Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Miscellaneous Writ No. 778 of 1962

Judges

Brij Lal Gupta, J.

Acts

provision in section 3-AA of the U.P Sales Tax Act.
section 3-AA and of rule 12-A
sub-section (1) of section 24
provisions of section 3-AA
provision in section 3-AA.
U.P Sales Tax Act
section 24(2)(c)
section 3-AA

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Smart Summary

Structured Summary of the Legal Opinion

Factual and Procedural Background

This is a petition under Article 226 of the Constitution seeking writ of certiorari to quash an order dated 23rd December, 1961 which assessed the petitioner to sales tax under the U.P. Sales Tax Act. The assessment relates to the assessment year 1957-58.

The petitioner claimed that out of its total turnover it was entitled to an exemption in respect of a turnover of Rs. 4,04,496-76 nP, because that turnover related to sales of oil-seeds sold to dealers for the purpose of resale in the same condition (and thus should not have been taxed). Under section 3-AA of the Act, sales of oil-seeds were liable to sales tax only when made by a dealer to a consumer; the provision also contained a (rebuttable) presumption that a sale was to a consumer unless the dealer proved otherwise.

By Notification No. 1095.X-1086-56 dated 30th March, 1957, rule 12-A was made under the rule-making power in section 24. Rule 12-A provided that a sale of goods specified in section 3-AA would be deemed to be a sale to the consumer unless it was to a dealer who furnished a certificate in Form III-A to the effect that the goods were purchased for resale in the same condition; details of such certificates were to be furnished by the selling dealer with his return in Form IV. Under the U.P. Sales Tax Act the return was a quarterly return, so the Form III-A certificate had to be furnished with each quarterly return.

The petitioner did not furnish a certificate in Form III-A. Instead it produced two affidavits and a contract book to show the sales were to dealers for resale in the same condition. The Sales Tax Officer rejected this evidence on the view that rule 12-A required the Form III-A certificate and that this certificate was the only permissible mode of proving that a sale was to a dealer (and hence exempt).

Legal Issues Presented

Whether rule 12-A (Notification No. 1095.X-1086-56, dated 30th March 1957), by permitting proof of a sale being to a dealer only by a certificate in Form III-A, is ultra vires or otherwise inconsistent with section 3-AA of the U.P. Sales Tax Act which gives a dealer the right to rebut the statutory presumption that a sale is to a consumer.
Whether the rule-making power under section 24 of the Act validly authorises the State to prescribe the mode or materials of proof (including requiring Form III-A) in assessment proceedings under the Act.

Arguments of the Parties

Petitioner's Arguments

The petitioner argued that section 3-AA gives a dealer the right to produce any kind of evidence or material to rebut the presumption that a sale was to a consumer. Implied in that right, the petitioner contended, is the right to choose the kind of evidence to be produced.
On that basis the petitioner submitted that rule 12-A improperly abridged or curtailed the statutory right under section 3-AA by making Form III-A the only permissible proof, and was therefore ultra vires the Act.

Sales Tax Officer / Rule-making Authority Position

The Sales Tax Officer treated rule 12-A as prescribing the exclusive mode of proof: because the petitioner had not filed the Form III-A certificate, the Officer rejected affidavits and the contract book and concluded the sales were taxable.
The rule-making authority (by implication) had framed rule 12-A under section 24; the rule requires the Form III-A certificate to be furnished with the dealer's quarterly return and made that certificate decisive for claiming the exemption under section 3-AA.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Madurai Pillai v. Muthu Chetty, A.I.R. 1914 Mad. 257	Cited for the proposition that a statutory power under one provision may be curtailed where the statute itself contains a provision enabling such curtailment (i.e., that a power under a provision can be cut down by another specific provision of the same statute).	The court mentioned this Full Bench decision to illustrate the principle that a statutory provision can be curtailed when another provision in the same statute permits curtailment; the court observed, however, that in the present case the point did not ultimately arise because it held rule 12-A did not curtail the right under section 3-AA in any event.

Court's Reasoning and Analysis

The court's analysis proceeded in two linked strands: (A) the nature of the right conferred by section 3-AA; and (B) the scope of the rule-making power under section 24 and whether rule 12-A falls within that power.

A. Nature of the right under section 3-AA

The court first characterised what section 3-AA actually does: it creates a rebuttable presumption that sales of specified goods (including oil-seeds) are sales to consumers; the dealer has the right to rebut that presumption by proving the contrary state of facts.
The court emphasised a distinction between (i) the right or opportunity to prove (i.e., the substantive entitlement to rebut the presumption) and (ii) the choice of materials or the mode of proof by which that fact is established. The former is the right to have the tribunal consider evidence; the latter concerns what evidence or form the Legislature or rule-maker requires to establish the fact.
On that basis the court rejected the petitioner's contention that the statutory right to rebut necessarily included a right to use any and every kind of material the dealer might select; the court held the section does not grant an absolute choice as to the character of the materials of proof.
Accordingly, rule 12-A, which prescribes a particular form of material (a certificate in Form III-A filed with the return) for the purpose of proving that a sale was to a dealer for resale in the same condition, does not take away the dealer's right to rebut the presumption — it prescribes the material by which the fact is to be proved.

B. Rule-making power under section 24 and validity of rule 12-A

The court examined section 24: subsection (1) authorises the State Government to make rules to carry out the purposes of the Act; subsection (2) specifically includes power to provide for determination of turnover (clause (c)) and to regulate procedure and forms in proceedings under the Act (clause (f)).
The court reasoned that the levy of sales tax depends upon assessment, which in turn requires determination of turnover and the allowance of deductions; rules prescribing modes of proof or materials on which particular facts are to be established are instrumental to carrying out assessment procedures and hence fall within the general rule-making power under section 24(1).
Further, because rule 12-A involves the determination of turnover for assessment purposes and prescribes forms/procedures for proceedings under the Act, it also falls squarely within the specific heads of rule-making power in section 24(2)(c) and (f).
Therefore, the court concluded that the rule-making authority was empowered to make rule 12-A and that the rule is not ultra vires. The rule has statutory force and the court observed it has the same force as a section in the Act for the purposes of its application.
Addressing the petitioner's further contention that a rule cannot curtail a statutory right, the court noted that both section 3-AA and section 24 are parts of the same statute and must be read together; if the Legislature intended to permit curtailment by rule-making under section 24, such curtailment is permissible. The court reiterated its primary finding that in any event the rule did not curtail the substantive right under section 3-AA.

In short, the court treated section 3-AA as conferring a right to rebut a presumption but distinguished that right from an entitlement to unrestricted choice of evidence; it treated rule 12-A as procedural/formal regulation made under section 24 that prescribes the material to be produced for claiming the exemption and found that rule valid.

Holding and Implications

Holding: The writ petition is DISMISSED WITH COSTS. The court held that rule 12-A is valid and not ultra vires section 3-AA of the U.P. Sales Tax Act, and that the Sales Tax Officer was justified in requiring the Form III-A certificate as the prescribed mode of proof under the rule.

Implications:

Direct effect on the parties: The petitioner's challenge to the assessment (to the extent it relied on non-statutory materials instead of the Form III-A certificate) failed; the assessment order dated 23rd December, 1961 remains operative and the petitioner was not entitled to the claimed exemption in the absence of the prescribed Form III-A certificate. The petition was dismissed with costs.
Statutory and procedural implication: The decision upholds the validity of a rule which prescribes the mode/materials of proof in assessment proceedings under the Act, holding that such a rule can be validly enacted under the general and specific rule-making powers in section 24 (including clauses as to turnover determination and procedure/forms). The court also stated that the rule has the same force as a section of the Act for these purposes.
Broader legal precedent: The opinion does not purport to lay down a novel principle beyond affirming that a statutory presumption may be rebutted only by materials prescribed by valid subordinate legislation where the statute empowers the rule-maker to regulate procedure/forms. The court cited an earlier Full Bench decision (Madurai Pillai v. Muthu Chetty) for the proposition that a power can be curtailed where a statute so provides, but observed that the curtailment issue did not ultimately arise because it found no substantive curtailment in this case. The opinion therefore primarily resolves the dispute between the parties rather than announcing an expansive new doctrinal rule.

Note: This summary reflects only the information and legal reasoning expressly contained in the provided opinion and does not infer or add facts beyond that text.

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Mansey Lakhansey And Company v. The State Of Uttar Pradesh And Another

1. This is a petition under Article 226 of the Constitution praying for the issue of a writ of certiorari for the quashing of an order dated 23rd December, 1961, assessing the petitioner to sales tax under the U.P Sales Tax Act.

2. The petitioner's case is that out of its total turnover it was entitled to exemption in respect of a turnover of Rs. 4,04,496-76 nP. as the particular turnover related to the sale of oil-seeds which according to the petitioner were sold not to consumers but to dealers for the purpose of resale by them in the same condition. It may be stated that under the provisions of section 3-AA sale of oil-seeds by a dealer to a consumer alone was liable to sales tax. The assessment order relates to the petitioner's assessment for the year 1957-58. At the material time section 3-AA stood as follows:—

“Notwithstanding anything contained in section 3 or 3-A, the turnover in respect of coal, iron and steel, raw jute, cotton, oil-seeds or raw hides and skins, shall not be liable to tax except at the point of sale by a dealer to the consumer and the rate of tax shall not exceed three pies per rupee. Unless the dealer proves otherwise, a sale shall be presumed to be to a consumer.”

3. Subsequently, the above section was amended. The words “unless the dealer proves otherwise a sale shall be presumed to be to a consumer” were deleted from the main section, and enacted in sub-section (2): “Unless the dealer proves otherwise, every sale by a dealer shall, for the purpose of sub-section (1), be presumed to be to a consumer.”

4. It will however be seen that in respect of the presumption the amendment did not make any real change in the section. Both prior as well as subsequent to the amendment a sale of the goods mentioned in the section was presumed to be to a consumer unless proved to be otherwise. But the presumption was always a rebuttable one, and it was open to a dealer to prove that the sale was not to a consumer and did not attract the liability to sales tax.

5. By Notification No. 1095.X-1086-56 dated 30th March, 1957, a rule was made by the rule-making authority under the powers conferred on it by section 24 of the Act. The rule was as follows:—

“12-A. A sale of any of the goods specified in section 3-AA shall be deemed to be a sale to the consumer, unless it is to a dealer who furnishes a certificate in Form III-A to the effect that the goods purchased are for re-sale in the same condition. Details of all such certificates shall be furnished by the selling dealer with his return in Form IV.”

6. It may be stated that under the U.P Sales Tax Act the return to be filed is a quarterly return. It follows that under the rule, the requisite certificate in Form III-A had to be filed with each quarterly return.

7. Admittedly the petitioner did not furnish a certificate in Form III-A, but produced two affidavits and a contract book in order to prove that the sales of oil-seeds by it had been made not to consumers, but to dealers, for resale in the same condition, and as such, the sales were not liable to sales tax. The Sales Tax Officer did not accept this evidence, as he took the view that the certificate in Form III-A required by rule 12-A not having been filed and that being the only mode of proof permissible, the sales were not exempt from sales tax.

8. The only argument which has been addressed to me by the learned counsel for the petitioner is that rule 12-A is ultra vires of the provision in section 3-AA of the U.P Sales Tax Act. His point is that section 3-AA gives the dealer a right to produce any kind of evidence or material to rebut the presumption that the sale was to a consumer, and the rule abridges or curtails that right by providing for proof only by a particular kind of evidence, namely a certificate in Form III-A. Thus the rule has made an inroad on the unqualified right conferred by section 3-AA and has limited and curtailed it, and a rule, which takes away from the amplitude of a right under a statutory provision and curtails and limits it is ultra vires.

9. In order to examine the merits of this argument, it is necessary to consider the nature of the right which has been conferred by the relevant provision in section 3-AA. All that that provision lays down is that in order to rebut the presumption of sale to the consumer, a dealer would have the right to prove to the contrary. It is not the case of the petitioner that the rule has deprived him of the right and the opportunity of rebutting the presumption. What is said is that implied in the right to rebut the presumption is the right to rebut it on the basis of any kind of evidence or material that a dealer may choose to produce before the Sales Tax Officer. I cannot agree with him in this. The right to an opportunity to prove a particular point is quite distinct from the right as to the choice of the materials on the basis of which the point may be proved. When one speaks of proof one implies that a certain state of facts exists or does not exist. The material on the basis of which the conclusion may be drawn is a thing quite distinct and apart. It follows that section 3-AA, while it gives the right to a dealer to rebut the presumption or to prove the existence or non-existence of a certain state of facts, does not give him any right as to the choice of the materials on the basis of which the fact may be proved or disproved.

10. So far as rule 12-A is concerned, it in no way takes away from him the right or the opportunity to rebut the presumption. All that that rule does is to lay down that in order to rebut the presumption and to prove a contrary state of facts to exist, a certificate in Form III-A will be the only material or evidence. Thus while the section deals with the right or the opportunity to prove or disprove a particular fact, the rule deals with the materials on the basis of which the fact might be proved or disproved. It follows that the subject-matter of section 3-AA and of rule 12-A is quite distinct. It must, therefore, be held that rule 12-A does not in any way abridge or take away the right conferred by section 3-AA and the argument must, therefore, fail and in the result the writ petition must be dismissed.

11. There is, however, another way of looking at the matter. Rule 12-A has been framed in the exercise of powers conferred upon the rulemaking authority by section 24 of the Act. Section 24 provides in its first sub-section as follows:—

“The State Government may make rules to carry out the purposes of this Act.”

12. In its second sub-section, in clauses (c) and (f) it provides as follows:—

“(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for;

…………………………………………………

(f) generally regulating the procedure to be followed and the forms to be adopted in proceedings under this Act…………”

13. The purpose of the Act is to levy sales tax. The tax can be levied only after an assessment is made. In making an assessment the turnover has to be determined. In determining the total taxable turnover certain deductions have to be made. The proceeding for assessment has to be initiated, and in due course, to be concluded. In the course of the proceeding, certain conclusions have to be reached on the basis of the evidence and the materials produced therein. From this it is quite clear that a rule providing for the mode of proof or providing for materials on the basis of which a particular fact might be established or a particular presumption rebutted, is a rule for carrying out the purposes of the Act, and can be validly made under sub-section (1) of section 24 in the exercise of the generality of the rule-making power. Further, it seems to me that the impugned rule also falls within the abmit of the particular powers envisaged under section 24(2)(c) and (f). In either view, it appears to me to be quite clear that the rule-making authority was fully empowered to make rule 12-A in the exercise of the power conferred on it under the Act. As such the rule was perfectly valid and not ultra vires. It has the same force as a section in the Act and its authority is on a par with the authority of the section itself.

14. Learned counsel has, however, urged that even though rule 12-A might be within the competence of the rule-making authority conferred on it by section 24, it is still ultra vires, because it abridges or curtails the amplitude of the right conferred on a dealer under section 3-AA. I do not agree with this submission. Both sections 3-AA and 24 are parts of the same statute. Assuming that the Legislature thought it fit to confer an amplitude of power on a dealer under section 3-AA, it is perfectly possible to conceive that it might have liked to abridge or curtail it under section 24, by which it conferred a power on the rule-making authority. The two provisions cannot be read in isolation. If the two provisions are read together, then it must necessarily follow that the Legislature curtailed the wide powers conferred under section 3-AA and the real content of the power conferred must be determined by reading both the provisions together, and not merely one of them. Apart from this, as I have already held above, the power conferred under section 3-AA was in no way curtailed by the rules, the subject of which was quite different from the subject of the section. In support of his submission that a statutory provision cannot be cut down or curtailed by a rule, learned counsel cited before me several cases. There can be no quarrel with this proposition but the point does not arise in the case, because as already observed, there was no curtailment of any power or right by the rule. Apart from this, it is well-settled that a power under a particular provision can be curtailed where there is a specific provision for the curtailment of such a power under another provision of the statute. In this connection, I may only mention the Full Bench decision of the Madras High Court in Madurai Pillai v. Muthu Chetty A.I.R 1914 Mad. 257.. It follows that even if a wider power had been conferred on a dealer under section 3-AA, if there was provision in section 24 for the curtailment of such power, as to my mind there is, the power could be validly curtailed. But as I have already observed above, the point does not arise in the case.

15. For the reasons stated above this writ petition must fail and is dismissed with costs.

16. Petition dismissed.

Mansey Lakhansey And Company v. The State Of Uttar Pradesh And Another

Structured Summary of the Legal Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Sales Tax Officer / Rule-making Authority Position

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Mansey Lakhansey And Company v. The State Of Uttar Pradesh And Another

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