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Judgment
Basheer Ahmed Sayeed, J.—The Government is the appellant in this appeal, which arises out of the decree and judgment of the learned
First Additional City Civil Judge decreeing the suit filed by the respondent in its entirety, only disallowing costs. The suit itself was brought by the
respondent for a declaration that the levy of additional sales tax for the year ending with 31st March 1948 by the defendant Government against
the plaintiff was illegal and for the issue of an injunction restraining the defendant from collecting the same from the plaintiff. The facts of the case
have been set out in the judgment of the Court below in great detail and I do not think it is necessary for me to traverse the grounds over again.
The point that arises for consideration is whether in view of the fact that admittedly the respondent did not comply with R, 18 (3) of the Madras
General Sales-Tax (Turnover and Assessment) Rules, 1939, and also R. 7 of the Madras General Sales-Tax Ruler, 1939, the respondent would
be entitled to the relief he claimed in the suit. The respondent has been a dealer in groundnut oil and cake. In regard to the assessment of such
dealers to sales tax, there are certain rules which have to be observed by the assessing authorities. Rule No. 5 (1) of the Madras General Sales-
Tax (Turnover and Assessment) Rules, 1939, lays down :
The tax or taxes under S. 3 or 5 or the notification or notifications under S. 6 (I) shall be levied on the net turnover of a dealer. In determining the
net turnover the amounts specified in Cls. (a) to (k) shall subject to the conditions specified therein, be deducted from the gross turnover of a
dealer.
R. 5 (1) (k) says that all amounts which a registered manufacturer of groundnut oil (other than relined groundnut oil) and cake may be entitled to
deduct from his gross turnover under R. 18 subject to the conditions specified in that rule, shall be deducted from the gross turnover, R. 18 has got
several sub-rules. R. 18 (1) is in the following terms:
Any dealer who manufactures groundnut oil and cake from groundnut and/or kernel purchased by him may, on application to the assessing
authority having jurisdiction over the area in which he carries on his business, be registered as a manufacturer of groundnut oil and cake.
It is not disputed that the dealer in this case, who is the respondent, is registered as a manufacturer of groundnut oil and cake, R, 18 (2) is to the
following effect :
Every such manufacturer shall be entitled to a deduction under Cl. (k) of sub-R.(1) of R. 5 equal to the value of the groundnut and/or kernel
purchased and converted by him into oil and cake provided that the amount for which the oil is sold is included in his turnover.
The emphasis in this rule is on the proviso, namely, that the amount for which the oil is sold is to be included in the turnover of the registered
manufacturer. The contention of the appellant is that the amount for which the oil is sold is not included in his turnover in order to enable the
assessing authority to determine the total net turnover in accordance with R. 5 (1) (k). In order to secure that the amount for which the oil is sold is
included in his turnover by the registered manufacturer, R. 18 (3) had been prescribed and it is in the following terms ""Every such manufacturer
shall submit so as to reach the registering authority not later than the 25th day of every month, a statement in Form A-9 in respect of the
transactions to the previous month. ""R. 18 (3) (I) runs as follows:"" the aggregate amount of groundnut and or kernel purchased by him and the total
purchase price ""It is the contention of the appellant, and it is not disputed that the respondent failed to comply with this R. 18 (3) of the rules. There
are two or three things which are to be noted in this Sub-R. (3) of R. 18. One is that there is a date within which the registering authority should
receive a return from the assessee, secondly, the assessee should send his return in Form A-9 in respect of the transactions relating to the previous
month thirdly, the details which Form A-9 should contain are also specified in this rule. It is contended by the learned Counsel for the appellant
that, in so far as the respondent did not comply with this Sub-R. (3) of R. 18, he would not be entitled to any deduction in respect of the oil
manufactured and sold, for, according to R. 5 (1) (k) the condition is imposed that the registered manufacturer of groundnut oil may be entitled to
deduct from his gross turnover all amounts under R. 18 but subject to the conditions specified in that rule and not otherwise. That is to say, if the
conditions laid down in R. 18 are not complied with, then R, 5 (1) (k) will not come into operation.
The point raised by the learned Counsel for the respondent is as to whether the conditions laid down in the sub-rules of R. 18 are merely
procedural or whether they will affect the substantive right given to the assessee to claim a refund or deduction of an amount equal to the value of
the manufactured oil sold by the assessee. It is urged on behalf of the respondent that, if the various provisions in the sub-rules of R. 18 amount to
a mere procedure, then certainly it could not be the intention of the Government, or the legislature, that the assessee should be penalized for failure
to observe the procedure, in that he should lose the entire benefit of a deduction in his total turnover. I find it difficult to agree with the contention of
the learned Counsel for the respondent that these are merely rules of procedure and their noncompliance shall not entail any penalty against the
assessee who fails to comply with the same. The very purpose of R. 5 (1) (k) seems to be that amounts could be deducted by the assessee from
his turnover only if the conditions specified in R. 18 are satisfied and the conditions in R. 18 are quite specific and definite. one is that the
manufacturer should be a registered one; secondly that he should include the amount for which oil is sold in his turnover and thirdly that he should
submit on or before the 25th day of every month a statement in Form A-9 in respect of the transactions relating to the previous month and that he
should also mention in that Form A-9 the aggregate amount of groundnut and/or kernel purchased by him and the total purchase price and the total
quantity of the groundnut oil manufactured, the amount for which it was sold and the amount included in the turnover. The idea underlying this rule
seems to be that, unless and until all these details are furnished and the statement in Form A-9 is filed within the prescribed date it will not be
possible for the assessing authority to find out what exactly is the deduction that has to be given to the assesse while determining his net turnover as
required by R. 5 (1) (k). Therefore, though it may be easily conceded that a substantive right has been given to the assessee to claim a deduction in
respect of the value of the oil manufactured and sold, still this substantive right is not independent of the conditions which are laid down in R. 18
which. have also to be fulfilled by the assessee. It has to be noted that the non-compliance of these conditions within the time prescribed or the
total omission of compliance with Sub-R. (3) of R. 8 works a hardship against the assessees. In recognition of this hardship and to mitigate the
vigor of it the Government would appear to have I nested a new Sub. R. 3 (A) of R. 18 which gives discretion to the assessing authority to
condone delay or even omission in any fit case according to the result of his enquiry. Unfortunately, this amended rule came into existence only on
10th February 1949, whereas the assessment which is now in question, relates to the year ending with 31st March 1948 so that it is obvious that
this rule, which has not been made to be retrospective in effect, cannot apply to the facts of the present case. Even so, with regard to R, 9 of the
Madras General Sales-Tax Rules, 1949, it is not in dispute that the assessee has failed to comply with that rule as well. That rule is to the effect
that every person claiming a rebate under S. 7 shall submit to the assessing authority an application in Form VIII within three months of the delivery
of the articles outside the State. It has reference to finished articles of Industrial manufacture and provides for a rebate to be allowed of one half of
the tax levied on sales of such articles for delivery outside the State, if such articles are actually so delivered. This rule also lays down that the
responsibility should be on the assessee and that there should be an application in Form No. 8 within three months of the delivery of the articles
outside the State. If such an application is not made within the three months period, it again appears to be difficult for the assessing authority to
know where exactly he stands with reference to the assessee in respect of the claims made, by him. No doubt, S. 7 gives a substantive right to the
party, but it cannot be said that that substantive right stands by itself without being qualified by what is contained in R. (9) of the General Sales-Tax
Rules; so that it becomes evident that if any assessee is to claim the benefit given to him under the sections of the Act or other rules framed under
the Act, he should comply with the conditions and terms specified in the rules before he could really claim the benefit given to him. If it was the
intention of the Legislature or the Government for the matter of that, that these rights should be exercised by the assessees irrespective of their
doing anything on their part in order that the assessing authorities may be in possession of full particulars and details of the transactions which the
assessees carry on, certainly nothing could have prevented the legislature to enact the law in that form. But, not having done so, I do not think it is
possible for me to agree with the learned Counsel for the respondent that these substantive rights are not affected by what are contained in the
rules framed under the rule-making power vested in the Government. It is no doubt true that on moral and ethical grounds the assessees are put to
considerable hardship. But in fiscal law moral and ethical grounds may not enter into consideration. On the other hand, if the Government is levying
any arbitrary assessments against the assessees, which are not within the scope of any section the Act or rules, then certainly it is open to Courts of
law to interpret the section in the strictest form so as to endure to the benefit of the assessee. But, I do not think that such a case arises in the
present appeal. I am therefore unable to agree with, the judgment and decree of the learned First Additional City Civil Judge in his having allowed
the prayers asked for by the respondent. The decree of the lower Court is set aside and the appeal is allowed. In the circumstances of the case. I
do not think that I shall be justified in ordering costs to the Government. There will be no order as to costs.