under Rule 39(1) of the U.P. Sales Tax Rules and filed returns of its turnover for the assessment year instead of the previous year. The Judge (Revision), Sales Tax held that without the previous sanction of the Sales Tax Commissioner under Rule 39(2), the assessee was not entitled to change the basis. On a reference, the Allahabad High Court answered the question in the negative, against the assessee. The assessee then appealed by special leave to the Supreme Court. The core legal issue was whether a dealer who had been assessed on previous year turnover could later switch to assessment year returns without Commissioner sanction. The appellant contended that Rule 39(1) election is only for assessment year returns, Rule 39(2) sanction applies only to that election, and Rule 40, which uses the word 'elects' for previous year returns, does not create any bar because there is no provision similar to Rule 39(2) for previous year filing. The State argued that the option could be exercised only once in the first year of taxability and that Rule 39(2) covers both elections, alternatively that general principles bar a change. The Supreme Court rejected the State's contentions. The Court held that under Rule 39(1), the dealer makes a choice to be assessed on assessment year turnover instead of previous year turnover. Rule 39(2) specifically covers only the case where such an election under Rule 39(1) has been made and the dealer wishes to exercise a fresh option. Even assuming that filing a previous year return under Rule 40 constitutes an election, there is no express provision like Rule 39(2) debarring the dealer from later exercising the option under Rule 39(1). The Court stated that an express provision like Rule 39(2) was necessary to prevent a dealer from exercising the option given under Rule 39(1), and general principles cannot displace a statutory right. The Court did not express any opinion whether Rule 39(2) could validly be made under Section 7(1). Accordingly, the Supreme Court set aside the High Court's answer, answered the referred question in the affirmative, allowed the appeal, and awarded costs to the appellant in the Supreme Court and the High Court.
Headnote
A) Tax Law - Sales Tax Assessment - Election of Assessment Year versus Previous Year - U.P. Sales Tax Act, 1948, Section 7; U.P. Sales Tax Rules, Rules 39, 40, 41 - For assessment years 1948-49 to 1950-51 the assessee was assessed on previous year returns; for 1951-52 it sought to file assessment year returns under Rule 39(1) without Commissioner sanction - Court held Rule 39(2) requiring sanction applies only where a dealer had elected assessment year under Rule 39(1) and wished to exercise a fresh option, not where dealer had previously filed previous year returns under Rule 40; no express provision bars the later election; general principles cannot override a statutory right - Held that the High Court should have answered the reference in favour of the assessee and the appeal is allowed with costs (Paras Not mentioned).
Issue of Consideration
Whether a dealer who has been assessed to tax on the turnover of the previous year according to his election can change his option and elect the assessment year by filing quarterly returns without the previous sanction of the Sales Tax Commissioner
Final Decision
Appeal allowed. The question referred to the High Court was answered in the affirmative. The assessee was entitled to elect assessment year under Rule 39(1) without previous sanction of Sales Tax Commissioner. Costs awarded to appellant in Supreme Court and High Court.
Law Points
- Under Rule 39(1) of U.P. Sales Tax Rules a dealer chooses assessment year returns
- Rule 39(2) sanction applies only to dealers who had elected assessment year and wish to vary
- Rule 40 previous year filing does not bar later election under Rule 39(1)
- statutory right cannot be displaced by general principles
