The other day I was sitting in the library of the Sales Tax Bar Association and a discussion was going on regarding the recent notifications and circulars, and I raised a point, that whether these circulars are according to law, or when everyone is finding them to be too harsh and difficult to comply with, can they be within the legislative and executive powers to issue such notifications and circulars. One of our very senior and respected lawyers raised the point, that Mr. Jain you talk of the Constitution, how many of us have read the Delhi Sales Tax Act, 1975, leave aside the Delhi Value Added Tax Act, 2004 or the Constitution of India. This instigated me to look around into the provisions of the different enactments.
Supreme Court in case of Goodyear India Ltd, .etc. etc. v. State of Haryana & Anr. Anr. [1990 AIR 781] observed that “In construing the expressions of the Constitution to judge whether the provisions of a statute are within the competence of the State Legislature, one must bear in mind that the Constitution is to be construed not in a narrow or pedantic sense. The Constitution is not to be construed as mere law but as the machinery by which laws are to be made.”
Taxes on sale or purchase of goods and taxes on the consignment of the goods are levied and collected by the Union and are assigned to the states under Article 269 of the Constitution of India.
Article 286 imposes restrictions on the states to impose any tax on the sales or purchases in the course of inter-state trade. Central Sales Tax Act, 1956 is enacted by the parliament to levy and regulate the levy on inter-state or out-side the state transaction of sales or purchases.
Section 9(2) of the Central Sales Tax Act, 1956 subject to other provisions of the Central Act and rules made there under, authorizes the state authorities empowered to assess and collect to exercise all the powers they had under the general sales tax law of the state. It does not empower the state legislature to make any laws to levy or collect the same.
Section 8(1) of the Central Sales Tax Act, 1956 provides that every dealer, who in the course of inter-state trade sell goods to a registered dealer shall be liable to pay tax the tax at the rate applicable to such goods under the general sales tax law of such state or 2% whichever is lower. Sub-section (4) of the said section prescribes that the provisions of Sub-section (4) shall not apply to any sale in the course of inter-state trade or commerce unless the selling dealer furnishes to the prescribed authority in the prescribed manner a declaration duly filed and signed by the registered purchasing dealer obtained from the prescribed authority. It further provides that the declaration is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit. Section 2(e) of the Central Sales Tax Act, 1956 defines “prescribed’\” means prescribed by rule made under this Act.
Rule 12(7) prescribes that Form C or Form F or the certificate in E-I or E-II shall be furnished to the prescribed authority within three months of end of the period to which the declaration or certificate relates. Now, Form F is to be furnished within three months of the end of the month for transactions effected during that month, whereas Form C is to be furnished within three months of the end of the quarter for transactions effect during that quarter.
The time limit prescribed to furnish these declarations or forms can be relaxed if the prescribed authority is satisfied that the dealer was prevented by sufficient cause in furnishing the same within the prescribed time.
The power to adjudge whether the dealer was prevent by sufficient cause in furnishing these declaration or certificate is that of the prescribed authority, and if the prescribed authority is the Commissioner of Trade & Taxes, Delhi he has to register this satisfaction or dissatisfaction himself. The power has been entrusted to the prescribed authority and can’t be exercised with, by any other person except the delegate and in the absence of any provision in the Central Sales Tax Act, 1956 these powers can’t be further delegated.
Supreme Court in case of Ishwar Singh v. State of Rajasthan and Ors. [2005 AIR 773] observed:
“The power to take cognizance of an offence under Sections 4 and 5 of the Explosive Substances Act, 1908 ("the said Act") required the consent of the Central Government under Section 7 of the said Act which had not been properly obtained. The High Court accepted the respondent's contention and quashed the proceedings against him. The State of Madhya Pradesh filed an appeal.
For a prosecution under the said Act, the consent of the Central Government is requisite by virtue of the provisions of Section 7 thereof. By notification dated 2nd December, 1978 the Central Government entrusted to District Magistrates, inter alia, in the State of Madhya Pradesh its functions under Section 7 of the said Act.
The consent for the prosecution of the respondent was granted by the Additional District Magistrate of the district concerned and, in this behalf, reliance was placed, on behalf of the appellant, upon a notification dated 24th April, 1995 issued by the appellant where under it appointed the Joint Collector and Executive Magistrate as Additional District Magistrate for the District of Gwalior and directed that he should "exercise powers of District Magistrate conferred under the said Code (Criminal Procedure Code ) or under any other law for the time being in force."
The submission on behalf of the appellant is that, by reason of the latter notification, the power under Section 7 of the said Act delegated by the Central Government to the District Magistrate had now been delegated to the Additional District Magistrate and that, accordingly, the consent that he granted for the prosecution of the respondent was valid. The Apex court held:
“5. It is difficult to accept the submission. The power of granting consent under Section 7 of the said Act rests with the Central Government. The Central Government has delegated it to the District Magistrate. It is, in our view, not competent for the State Government to further delegate to the Additional District Magistrate a power of the Central Government which the Central Government has delegated to the District Magistrate.
6. The decision of this Court in Hari Chand Aggarwal v. The Batala Engineering Co. Ltd. 1969 AIR(SC) 483 ] is also of some relevance. This Court said that where, by virtue of a notification under Section 20 of the Defence of India Act, the Central Government had delegated its powers under Section 29 to a District Magistrate, an Additional District Magistrate was not competent to requisition property under Section 29 simply because he had been invested with all powers of a District Magistrate under Section 10(2).”
In view of the above the jurisdiction to accept the declaration or certificate is that of the prescribed authority and none other than the prescribed authority can exercise the same. It may not be out of place to mention that the Commissioner has to hear appeal against the decision of the prescribed authority that ‘whether the dealer was prevented by sufficient cause or not in furnishing the statutory forms within the prescribed time’, he himself can’t deny the submission of forms, and again sit in appeal against his decision.
Rule 4 of the Central Sales Tax (Delhi) Rules, 2004 limiting the time for submission of these declarations or certificates within a period of three months after the end of each quarter, does not leave any discretion to the prescribed authority to entertain the forms subject to his satisfaction that the dealer was prevented by sufficient cause in furnishing those forms within the prescribed time, thus is contrary to the provision of Section 9(2) of the Central Sales Tax Act, 1956 where it states that the state authorities can exercise the powers assigned to them under the general sales tax law of the state, but they are subject to the provisions of the Central Sales Tax Act, 1956 and rules made there under, and rule 12(7) specifically allows the prescribed authority to entertain the forms if he is satisfied that the dealer was prevented by sufficient cause in furnishing the same within the prescribed time.
Rule 4 of the Central Sales Tax Act, 1956 is also beyond the legislative competence of the state legislature as Sub-section (1) of Section 13 of the Central Sales Tax Act, 1956 specifically provides that the Central Government may by notification in the Official Gazette make rules for—(a) ……………….. ……………….. ………………..(d) the form in which and the particulars to be contained in any declaration or certificate to be given under this Act, the State of origin of such form or certificate and the time within which any such certificate or declaration shall be produced or furnished;
In these circumstances and in the absence of any specific provision providing the competence to the legislature to make rule 4 is ultra-vires. The Central Sales Tax Act, 1956 empowers the state legislature to make rules generally on the matters where the Central Government does not have exercised its powers, and the State may make rules, not inconsistent with the provisions of the Central and the rules made under Sub-section of the Section 13 of the Central Sales Tax Act, 1956.
In case of Addl. Distt. Magistrate (Rev.) Delhi Admn, etc., v. Shri Siri Ram, etc., [2000 (3) SCR 1019] the Apex Court held “It is well recognized principle of interpretation of a statute that conferment of rulemaking power by an Act does not enable the rule making authority to make rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto. From the above discussion, we have no hesitation to hold that by amending the Rules and Form P.5, the rule making authority have exceeded the power conferred on it by the Land Reforms Act.”
For the same reasons, when the legislature of the State does not have power to the legislate in respect to ‘certificates and declaration’ required to be submitted under the Central Sales Tax Act, 1956, the provisions relating to Form DVAT 51, the further delegation of power to the Commissioner in respect thereof is also beyond the competence of the legislature.
In St. Jones Teachers Training Institute v. Regional Director, AIR 2003 SC 1533 it was held “A Regulation is a rule or order prescribed by a superior for the management of some business and implies a rule for general course of action. Rules and Regulations are all comprised in delegated legislations. The power to make subordinate legislation is derived from the enabling Act and it is fundamental that the delegate on whom such a power is conferred has to act within the limits of authority conferred by the Act. Rules cannot be made to supplant the provisions of the enabling Act but to supplement it.”
Friend, this is my study on the subject, and I will request you to examine the same critically and liberally comment upon it, as the same will be of help to the fellow professionals and the general public/dealers at large.