Name:-Akshat Nakhawa
Institute:-Fr c Rodrigues of management studies
MMS SEM2
ROLL NO:-M2206
This is a case of the year march 28 1961.
Ashok Leyland has its firm setup in madras, where it manufactures, assembles and sells motor vehicles and spare part and accessories. It is spread over several states, they adopted a system of distribution of its motor vehicles, spare parts and accessories at a uniform price to the customers in various states through appointed called distributer (A DEALER) they were restricted to sell within the states boundaries if the territory of the dealer was outside the state of madras they have to enter into an agreement with the dealer the ship the consignment through rail or steamer or by road transport.
In the year relevant to assessment year 1952-53 the total turnover of the company in respect of sales was RS 1, 43, 67,007. The Deputy commercial tax officer, madras, computed the taxable amount of the company to sum RS 1,12,21,707 which represented the value of vehicles, spare parts etc. sold outside of state of madras the balance of RS21,45,299 was determined as net assessable turnover value. The tax imposed on the company was duly paid by the company.
Later the tax officer, under the SECTION 12 of the Madras General Sales Tax Act, 1939. Asked the assesse to provide its books of accounts for the purpose of satisfying himself. After providing the books of accounts the officer issued a notice proposing to revise the assessment by including a sum of RS 42,98,068 stating that the sale of vehicle was made within the state of madras and thereby it is liable to tax. ASHOK LEYLAND submitted its objection saying that the transactions were made in course of inter- state trade and commerce.
An appeal was taken to the sales tax tribunal of madras stating that the commercial tax officer was imposing on them without jurisdiction and we are not liable to pay the tax, the sales tax officer rejected the absence of jurisdiction and held merit on that sum of RS 12, 48,403 that the vehicles were driven away on their own motive power.
The assesse went to the High Court of madras and challenged the court with four items
• Sum of RS 1, 43,072 was the value of vehicles delivered ex-factory to the dealer’s drivers.
• A sum of RS 28, 01, 357 was the value that represented the driven away under the trade number of the dealers, outside the state of madras.
• A sum of RS 7866 the value of spare parts delivered with cars.
• Sum of RS 15,000 spare parts consigned to the dealers outside the state of madras sent by rail or steamer.
The high court rejected the assesses first three items and approved to the fourth when the legal officer who opened the appeal for the assesse held an argument that the high court was in r=error in holding transaction and wanted to drew his attention ion the VALIDATION ACT. The argument centered around the question whether the assessment in respect of 1st three items came within protection of validation act.
As per section 2 of validation the 1st argument didn’t reflect the true scope correctly. In some states it was said that it was liable to tax in that state where it is been delivered .for the 2nd argument as per the legal officer one has to know about the “sale” and “turnover” and section 3to understand that the transactions under consideration in this appeal liable to sales tax. Also by using Section 22 it was concluded that, they were unable to accept as correct the arguments advanced on behalf of the assesse. In the courts view the Validation act applies and the assessment on the transaction cannot be now challenged on the ground alleged by the assesse. The appeal failed and is dismissed with costs.